**Table            of Contents**

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

**Washington,            D.C. 20549**

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**FORM          10-QSB**

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**December 31, 2005**

**000-28745**

**NATIONAL          SCIENTIFIC CORPORATION**

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

**(480)            948-8324**

**Preferred          Stock, $0.10 par value**

**Common          Stock, $0.01 par value**

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**Table              of Contents**

**NATIONAL          SCIENTIFIC CORPORATION**

**FORM          10-QSB**

**INDEX**

|                                                                                                       |                                                                                                                                                                                                                                                                      |  **Page** |
|------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|
|                                                                                                       |                                                                                                                                                                                                                                                                      |           |
| Part                I                                                                                      | Financial                Information                                                                                                                                                                                                                                      |  3        |
|                                                                                                       |                                                                                                                                                                                                                                                                      |           |
| Item                1.                                                                                     | Financial                Statements (unaudited)                                                                                                                                                                                                                           |  3        |
|                                                                                                       |                                                                                                                                                                                                                                                                      |           |
|                                                                                                       | Unaudited                    Condensed Balance Sheets - December 31, 2005 and                    September 30, 2005                                                                                                                                                       |  3        |
|                                                                                                       | Unaudited                      Condensed Statements of Operations - Quarters ended December                      31, 2005, 2004, and Cumulative from October 1, 1997 (Inception)                      through                      December                      31, 2005 |  4        |
|                                                                                                       | Unaudited                      Condensed Statements of Cash Flows - Quarters ended December                      31, 2005, 2004, and Cumulative from October 1, 1997 (Inception)                      through                      December                      31, 2005 |  5        |
|                                                                                                       | Unaudited                      Condensed Statement of Changes in Shareholders’ Equity (Deficit) -                      Three                      Months Ended December 31, 2005 and Development                      Stage                                         |  7        |
|                                                                                                       | Notes                  to Financial Statements                                                                                                                                                                                                                            |  8        |
|                                                                                                       |                                                                                                                                                                                                                                                                      |           |
| Item                2.                                                                                     | Management’s                  Discussion and Analysis of Financial Condition                  and Results of Operations                                                                                                                                             |  16       |
| Item                3.                                                                                     | Controls                and Procedures                                                                                                                                                                                                                                    |  19       |
|                                                                                                       |                                                                                                                                                                                                                                                                      |           |
| Part                II                                                                                     | Other                Information                                                                                                                                                                                                                                          |  21       |
|                                                                                                       |                                                                                                                                                                                                                                                                      |           |
| Item                1.                                                                                     | Legal                Proceedings                                                                                                                                                                                                                                          |  21       |
| Item                2.                                                                                     | Changes                  in Securities and Use of Proceeds                                                                                                                                                                                                                |  21       |
| Item                3.                                                                                     | Defaults                Upon Senior Securities                                                                                                                                                                                                                            |  21       |
| Item                4.                                                                                     | Submission                  of Matters to a Vote of Security                  Holders                                                                                                                                                                                     |  21       |
| Item                5.                                                                                     | Other                Information                                                                                                                                                                                                                                          |  21       |
| Item                6.                                                                                     | Exhibits                and Reports on Form 8-K                                                                                                                                                                                                                           |  22       |
|                                                                                                       |                                                                                                                                                                                                                                                                      |           |
| Signatures                                                                                                 |  23                                                                                                                                                                                                                                                                  |
|                                                                                                       |                                                                                                                                                                                                                                                                      |
| Exhibit                31 - Certification Pursuant to Section 302 of the Sarbanes-Oxley                Act |                                                                                                                                                                                                                                                                      |
| Exhibit                32 - Certification Pursuant to Section 906 of the Sarbanes-Oxley                Act |                                                                                                                                                                                                                                                                      |

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**Table          of Contents**

**PART      1 - FINANCIAL INFORMATION**

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

**NATIONAL      SCIENTIFIC CORPORATION**

**(A      Development Stage Company)**

**Unaudited      Condensed Balance Sheets**

**December      31, 2005 and September 30, 2005**

|                                                                                                                                                                                                                                                                     |   | **December                  31, 2005** |        | **September                  30, 2005** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|-------------|-----------------------------------------|--------|
| **ASSETS**                                                                                                                                                                                                                                                               |   |                              |        |                                    |   |
| Current                  Assets:                                                                                                                                                                                                                                         |   |                                   |        |                                    |   |  |   |
| Cash                  and cash equivalents                                                                                                                                                                                                                               |   | $                                      | 15,714      |                                    | $      | 1,616 |   |
| Trade                  receivables, net                                                                                                                                                                                                                                  |   |                                   | 4,361       |                                    |   | 9,968 |   |
| Inventory,                  net                                                                                                                                                                                                                                          |   |                                   | 18,189      |                                    |   | 23,735 |   |
| Other                  assets                                                                                                                                                                                                                                            |   |                                   | 13,905      |                                    |   | 68 |   |
| Total                  current assets                                                                                                                                                                                                                                    |   |                                   | 52,169      |                                    |   | 35,387 |   |
|                                                                                                                                                                                                                                                                     |   |                                   |        |                                    |   |  |   |
| Property                  and equipment, net                                                                                                                                                                                                                             |   |                                   | 6,019       |                                    |   | 7,680 |   |
| Deposits                                                                                                                                                                                                                                                                 |   |                                   | 2,000       |                                    |   | 2,000 |   |
| Deferred                  offering costs, net                                                                                                                                                                                                                            |   |                                   | 23,200      |                                    |   | – |   |
| Investment                                                                                                                                                                                                                                                               |   |                                   | 289,100     |                                    |   | 289,100 |   |
|                                                                                                                                                                                                                                                                     |   | $                                      | 372,488     |                                    | $      | 334,167 |   |
|                                                                                                                                                                                                                                                                     |   |                                   |        |                                    |   |   |   |
| **LIABILITIES                  AND SHAREHOLDERS’ EQUITY (DEFICIT)**                                                                                                                                                                                                |   |                                   |        |                                    |   |  |   |
| Current                  Liabilities:                                                                                                                                                                                                                                    |   |                                   |        |                                    |   |  |   |
| Accounts                  payable - related parties                                                                                                                                                                                                                      |   | $                                      | 70,840      |                                    | $      | 72,914 |   |
| Accounts                  payable - other                                                                                                                                                                                                                                |   |                                   | 162,726     |                                    |   | 183,664 |   |
| Accrued                  expenses                                                                                                                                                                                                                                        |   |                                   | 608,706     |                                    |   | 519,132 |   |
| Notes                  payable - related party                                                                                                                                                                                                                           |   |                                   | 159,000     |                                    |   | 159,000 |   |
| Notes                  payable - other                                                                                                                                                                                                                                   |   |                                   | 43,250      |                                    |   | 60,150 |   |
| Total                  current liabilities                                                                                                                                                                                                                               |   |                                   | 1,044,522   |                                    |   | 994,860 |   |
|                                                                                                                                                                                                                                                                     |   |                                   |        |                                    |   |  |   |
| Notes                  payable, net of current portion                                                                                                                                                                                                                   |   |                                   | 115,518     |                                    |   | – |   |
| Total                  liabilities                                                                                                                                                                                                                                       |   |                                   | 1,160,040   |                                    |   | 994,860 |   |
|                                                                                                                                                                                                                                                                     |   |                                   |        |                                    |   |  |   |
| Commitments                  and contingencies                                                                                                                                                                                                                           |   |                                   | –     |                                    |   | – |   |
|                                                                                                                                                                                                                                                                     |   |                                   |        |                                    |   |   |   |
| Shareholders’                  equity (deficit):                                                                                                                                                                                                                   |   |                                   |        |                                    |   |  |   |
| Preferred                  stock, par value $0.10; 4,000,000 shares authorized, and no shares                  issued                  and outstanding                                                                                                                   |   |                                   | –     |                                    |   | – |   |
| Common                  stock, par value $0.01; 187,000,000 shares authorized, and shares                  issued                  and outstanding 95,795,459 and 94,095,459 at December 31, 2005                  and                  September 30, 2005, respectively |   |                                   | 957,955     |                                    |   | 940,955 |   |
| Additional                  paid-in capital                                                                                                                                                                                                                              |   |                                   | 22,311,347  |                                    |   | 22,248,814 |   |
| Accumulated                  deficit prior to the development stage                                                                                                                                                                                                      |   |                                   | (2,394,680  | )                                       |   | (2,394,680 | ) |
| Accumulated                  deficit during the development stage                                                                                                                                                                                                        |   |                                   | (21,662,174 | )                                       |   | (21,455,782 | ) |
| Total                  shareholders’ equity (deficit)                                                                                                                                                                                                              |   |                                   | (787,552    | )                                       |   | (660,693 | ) |
|                                                                                                                                                                                                                                                                     |   |                                   |        |                                    |   |   |   |
|                                                                                                                                                                                                                                                                     |   | $                                      | 372,488     |                                    | $      | 334,167 |   |
|                                                                                                                                                                                                                                                                     |   |                                   |        |                                    |   |   |   |

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

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**Table          of Contents**

**NATIONAL      SCIENTIFIC CORPORATION**

**(A      Development Stage Company)**

**Unaudited      Condensed Statements of Operations**

**For      the Quarters Ended December 31, 2005, 2004, and Development      Stage**

|                                                         |   | **Three                Months Ended December 31, 2005** |       |  **Three                Months Ended December 31, 2004** |   |  **Development                Stage** |   |
|--------------------------------------------------------------|--------|---------------------------------------------------------|------------|---------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                         |   |                                                    |       |                                                          |   |                                       |   |
| Revenues                                                     |   | $                                                       | 77,679     |                                                          | $      | 1,863                                      |   | $ | 1,178,107 |   |
| Cost                of Sales                                 |   |                                                    | 52,839     |                                                          |   | 1,113                                      |   |   | 1,054,703 |   |
|                                                         |   |                                                    |       |                                                          |   |                                       |   |   |   |   |
| Gross                profit                                  |   |                                                    | 24,840     |                                                          |   | 750                                        |   |   | 123,404 |   |
|                                                         |   |                                                    |       |                                                          |   |                                            |   |   |   |   |
| Costs                and expenses                            |   |                                                    |       |                                                          |   |                                            |   |   |   |   |
| Salaries                and benefits                         |   |                                                    | 83,127     |                                                          |   | 103,801                                    |   |   | 2,990,939 |   |
| Research                and development                      |   |                                                    | 88,078     |                                                          |   | 73,483                                     |   |   | 4,446,061 |   |
| Stock                compensation                            |   |                                                    | —    |                                                          |   | 4,437                                      |   |   | 3,142,288 |   |
| Consulting                fees, related party                |   |                                                    | —    |                                                          |   | —                                    |   |   | 8,175,973 |   |
| Other                                                        |   |                                                    | 42,818     |                                                          |   | 55,988                                     |   |   | 2,966,460 |   |
| Inventory                obsolescence charge                 |   |                                                    | —    |                                                          |   | —                                    |   |   | 46,775 |   |
| Total                costs and expenses                      |   |                                                    | 214,023    |                                                          |   | 237,709                                    |   |   | 21,768,496 |   |
|                                                         |   |                                                    |       |                                                          |   |                                       |   |   |   |   |
| Loss                from operations                          |   |                                                    | (189,183   | )                                                             |   | (236,959                                   | )      |   | (21,645,092 | ) |
|                                                         |   |                                                    |       |                                                          |   |                                            |   |   |   |   |
| Other                income (expense)                        |   |                                                    |       |                                                          |   |                                            |   |   |   |   |
| Interest                and other income                     |   |                                                    | —    |                                                          |   | —                                    |   |   | 178,972 |   |
| Gain                on settlement                            |   |                                                    | —    |                                                          |   | —                                    |   |   | 89,403 |   |
| Interest                expense                              |   |                                                    | (16,409    | )                                                             |   | (3,717                                     | )      |   | (98,166 | ) |
| Amortization                of deferred offering costs       |   |                                                    | (800       | )                                                             |   | —                                    |   |   | (800 | ) |
| Loss                on disposal of assets                    |   |                                                    | —    |                                                          |   | —                                    |   |   | (30,960 | ) |
| Loss                on impairment of investment              |   |                                                    | —    |                                                          |   | —                                    |   |   | (91,344 | ) |
| Loss                on impairment of equipment               |   |                                                    | —    |                                                          |   | —                                    |   |   | (64,187 | ) |
|                                                         |   |                                                    | (17,209    | )                                                             |   | (3,717                                     | )      |   | (17,082 | ) |
| Loss                before income taxes                      |   |                                                    | (206,392   | )                                                             |   | (240,676                                   | )      |   | (21,662,174 | ) |
| Income                tax expense                            |   |                                                    | —    |                                                          |   | —                                    |   |   | — |   |
|                                                         |   |                                                    |       |                                                          |   |                                            |   |   |   |   |
| Net                loss                                      |   | $                                                       | (206,392   | )                                                             | $      | (240,676                                   | )      | $ | (21,662,174 | ) |
|                                                         |   |                                                    |       |                                                          |   |                                       |   |   |   |   |
| Net                loss per common share, basic and diluted  |   | $                                                       | (0.00      | )                                                             | $      | (0.00                                      | )      |   |   |   |
|                                                         |   |                                                    |       |                                                          |   |                                       |   |   |   |   |
| Weighted                average number of shares outstanding |   |                                                    | 95,090,024 |                                                          |   | 84,345,443                                 |   |   |   |   |
|                                                         |   |                                                    |       |                                                          |   |                                       |   |   |   |   |

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

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**Table            of Contents**

**NATIONAL      SCIENTIFIC CORPORATION**

**(A      Development Stage Company)**

**Unaudited      Condensed Statements of Cash Flows**

**For      the Quarters Ended December 31, 2005, 2004, and Development      Stage**

|                                                                                                      |   | **Three                Months Ended December 31, 2005** |     |  **Three                Months Ended December 31, 2004** |   |  **Development** **Stage** |   |
|-----------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------|----------|---------------------------------------------------------------|--------|--------------------------------------|--------|
| Cash                flows from operating activities:                                                      |   |                                                    |          |                                                          |   |                                      |   |   |  |   |
| Net                loss                                                                                   |   | $                                                       | (206,392 | )                                                             | $      | (240,676                             | )      | $ | (21,662,174 | ) |
| Adjustments                to reconcile net loss to net cash used in operating                activities: |   |                                                    |     |                                                          |   |                                 |   |   |   |   |
| Depreciation                                                                                              |   |                                                    | 1,661    |                                                          |   | 3,335                                |   |   | 93,332 |   |
| Loss                on disposal of assets                                                                 |   |                                                    | —  |                                                          |   | —                              |   |   | 30,960 |   |
| Impairment                loss on equipment                                                               |   |                                                    | —  |                                                          |   | —                              |   |   | 64,187 |   |
| Stock                and options issued for services, net                                                 |   |                                                    | —  |                                                          |   | 4,437                                |   |   | 11,639,616 |   |
| Impairment                of inventory                                                                    |   |                                                    | —  |                                                          |   | —                              |   |   | 46,775 |   |
| Impairment                of investment                                                                   |   |                                                    | —  |                                                          |   | —                              |   |   | 91,344 |   |
| Warrant                expense                                                                            |   |                                                    | —  |                                                          |   | —                              |   |   | 4,691 |   |
| Amortization                of deferred offering costs                                                    |   |                                                    | 800      |                                                          |   | —                              |   |   | 800 |   |
| Amortization                of debt discount                                                              |   |                                                    | 1,720    |                                                          |   | —                              |   |   | 1,720 |   |
| Amortization                of beneficial conversion feature                                              |   |                                                    | 331      |                                                          |   | —                              |   |   | 331 |   |
| Changes                in assets and liabilities:                                                         |   |                                                    |     |                                                          |   |                                 |   |   |   |   |
| Decrease                (increase) in inventory                                                           |   |                                                    | 5,546    |                                                          |   | (1,231                               | )      |   | (64,964 | ) |
| (Increase)                decrease in deferred offering costs                                             |   |                                                    | —  |                                                          |   | —                              |   |   | (85,171 | ) |
| Decrease                (increase) in receivables                                                         |   |                                                    | 5,607    |                                                          |   | 538                                  |   |   | 127,270 |   |
| Decrease                (increase) in other assets                                                        |   |                                                    | (13,837  | )                                                             |   | (4,817                               | )      |   | (6,965 | ) |
| Increase                (decrease) in accounts payable and accrued expenses                               |   |                                                    | 84,562   |                                                          |   | 22,827                               |   |   | 1,166,918 |   |
| Net                cash (used in) operating activities                                                    |   |                                                    | (120,002 | )                                                             |   | (215,587                             | )      |   | (8,551,330 | ) |
|                                                                                                      |   |                                                    |     |                                                          |   |                                 |   |   |   |   |
| Cash                flows from investing activities:                                                      |   |                                                    |          |                                                          |   |                                      |   |   |  |   |
| Acquisition                of property and equipment                                                      |   |                                                    | —  |                                                          |   | —                              |   |   | (155,766 | ) |
| Repayment                of loans                                                                         |   |                                                    | —  |                                                          |   | —                              |   |   | 200,000 |   |
| Proceeds                from the sale of furniture and equipment                                          |   |                                                    | —  |                                                          |   | —                              |   |   | 6,050 |   |
| Loans                issued                                                                               |   |                                                    | —  |                                                          |   | —                              |   |   | (400,000 | ) |
| Net                cash (used in) provided by investing activities                                        |   |                                                    | —  |                                                          |   | —                              |   |   | (349,716 | ) |
|                                                                                                      |   |                                                    |     |                                                          |   |                                 |   |   |   |   |
| Cash                flows from financing activities:                                                      |   |                                                    |          |                                                          |   |                                      |   |   |  |   |
| Proceeds                from notes payable                                                                |   |                                                    | 175,000  |                                                          |   | —                              |   |   | 439,500 |   |
| Loan                from (to) officer , related party                                                     |   |                                                    | —  |                                                          |   | 65,000                               |   |   | 65,079 |   |
| Draws                on the line of credit                                                                |   |                                                    | —  |                                                          |   | —                              |   |   | 430,000 |   |
| Repayment                of notes payable                                                                 |   |                                                    | (16,900  | )                                                             |   | —                              |   |   | (225,500 | ) |
| Repayment                of line of credit                                                                |   |                                                    | —  |                                                          |   | —                              |   |   | (430,000 | ) |
| Repayment                of capital lease obligations                                                     |   |                                                    | —  |                                                          |   | —                              |   |   | (1,819 | ) |
| Proceeds                from the exercise of options                                                      |   |                                                    | —  |                                                          |   | —                              |   |   | 208,265 |   |
| Proceeds                from the exercise of warrants                                                     |   |                                                    | —  |                                                          |   | —                              |   |   | 92,460 |   |
| Proceeds                from equity line of credit                                                        |   |                                                    | —  |                                                          |   | —                              |   |   | 414,824 |   |
| Proceeds                from the issuance of preferred stock                                              |   |                                                    | —  |                                                          |   | —                              |   |   | 482,500 |   |
| Payment                of financing costs                                                                 |   |                                                    | (24,000  | )                                                             |   | —                              |   |   | (24,000 | ) |
| Deposits                from private placement                                                            |   |                                                    | —  |                                                          |   | —                              |   |   | — |   |
| Proceeds                from securities exchange agreement                                                |   |                                                    | —  |                                                          |   | —                              |   |   | 240,000 |   |
| Proceeds                from issuance of common stock                                                     |   |                                                    | —  |                                                          |   | —                              |   |   | 7,221,833 |   |
| Net                cash provided by financing activities                                                  |   |                                                    | 134,100  |                                                          |   | 65,000                               |   |   | 8,913,142 |   |
|                                                                                                      |   |                                                    |     |                                                          |   |                                 |   |   |   |   |
|                                                                                                      |   |                                                    |     |                                                          |   |                                 |   |   | (Continued)  |   |

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

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**Table          of Contents**

**NATIONAL        SCIENTIFIC CORPORATION**

**(A        Development Stage Company)**

**Unaudited        Condensed Statements of Cash Flows**

**For        the Quarters Ended December 31, 2005, 2004, and Development        Stage**

**(Continued)**

|                                                                           |   | **Three                  Months Ended December 31, 2005** |    |  **Three                  Months Ended December 31, 2004** |   |  **Development** **Stage** |   |
|--------------------------------------------------------------------------------|--------|-----------------------------------------------------------|---------|-----------------------------------------------------------------|--------|--------------------------------------|--------|
|                                                                           |   |                                                      |    |                                                            |   |                                 |   |   |   |   |
| Net                  (decrease) increase in cash and cash equivalents          |   |                                                      | 14,098  |                                                            |   | (150,587                             | )      |   | 12,096 |   |
| Cash                  and cash equivalents, beginning of period                |   |                                                      | 1,616   |                                                            |   | 160,214                              |   |   | 3,618 |   |
|                                                                           |   |                                                      |    |                                                            |   |                                 |   |   |   |   |
| Cash                  and cash equivalents, end of period                      |   | $                                                         | 15,714  |                                                            | $      | 9,627                                |   | $ | 15,714 |   |
|                                                                           |   |                                                      |    |                                                            |   |                                 |   |   |   |   |
| Supplementary                  Disclosure of Cash Flow Information             |   |                                                      |         |                                                            |   |                                      |   |   |  |   |
| Cash                  paid for interest                                        |   | $                                                         | 556     |                                                            | $      | —                              |   | $ | 37,269 |   |
| Cash                  paid for income taxes                                    |   | $                                                         | — |                                                            |   | —                              |   | $ | 50 |   |
| Conversion                  of accounts payable and accrued expenses to equity |   | $                                                         | 18,000  |                                                            | $      | —                              |   | $ | 100,190 |   |
| Common                  stock exchanged for investment                         |   |                                                      | — |                                                            |   | —                              |   |   | 289,100 |   |
| Debt                  discount and beneficial conversion feature               |   | $                                                         | 61,533  |                                                            | $      | —                              |   | $ | 61,533 |   |
|                                                                           |   |                                                      |    |                                                            |   |                                 |   |   |   |   |

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

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**Table            of Contents**

**NATIONAL      SCIENTIFIC CORPORATION**

**(A        Development Stage Company)**

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

**For        the Three Months Ended December 31, 2005 and Development        Stage**

|                                                                                                                 |   | **Common****Stock**                     |       | **Preferred****Stock**           |   |                                    |   |                             |    |                                              |   |                                                                  |   |
|----------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|------------|----------------------------------|--------|-----------------------------------------|--------|----------------------------------|---------|---------------------------------------------------|--------|-----------------------------------------------------------------------|--------|
|                                                                                                                 |   | **Number                    of Shares** |       | **Par                    Value** |   | **Number                    of Shares** |   | **Par                    Value** |    | **Additional                    Paid-In Capital** |   | **Accumulated                    Defecit Prior to Development Stage** |   | **Accumulated                    Defecit During the Development Stage** |   | **Total** |   |
|                                                                                                                 |   |                                    |       |                             |   |                                    |   |                             |    |                                              |   |                                                                  |   |   |   |   |   |
| Balance,                    September 30, 2005                                                                       |   |                                    | 94,095,459 |                             | $      | 940,955                                 |   |                             | – |                                              | $      | –                                                               |   | $ | 22,248,814 |   | $ | (2,394,680 | ) | $ | (21,455,782 | ) | $ | (660,693 | ) |
|                                                                                                                 |   |                                    |       |                             |   |                                    |   |                             |    |                                              |   |                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance                    of common stock as part of financing program                                             |   |                                    | 1,200,000  |                             |   | 12,000                                  |   |                             | – |                                              |   | –                                                               |   |   | 49,533 |   |   | – |   |   | – |   |   | 61,533 |   |
|                                                                                                                 |   |                                    |       |                             |   |                                    |   |                             |    |                                              |   |                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance                    of common stock in exchange for accounts payable and accrued                    expenses |   |                                    | 500,000    |                             |   | 5,000                                   |   |                             | – |                                              |   | –                                                               |   |   | 13,000 |   |   | – |   |   | – |   |   | 18,000 |   |
|                                                                                                                 |   |                                    |       |                             |   |                                    |   |                             |    |                                              |   |                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    loss                                                                                          |   |                                    | –    |                             |   | –                                 |   |                             | – |                                              |   | –                                                               |   |   | – |   |   | – |   |   | (206,392 | ) |   | (206,392 | ) |
|                                                                                                                 |   |                                    |       |                             |   |                                    |   |                             |    |                                              |   |                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,                    December 31, 2005                                                                        |   |                                    | 95,795,459 |                             | $      | 957,955                                 |   |                             | – |                                              | $      | –                                                               |   | $ | 22,311,347 |   | $ | (2,394,680 | ) | $ | (21,662,174 | ) | $ | (787,552 | ) |
|                                                                                                                 |   |                                    |       |                             |   |                                    |   |                             |    |                                              |   |                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |

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

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**Table            of Contents**

**NATIONAL      SCIENTIFIC CORPORATION**

**(A      Development Stage Company)**

**NOTES      TO FINANCIAL STATEMENTS**

**December      31, 2005**

**(Unaudited)**

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

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

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

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**Table          of Contents**

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

**Stock      Options**

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**Table          of Contents**

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

**Stock      Based Compensation**

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

|                                        |   | **Stock                Options Outstanding** |      | **Stock                Options Exercisable** |   |
|---------------------------------------------|--------|----------------------------------------------|-----------|----------------------------------------------|--------|
|                                        |   |                                         |      | **Weighted**                                 |   |   |   |   |   |   |   |
|                                        |   |                                         |      | **Average**                                  |   |   |   |   |   |   |   |
|                                        |   |                                         |      | **Remaining**                                |   | **Weighted** |   |   |   | **Weighted** |   |
|                                        |   |                                         |      | **Contractual**                              |   | **Average** |   |   |   | **Average** |   |
|                                        |   | **Number**                                   |      | **Life**                                     |   | **Exercise** |   | **Number** |   | **Exercise** |   |
| **Range                of Exercise Prices** |   | **of                Shares**                 |      | **(In                Years)**                |   | **Price** |   | **of                Shares** |   | **Price** |   |
|                                        |   |                                         |      |                                         |   |   |   |   |   |   |   |
| $0.05                to $0.46               |   |                                         | 2,479,257 |                                         |   | 7.26 |   | $ | 0.18 |   |   | 2,479,257 |   | $ | 0.18 |   |
| $0.47                to $1.84               |   |                                         | 1,000,000 |                                         |   | 4.92 |   | $ | 1.84 |   |   | 1,000,000 |   | $ | 1.84 |   |
| $1.85                to $3.00               |   |                                         | 310,000   |                                         |   | 5.07 |   | $ | 2.49 |   |   | 310,000 |   | $ | 2.49 |   |
| Total                                       |   |                                         | 3,789,257 |                                         |   | 6.12 |   | $ | 0.81 |   |   | 3,789,257 |   | $ | 0.81 |   |
|                                        |   |                                         |      |                                         |   |   |   |   |   |   |   |   |   |   |   |   |

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**Table          of Contents**

|                                                                                                                                  |   | **December                31,****2005** |     | **December                31, 2004** |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|----------|--------------------------------------|--------|
|                                                                                                                                  |   |                                    |     |                                 |   |
| Net                loss as reported                                                                                                   |   | $                                       | (206,392 | )                                    | $      | (240,676 | ) |
| Deduct:                Total stock based compensation expense as determined under the fair                value                method |   |                                    | –  |                                 |   | (5,637 | ) |
| Add:                Total stock based compensation recorded in the statement of                operations                             |   |                                    | –  |                                 |   | 4,437 |   |
|                                                                                                                                  |   |                                    |     |                                 |   |   |   |
| Pro                forma net loss                                                                                                     |   | $                                       | (206,392 | )                                    | $      | (241,876 | ) |
|                                                                                                                                  |   |                                    |     |                                 |   |   |   |
| Loss                per share as reported                                                                                             |   |                                    | (0.00    | )                                    |   | (0.00 | ) |
|                                                                                                                                  |   |                                    |     |                                 |   |   |   |
| Loss                per share, pro forma                                                                                              |   |                                    | (0.00    | )                                    |   | (0.00 | ) |
|                                                                                                                                  |   |                                    |     |                                 |   |   |   |

**Warrants**

|                                                    |   | **Warrants                Outstanding**         |       |  **Warrants                Exercisable**      |   |
|---------------------------------------------------------|--------|-------------------------------------------------|------------|----------------------------------------------------|--------|
|   **Range                of Exercise Prices** |   |   **Number                of Shares** |       | **Weighted                Average Exercise Price** |   | **Weighted                Average Remaining Contractual Life (Years)** |   |   **Number                of Shares** |   | **Weighted                Average Exercise Price** |   |
|                                                    |   |                                            |       |                                               |   |   |   |    |   |   |   |
| $0.062                to $0.062                         |   |                                            | 135,000    |                                               |   | 0.062 |   |   | 2.48 |   |   | 135,000 |   |   | 0.062 |   |
| $0.090                to $0.090                         |   |                                            | 1,250,000  |                                               |   | 0.090 |   |   | 2.72 |   |   | 1,250,000 |   |   | 0.090 |   |
| $0.100                to $0.100                         |   |                                            | 3,108,497  |                                               |   | 0.100 |   |   | 4.85 |   |   | 3,108,497 |   |   | 0.100 |   |
| $0.110                to $0.110                         |   |                                            | 7,750,700  |                                               |   | 0.110 |   |   | 3.27 |   |   | 7,750,700 |   |   | 0.110 |   |
| $0.130                to $0.130                         |   |                                            | 640,000    |                                               |   | 0.130 |   |   | 1.02 |   |   | 640,000 |   |   | 0.130 |   |
| $0.350                to $0.350                         |   |                                            | 1,000,000  |                                               |   | 0.350 |   |   | 0.50 |   |   | 1,000,000 |   |   | 0.350 |   |
| $0.500                to $0.500                         |   |                                            | 1,275,000  |                                               |   | 0.500 |   |   | 0.50 |   |   | 1,275,000 |   |   | 0.500 |   |
| $0.750                to $0.750                         |   |                                            | 275,000    |                                               |   | 0.075 |   |   | 0.50 |   |   | 275,000 |   |   | 0.075 |   |
|                                                    |   |                                            | 15,434,197 |                                               |   |   |   |   |   |   |   | 15,434,197 |   |   |   |   |
|                                                    |   |                                            |       |                                               |   |   |   |   |   |   |   |   |   |   |   |   |

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**Table          of Contents**

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

|                                                                               |   | **December                31, 2005** |     | **September                30, 2005** |   |
|------------------------------------------------------------------------------------|--------|--------------------------------------|----------|---------------------------------------|--------|
|                                                                               |   | **(Unaudited)**                      |     | **(Audited)**                         |   |
|                                                                               |   |                                 |     |                                  |   |
| Note                payable to shareholder; unsecured; non-interest                |   |                                 |     |                                  |   |   |   |
| bearing;                matures in June 2006; repayment may be made by the         |   |                                 |     |                                  |   |   |   |
| Company                with either cash or its restricted common stock             |   |                                 |     |                                  |   |   |   |
| or                a combination of cash and stock.                                 |   | $                                    | 43,250   |                                  | $      | 43,250 |   |
| Note                payable to an Officer of the Company; interest                 |   |                                 |     |                                  |   |   |   |
| at                6%; principal and interest payable on demand; unsecured.         |   |                                 | 159,000  |                                  |   | 159,000 |   |
| Note                payable to shareholder; unsecured; non-interest bearing        |   |                                 | –  |                                  |   | 3,000 |   |
| Note                payable to shareholder; unsecured; interest at 6%              |   |                                 | –  |                                  |   | 5,000 |   |
| Note                payable to an employee; interest at 6%; principal and interest |   |                                 |     |                                  |   |   |   |
| at                6%; principal and interest payable on demand; unsecured.         |   |                                 | –  |                                  |   | 8,900 |   |
| Note                payable to an investment fund; payable in full in              |   |                                 |     |                                  |   |   |   |
| November                2010; interest at 8% payable semi-annually in May          |   |                                 |     |                                  |   |   |   |
| and                November; unsecured.                                            |   |                                 | 175,000  |                                  |   | – |   |
|                                                                               |   |                                 | 377,250  |                                  |   | 219,150 |   |
| Less:                                                                              |   |                                 |     |                                  |   |   |   |
| Current                portion of long term debt                                   |   |                                 | (202,250 | )                                     |   | (219,150 | )  |
| Discount                                                                           |   |                                 | (49,880  | )                                     |   | – |   |
| Beneficial                conversion feature                                       |   |                                 | (9,602   | )                                     |   | – |   |
| Long-term                debt, net of current portion                              |   | $                                    | 115,518  |                                  | $      | – |   |
|                                                                               |   |                                 |     |                                  |   |   |   |

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**Table          of Contents**

|   |   |   |    |
|--------|--------|--------|---------|
| 2006   |   | $      | 202,250 |   |
| 2007   |   |   | – |   |
| 2008   |   |   | – |   |
| 2009   |   |   | – |   |
| 2010   |   |   | 175,000 |   |
|   |   | $      | 377,250 |   |

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

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**Table          of Contents**

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

| Inventory,                gross               |   | $      | 64,964  |   |
|-----------------------------------------------|--------|--------|---------|--------|
| Less:                reserve for obsolescence |   |   | (46,775 | )      |
| Inventory,                net                 |   | $      | 18,189  |   |

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

|                                                                      |   | **December                  31,****2005** |       | **December                  31,****2004** |   |
|---------------------------------------------------------------------------|--------|-------------------------------------------|------------|-------------------------------------------|--------|
|                                                                      |   |                                      |       |                                      |   |
| Net                  (loss)                                               |   | $                                         | (206,392   | )                                         | $      | (240,676 | ) |
| Weighted                  average shares:                                 |   |                                      |            |                                      |   |  |   |
| Average                  shares outstanding                               |   |                                      | 95,090,024 |                                      |   | 84,345,443 |   |
| Effect                  of diluted shares                                 |   |                                      | —    |                                      |   | — |   |
|                                                                      |   |                                      |       |                                      |   |   |   |
| Average                  shares outstanding, adjusted for dilutive effect |   |                                      | 95,090,024 |                                      |   | 84,345,443 |   |
|                                                                      |   |                                      |       |                                      |   |   |   |
| (Loss)                  per share - basic                                 |   | $                                         | (0.00      | )                                         | $      | (0.00 | ) |
|                                                                      |   |                                      |       |                                      |   |   |   |
| (Loss)                  per share - diluted                               |   | $                                         | (0.00      | )                                         | $      | (0.00 | ) |
|                                                                      |   |                                      |       |                                      |   |   |   |

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**Table            of Contents**

|                                        |   | **December                31,****2005** |       | **December                31,****2004** |   |
|---------------------------------------------|--------|-----------------------------------------|------------|-----------------------------------------|--------|
|                                        |   |                                    |       |                                    |   |
| Options                                     |   |                                    | 3,789,257  |                                    |   | 3,749,257 |   |
| Warrants                                    |   |                                    | 15,434,197 |                                    |   | 18,249,197 |   |
|                                        |   |                                    |       |                                    |   |   |   |
| Potential                common equivalents |   |                                    | 19,223,454 |                                    |   | 21,998,454 |   |
|                                        |   |                                    |       |                                    |   |   |   |

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**Table          of Contents**

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

**SAFE      HARBOR STATEMENT**

**Three      Months Ended December 31, 2005 Compared to Three Months Ended December 31,      2004**

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**Table          of Contents**

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**Table          of Contents**

**Liquidity          and Capital Resources**

**Other        Subsequent Events **

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**Table          of Contents**

***Travado      IBUS***

***Travado      IBUS***

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

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**Table              of Contents**

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

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

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**Table          of Contents**

**SIGNATURES**

|                                            |                                                                                                                                                                                       |                                                               |
|-------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------|
|                                            | **NATIONAL                    SCIENTIFIC CORPORATION**                                                                                                                                     |
|                                       |                                                                                                                                                                                  |                                                          |
| Date: February                    14, 2006 | 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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