**Table      of Contents**

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

**Washington,      D.C. 20549**

**FORM      10-QSB**

**June      30, 2007**

**000-28745**

**NATIONAL      SCIENTIFIC CORPORATION**

| **Texas**                                                     |   | **86-0837077**                                      |
|---------------------------------------------------------------|--------|-----------------------------------------------------|
| (State                of Incorporation)                       |   | (I.R.S.                Employer Identification No.) |
|                                                          |   |                                                |
|  **8361                E. Evans Road, Suite 106**        |   |                                                |
| **Scottsdale,                AZ**                             |   | **85260-3617**                                 |
|  (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**

**TABLE      OF CONTENTS**

|                                                                                                       |                                                                                                                                                                            |   |  **Page** |
|------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|
|                                                                                                       |                                                                                                                                                                            |   |           |
| Part                I                                                                                      | Financial                Information                                                                                                                                            |   | 3              |
|                                                                                                       |                                                                                                                                                                            |   |           |
| Item                1.                                                                                     | Financial                Statements (unaudited)                                                                                                                                 |   | 3              |
|                                                                                                       |                                                                                                                                                                            |   |           |
|                                                                                                       | Condensed                Balance Sheets - As of June 30, 2007 (Unaudited)                and September 30, 2006                                                                 |   | 3              |
|                                                                                                       | Condensed                Statements of Operations (Unaudited) - Three                and nine months ended June 30, 2007 and 2006                                          |   | 4              |
|                                                                                                       | Condensed                Statements of Cash Flows (Unaudited) - Nine                months ended June 30, 2007 and 2006                                                         |   | 5              |
|                                                                                                       | Condensed                Statement of Changes in Shareholders’ Equity                (Deficit) (Unaudited) - Nine months ended June 30, 2007 and                2006 |   | 6              |
|                                                                                                       | Notes                to Condensed Financial Statements                                                                                                                          |   | 7              |
|                                                                                                       |                                                                                                                                                                            |   |           |
| Item                2.                                                                                     | Management’s                Discussion and Analysis of Financial Condition                and Results of Operations                                                       |   | 18             |
| Item                3.                                                                                     | Controls                and Procedures                                                                                                                                          |   | 23             |
|                                                                                                       |                                                                                                                                                                            |   |           |
| Part                II                                                                                     | Other                Information                                                                                                                                                |   | 24             |
|                                                                                                       |                                                                                                                                                                            |   |           |
| Item                1.                                                                                     | Legal                Proceedings                                                                                                                                                |   | 24             |
| Item                2.                                                                                     | Changes                in Securities and Use of                Proceeds                                                                                                         |   | 24             |
| Item                3.                                                                                     | Defaults                Upon Senior Securities                                                                                                                                  |   | 24             |
| Item                4.                                                                                     | Submission                of Matters to a Vote of Security                Holders                                                                                               |   | 24             |
| Item                5.                                                                                     | Other                Information                                                                                                                                                |   | 24             |
| Item                6.                                                                                     | Exhibits                and Reports on Form 8-K                                                                                                                                 |   | 25             |
|                                                                                                       |                                                                                                                                                                            |   |           |
| Signatures                                                                                                 |                                                                                                                                                                            | 26     |
|                                                                                                       |                                                                                                                                                                            |   |
| 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**

**Condensed      Balance Sheets**

|                                                                                                                                                                                                                                                      |   | **June                  30,** |        |   | **September                  30,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|-------------|--------|------------------------------------|--------|
|                                                                                                                                                                                                                                                      |   | **2007**                      |        |   | **2006**                           |   |
| **ASSETS**                                                                                                                                                                                                                                                |   | **(Unaudited)**               |        |   | **(Audited)**                      |   |
| Current                  Assets:                                                                                                                                                                                                                          |   |                          |        |   |                               |   |
| Cash                  and cash equivalents                                                                                                                                                                                                                |   | $                             | 12,047      |   |                               | $      | 43,899 |   |
| Trade                  receivables, net                                                                                                                                                                                                                   |   |                          | 120,547     |   |                               |   | 141,498 |   |
| Inventory,                  net                                                                                                                                                                                                                           |   |                          | 10,789      |   |                               |   | 6,020 |   |
| Other                  assets                                                                                                                                                                                                                             |   |                          | 8,481       |   |                               |   | 5,570 |   |
| Total                  current assets                                                                                                                                                                                                                     |   |                          | 151,864     |   |                               |   | 196,987 |   |
|                                                                                                                                                                                                                                                      |   |                          |        |   |                               |   |   |   |
| Property                  and equipment, net                                                                                                                                                                                                              |   |                          | 726         |   |                               |   | 1,037 |   |
| Deposits                                                                                                                                                                                                                                                  |   |                          | 2,340       |   |                               |   | 2,000 |   |
| Deferred                  financing costs, net                                                                                                                                                                                                            |   |                          | 16,000      |   |                               |   | 19,600 |   |
| Total                  assets                                                                                                                                                                                                                             |   | $                             | 170,930     |   |                               | $      | 219,624 |   |
|                                                                                                                                                                                                                                                      |   |                          |        |   |                               |   |   |   |
| **LIABILITIES                  AND SHAREHOLDERS’ (DEFICIT)**                                                                                                                                                                                        |   |                          |        |   |                               |   |   |   |
| Current                  Liabilities:                                                                                                                                                                                                                     |   |                          |        |   |                               |   |   |   |
| Accounts                  payable - related parties                                                                                                                                                                                                       |   | $                             | 5,598       |   |                               | $      | 83,584 |   |
| Accounts                  payable - other                                                                                                                                                                                                            |   |                          | 198,603     |   |                               |   | 165,593 |   |
| Accrued                  expenses                                                                                                                                                                                                                         |   |                          | 968,770     |   |                               |   | 848,446 |   |
| Due                  to factors                                                                                                                                                                                                                           |   |                          | 27,910      |   |                               |   | 104,400 |   |
| Notes                  payable - related party                                                                                                                                                                                                            |   |                          | 159,000     |   |                               |   | 159,000 |   |
| Notes                  payable - other                                                                                                                                                                                                                    |   |                          | 80,875      |   |                               |   | 133,375 |   |
| Total                  current liabilities                                                                                                                                                                                                                |   |                          | 1,440,756   |   |                               |   | 1,494,398 |   |
|                                                                                                                                                                                                                                                      |   |                          |        |   |                               |   |   |   |
| Notes                  payable, less current portion, net of discount and beneficial conversion                  feature of $41,022 at June 30, 2007 and $50,252 at September 30,                  2006                                                   |   |                          | 133,978     |   |                               |   | 124,748 |   |
| Total                  liabilities                                                                                                                                                                                                                        |   |                          | 1,574,734   |   |                               |   | 1,619,146 |   |
|                                                                                                                                                                                                                                                      |   |                          |        |   |                               |   |   |   |
| Commitments                  and contingencies                                                                                                                                                                                                            |   |                          | –     |   |                               |   | – |   |
|                                                                                                                                                                                                                                                      |   |                          |        |   |                               |   |   |   |
| Shareholders’                  (deficit):                                                                                                                                                                                                           |   |                          |        |   |                               |   |   |   |
| Preferred                  stock, par value $0.10; 4,000,000 shares authorized, none issued                  and                  outstanding                                                                                                             |   |                          | –     |   |                               |   | – |   |
| Common                  stock, par value $0.01; 187,000,000 shares authorized, and shares                  issued                  and outstanding of 115,261,113 at June 30, 2007 and 99,108,039                  at                  September 30, 2006 |   |                          | 1,152,611   |   |                               |   | 991,081 |   |
| Additional                  paid-in capital                                                                                                                                                                                                               |   |                          | 22,623,440  |   |                               |   | 22,405,152 |   |
| Accumulated                  deficit                                                                                                                                                                                                                      |   |                          | (25,179,855 | )      |                               |   | (24,795,755 | ) |
| Total                  shareholders’ (deficit)                                                                                                                                                                                                      |   |                          | (1,403,804  | )      |                               |   | (1,399,522 | ) |
| Total                  liabilities and shareholder’s equity (deficit)                                                                                                                                                                               |   | $                             | 170,930     |   |                               | $      | 219,624 |   |

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**Table          of Contents**

**NATIONAL      SCIENTIFIC CORPORATION**

**Condensed      Statements of Operations**

**(Unaudited)**

|                                                           |   | **Three                  months ended** |        |   | **Nine                  months ended** |   |
|----------------------------------------------------------------|--------|-----------------------------------------|-------------|--------|----------------------------------------|--------|
|                                                           |   | **June                  30,**           |        |   | **June                  30,**          |   |
|                                                           |   | **2007**                                |        |   | **2006**                               |   |   | **2007** |   |   | **2006** |   |
|                                                           |   |                                    |        |   |                                   |   |   |   |   |   |   |   |
| Revenues                                                       |   | $                                       | 216,372     |   |                                   | $      | 8,920 |   |   | $ | 401,088 |   |   | $ | 96,751 |   |
|                                                           |   |                                    |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Cost                  of Sales                                 |   |                                    | 109,456     |   |                                   |   | 7,224 |   |   |   | 202,941 |   |   |   | 64,183 |   |
|                                                           |   |                                    |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Gross                  profit                                  |   |                                    | 106,916     |   |                                   |   | 1,696 |   |   |   | 198,147 |   |   |   | 32,568 |   |
|                                                           |   |                                    |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Costs                  and expenses                            |   |                                    |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Salaries                  and benefits                         |   |                                    | 60,110      |   |                                   |   | 64,057 |   |   |   | 193,961 |   |   |   | 193,746 |   |
| Research                  and development                      |   |                                    | 43,693      |   |                                   |   | 42,166 |   |   |   | 127,980 |   |   |   | 176,709 |   |
| Stock                  compensation                            |   |                                    | 7,336       |   |                                   |   | 5,723 |   |   |   | 15,267 |   |   |   | 5,723 |   |
| Other                                                          |   |                                    | 54,287      |   |                                   |   | 61,249 |   |   |   | 123,560 |   |   |   | 148,436 |   |
| Total                  costs and expenses                      |   |                                    | 165,426     |   |                                   |   | 173,195 |   |   |   | 460,768 |   |   |   | 524,614 |   |
|                                                           |   |                                    |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Loss                  from operations                          |   |                                    | (58,510     | )      |                                   |   | (171,499 | ) |   |   | (262,621 | ) |   |   | (492,046 | ) |
|                                                           |   |                                    |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Other                  income (expense)                        |   |                                    |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Other                  income                                  |   |                                    | –     |   |                                   |   | – |   |   |   | 25,740 |   |   |   | – |   |
| Interest                  expense                              |   |                                    | (25,006     | )      |                                   |   | (29,700 | ) |   |   | (143,619 | ) |   |   | (66,600 | ) |
| Amortization                  of deferred financing costs      |   |                                    | (1,200      | )      |                                   |   | (1,200 | ) |   |   | (3,600 | ) |   |   | (3,200 | ) |
|                                                           |   |                                    | (26,206     | )      |                                   |   | (30,900 | ) |   |   | (121,479 | ) |   |   | (69,800 | ) |
|                                                           |   |                                    |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Loss                  before income taxes                      |   |                                    | (84,716     | )      |                                   |   | (202,399 | ) |   |   | (384,1007 | ) |   |   | (561,846 | ) |
| Income                  tax expense                            |   |                                    | –     |   |                                   |   | – |   |   |   | – |   |   |   | – |   |
|                                                           |   |                                    |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loss                                      |   | $                                       | (84,716     | )      |                                   | $      | (202,399 | ) |   | $ | (384,100 | ) |   | $ | (561,846 | ) |
|                                                           |   |                                    |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loss per common share, basic and diluted  |   | $                                       | (0.00       | )      |                                   | $      | (0.00 | ) |   | $ | (0.00 | ) |   | $ | (0.01 | ) |
|                                                           |   |                                    |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                  average number of shares outstanding |   |                                    | 111,706,611 |   |                                   |   | 97,247,987 |   |   |   | 104,299,409 |   |   |   | 96,068,682 |   |

*.*

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**Table            of Contents**

**NATIONAL      SCIENTIFIC CORPORATION**

**Condensed      Statements of Cash Flows**

**(Unaudited)**

|                                                                                                              |   | **Nine                    months**   |     |   | **Nine                    months**   |   |
|-------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|----------|--------|--------------------------------------|--------|
|                                                                                                              |   | **Ended**                            |     |   | **Ended**                            |   |
|                                                                                                              |   | **June                    30, 2007** |     |   | **June                    30, 2006** |   |
|                                                                                                              |   |                                 |     |   |                                 |   |
| Cash                    flows from operating activities:                                                          |   |                                 |     |   |                                 |   |
| Net                    loss                                                                                       |   | $                                    | (384,100 | )      |                                 | $      | (561,846 | ) |
| Adjustments                    to reconcile net loss to net cash used in operating                    activities: |   |                                 |     |   |                                 |   |   |   |
| Depreciation                                                                                                      |   |                                 | 311      |   |                                 |   | 4,982 |   |
| Stock                    issued for services                                                                      |   |                                 | 3,000    |   |                                 |   | 5,723 |   |
| Stock                    options issued for services                                                              |   |                                 | 5,794    |   |                                 |   | – |   |
| Stock                    issued to cure default of note payable                                                   |   |                                 | 66,000   |   |                                 |   | – |   |
| Warrant                    expense                                                                                |   |                                 | 7,344    |   |                                 |   | 5,256 |   |
| Amortization                    of deferred financing costs                                                       |   |                                 | 3,600    |   |                                 |   | 3,200 |   |
| Amortization                    of debt discount                                                                  |   |                                 | 7,740    |   |                                 |   | 6,880 |   |
| Amortization                    of beneficial conversion feature                                                  |   |                                 | 1,490    |   |                                 |   | 1,324 |   |
| Changes                    in assets and liabilities:                                                             |   |                                 |     |   |                                 |   |   |   |
| Decrease                    (increase) in inventory, net                                                          |   |                                 | (4,769   | )      |                                 |   | 3,882 |   |
| Decrease                    in receivables, net                                                                   |   |                                 | 20,951   |   |                                 |   | 8,093 |   |
| (Increase)                    in other assets and deposits                                                        |   |                                 | (3,251   | )      |                                 |   | (25,410 | ) |
| Increase                    in accounts payable and accrued expenses                                              |   |                                 | 203,028  |   |                                 |   | 363,144 |   |
| Net                    cash used in operating activities                                                          |   |                                 | (72,862  | )      |                                 |   | (184,772 | ) |
|                                                                                                              |   |                                 |     |   |                                 |   |   |   |
| Cash                    flows from financing activities:                                                          |   |                                 |     |   |                                 |   |   |   |
| Increase                    in notes payable                                                                      |   |                                 | 20,725   |   |                                 |   | 215,125 |   |
| Repayment                    of notes payable                                                                     |   |                                 | (13,025  | )      |                                 |   | (16,900 | ) |
| Net                    proceeds from factors                                                                      |   |                                 | (76,490  | )      |                                 |   | – |   |
| Payment                    of financing costs                                                                     |   |                                 | –  |   |                                 |   | (24,000 | ) |
| Proceeds                    from issuance of common stock                                                         |   |                                 | 109,800  |   |                                 |   | 10,000 |   |
| Net                    cash provided by financing activities                                                      |   |                                 | 41,010   |   |                                 |   | 184,225 |   |
|                                                                                                              |   |                                 |     |   |                                 |   |   |   |
| Net                    decrease in cash and cash equivalents                                                      |   |                                 | (31,852  | )      |                                 |   | (547 | ) |
| Cash                    and cash equivalents, beginning of period                                                 |   |                                 | 43,899   |   |                                 |   | 1,616 |   |
| Cash                    and cash equivalents, end of period                                                       |   | $                                    | 12,047   |   |                                 | $      | 1,069 |   |
|                                                                                                              |   |                                 |     |   |                                 |   |   |   |
| Supplementary                    Disclosure of Cash Flow Information:                                             |   |                                 |     |   |                                 |   |   |   |
| Cash                    paid for interest                                                                         |   | $                                    | 19,522   |   |                                 | $      | 8,737 |   |
| Conversion                    of accounts payable and accrued expenses to equity                                  |   | $                                    | 127,680  |   |                                 | $      | 89,300 |   |
| Conversion                    of notes payable and accrued expenses to equity                                     |   | $                                    | 60,200   |   |                                 | $      | – |   |
| Debt                    discount and beneficial conversion feature                                                |   | $                                    | –  |   |                                 | $      | 86,172 |   |

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**Table          of Contents**

**NATIONAL      SCIENTIFIC CORPORATION**

**Condensed      Statement of Changes in Shareholders’Equity (Deficit)**

**For      the Nine Months Ended June 30, 2007**

**(Unaudited)**

|                                                                                                                                             |   |   | **Common                        Stock**        |        |   |                                 |   |      |                                 |   |   |                       |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------------------------------------------|-------------|--------|--------------------------------------|--------|-----------|--------------------------------------|--------|--------|----------------------------|--------|
|                                                                                                                                             |   |   | **Number                        of****Shares** |        |   | **Par                        Value** |   |      | **Additional****Paid-In****Capital** |   |   | **Accumulated****Deficit** |   |   | **Total** |   |
|                                                                                                                                             |   |   |                                           |        |   |                                 |   |      |                                 |   |   |                       |   |   |   |   |
| Balance                        at September 30, 2006                                                                                             |   |   |                                           | 99,108,039  |   |                                 | $      | 991,081   |                                 |   | $      | 22,405,152                 |   |   | $ | (24,795,755 | ) |   | $ | (1,399,522 | ) |
|                                                                                                                                             |   |   |                                           |        |   |                                 |   |      |                                 |   |   |                       |   |   |   |   |   |   |   |   |   |
| Stock                        issued for services                                                                                                 |   |   |                                           |        |   |                                 |   |      |                                 |   |   |                       |   |   |   |   |   |   |   |   |   |
| Price                        per share ranged                                                                                                    |   |   |                                           |        |   |                                 |   |      |                                 |   |   |                       |   |   |   |   |   |   |   |   |   |
| $0.0385                                                                                                                                     |   |   | 25,974                                         |        |   |                                 | 260    |      |                                 |   | 740    |                       |   |   | – |   |   |   | 1,000 |   |
| $0.0254                                                                                                                                          |   |   |                                           | 78,740      |   |                                 |   | 787       |                                 |   |   | 1,213                      |   |   |   | – |   |   |   | 2,000 |   |
|                                                                                                                                        |   |   |                                           |        |   |                                 |   |      |                                 |   |   |                       |   |   |   |   |   |   |   |   |   |
| Stock                        options granted                                                                                                     |   |   |                                           | –     |   |                                 |   | –   |                                 |   |   | 5,794                      |   |   |   | – |   |   |   | 5,794 |   |
|                                                                                                                                        |   |   |                                           |        |   |                                 |   |      |                                 |   |   |                       |   |   |   |   |   |   |   |   |   |
| Warrants                        extended by one year                                                                                             |   |   |                                           | –     |   |                                 |   | –   |                                 |   |   | 6,473                      |   |   |   | – |   |   |   | 6,473 |   |
|                                                                                                                                        |   |   |                                           |        |   |                                 |   |      |                                 |   |   |                       |   |   |   |   |   |   |   |   |   |
| Warrants                        issued with debt                                                                                                 |   |   |                                           | –     |   |                                 |   | –   |                                 |   |   | 871                        |   |   |   | – |   |   |   | 871 |   |
|                                                                                                                                        |   |   |                                           |        |   |                                 |   |      |                                 |   |   |                       |   |   |   |   |   |   |   |   |   |
| Stock                        issued in exchange of accrued expenses for:                                                                         |   |   |                                           |        |   |                                 |   |      |                                 |   |   |                       |   |   |   |   |   |   |   |   |   |
| $0.035                                                                                                                                           |   |   |                                           | 714,286     |   |                                 |   | 7,143     |                                 |   |   | 17,857                     |   |   |   | – |   |   |   | 25,000 |   |
| $0.030                                                                                                                                           |   |   |                                           | 666,667     |   |                                 |   | 6,666     |                                 |   |   | 13,334                     |   |   |   | – |   |   |   | 20,000 |   |
| $0.020                                                                                                                                           |   |   |                                           | 4,134,047   |   |                                 |   | 41,340    |                                 |   |   | 41,340                     |   |   |   | – |   |   |   | 82,680 |   |
|                                                                                                                                        |   |   |                                           |        |   |                                 |   |      |                                 |   |   |                       |   |   |   |   |   |   |   |   |   |
| Private                        placement of stock                                                                                                |   |   |                                           |        |   |                                 |   |      |                                 |   |   |                       |   |   |   |   |   |   |   |   |   |
| Shares                        issued for:                                                                                                        |   |   |                                           |        |   |                                 |   |      |                                 |   |   |                       |   |   |   |   |   |   |   |   |   |
| $0.02                                                                                                                                            |   |   |                                           | 8,000,000   |   |                                 |   | 80,000    |                                 |   |   | 80,000                     |   |   |   | – |   |   |   | 160,000 |   |
| $0.03                                                                                                                                            |   |   |                                           | 333,360     |   |                                 |   | 3,334     |                                 |   |   | 6,666                      |   |   |   | – |   |   |   | 10,000 |   |
|                                                                                                                                        |   |   |                                           |        |   |                                 |   |      |                                 |   |   |                       |   |   |   |   |   |   |   |   |   |
| Stock                        issued to settle dispute regarding timing of interest payment                        on                        note |   |   |                                           | 2,200,000   |   |                                 |   | 22,000    |                                 |   |   | 44,000                     |   |   |   | – |   |   |   | 66,000 |   |
|                                                                                                                                        |   |   |                                           |        |   |                                 |   |      |                                 |   |   |                       |   |   |   |   |   |   |   |   |   |
| Net                        loss for the nine months ended June 30, 2007                                                                          |   |   |                                           | –     |   |                                 |   | –   |                                 |   |   | –                    |   |   |   | (384,100 | ) |   |   | (384,100 | ) |
|                                                                                                                                        |   |   |                                           |        |   |                                 |   |      |                                 |   |   |                       |   |   |   |   |   |   |   |   |   |
| Balance                        at June 30, 2007                                                                                                  |   |   |                                           | 115,261,113 |   |                                 | $      | 1,152,611 |                                 |   | $      | 22,623,440                 |   |   | $ | (25,179,855 | ) |   | $ | (1,403,804 | ) |
|                                                                                                                                        |   |   |                                           |        |   |                                 |   |      |                                 |   |   |                       |   |   |   |   |   |   |   |   |   |

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**Table          of Contents**

**NATIONAL      SCIENTIFIC CORPORATION**

**NOTES        TO FINANCIAL STATEMENTS**

**June        30, 2007**

**(Unaudited)**

| **1.** | **Summary                  of Significant Accounting Policies and Use of                  Estimates** |
|--------|-------------------------------------------------------------------------------------------------------|

***Nature            of Business***

***Basis            of Presentation***

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**Table                  of Contents**

***Going            Concern***

***Use            of Estimates***

***Revenue            Recognition***

***Fair            Value of Financial Instruments***

***Earnings            per Share***

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**Table                  of Contents**

***Stock-Based            Compensation***

          -  Expected                  term is determined using a weighted average of the contractual                  term and                  vesting period of the award; 
          -  Expected                  volatility is measured using the average of historical daily changes                  in the                  market price of the Company’s common stock over two years prior to the                  award.; 
          -  Risk-free                  interest rate is equivalent to the implied yield on U.S. Treasury                  bills with a                  remaining maturity equal to the expected term of the awards; and, 
          -  Forfeitures                  are based on the history of cancellations of similar awards granted                  by the                  Company and management’s analysis of potential                  forfeitures. 

***Recent            Accounting Pronouncements***

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**Table                  of Contents**

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

| **3.** | **Stock-Based                    Compensation** |
|--------|-------------------------------------------------|

***Stock            Options***

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**Table                  of Contents**

|                                                         |   |       |      |   | **Weighted** |   |    | **Weighted                      Average** |   |   |          |   |   |                               |    |
|--------------------------------------------------------------|--------|------------|-----------|--------|--------------|--------|---------|-------------------------------------------|--------|--------|---------------|--------|--------|------------------------------------|---------|
|                                                         |   | **Number** |      |   | **Average**  |   |    | **Remaining**                             |   |   | **Aggregate** |   |   | **Aggregate**                      |    |
|                                                         |   | **of**     |      |   | **Exercise** |   |    | **Contractual**                           |   |   | **Fair**      |   |   | **Intrinsic**                      |    |
|                                                         |   | **Shares** |      |   | **Price**    |   |    | **Term                      (1)**         |   |   | **Value**     |   |   | **Value                      (2)** |    |
|                                                         |   |       |      |   |         |   |    |                                      |   |   |          |   |   |                               |    |
| Options                      Outstanding, September 30, 2006 |   |       | 4,159,938 |   |         | $      | 0.74    |                                      |   |   | 5.80          |   |   | $                                  | 60,673  |   |   |   |   |
| Granted                                                      |   |       | 206,818   |   |         |   | 0.03    |                                      |   |   | 9.55          |   |   |                               | 5,794   |   |   |   |   |
| Exercised                                                    |   |       | –   |   |         |   | – |                                      |   |   |          |   |   |                               | – |   |   |   |   |
| Forfeited                                                    |   |       | (150,000  | )      |         |   | 0.15    |                                      |   |   | 6.41          |   |   |                               | (5,055  | ) |   |   |   |
| Options                      Outstanding, June 30, 2007      |   |       | 4,216,756 |   |         | $      | 0.73    |                                      |   |   | 6.33          |   |   | $                                  | 61,412  |   |   | $ | – |   |
| Options                      Exercisable June 30, 2007       |   |       | 4,216,756 |   |         | $      | 0.73    |                                      |   |   | 6.33          |   |   | $                                  | 61,412  |   |   | $ | – |   |
| ____________                                                 |   |       |      |   |         |   |    |                                      |   |   |          |   |   |                               |    |   |   |   |   |   |

| (1) | Remaining                      contractual term is presented in                      years |
|-----|--------------------------------------------------------------------------------------------|

| (2) | The                      aggregate intrinsic value is calculated as the difference between                      the                      exercise price of the underlying awards and the closing price                      of our                      common stock as of June 30, 2007, for those awards that have                      an exercise                      price currently below the closing price as of June 30, 2007.                      Awards with                      an exercise price above the closing price as of June 30, 2007                      of $0.02 are                      considered to have no intrinsic                      value. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**Table                  of Contents**

| Risk                      -free interest rate | 4.46%                      to 5.03%  |
|-----------------------------------------------|--------------------------------------|
| Expected                      life (years)    | 5                                    |
| Expected                      volatility      | 91.4%                      to 184.8% |
| Expected                      dividends       | None                                 |
| Forfeitures                      assumed      | None                                 |

|                                                                                                                                            |   | **Three                      months                      ended****June                      30, 2006** |     |   | **Nine                      months                      ended****June                      30, 2006** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------|----------|--------|-------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                            |   |                                                                                                   |     |   |                                                                                                  |   |
| Net                      loss as reported                                                                                                       |   | $                                                                                                      | (202,399 | )      |                                                                                                  | $      | (561,846 | ) |
| Deduct:                      Total stock based compensation as determined under the fair                      value                      method |   |                                                                                                   | (11,818  | )      |                                                                                                  |   | (11,818 | ) |
| Add:                      Total stock based compensation recorded in the statements of                      operations                          |   |                                                                                                   | 5,723    |   |                                                                                                  |   | 5,723 |   |
|                                                                                                                                            |   |                                                                                                   |     |   |                                                                                                  |   |   |   |
| Pro                      forma net loss                                                                                                         |   | $                                                                                                      | (208,494 | )      |                                                                                                  | $      | (567,941 | ) |
|                                                                                                                                            |   |                                                                                                   |     |   |                                                                                                  |   |   |   |
| Loss                      per share as reported                                                                                                 |   | $                                                                                                      | (0.00    | )      |                                                                                                  | $      | (0.01 | ) |
|                                                                                                                                            |   |                                                                                                   |     |   |                                                                                                  |   |   |   |
| Loss                      per share, pro forma                                                                                                  |   | $                                                                                                      | (0.00    | )      |                                                                                                  | $      | (0.01 | ) |

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**Table                  of Contents**

***Warrants***

|                                                          |   |       |       |  **Weighted** |   | **Weighted                      Average** |   |                |    |                                     |   |
|---------------------------------------------------------------|--------|------------|------------|--------------------|--------|-------------------------------------------|--------|---------------------|---------|------------------------------------------|--------|
|                                                          |   | **Number** |       |  **Average**  |   | **Remaining**                             |   |  **Aggregate** |    |  **Aggregate**                      |   |
|                                                          |   | **of**     |       |  **Exercise** |   | **Contractual**                           |   |  **Fair**      |    |  **Intrinsic**                      |   |
|                                                          |   | **Shares** |       |  **Price**    |   | **Term                      (1)**         |   |  **Value**     |    |  **Value                      (2)** |   |
|                                                          |   |       |       |               |   |                                      |   |                |    |                                     |   |
| Warrants                      Outstanding, September 30, 2006 |   |       | 15,384,197 |               | $      | 0.15                                      |   |                | 2.36    |                                     | $      | 103,492 |   |   |   |   |
| Granted                                                       |   |       | 3,220,000  |               |   | 0.12                                      |   |                | 1.94    |                                     |   | 52,656 |   |   |   |   |
| Exercised                                                     |   |       | –    |               |   | –                                   |   |                | – |                                     |   | – |   |   |   |   |
| Cancelled                      or expired                     |   |       | (890,000   | )                  |   | 0.08                                      |   |                | 4.42    |                                     |   | (8,801 | ) |   |   |   |
| Warrants                      Outstanding, June 30, 2007      |   |       | 17,714,197 |               | $      | 0.17                                      |   |                | 1.81    |                                     | $      | 147,347 |   | $ | – |   |
| ___________                                                   |   |       |       |               |   |                                      |   |                |    |                                     |   |   |   |   |   |   |

| (1) | Remaining                      contractual term is                      presented in years. |
|-----|---------------------------------------------------------------------------------------------|

| (2) | The                      aggregate intrinsic value is                      calculated as the difference between the exercise price of                      the underlying                      awards and the closing price of our common stock as of June                      30, 2007, for                      those awards that have an exercise price currently below the                      closing price                      as of June 30, 2007. Awards with an exercise price above the                      closing price                      as of June 30, 2007 of $0.05 are considered to have no intrinsic                      value. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Risk-free                      interest rate | 4.60%                      to 4.91%  |
|----------------------------------------------|--------------------------------------|
| Expected                      life (years)   | 2                      to 5          |
| Expected                      volatility     | 83.5%                      to 184.8% |
| Expected                      dividends      | None                                 |
| Forfeitures                      assumed     | None                                 |

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**Table                  of Contents**

| **4.** | **Trade                      Receivables** |
|--------|--------------------------------------------|

|                                   |   | **June                      30, 2007****(Unaudited)** |    |   | **September                      30, 2006****(Audited)** |   |
|----------------------------------------|--------|-------------------------------------------------------|---------|--------|----------------------------------------------------------|--------|
|                                   |   |                                                  |    |   |                                                     |   |
| Trade                      receivables |   | $                                                     | 120,547 |   |                                                     | $      | 141,498 |   |
| Less:                      reserves    |   |                                                  | – |   |                                                     |   | – |   |
|                                   |   | $                                                     | 120,547 |   |                                                     | $      | 141,498 |   |

| **5.** | **Inventory,                    net** |
|--------|---------------------------------------|

|                                                |   | **June                      30, 2007****(Unaudited)** |    |   | **September                      30, 2006****(Audited)** |   |
|-----------------------------------------------------|--------|-------------------------------------------------------|---------|--------|----------------------------------------------------------|--------|
|                                                |   |                                                  |    |   |                                                     |   |
| Inventory,                      gross               |   | $                                                     | 10,789  |   |                                                     | $      | 70,622 |   |
| Less:                      reserve for obsolescence |   |                                                  | – |   |                                                     |   | (64,602 | ) |
| Inventory,                      net                 |   | $                                                     | 10,789  |   |                                                     | $      | 6,020 |   |

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**Table              of Contents**

| **6.** | **Accrued                      Expenses** |
|--------|-------------------------------------------|

**:**

|                                                                            |   | **June                        30,                        2007****(Unaudited)** |    |   | **September                        30,                        2006****(Audited)** |   |
|---------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------|---------|--------|-----------------------------------------------------------------------------------|--------|
|                                                                            |   |                                                                           |    |   |                                                                              |   |
| Salaries                        and vacation pay - current management and staff |   | $                                                                              | 666,872 |   |                                                                              | $      | 585,678 |   |
| Salaries                        and vacation pay - former employee              |   |                                                                           | 29,375  |   |                                                                              |   | 29,375 |   |
| Payroll                        taxes for back pay                               |   |                                                                           | 47,262  |   |                                                                              |   | 37,342 |   |
| Interest                                                                        |   |                                                                           | 149,731 |   |                                                                              |   | 101,698 |   |
| Employee                        stock retainage pool                            |   |                                                                           | 50,250  |   |                                                                              |   | 50,250 |   |
| Other                        liabilities                                        |   |                                                                           | 25,280  |   |                                                                              |   | 44,103 |   |
|                                                                            |   | $                                                                              | 968,770 |   |                                                                              | $      | 848,446 |   |

| **7.** | **Notes                      Payable and Long-Term                      Debt** |
|--------|--------------------------------------------------------------------------------|

| `                                                                                                             |   | **June                    30, 2007****(Unaudited)** |     |   | **September                    30,                    2006****(Audited)** |   |
|---------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|----------|--------|---------------------------------------------------------------------------|--------|
|                                                                                                          |   |                                                |     |   |                                                                      |   |
| Non-interest                    bearing note payable, due June 2006; unsecured;                               |   |                                                |     |   |                                                                      |   |
| 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 |   |
| 6%                    note payable to a related party; unsecured; principal and                               |   |                                                |     |   |                                                                      |   |   |   |
| interest                    payable on demand; unsecured                                                      |   |                                                | 159,000  |   |                                                                      |   | 159,000 |   |
| Non-interest                    bearing note payable; unsecured; payable on demand                            |   |                                                | –  |   |                                                                      |   | 1,000 |   |
| Non-interest                    bearing note payable; unsecured; payable on demand                            |   |                                                | –  |   |                                                                      |   | 1,500 |   |
| Non-interest                    bearing note payable; unsecured; payable on demand                            |   |                                                | –  |   |                                                                      |   | 1,000 |   |
| 12%                    note payable; secured; payable on demand                                               |   |                                                | 11,625   |   |                                                                      |   | 16,625 |   |
| 12%                    note payable; secured; payable on demand                                               |   |                                                | 20,000   |   |                                                                      |   | 20,000 |   |
| 8%                    note payable; unsecured; principal payable in full in November                    2010; |   |                                                |     |   |                                                                      |   |   |   |
| With                    semi-annual interest payments in May and November                                     |   |                                                | 175,000  |   |                                                                      |   | 175,000 |   |
| 12%                    note payable; secured; payable on demand                                               |   |                                                | –  |   |                                                                      |   | 50,000 |   |
| 6%                    note payable; unsecured; payable on demand with 30 days prior                    notice |   |                                                | 6,000    |   |                                                                      |   | – |   |
|                                                                                                          |   |                                                | 414,875  |   |                                                                      |   | 467,375 |   |
| Less:                                                                                                         |   |                                                |     |   |                                                                      |   |   |   |
| Current                    portion of long term debt                                                          |   |                                                | (239,875 | )      |                                                                      |   | (292,375 | ) |
| Discount                                                                                                      |   |                                                | (34,400  | )      |                                                                      |   | (42,140 | ) |
| Beneficial                    conversion feature                                                              |   |                                                | (6,622   | )      |                                                                      |   | (8,112 | ) |
| Long-term                    debt, net of current portion                                                     |   | $                                                   | 133,978  |   |                                                                      | $      | 124,748 |   |

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**Table                of Contents**

| 2007   |   | $      | 239,875 |   |
|--------|--------|--------|---------|--------|
| 2008   |   |   | – |   |
| 2009   |   |   | – |   |
| 2010   |   |   | – |   |
| 2011   |   |   | 175,000 |   |
|   |   | $      | 414,875 |   |

| **8.** | **Earnings                      Per Share** |
|--------|---------------------------------------------|

|                                                                           |   | **Three                        months ended** |        | **Nine                        months ended** |   |
|--------------------------------------------------------------------------------|--------|-----------------------------------------------|-------------|----------------------------------------------|--------|
|                                                                           |   | **June                        30,**           |        | **June                        30,**          |   |
|                                                                           |   |                                          | **2007**    |                                         |   | **2006** |   |   | **2007** |   |   | **2006** |   |
|                                                                           |   |                                          |        |                                         |   |   |   |   |   |   |   |   |   |
| Net                        (loss)                                              |   | $                                             | (84,716     | )                                            | $      | (202,399 | ) | $ | (384,100 | ) | $ | (561,846 | ) |
| Weighted                        average shares:                                |   |                                          |        |                                         |   |   |   |   |   |   |   |   |   |
| Average                        shares outstanding                              |   |                                          | 111,706,611 |                                         |   | 97,247,987 |   |   | 104,299,409 |   |   | 96,068,682 |   |
| Effect                        of dilutive shares                               |   |                                          | –     |                                         |   | – |   |   | – |   |   | – |   |
|                                                                           |   |                                          |        |                                         |   |   |   |   |   |   |   |   |   |
| Average                        shares outstanding adjusted for dilutive effect |   |                                          | 111,706,611 |                                         |   | 97,247,987 |   |   | 104,299,409 |   |   | 96,068,682 |   |
|                                                                           |   |                                          |        |                                         |   |   |   |   |   |   |   |   |   |
| (Loss)                        per share - basic                                |   | $                                             | (0.00       | )                                            | $      | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) |
|                                                                           |   |                                          |        |                                         |   |   |   |   |   |   |   |   |   |
| (Loss)                        per share - diluted                              |   | $                                             | (0.00       | )                                            | $      | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) |

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**Table                    of Contents**

|                                           |   | **June                        30,                        2007** |       |   | **June                        30,                        2006** |   |
|-----------------------------------------------------|--------|-----------------------------------------------------------------|------------|--------|-----------------------------------------------------------------|--------|
|                                                |   |                                                            |       |   |                                                            |   |
| Options                                             |   |                                                            | 4,216,756  |   |                                                            |   | 3,941,615 |   |
| Warrants                                            |   |                                                            | 17,714,197 |   |                                                            |   | 14,634,197 |   |
| Potential                        common equivalents |   |                                                            | 21,930,953 |   |                                                            |   | 18,575,812 |   |

| **9.** | **Subsequent                        Events** |
|--------|----------------------------------------------|

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**Table          of Contents**

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

**SAFE          HARBOR STATEMENT**

**General**

**Overview**

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**Table                of Contents**

** Three          Months Ended June 30, 2007 Compared to Three Months Ended June 30,          2006**

**Revenues**

**Gross          Profit**

**Salaries          and Benefits**

**Research          and Development**

**Stock          Compensation**

**Other          Expenses**

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**Table                of Contents**

**Interest          Expense**

**Amortization          of Deferred Financing Costs**

**Nine          months Ended June 30, 2007 Compared to Nine months Ended June 30,          2006**

**Revenues**

**Gross          Profit**

**Salaries          and Benefits**

**Research          and Development**

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**Table                of Contents**

**Stock          Compensation**

**Other          Expenses**

**Other          Income**

**Interest          Expense**

**Amortization          of Deferred Financing Costs**

**Liquidity          and Capital Resources**

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**Table                of Contents**

**Other          Results of Operations**

**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.** |
|--------------------------|---------------------------------------|

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**Table            of Contents**

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

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

| **Exhibit****Number** |   |  **Description**                                                                         |
|-----------------------|--------|-----------------------------------------------------------------------------------------------|
|                  |   |                                                                                          |
| 13                    |   | Form10-KSB                Annual Report For The Fiscal Year Ended Sept. 30, 2006 (1).    |
| 31                    |   | Certification                Pursuant to Section 302 of the Sarbanes-Oxley Act                |
| 32                    |   | Certification                Pursuant to Section 906 of the Sarbanes-Oxley                Act |

| (1) | Filed                  on or around January 16, 2007, on Form                  10-KSB. |
|-----|----------------------------------------------------------------------------------------|

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

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**Table          of Contents**

**SIGNATURES**

|                                       |                                                                                                                                           |                                   |
|--------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------|
|                                       | **NATIONAL                SCIENTIFIC CORPORATION**                                                                                             |
|                                       |                                                                                                                                           |                                   |
| Date:                 August 14, 2007 | By:                                                                                                                                            | /s/                Michael A. Grollman |
|                                       | Michael                A. GrollmanDirector,                Chief Executive Officer, Acting Chief Financial                Officer and Chairman |

|   |                                                                            |                               |
|--------|---------------------------------------------------------------------------------|------------------------------------|
|   |                                                                            |                               |
|   | By:                                                                             | /s/                Graham L. Clark |
|   | Graham                L. ClarkDirector,                President, and Secretary |

|   |                                 |                             |
|--------|--------------------------------------|----------------------------------|
|   |                                 |                             |
|   | By:                                  | /s/                Gregory Szabo |
|   | Gregory                SzaboDirector |

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