UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                  -------------

                                    FORM 10-K
                                  -------------

(Mark One)

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
    For the fiscal year ended December 31, 2003

                                       OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
    For the transition period from ____________ to ____________

                         Commission file number 0-18267

                                 NCT Group, Inc.
             (Exact name of registrant as specified in its charter)

   Delaware                                                     59-2501025
--------------------------------------------------------------------------------
   (State or other jurisdiction of                           (I.R.S. Employer
   incorporation or organization)                           Identification No.)

20 Ketchum Street, Westport, Connecticut                             06880
--------------------------------------------------------------------------------
(Address of principal executive offices)                           (Zip Code)

        Registrant`s telephone number, including area code (203) 226-4447
                                                           --------------

Securities registered pursuant to Section 12(b) of the Act:  None
                                                             ----

Securities registered pursuant to Section 12(g) of the Act:
                                                   Common Stock, $0.01 par value
                                                   -----------------------------
                                                          (Title of Class)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. /X/ Yes /_/ No

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant`s  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /_/

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). /_/ Yes /X/ No

     The  aggregate  market  value  of  the  outstanding  common  equity  of the
registrant  held  by   non-affiliates  as  of  the  last  business  day  of  the
registrant's  most recently  completed  second fiscal quarter was  approximately
$18.7 million.

     The  number of  shares  outstanding  of the  registrant's  common  stock is
641,970,392 as of April 5, 2004.

<PAGE>


<TABLE>
<CAPTION>

                                Table of Contents
                                                                                        Page
Part I
<S>  <C>                                                                                   <C>
Item 1.    Business                                                                        3
Item 2.    Properties                                                                     26
Item 3.    Legal Proceedings                                                              26
Item 4.    Submission of Matters to a Vote of Security Holders                            30

Part II

Item 5.    Market for the Registrant's Common Equity and Related Stockholder
           Matters                                                                        30
Item 6.    Selected Financial Data                                                        47
Item 7.    Management's Discussion and Analysis of Financial Condition and
           Results of Operations                                                          49
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk                     62
Item 8.    Financial Statements and Supplementary Data                                    62
Item 9.    Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure                                                           62
Item 9A.   Controls and Procedures                                                        63

Part III

Item 10.   Directors and Executive Officers of the Registrant                             63
Item 11.   Executive Compensation                                                         67
Item 12.   Security Ownership of Certain Beneficial Owners and Management                 71
Item 13.   Certain Relationships and Related Transactions                                 74
Item 14.   Principal Accounting Fees and Services                                         95

Part IV

Item 15.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K               95

Signatures                                                                                97

                                       2
<PAGE>


</TABLE>


                                     PART I

ITEM 1.    BUSINESS

A.      General Development of Business

        Overview

     NCT  Group,  Inc.  (OTCBB:  NCTI)  is a  high-tech,  intellectual  property
development  company.  As used in this Annual Report on Form 10-K,  "we," "our,"
"us," "company" and "NCT" refer to NCT Group, Inc. and its subsidiaries,  unless
the context requires otherwise.  As of February 29, 2004, NCT held approximately
595  patents  and  related  rights  and an  extensive  library of  know-how  and
non-patented technology. Our patents allow us and our subsidiaries and licensees
to develop  product lines that include those listed below by our three operating
segments:

Communications Segment
     o    Pro Tech communications headsets and other products
     o    NoiseBuster(R)consumer headsets; ProActive(R)industrial headsets
     o    ClearSpeech(R)   microphones,   speakers,  suite  of  noise  and  echo
          cancellation algorithms and other products
     o    An aircraft cabin quieting system
     o    Artera Turbo(TM) Internet speed enhancement service

Media Segment
     o    Sight & Sound(R)place-based audio and billboard media
     o    Gekko(TM)flat speakers, frames, prints and subwoofers

Technology Segment
     o    Java(TM) - language based microprocessor cores.

     For the year ended  December 31, 2003, our operating  revenue  consisted of
approximately 62.0% in technology licensing fees and royalties, 35.2% in product
sales, 1.8% in advertising and 1.0% in engineering and development services. Our
recognized technology licensing fee revenue for the year ended December 31, 2003
was  primarily  due to  recognition  of deferred  revenue and  generally did not
represent cash realized by the company. No additional cash will be realized upon
recognition of revenue from our remaining deferred revenue balance. Please refer
to detailed discussion below in I. - Revenue. Presently, we do not have material
revenue-generating   licensing  contracts.   The  revenue  contribution  by  our
operating segments for 2001, 2002 and 2003 is outlined below in I. - Revenue and
in Note 25 - notes to our consolidated financial statements.

     In 2003, we have been primarily dependent upon funding from Carole Salkind.
Although we do not have a formal  agreement  requiring  her to do so, we believe
that  Carole  Salkind  will  continue to provide  funds to NCT.  Our belief that
funding from her will continue is based primarily upon her continued  funding of
NCT during 2003 despite NCT's  failure to repay her notes as the notes  matured.
During  2003,  Carole  Salkind has allowed  matured  notes to be rolled into new
notes along with accrued interest and default penalties. See further information
about this in the section "Certain Relationships and Related Transactions."

        Operating segments

     We operate our business  ventures out of separate  subsidiaries,  organized
into three operating segments: communications, media and technology. Each of our
operating segments is targeted to the  commercialization of products in specific
markets.  The following  table  summarizes our ownership of entities  within our
operating segments as of December 31, 2003.

                                       3
<PAGE>


                                                    NCT Group, Inc.
                                               50% or Greater Ownership
                                               ------------------------
<TABLE>
<CAPTION>

                                                                                           % Ownership
                                                                                           -----------
Operating Segment                                                                 Actual          Fully Diluted (a)
-----------------                                                                 ------          -------------
<S>                          <C>                                                    <C>                  <C>

Communications Segment
----------------------
  NCT Hearing Products, Inc. ("NCT Hearing")                                        100                  100
         Pro Tech Communications, Inc. ("Pro Tech")                                  82                   24
         NCT Medical Systems, Inc.                                                   90                   90
  Noise Cancellation Technologies (Europe) Ltd. ("NCT Europe") (b)                  100                  100
  Artera Group, Inc. ("Artera")                                                     100                   69  (c)
         Artera Group International Limited ("Artera International")(b)             100                  100  (d)
  Midcore Software, Inc. ("Midcore")                                                100                  100
         Midcore Software Limited (b)                                               100                  100
  ConnectClearly.com, Inc. ("ConnectClearly")                                        99                   94

Media Segment
-------------
  Distributed Media Corporation ("DMC")                                              99                   99
         DMC Cinema, Inc. (e)                                                        84                   84  (f)
         DMC HealthMedia Inc. ("DMC HealthMedia") (e)                               100                  100
  Distributed Media Corporation International Limited ("DMCI") (b)                  100                  100
         Distributed Media Corporation Limited (b)                                  100                  100
  DMC New York, Inc. ("DMC NY")                                                     100                  100
  NCT Audio Products, Inc. ("NCT Audio") (e)                                        100                  100
  NCT Video Displays, Inc. ("NCT Video")                                            100                  100

Technology Segment/Other
------------------------
  Advancel Logic Corporation ("Advancel")                                            99                   99
  NCT Muffler, Inc.                                                                 100                  100
  Chaplin Patents Holding Company, Inc.                                             100                  100
  NCT Far East, Inc.                                                                100                  100
  2020 Science Limited (b)                                                          100                  100

</TABLE>

Footnotes:
----------
(a)  In  addition to all of the  potential  dilutions  described  in this table,
     under  convertible notes of NCT Group, Inc. issued to Carole Salkind if any
     subsidiary of NCT (other than Pro Tech Communications, Inc.) makes a public
     offering of its common stock,  Carole Salkind has the right to exchange all
     or any part of the principal amount of the notes into that publicly offered
     common stock,  at the initial public  offering price thereof.  No provision
     has been made for this exchange right in any of the subsidiaries listed.
(b)  Denotes foreign subsidiaries.
(c)  Assumes a $1.00 per share price for the Artera  Group,  Inc.  common  stock
     into which certain of the outstanding Artera Group, Inc. series A preferred
     stock is  convertible.  An assumption is necessary  because the  conversion
     formula for the Artera  preferred  stock is based primarily on the price of
     Artera  common  stock on a public  trading  market,  and no such market yet
     exists.  For more about the Artera preferred stock, refer to Note 2 - notes
     to the consolidated financial statements.
(d)  On April 5, 2002, Artera International ceased its Internet service provider
     operations and entered into liquidation  proceedings that have not yet been
     concluded.
(e)  NCT's shares of this subsidiary are presently  under the  jurisdiction of a
     Connecticut  court.  For more  information  about this,  see the Production
     Resource   Group  (PRG)   litigation   in  the  section   entitled   "Legal
     Proceedings."
(f)  On  February  28,  2002,  DMC Cinema  ceased  business  operations  and the
     corporation is now dormant.

                                       4
<PAGE>


     Business Operations

     Business  operations for NCT's  material  business units during fiscal 2003
include  those  outlined  below.  From  time to  time,  we may  rationalize  our
operating  model to  emphasize  one  business  unit over  others as we align our
limited resources to seek to maximize key opportunities.

     NCT Hearing Products, Inc.:

     o    Designs,  develops and markets  active noise  reduction  headphone and
          headset products for consumer, industrial and communications markets
     o    Product  lines  include  the  NoiseBuster(R)  line of  consumer  audio
          headphones  and the  ProActive(R)  line of  industrial  communications
          headsets and active noise reduction earmuffs
     o    Majority  of NCT  Hearing's  sales  are in  North  America;  principal
          customers  consist of end-users,  retail  stores,  original  equipment
          manufacturers and the airline industry

     Pro Tech Communications, Inc.:

     o    An 82%-owned  subsidiary  of NCT Hearing  Products,  Inc.  acquired in
          September 2000
     o    Designs,  develops and manufactures lightweight headsets and new audio
          technologies  for  applications  in  fast-food,  telephone  and  other
          commercial settings
     o    Currently  has  marketing  agreements  with  major  companies  in  the
          fast-food  industry and with catalog and Internet site distributors of
          telephone equipment, primarily in North America
     o    Granted  a  license  from  NCT  Hearing  for  active  noise  reduction
          technology as well as noise and echo cancellation technologies for use
          in lightweight  cellular,  multimedia and telephony  headsets and this
          technology will provide differentiation for Pro Tech products
     o    Three  business  divisions  are  headset  products,   which  develops,
          manufactures  and  distributes   headsets  and  other   communications
          products   to  the  call   center   market  and   fast-food   markets;
          telecommunication system integration, which sells and installs analog,
          digital and Internet protocol phone systems to call centers as well as
          to small and medium-sized businesses; and call center operation, which
          runs  a  full  service  call  center  utilizing  the  latest  customer
          relationship management technology

     Noise Cancellation Technologies (Europe) Ltd.:

     o    Provides research and engineering services to the company in the field
          of active sound control  technology  and to all NCT business  units as
          needed
     o    Development center for all ClearSpeech algorithm technology
     o    Provides marketing and sales support to the company for European sales

     Artera Group, Inc.:

     o    Develops and markets Artera Turbo(TM) software-based,  high-speed data
          communication and network optimization service to residential users as
          well as small and medium businesses
     o    Foundation  for  Artera  Turbo  provided  by  NCT  subsidiary  Midcore
          Software, Inc.'s product called MidPoint Software
     o    Markets Artera Turbo through a network of resellers including Internet
          service providers, incumbent local exchange carriers and others
     o    U.K.-based   information    technology   subsidiary,    Artera   Group
          International  Limited,  offering  voice  and  data  services  to  the
          business community was closed in 2002. On December 18, 2001, the Board
          of Directors of Artera Group International  Limited decided to suspend
          under-performing  operations  and reduce the number of  employees.  On
          March 21, 2002, the Board decided to cease all  operations.  Cessation
          was  formalized  on April 5,  2002  when  Artera  Group  International
          Limited entered  liquidation  proceedings  which proceedings are still
          underway

                                       5
<PAGE>


     ConnectClearly.com, Inc.:

     o    Established to focus on the  development  of Internet  telephony-based
          voice  applications  targeted to the e-commerce and e-CRM  (electronic
          customer relationship management) markets
     o    NCT's  proprietary  Internet  telephony  software  is  the  basis  for
          developing a user-friendly  "click to talk"  application for improving
          the completion rate of Internet transactions by allowing for real-time
          customer service access by a user

     Distributed Media Corporation:

     o    Media  company that uses  proprietary  digital  technology  to deliver
          audio and visual advertising messages integrated with CD-quality music
          to a variety of  out-of-home  and  professional  venues such as retail
          stores and hospitals
     o    Develops and distributes Sight & Sound(R), a microbroadcasting  system
          that delivers place-based broadcast and billboard advertising
     o    Generates revenue from advertising sales and licensing activities
     o    Subsidiary  DMC  HealthMedia  Inc.  was  formed in May 2000 to develop
          Sight & Sound(R)  networks in hospitals  and other health care venues.
          As of December 31, 2003, DMC HealthMedia  has completed  installations
          in  four  New  York  City  hospitals  and 16  outpatient  health  care
          facilities.
     o    Subsidiary DMC Cinema,  Inc., formerly known as Theater Radio Network,
          was acquired in August 2000. DMC Cinema provided audio  programming in
          cinemas,  producing and  distributing a content mix of music,  trivia,
          public service  announcements and advertisements.  In 2002, DMC Cinema
          ceased  business  operations  because  of  under-performance  and  the
          corporation is now dormant.

     NCT Audio Products, Inc.:

     o    Designs,  develops and markets products which utilize  innovative flat
          panel transducer  technology  including the Gekko(TM) flat speaker and
          ArtGekko(TM) printed grille collection
     o    Gekko(TM)flat  speakers are distributed to consumers through a network
          of audio resellers
     o    Provides speakers to our subsidiary  Distributed Media Corporation for
          use in its Sight & Sound(R)microbroadcasting system

     Advancel Logic Corporation:

     o    Participant  in the native  Java(TM)  (Java(TM)  is a trademark of Sun
          Microsystems, Inc.) embedded microprocessor market whose purpose is to
          simplify application  development by providing a platform for the same
          software to run on many  different  kinds of computers and other smart
          devices
     o    Developed a family of processor cores, which will execute instructions
          written in both  Java(TM)  bytecode and the C/C++  computer  language,
          significantly enhancing the rate of instruction execution, which opens
          up many new applications including the next generation home appliances
          and   automotive   applications,   smart   cards  for  a  variety   of
          applications, hearing aids and mobile communications devices
     o    In  1998,  certain  Advancel-developed   technology  was  licensed  to
          STMicroelectronics  SA for  smart  card  applications,  and  in  2003,
          STMicroelectronics   SA  began  shipping  orders  of  its  smart  card
          incorporating our technology
     o    In 2000,  Advancel  entered  into a license  agreement  with  Infinite
          Technology Corporation under which Infinite Technology Corporation was
          granted  exclusive rights to create,  make,  market,  sell and license
          products and  intellectual  property  based upon  Advancel's  Java(TM)
          Turbo-J(TM)  technology and granted non-exclusive rights to Advancel's
          Java(TM) smart card core

                                       6
<PAGE>


     Historical Developments

     For the years ended December 31, 2001, 2002 and 2003, Carole Salkind, a NCT
shareholder,  has provided us approximately $2.5 million, $9.6 million and $10.4
million,  respectively,  cash to  sustain  our  operations,  for which we issued
secured   convertible  notes  and  warrants.   As  of  December  31,  2003,  our
indebtedness to Carole Salkind totaled  approximately $33.8 million. For further
information,  please refer to the section below entitled "Certain  Relationships
and Related Transactions."

     In 2003,  the company  was  primarily  focused on product and  distribution
channel development for Artera Turbo(TM). Highlights for the year include:

o    Artera introduced  Artera Turbo Version 2.5, a residential  dial-up product
     with speed improvements over Version 2.0.
o    Artera  introduced  Artera  Turbo  Version  3.0 with new speed  enhancement
     features, a simplified installation process, a 40% smaller program size and
     more comprehensive help and on-screen documentation.
o    Artera introduced Artera Turbo Version 3.1 that increases  effective speeds
     of e-mail  protocols that are not web-based  (e.g.,  Microsoft  Outlook(R),
     Microsoft Outlook  Express(R) and Netscape(R) Mail) including  compressible
     files sent with  them.  Additionally,  Artera  Turbo 3.1  accelerates  file
     transfer  protocol  (FTP) uploads and downloads of  compressible  files and
     features automatic software updates and enhanced parental controls.
o    Artera  developed  its Artera  Turbo  distribution  network by signing  new
     resellers  and  master  distributors  in  the  U.S.,  Latin  America,   the
     Netherlands,  Turkey, the U.K. and elsewhere.  These  distributors  include
     telecommunications   wholesalers  representing  hundreds  of  thousands  of
     dial-up lines for potential use of Artera Turbo.
o    DMC  HealthMedia  expanded  its  health  care  facility-based   network  by
     installing 12 additional outpatient care facilities throughout the New York
     metropolitan area.
o    DMC HealthMedia advertisers  Neighborhood Health Partners and Health Source
     increased   their  presence  on  the  network  with  expanded   advertising
     contracts.
o    STMicroelectronics,  a global  leader  in  semiconductor  solutions  across
     microelectronics  applications,  provided  samples  of its smart  card chip
     incorporating NCT technology to its major customers.
o    NCT added two algorithms to its ClearSpeech(R) suite - ClearSpeech Adaptive
     Speech Filter II (ASFII) and ClearSpeech  Adaptive Noise Suppressor  (ANS).
     ASFII  improves  NCT's  standard  Adaptive  Speech  Filter noise  reduction
     algorithm by providing  faster  response  time,  less voice  distortion and
     fewer background noise remnants for automotive communications applications.
     ANS is a new algorithm designed to reduce, by 3-12dB, audio signals below a
     given threshold.

     In 2002, the company's efforts were focused on developing,  introducing and
launching  the  single  line,  single  user  version  of  its  Artera  Turbo(TM)
subscription   service;   growing  the  DMC  HealthMedia   network  and  closing
non-performing subsidiaries. Highlights in 2002 include the following:

o    We completed our  acquisition of DMC New York,  Inc.,  which resulted in an
     additional charge of $9.2 million.
o    Artera Group  launched its new Artera Turbo  service on October 9, 2002 and
     began development of a distribution channel for the product.
o    Artera Group further developed its relationship  with GTSI  Corporation,  a
     leading  government  reseller  with annual sales of over $650 million and a
     sales force of over 300.
o    Artera  entered into an agreement with  FairPoint  Communications,  Inc., a
     U.S. telephone  company.  FairPoint  Communications  will sell Artera Turbo
     subscription  services  through  its 29  owned  and  operated  rural  local
     exchange carriers across 18 states,  serving  approximately  245,000 access
     lines.
o    FairPoint relationship was expanded to include FairPoint Broadband, Inc., a
     subsidiary of FairPoint  Communications,  to serve as the exclusive  master
     distributor  of Artera  Turbo(TM) to virtually all of the 1,100 rural local
     exchange  carriers  and  incumbent  local  exchange   carriers.   FairPoint
     Broadband is also a non-exclusive master distributor of Artera Turbo(TM) to
     approximately 7,600 Internet service providers across the U.S. and Canada.

                                       7
<PAGE>


o    DMC HealthMedia installed Sight & Sound(R) networks in four hospitals and
     four health care facilities in the New York metropolitan area and initiated
     advertising sales efforts to organizations promoting health care enrollment
     programs.
o    Two  algorithms  in NCT's  ClearSpeech  suite  became  certified in 2002 as
     eXpressDSP  Compliant.   This  is  a  program  that  certifies  third-party
     developers who meet standards for porting  algorithms to Texas Instruments'
     platforms, thereby accelerating their time to market.
o    ClearSpeech(R) Adaptive Speech Filter algorithm was incorporated into a new
     line of Third Generation cell phones from Sharp Corporation (Japan).
o    In an effort to improve our  financial  performance,  we closed DMC Cinema,
     Inc.  (acquired  in  2000  as  Theater  Radio  Network),  a  subsidiary  of
     Distributed Media Corporation, Artera Group International Limited (acquired
     in 2001 as the Web Factory),  a subsidiary  of Artera  Group,  Inc. and the
     Linthicum, Maryland corporate research and development operation.

     During 2001, our activities were focused toward assimilating the operations
of acquired companies,  including Artera  International  (acquired in 2001), DMC
Cinema  (acquired  in 2000),  Midcore  Software  (acquired in 2000) and Pro Tech
Communications   (acquired  in  2000),   and  further   development  of  related
technologies. In addition, we continued our efforts to develop Distributed Media
Corporation. The following were significant events in 2001:

o    In January 2001,  Artera Group,  Inc. secured initial net financing of $2.5
     million,  based upon convertible  notes issued to outside  investors with a
     face  value of $5.0  million,  convertible  to Artera  common  stock if the
     subsidiary  goes  public.  As founder  investors,  the  investors in Artera
     received a 50%  discount  to face value on the  convertible  notes.  Artera
     issued  additional 6% convertible notes in 2001 for an aggregate face value
     of $2.6  million.  Consideration  for the $7.6 million face value of Artera
     debt issued in 2001  consisted of $2.9 million cash, net of $0.1 million in
     expenses,  Pro Tech common stock  valued at $0.5  million and  non-recourse
     notes receivable of $1.0 million.
o    We  reacquired  (or agreed to reacquire)  DMC licenses that had  previously
     been sold in 1999 and early 2000,  including all DMC licenses for the right
     to operate in the New York area and the license for the right to operate in
     Israel.  These  repurchases  resulted in aggregate charges in 2001 of $19.3
     million,  net of $2.7 million  reduction  of deferred  revenue in 2001 (the
     2002 charge was $9.2 million as noted above).  Our purchase of DMC licenses
     previously  sold was to preserve the value of DMC in the respective  market
     areas  where  licenses  had been sold by  repurchasing  the  licenses  from
     licensees who were not exploiting  them and gaining control of the licenses
     so that they would be available for future sale at prices that would better
     reflect anticipated  operational revenue. To that point in time, we had not
     been able to develop a sufficient  capital  core to exploit the  technology
     and to execute the DMC business  plan.  Please  refer to the section  below
     entitled "Certain Relationships and Related Transactions."
o    NCT and NXT plc reached an agreement to reorganize their 1997 cross-license
     arrangements  related  to flat  panel  speaker  technology.  Under  the new
     agreements, NCT received 2 million ordinary NXT shares in consideration for
     the  cancellation  of the 6% royalty  payable by NXT to NCT Audio Products.
     The NXT shares at issuance held a value of approximately  $9.2 million.  We
     sold all the NXT shares in 2001 for an  aggregate  of $6.9 million in cash,
     net of fees and expenses.

     During 2000, our efforts were devoted to consummating  several acquisitions
including Midcore Software,  Inc., Theater Radio Network, Inc. (which we renamed
DMC Cinema),  and Pro Tech  Communications,  Inc. and continuing  efforts on the
development of Distributed  Media  Corporation.  The following were  significant
events in 2000:

o    Distributed Media Corporation licensed to Eagle Assets Limited the right to
     develop a portion of the New York microbroadcasting  region for $2 million.
     We agreed to reacquire this license in 2001 (see above).
o    Distributed Media Corporation  licensed to Brookepark  Limited the right to
     develop  Israel as a  microbroadcasting  media  market for $2  million.  We
     agreed to reacquire this license in 2001 (see above).
o    NCT  licensed to Delphi  Automotive  Systems  the rights to  ClearSpeech(R)
     noise,  acoustic echo and live echo cancellation  algorithms for use in its
     mobile   multimedia    computing    platform   for   hands-free    cellular
     communications.

                                       8
<PAGE>


o    Our subsidiary, Advancel Logic Corporation, licensed to Infinite Technology
     Corporation  exclusive  rights to create,  make,  market,  sell and license
     products  and   intellectual   property  based  upon  Advancel's   Java(TM)
     Turbo-J(TM)  technology,  subject  to  rights  previously  licensed  to  ST
     Microelectronics  and granted  non-exclusive  rights to Advancel's Java(TM)
     smart card core.

     During  1999,  NCT  Audio's   marketing   accelerated.   Headset  marketing
continued,  as did technology  licensing of the ClearSpeech  technology.  During
1999, NCT's media subsidiary  Distributed Media Corporation (formed in 1998) was
launched.  Also  during  1999,  NCT  introduced  home  theater in a box and home
theater speaker bundles;  Lernout & Hauspie licensed  ClearSpeech noise and echo
cancellation for speech  applications;  Distributed Media  Corporation  executed
contracts with Barnes & Noble College  Bookstores  and Wherehouse  Entertainment
stores;  and Distributed Media  Corporation  entered into a $1 million financing
agreement with Production Resource Group.

B.   Business Strategy

     Our objective is to leverage our existing base of proprietary  technologies
by licensing  them and  developing  new products and  services.  To achieve this
objective,  we license our technologies to subsidiary companies that are focused
in  particular  markets  so that  the  subsidiaries,  in  turn,  may  offer  our
technologies for licensing to others and developing  products and services to be
offered to customers. Employing this strategy, the subsidiary is responsible for
developing  the specific  knowledge  and intimacy  with its market and industry.
NCT's  technologies are applicable to a wide variety of markets,  and therefore,
this market  knowledge  would be  difficult  to  cultivate  without  specialized
subsidiaries.  For example,  Artera Group,  Inc.  licensed the Artera Turbo (TM)
technology  and is  commercializing  a  subscription-based  service for Internet
users. Pro Tech  Communications,  Inc. licensed NCT's active noise reduction and
ClearSpeech(R)  algorithms  for  use  in  headset  products.  Distributed  Media
Corporation is commercializing a  microbroadcasting  system utilizing NCT's flat
speaker  technology and proprietary system management  algorithms.  From time to
time, we sell ownership  interests in NCT and our subsidiaries to acquire assets
and funds needed to operate and finance our ventures.

     We anticipate  that as we establish  distribution  channels and as consumer
awareness of our products and  communication and media services  increases,  so,
too, will product sales and revenue from licensing  fees and  royalties.  At the
same time,  we continue to strive to lower the cost of our products and services
and enhance their technological performance.

C.   Technology

     Active Noise  Reduction.  Active noise reduction  systems are  particularly
effective at minimizing  low frequency  acoustical  noise,  or rumbling  sounds.
Active  noise  reduction  creates  sound waves that are equal in  frequency  but
opposite in phase to the noise,  which is any unwanted  acoustical  signal.  The
effect of the anti-noise  signal on the noise signal is the  cancellation of the
unwanted noise signal.  Products  incorporating  this  technology  include NCT's
NoiseBuster(R) and ProActive(R) headset lines.

     Signal  Enhancement.  Our technology can be used to reduce unwanted signals
that  enter into a  communications  network,  as when  background  noise  enters
telecommunications or radio systems from a telephone receiver or microphone.  We
have developed a line of patented algorithms called  ClearSpeech(R) that perform
various signal  enhancement  functions.  The ClearSpeech  Adaptive Speech Filter
algorithm  removes  noise from  voice  transmissions.  The  filter is  effective
against a variety of stationary  noises whose  amplitude and pitch change slowly
compared to the spectral variations characteristic of human speech.  ClearSpeech
Acoustic Echo  Cancellation  removes  acoustic  echoes in hands-free full duplex
communication   systems.    Acoustic   echo   cancellation   is   an   adaptive,
frequency-based  algorithm that  continuously  tracks and updates the changes in
the acoustic path between the  loudspeaker  and the  microphone to eliminate the
acoustic  echo.  The  ClearSpeech  Reference  Noise Filter  isolates and removes
interfering  signals,  such as background radio,  television,  machine and siren
noise, so communications  can be heard more clearly.  The reference noise filter
algorithm  was  designed  to  remove  interference  from  a  desired  signal  in
applications where a reference signal for the interference is available.

                                       9
<PAGE>


     Digital Broadcasting Station System Software.  Digital broadcasting station
system   software   is  being   utilized   by  DMC  in  its  Sight  &   Sound(R)
microbroadcasting  system  to  deliver  customized  music  programming  to  each
broadcasting  site.  Advertising  is scheduled and updated via a  communications
link such as the Internet. The software also performs status checking,  play log
functions and other  diagnostic  functions made available to the central control
network.

     Telephone Amplifier Technology. Pro Tech has been awarded a patent entitled
"Linearization  of FET Channel  Impedance for Small Signal  Applications"  which
covers the  semiconductor  technology used in Pro Tech's  two-prong and tabletop
telephone  amplifiers  for call centers.  This  technology  facilitates a higher
level  of  signal  processing  quality  at  a  significantly  lower  price  than
conventional semiconductor solutions.

     Information  and  Traffic  Optimization   Management   Software.   Artera's
patent-pending  technology,  Artera Turbo(TM),  is a subscription-based  service
that allows users with a single 56K dial-up connection to browse the Internet at
effective  speeds faster than with a 325kbs digital  subscriber  line connection
for a fraction of the cost of broadband.  Effective speeds of faster connections
such as cable,  digital  subscriber line (DSL) and integrated  services  digital
network (ISDN) are improved as well.  Artera Turbo enhances the effective  speed
of Internet activities,  including web browsing,  e-mail and file transfers, for
any  residence  or small to medium  sized  office,  educational  institution  or
governmental  facility.  Artera  Turbo  works via a series of  proprietary  data
management  techniques.   These  involve  optimization  processes  Artera  Turbo
performs on an information stream to reduce the number of bytes transferred over
the network (reduction of the size of data  transferred).  Those techniques that
have been  developed  by us are the  subjects of three  pending  patents of NCT,
licensed to Artera. We believe that those aspects of the Artera Turbo technology
that are patent  pending are unique to NCT and Artera.  While it is not possible
to patent  all of Artera  Turbo's  data  optimization  technology,  our  patents
pending cover the unique  implementation  techniques we have  developed.  To use
Artera Turbo, the user installs the Artera Turbo software on his or her computer
via download or CD. No additional hardware is required for the user, nor for the
user's Internet  service  provider.  The Artera Turbo software causes the user's
computer to connect to the Internet  through one of Artera Turbo's data centers.
These data centers are integrated systems of server hardware and proprietary and
non-proprietary  software  operated by Artera (or outside  providers on Artera's
behalf) at  commercial  facilities.  The data  centers  perform most of the data
management  functions of Artera Turbo and communicate  with users'  computers to
cause them to perform  related  functions.  Record  keeping,  access control and
billing  are  accomplished   through  a  customer  relations  management  system
connected to the data  centers.  In  forthcoming  versions of Artera  Turbo,  we
expect large  enterprises to be able to house their own,  separate data centers,
resulting in bandwidth usage  reductions in their private  networks.  The Artera
Turbo  product not only  increases  effective  data  transfer  speeds,  but also
manages  Internet  access with features  such as usage  control and  accounting,
routing, firewall, e-mail server, caching, parental controls and more.

D.   NCT Proprietary Rights and Protection

     As of February 29, 2004, NCT and its subsidiaries  held  approximately  595
patents and related  rights and an extensive  library of know-how and unpatented
technology.  We have patent coverage in the U.S., Canada,  Japan, Europe, Korea,
Australia,  Hong Kong and Taiwan. We hold or have rights to 317 inventions as of
February  29,  2004,   including  113  United   States   patents  and  over  482
corresponding  foreign  patents.  We have  pending 119 U.S.  and foreign  patent
applications. Our engineers have made 164 invention disclosures for which we are
in the process of preparing patent applications.

     NCT has continued to make  substantial  investments  in its  technology and
intellectual  property  and  has  incurred  development  costs  for  engineering
prototypes,  pre-production  models and  field-testing  of several  products and
applications.  Management  believes that our  investment in our  technology  has
resulted in the expansion of the value of our  intellectual  property  portfolio
and improvement in the functionality,  speed, costs of components,  products and
applications. Our intellectual property strategy has been to build upon our base
of core technology that we have developed, acquired or exclusively licensed with
newer advanced  technology  patents  developed by,  purchased by, or exclusively
licensed to, us. In many instances, we have incorporated the technology embodied
in our  core  patents  into  patents  covering  specific  product  applications,
including the products'  design and  packaging.  We believe this  building-block
approach  provides  greater  protection  to us than  relying  solely on the core
patents. As our patent holdings increase,  we believe the importance of our core
patents will diminish from a competitive viewpoint.

                                       10
<PAGE>


     DMC  received a U.S.  patent for  Network of Digital  Broadcast  Systems in
January  2003.  During 2003,  we also  received  five foreign  patents  based on
headset active vibration  control and acoustic echo canceller  technologies (two
in each of Canada and Europe and one in Japan). We also filed three applications
based on Artera  technology in 12 foreign  countries in December  2003. In 2002,
three U.S. patent  applications plus their  corresponding  foreign  applications
were filed to cover Artera  technology.  In addition,  one U.S. and one European
headset patent were issued in 2002 covering cushioned earphones and headsets for
aircraft.

     Our core patents and advanced patents and patent  applications  include the
following technologies:

o    active noise control for headsets;
o    adaptive feed forward approach to active noise control;
o    cabin quieting and vibration isolation;
o    multi-channel noise control;
o    combined feedforward and feedback control;
o    control using harmonic filters;
o    filters for signal enhancement and speech filtering;
o    control systems for noise shaping;
o    ClearSpeech (R) technology;
o    Sight  &  Sound(R)'s  method  and  apparatus  for  delivering   audiovisual
     information; and
o    Artera Turbo information and traffic optimization management.

     The  patents  described  above  include  patents of all ages  ranging  from
pending  applications,  which will have a duration of 20 years from their filing
dates, through patents soon to expire. Our patents have expiration dates ranging
from 2004 through 2019, with the majority of the material  patents upon which we
rely expiring in 2011 and beyond.

     NCT has been granted the following trademark registrations:

        Mark                       Field of Use
        ----                       ------------
     NCT logo                      Company logo
     NoiseBuster(R)                Headsets
     ClearSpeech(R)                Adaptive speech filter products
     ProActive(R)                  Headsets
     Sight & Sound(R)              Microbroadcasting
     Artera(R)                     Computer software that permits
                                   high-speed Internet connection and
                                   high-speed electronic transmission of data,
                                   images, documents and voice
     Fastest Ride on the Net!(R)   Computer software that permits high-speed
                                   Internet connection and high-speed
                                   electronic transmission of data, images,
                                   documents and voice

                                       11
<PAGE>


     We have also applied for registration of a number of trademarks including:

        Mark                       Field of Use
        ----                       ------------
     Artera(TM)                    Telecommunications services
                                   involving electronic transmission of
                                   data, images, documents and voice;
                                   provision of high-speed access to
                                   area networks and the Internet;
                                   hosting of web sites of others;
                                   telecommunications consultation (a)
     Artera Turbo(TM)              Computer software that permits high-speed
                                   Internet connection and high-speed electronic
                                   transmission of data, images, documents and
                                   voice; hosting of web sites of others (a)
     Fastest Ride on the Net!(TM)  Telecommunications  services involving
                                   electronic transmission of data, images,
                                   documents and voice; provision of high-speed
                                   access to area networks and the Internet

     Footnote:
     ---------
     (a)  In December 2002,  oppositions  were filed before the U.S.  Patent and
          Trademark  Office to these  trademark  registration  applications  for
          Artera and Artera Turbo.  The alleged basis for the  oppositions  is a
          confusing similarity to another trademark already registered (Altera).
          NCT  intends  to  defend  these  Artera  and  Artera  Turbo  trademark
          registration   applications   against  these  oppositions.   For  more
          information, see the section "Legal Proceedings."

     We also filed trademark  registration  applications for the names Gekko(TM)
and  ArtGekko(TM).  These  applications  were  challenged  by  the  holder  of a
registered  trademark  for the  name  Gecko on the  grounds  of  similarity  and
confusion  in a  proceeding  before the U.S.  Patent  and  Trademark  Office.  A
settlement  of these  challenges  has been  reached  in  principle,  and a final
settlement agreement is expected soon. The settlement is not expected to require
payments  by either  party and is  expected to permit NCT to continue to use the
Gekko and ArtGekko names.

     No  assurance  can be given as to the  range or degree  of  protection  any
patent or  trademark  issued to, or  licensed  by, NCT will  afford or that such
patents,  trademarks or licenses  will provide  protection  that has  commercial
significance  or  will  provide  competitive  advantages  for our  products.  No
assurance can be given that NCT's owned or licensed  patents or trademarks  will
afford  protection  against  competitors  with  similar  patents,   products  or
trademarks.  No  assurance  exists  that  NCT's  owned or  licensed  patents  or
trademarks  will not be challenged by third  parties,  invalidated,  or rendered
unenforceable. Furthermore, there can be no assurance that any pending patent or
trademark  registration  applications or  applications  filed in the future will
result in the issuance of a patent or registered  trademark.  The  invalidation,
abandonment or expiration of patents or trademarks owned or licensed by us which
we believe to be commercially  significant  could permit increased  competition,
with potential adverse effects on NCT and its business prospects.

     We have  conducted  only  limited  patent  and  trademark  searches  and no
assurances  can be given that patents or  trademarks do not exist or will not be
issued or  registered  in the future  that  would have an adverse  effect on our
ability to market our  technologies  or  products or  maintain  our  competitive
position with respect to our  technologies and products.  Substantial  resources
may be required to obtain and defend patent and trademark rights of NCT.

     Our  policy is to enter  into  confidentiality  agreements  with all of our
executive officers,  key technical personnel and advisors, but no assurances can
be made  that  NCT's  know-how,  inventions  and  other  secret  or  unprotected
intellectual property will not be disclosed to third parties by such persons.

     Finally,  annuities and maintenance fees for our extensive patent portfolio
are a  significant  portion of our  expenses;  such costs  typically  range from
$300,000 to $600,000 annually.  Maintenance fees are charged to maintain granted
U.S.  patents in force;  foreign patents and applications are subject to annuity
fees in order to maintain the patents and the pendancy of the applications.  If,
due to financial  constraints,  it becomes necessary for NCT to reduce its level
of  operations,  we will not be able to continue to meet the extensive  monetary
outlay  for  annuities  and  maintenance  fees  to  keep  all  the  patents  and
applications from becoming abandoned. If this occurs, we will have to prioritize
our portfolio accordingly.

                                       12
<PAGE>


E.   Research and Development

     Our  research  and  development  personnel  focus on product,  software and
algorithm development, which provides the technological basis for our technology
licensing and commercial  products,  and on basic research,  which helps provide
the scientific advances that ultimately lead to new products and technology.  As
of February  29,  2004,  our  product  and  development  team was  comprised  of
approximately  22  development  engineers  and  scientists.  In  addition to our
internal  research and development team, we have entered into joint research and
development initiatives with other companies.

     NCT-sponsored  research and development  expenses  aggregated $6.0 million,
$4.7  million and $3.7 million for the years ended  December 31, 2001,  2002 and
2003,  respectively.  We anticipate  that we will  continue to make  significant
research and development expenditures to maintain our competitive position. This
includes  improving our current  technologies  and products and developing newer
technologies and products.

     Our key  research  and  development  activities  over the last three fiscal
     years include:

     o    Development  of  Artera  Turbo  subscription   service  and  web-based
          customer relationship management system for Artera;
     o    Improvement  to  existing  echo   cancellation   and  noise  filtering
          algorithms  including  porting  to  specific  hardware  platforms  and
          processor cores;
     o    Development of four new  ClearSpeech(R)  noise  filtering  algorithms,
          adaptive speech filter II, adaptive noise suppressor,  speech in noise
          detector and intelligent squelch filter;
     o    Improvements to the active noise cancellation technologies used in our
          headset products;
     o    Development of new algorithms and systems;
     o    Development of advertisement play verification software; and
     o    Development  of  echo  cancellation/noise  filtering  software  module
          appropriate for integration into an Internet telephony program.

F.   Existing Products and Services

     Introduction

     NCT and its subsidiaries,  rather than its licensees,  produces each of the
existing  products  and  services  we discuss  below.  NCT's  manufacturing  and
assembly operations are primarily  outsourced and handled through contracts with
key suppliers and partners.  Typically, we purchase complete products from these
sub-contractors  built to our  specifications.  Products are then shipped either
directly to our customers,  to our warehouse or to our  third-party  warehousing
provider.  Our employees are  responsible  for the  receiving,  stocking,  cycle
counting,  shipping and handling of most of our  products.  On occasion,  we may
require that some modifications or value-added  service be performed in-house or
at a third-party contractor.

     Revenue  recognized  for our product lines based upon our  technologies  is
classified in our  statements of  operations  as technology  licensing  fees and
royalties,  product sales, advertising and engineering and development services.
Our  product  lines (and  licenses)  that  comprised  more than 15% of our total
revenue in any one of the last three years are as follows:

o    Flat panel  technology  licensed to New  Transducers  Ltd. (NXT)  comprised
     approximately 15.1%, 29.2% and 44.0% of our total revenue in 2001, 2002 and
     2003, respectively.
o    Midcore technology licensed to Teltran  International Group, Inc. (Teltran)
     comprised approximately 21.7%, 26.2% and zero of our total revenue in 2001,
     2002 and 2003, respectively.
o    Pro Tech Communications'  product revenue was 20.5%, 22.5% and 24.3% of our
     total revenue in 2001, 2002 and 2003, respectively.

                                       13
<PAGE>


     NCT Hearing Products

o    NoiseBuster(R).  Line of personal  active noise  reduction  headphones  and
     communications  headsets that has been marketed since 1997. The NoiseBuster
     reduces low frequency  background noise  electronically  using active noise
     reduction  technology,  while leaving speech and music clearly audible. The
     NoiseBuster headset is sold directly by NCT as well as through a network of
     resellers.
o    ProActive(R).  Line of active noise reduction industrial hearing protection
     and closed back communications  headsets that has been marketed since 1996.
     The  ProActive  is ideal for use in  higher-noise  environments  consisting
     largely of  low-frequency  noise that cannot easily be reduced with passive
     methods.  Low  frequency  noise  masks the  intelligibility  of speech  and
     warning signals, which can be hazardous.  ProActive is sold directly by NCT
     as well as through a network of resellers.
o    NB-PCU. Integration of NCT's active noise control technology into in-flight
     passenger entertainment systems. As a component of the system, NCT also has
     developed a low-cost  headset  specifically for in-flight use to be used in
     conjunction  with the integrated  active noise reduction  electronics.  The
     system is currently being installed in first and  business-class  cabins on
     new United Airlines' aircraft.

     Pro Tech Communication Products

     Pro Tech currently sells high-quality, lightweight headsets to call centers
and the fast food industry. The following are products manufactured or assembled
by Pro Tech and  sold  directly  by Pro Tech as well as  through  a  network  of
resellers:

o    The ProCom. Lightweight fast-food headset
o    The  Apollo.  Advanced,  lightweight  headset  design  sold  for  use  with
     telephone users in the call center and small office market
o    The Apollo  Freedom  Series  Headset.  A headset made to plug directly into
     phone  systems that already have  amplification  built into their  existing
     handset
o    The Gemini  Amplifier.  A full  feature  amplifier  designed  to be used in
     nearly all phone or PC phone  configurations  in the call  center and small
     office market
o    The USB Adapter. An adapter that allows the use of an amplifier and headset
     in PC phone installations
o    The DSP Intelligent  Microphone.  Designed to serve those markets where the
     use of a headset is not wanted but headset  functionality  is required such
     as  speech   recognition  and  speech   enabling   input/output  PC  gaming
     applications
o    The Manager's Headset. A lightweight  over-the-ear  fast-food headset which
     provides  improved  comfort  to  the  fast-food  store  manager  monitoring
     drive-through activity
o    The A-10  Amplifier.  Multi-line  amplifier  being offered with each of Pro
     Tech's headsets,  designed for the small office and home office markets and
     has been  engineered to work with over 90% of all existing phone systems in
     the world
o    The A-27 Amplifier.  Designed for automatic  control  distributors or phone
     systems which use the standard PJ-237 2-prong plug as their interface
o    The Active Series Headset. Designed for the mobile headset user
o    The Trinity Headset. Designed for users in noisy environments

     NCT Communications Products

     ClearSpeech (R) algorithms are developed by NCT and licensed  directly from
NCT to manufacturers for use in a wide variety of communications applications.

o    ClearSpeech(R)Adaptive  Speech Filter.  Removes stationary noise from voice
     transmissions
o    ClearSpeech(R)Adaptive Speech Filter II. Removes broadband stationary noise
     from voice transmissions, particularly aimed at automotive environments
o    ClearSpeech(R)-Acoustic  Echo  Cancellation.  Removes  acoustic  echoes  in
     hands-free full duplex communication systems
o    ClearSpeech(R)-Reference  Noise  Filter.  Isolates and removes  interfering
     signals, such as background radio, television,  machine and siren noise, so
     communications can be heard more clearly

                                       14
<PAGE>


o    ClearSpeech(R)-Speech  in Noise  Detector.  A  noise-robust  voice activity
     detector that  produces a binary value,  depending on whether or not speech
     is detected,  and an audio output for which  non-speech  segments have been
     muted
o    ClearSpeech(R)-Intelligent Squelch Filter. Reduces unwanted signals such as
     pops and pre-speech noise experienced in some radio communications
o    ClearSpeech(R)-Line  Echo  Cancellation.  Reduces electrical echo caused by
     2-4 wire hybrids in telephone networks
o    ClearSpeech(R) Adaptive Noise Suppressor.  Reduces signals that are below a
     given threshold
o    ClearSpeech(R)-Mic. The first digital noise reduction microphone system for
     use with hands-free communication systems, substantially reduces background
     road, tire, wind, engine and traffic noise from hands-free calls,  allowing
     the person  receiving  the call to hear voices  more  clearly and with less
     frustration
o    ClearSpeech(R)-Speaker. A loudspeaker that cleans background noise from the
     incoming   speech  signal  over  a  two-way  or  mobile  radio  for  better
     intelligibility,  suitable for use with mobile radios,  fleet communication
     systems,   marine   radios   and  many   other   communication   systems
o    ClearSpeech(R)  Chip  Set.  Currently  being  sold for  incorporation  into
     communication systems at drive-through  fast-food  restaurants,  allows the
     system to filter background car noise so that only the voice comes through,
     cutting down on errors in the order process
o    ClearSpeech(R)-PCB   Board.   Currently   sold   for   incorporation   into
     communication systems for public transportation buses
o    ClearSpeech(R)-Algorithm  Evaluation Platform. A hardware platform designed
     to facilitate real-time evaluation of the ClearSpeech algorithms

     NCT Audio Products

     Gekko(TM) flat speaker and ArtGekko(TM)  speaker grille. Line of flat audio
speakers  utilizing NCT's patented flat panel transducer  technology and line of
acoustically  permeable,  decorative  speaker  grilles.  With  this  technology,
Gekko(TM)  speakers deliver sweet space sound that floods the room with sound as
opposed to conventional speakers which deliver sound like a spotlight. Available
in two sizes,  the Gekko(TM)  flat speakers are thin wall hanging  speakers that
are  designed to accept high quality  reproductions  of the world's most popular
artwork,  which is the  ArtGekko(TM)  line of replacement  prints and decorative
frames. The art is printed on acoustically  transparent  material,  which allows
all sound from the flat speaker to pass freely.  Gekko(TM)  flat  speakers  have
been sold  since  1998  through a network  of audio  retailers.  NCT Audio  also
provides  flat speakers for  Distributed  Media  Corporation's  Sight & Sound(R)
microbroadcasting system.

     Distributed Media Corporation Advertising

     Sight & Sound(R)  system.  Sight &  Sound(R)  provides  advertisers  with a
place-based  medium in out-of-home  commercial and professional  establishments.
The Sight & Sound(R)  unit is  comprised of a  stationary  billboard  format and
broadcast  music and  advertisements.  The source of the sound for the system is
our digital  broadcast  system that  contains a computer  with a hard drive,  an
amplifier,  sound  compression unit and other electronic  devices.  The music is
downloaded  from the DMC home office to the hard drive  through the Internet and
then played  through flat panel speakers  installed in the store.  The system is
controlled and monitored remotely from a central site and the system is scalable
to any number of sites.  The audio  portion  of the  advertising  is  downloaded
electronically  while  the  print  aspect  of  our  advertisements  is  sent  to
independent agents who place the advertisements in the establishments.

     The  viability of this  business is dependent  on  advertising  placements.
Because  of this  and  because  advertisers,  especially  national  advertisers,
require  significant  reach into a market when  purchasing  media,  an important
objective  of DMC is to  develop a  substantial  network  of  establishments  as
quickly as possible.  There are two  different  strategies  DMC has employed for
building  the Sight & Sound(R)  network.  One  strategy  is for DMC to  contract
directly  with  large  national  retailers  (such  as  Barnes  &  Noble  College
Bookstores)  and with health care  facilities  for the deployment of the Sight &
Sound(R)  music  system and media  service in their  establishments.  Under this
contract  strategy,  DMC (or its designee)  provides,  installs and operates the
Sight &  Sound(R)  system  at its  directly  contracted  locations  and pays the
contracted person (such as Barnes & Noble College  Bookstores or the health care
facility) a percentage  of the  advertising  revenue  generated by its installed
locations.  As  contracted,  we

                                       15
<PAGE>


maintain the system by providing the music genre  selected  along with the audio
advertisements  to be aired and the billboard  advertisements to be displayed on
the flat panel speakers at the respective  locations.  DMC pays a portion of the
advertising  revenue  generated (a royalty) as  compensation  for our use of the
facilities  where  the  Sight  &  Sound(R)  system  is  located  (including  the
establishments  secured by DMC's  licensees).  We  believe  the  payment  serves
several purposes  including:  an inducement for the establishment owner to house
the Sight & Sound(R) unit and an incentive for the  establishment  owner to seek
and promote advertisers to air/display advertisements at the location.

     DMC had executed a contract with Barnes & Noble College  Bookstores,  which
allows for the placement of our Sight & Sound(R) system in its approximately 400
retail store  locations  throughout the U.S. (as our cash resources will allow).
As of December 31, 2003,  33 Barnes & Noble  College  Bookstores  locations  are
currently  operating DMC digital  broadcasting  systems  primarily  installed in
2000.  Our  installed  base  of  operating  Barnes  & Noble  College  Bookstores
locations has declined due to lost leases and new  construction by the retailer.
Our installation process is contingent on having adequate cash resources and has
progressed  slowly due to our financial  constraints.  The operating systems are
geographically dispersed throughout the U.S.

     A second  strategy  developed to  accelerate  the  expansion of the Sight &
Sound network is the  licensing of market areas (by  geographic  territories  or
lines of business).  As a way of  accelerating  the growth of DMC and delivering
expanded  reach to its  advertisers,  through 2000,  DMC had actively  pursued a
licensing  strategy of forming  national and  international  affiliate  networks
(generally  within  a  defined  geographical  or  market  area  such as  health,
education,  hospitality  or  fitness).  Since 2000,  DMC has  de-emphasized  its
licensing  efforts  due  to  insufficient   capital  to  market  to  prospective
licensees,  inadequate  financing  to provide  equipment  to the  licensees,  as
needed, and weakness in the advertising sector. In the licensing  strategy,  DMC
(as licensor)  provides the Sight & Sound unit to the licensee,  as the licensee
may request.  The licensee secures locations to house the Sight & Sound unit, is
responsible for the installation, maintenance and operation of the Sight & Sound
unit and is  responsible  for  selling  local and  regional  advertising  in its
licensed  area.  Upon request from the licensee and for a fee, DMC maintains the
system by providing  music of the selected genre along with the audio and visual
advertising  scheduled  to be aired and  displayed  on the  behalf of the paying
advertiser.  DMC installs and operates the system on behalf of the licensee only
as  requested  by the  licensee  and for a fee.  Both DMC and the  licensee  are
responsible  for  selling  advertising,  although  DMC's  emphasis is to attract
national advertisers (see discussion of DMC licensing activities in I. - Revenue
below). As noted above, DMC pays a portion of the advertising  revenue generated
to the licensee as compensation  for our use of the facilities where the Sight &
Sound(R)  system is located.  We believe the payment serves as an inducement for
the licensee to secure locations to house the Sight & Sound(R) unit and provides
an incentive  for the licensee to seek and promote  advertisers  to  air/display
advertisements at its locations.

     Artera Group Products

     Artera  Turbo is a  software-based  service  that  improves  the  effective
performance of communication  lines for Internet-based  applications such as web
browsing,  e-mail and file  transfers.  It  accomplishes  these  improvements by
employing a number of patent-pending,  performance  enhancement  techniques that
decrease  the  size and  increase  efficiencies  in the  movement,  storage  and
delivery  of  electronic  data.  The core of the  Artera  Turbo  service  is the
MidPoint  technology,   which  we  combined  with  other  performance  enhancing
technologies  we invented to create  Artera Turbo.  The following  releases have
been made:

o    With  Artera  Turbo  version  1  (released   January   2002),   local  area
     network-based PC users (typically,  businesses)  utilizing multiple dial-up
     lines are able to achieve  effective  speeds of up to four times the normal
     speed of dial-up lines. The effective speeds of faster  connections such as
     cable,  digital subscriber line and integrated services digital network are
     improved as well.
o    With Artera Turbo version 2 (released October 2002), residential, single PC
     users  with a single  dial-up  line are able to  achieve  effective  speeds
     averaging  five times as fast as those  achieved  when Artera  Turbo is not
     used. The effective  speeds of faster  connections  such as cable,  digital
     subscriber  line and integrated  services  digital  network are improved as
     well.
o    With Artera Turbo version 2.5 (released  January 2003),  the single dial-up
     line,  single PC user is able to achieve  effective  speeds  averaging  5.6
     times  as fast as  those  achieved  when  Artera  Turbo  is not  used.  The
     effective speeds of faster  connections such as cable,  digital  subscriber
     line and integrated services digital network are also improved.

                                       16
<PAGE>


o    With Artera Turbo 3.0  (released  April 2003),  we  introduced an intuitive
     user interface that makes accessing  features,  adding options and changing
     settings  easier for the user and that includes visual feedback to the user
     to indicate some of Artera Turbo's most important features.
o    With  Artera  Turbo  Version 3.1  (released  December  2003),  we added the
     ability to  increase  effective  speeds of e-mails  that are not  web-based
     (e.g., Microsoft  Outlook(R)e-mails),  including  compressible  attachments
     sent with them, and of  compressible  files uploaded or downloaded via file
     transfer protocol (FTP). We also added an automatic software update feature
     and enhanced  parental  controls,  which are  important to the  residential
     user.  The Local Area Network  (LAN)-based  product allows small office and
     home network  users  connected to a LAN to share an Internet  connection by
     teaming  multiple dial-up or other lines. For broadband access to LAN-based
     technology, the user is able to achieve more than twice the effective speed
     using less than half the  bandwidth.  Also  within  this  version of Artera
     Turbo was our Road Warrior client software,  which allows notebook computer
     users to move easily from their office LANs to use at home or on the road.

     For each application of Artera Turbo, the level of its performance  depends
on the nature of the data being  transmitted.  The general rule is that the more
compressible,  cacheable and inefficiently  designed the data, the higher Artera
Turbo's performance.  Artera Turbo is most effective with web browsing,  e-mail,
e-mails with compressible  attachments and file transfer of compressible  files.
Artera Turbo is less effective with  streaming  media,  secure web pages such as
those used for credit card forms, e-mail with  non-compressible  attachments and
FTP  transfers  of  non-compressible   files.  While  Internet  connections  are
generally faster with multiple lines (requiring  multiple modems and, typically,
multiple Internet service provider  accounts),  Artera Turbo achieves  effective
speed improvements with only one line, modem,  Internet service provider account
and personal computer. All of the performance  enhancements described above have
been  verified  in tests  conducted  in our  laboratories,  although we have not
contracted independent laboratories to conduct the tests on the product.

     Although  there are other  products  being  marketed  by  Internet  service
providers and other vendors that perform  services  similar to Artera Turbo,  we
differentiate our product from the competition by offering high performance with
more features and greater adaptability. For example:

o    Artera Turbo works with any type of Internet connection  including dial-up,
     ISDN,  wireless,  satellite,  DSL, cable and T-1 lines. Many Internet speed
     enhancers deliver speed improvements only for narrowband dial-up.
o    Artera  Turbo  includes  an  integrated,  ultra-secure  firewall to protect
     computers  from  viruses,  hackers  and  other  unwanted  attacks.  To  our
     knowledge, no other Internet speed enhancer contains this feature.
o    Artera  Turbo  includes  integrated  web site  parental  controls  to allow
     parents to determine  which web pages their  children may or may not visit.
     To our knowledge, no other Internet speed enhancer contains this feature.
o    All current  Internet speed enhancers trade off, to some extent,  on-screen
     graphics  resolution for effective speed increases,  but with Artera Turbo,
     our tests  indicated the rate of effective speed increase for a given level
     of graphics  resolution  reduction is higher than with other Internet speed
     enhancers;
o    Artera  Turbo  comes  in a  single  user  residential  version  and a small
     office/home  office  (SoHo)  version that can support up to 249  concurrent
     users on a LAN. In 2004, we have developed an enterprise  version that will
     support 250 or more concurrent users on a LAN.

     We continue to work to improve Artera Turbo to allow even faster  effective
Internet speeds and to permit the use of the product under  additional  personal
computer and network configurations. Artera Turbo will remain a valuable product
even if the use of narrowband  dial-up  Internet  access  declines in the United
States over time, because (i) Artera Turbo increases effective speeds of faster,
broadband  connections  as well as  dial-up;  (ii) any decline in dial-up in the
United States will be gradual;  (iii) Artera Turbo will still be able to service
large numbers of dial-up customers in other countries; and (iv) with forthcoming
versions,  Artera Turbo will be able to improve  effective data transfer  speeds
within internal LANs not connected to the Internet.

     Artera Turbo is delivered to end users as a subscription service, generally
on a  month-to-month  basis but  sometimes  under annual or other  arrangements.
Artera  markets its  services to  regulated  and  unregulated  phone  companies,
Internet service  providers (ISP),  wireless  providers and other  organizations
that offer Internet access services. Artera continues to expand its distribution
channels for resellers.  Distribution  is via Artera's  network of exclusive and
non-exclusive  distributors  and their resellers in the United States and around
the world.  Distributors

                                       17
<PAGE>


include ISPs and others that offer  Internet  access  services such as Incumbent
Local Exchange Carriers and Competitive Local Exchange Carriers. Artera Turbo is
generally offered to end users in one of the following ways:

o    As a  bundled  offering,  in  which a  reseller  has a single  offering  of
     Internet  access  service  and  Artera  Turbo is an  included  part of that
     offering for all of the reseller's customers.
o    As a premium  offering,  in which a  reseller  offers a  standard  Internet
     access  service that does not include  Artera Turbo and a premium  Internet
     access service that does, with the customer selecting between the two.
o    As a  separate  offering,  in which a  reseller  offers  Artera  Turbo as a
     distinct  product  that can be  purchased  and used to enhance the existing
     Internet access offerings of the reseller.

     Artera Turbo pricing to distributors  varies depending on the version being
distributed, the geographical territory, the volume of distribution, the support
services performed by the distributor, the nature and extent of the distribution
and marketing  commitments and, of course, the competitive  environment.  Artera
Turbo pricing to end users is determined by the resellers. Some resellers do not
specifically  charge for Artera Turbo,  choosing  instead to include it in their
offerings to improve  performance,  reduce end user turnover  (churn) and garner
new customers.  Of the distributors who do charge for Artera Turbo,  monthly per
user charges  generally  range from $2.00 to $5.00.  Other Internet access speed
enhancers are generally  priced in the same range. Our experience with retaining
Artera   Turbo   subscribers   is  at  or  above  the  norm  for  similar   paid
Internet-related  services.  The  majority  of  distributors  signed  by  Artera
continue to offer Artera Turbo to their customers.

     In 2002, Artera,  FairPoint  Communications,  Inc. and FairPoint Broadband,
Inc., a  wholly-owned  subsidiary of FairPoint  Communications,  Inc.,  executed
various license  agreements whereby FairPoint served,  with some exceptions,  as
the exclusive master  distributor of Artera Turbo to ILECs, rural local exchange
carriers  and  certain  ISPs in the  United  States  and  Canada  and have other
non-exclusive rights with respect to Artera Turbo in that territory.  On May 23,
2003,  FairPoint Broadband and Artera entered into a memorandum of understanding
in which they noted their mutual intent to execute a new agreement.  On November
1, 2003, the parties executed a new agreement that replaced the prior agreements
with FairPoint Broadband and FairPoint Communications. Please refer to Note 13 -
notes to the consolidated financial statements.

     As of December 31, 2003,  FairPoint has paid us $546,000 in  non-refundable
license  fees  representing  the total amount due us. The balance of the license
fee of $2.0  million  required  under  one of the prior  agreements  will not be
collected  because of the  renegotiated  agreement  executed  in 2003.  To date,
Fairpoint  has paid us only a nominal  amount (less than  $1,000) in  royalties.
FairPoint  has told us that it has not sought  alternative  vendors for services
like Artera's,  but rather has worked with Artera to make the relationship  more
beneficial for both parties.  We too have not sought a replacement for FairPoint
and have  worked to improve the  relationship  for mutual  benefit.  Although we
continue  to sign up and  seek  other  distributors  for  Artera  Turbo in North
America and beyond, those are additions to, not replacements of, FairPoint.  Our
experience  with  retaining  Artera  Turbo  subscribers   through  FairPoint  is
comparable to our experience  through other  distributors,  which is at or above
the norm for similar paid Internet-related services.

G.   Strategic Relationships

     NCT's  establishment and maintenance of strategic  relationships with major
domestic and  international  business concerns has facilitated the licensing and
sale of its technologies and applications. In exchange for the benefits to these
companies' own products offered by our technology,  these  relationships,  under
the  terms  of  license   agreements,   provide   marketing,   distribution  and
manufacturing  capabilities  for our products and enable us to limit the expense
of our own research and development  activities.  In order to ensure  dependable
sources of supply and to maintain  quality  control and cost  effectiveness  for
components  incorporated in our applications and products,  an important element
of our  strategy  has  been  to  identify  and  enter  into  relationships  with
manufacturers  that will develop and produce  custom-made  items for NCT product
applications,  and  with  manufacturers  of  components  that  will  supply  and
integrate  components for NCT technologies.  The following  summarizes NCT's key
licensing relationships:

                                       18
<PAGE>


--------------------------------------------------------------------------------
                                 Date Initial
                                 Relationship
     Key Licensees               Established             Applications
     -------------               -----------             ------------
Ultra Electronics Ltd.            June 1991      Aircraft Cabin Quieting Systems

New Transducers Ltd.              March 1997        Flat Panel Transducers

Oki Electric Industry Co., Ltd.  October 1997           Communications

STMicroelectronics SA &          November 1998          Java(TM)platform
  STMicroelectronics Srl

Delphi Automotive Systems          May 2000              Communications

Sharp Corporation                 August 2001            Communications
--------------------------------------------------------------------------------


     Ultra Electronics Ltd. (U.K.)

     Since  1991,  NCT and Ultra  (and  Ultra's  predecessor,  part of the Dowty
Group),  have been designing and developing systems to enhance passenger comfort
by  quieting  aircraft  passenger  compartments  in  specified  propeller-driven
aircraft,  which Ultra sells to the worldwide turbo-prop aircraft market. In May
1993,  Ultra and NCT signed a teaming  agreement  to produce and install the NCT
cabin quieting system on the SAAB 340 aircraft.  Deliveries under this agreement
began in 1994. In March 1995,  NCT and Ultra  amended the teaming  agreement and
concluded a licensing and royalty  agreement for $2.6 million.  The  arrangement
with Ultra  terminates  upon the  expiration  of the last  applicable  patent or
rights.  Under this  agreement  beginning in 1998 and  continuing  through 2013,
Ultra has or will pay NCT a royalty of 1.5% of sales of  products  incorporating
NCT technology (refer to Note 4 - notes to the consolidated financial statements
for further details).  Each quarter on a timely basis, Ultra provides us with an
accounting of its sales of products incorporating NCT technology; however, Ultra
tends to not pay us the royalties due on a timely basis.

     New Transducers Ltd. (U.K.)

     New Transducers Ltd. (NXT),  its parent,  NXT plc, a United Kingdom company
listed  on the  London  Stock  Exchange,  NCT and  NCT  Audio  executed  various
cross-licensing  agreements  in  1997.  In  2001,  NCT and NXT  entered  into an
arrangement to reorganize the  cross-license  agreements  between the companies.
Under the new  agreements,  we received  two million  ordinary NXT plc shares in
consideration  of the  cancellation  of the royalty  payable by NXT to NCT Audio
under the 1997 cross-license agreement. The NXT plc shares, upon issuance, had a
market  value of  approximately  $9.2  million;  these shares were sold for $6.9
million after commissions, resulting in a loss of $2.3 million. We used the cash
proceeds in accordance with the revised  agreements.  In addition,  ownership of
specified intellectual property, the rights to which were previously licensed to
NXT,  was  transferred  to NXT.  NXT  has  licensed  to NCT  and its  applicable
subsidiaries   the   specified  NXT   intellectual   property  and  all  of  the
NCT-developed  intellectual property. NXT agreed to design a low-cost flat panel
speaker for use by Distributed Media Corporation. Also under the new agreements,
we  acquired  533  shares of NCT Audio that were held by NXT and  allowed  NXT a
cashless  exercise of an option granted in 1997 to purchase  3,850,000 shares of
our  common  stock.  NXT is  required  to assist  DMC in  developing  a new flat
speaker,  and we will pay royalties on products  developed by NXT and sold by us
at the greater of 2% of net sales revenue or ten cents per product  developed by
NXT  (refer  to  Notes  4,  16 and 17 -  notes  to  the  consolidated  financial
statements for further details).

     Oki Electric Industry Co., Ltd. (Japan)

     In October 1997, NCT and Oki executed a license agreement.  Under the terms
of the  agreement,  which  included an up-front  license fee and future per unit
royalties,  Oki licensed NCT's ClearSpeech(R)  noise cancellation  algorithm for
integration   into   large-scale    integrated   circuits   for   communications
applications.  NCT has  granted  Oki the  right  to  manufacture,  use and  sell
products incorporating the algorithm.  The algorithm is specifically designed to
remove  background  noise from  speech and other  transmitted  signals,  greatly
improving  intelligibility  and  clarity  of  communications.  NCT is  currently
receiving  royalties from OKI relating to the license agreement (refer to Note 4
-

                                       19
<PAGE>


notes to the consolidated financial statements).  This agreement terminates upon
the expiration of the last applicable licensed patent, unless earlier terminated
by written agreement of the parties.

     STMicroelectronics SA & STMicroelectronics Srl (France and Italy)

     In November 1998,  our  subsidiary,  Advancel,  and  STMicroelectronics  SA
executed a license agreement.  Under the terms of the agreement,  which included
the payment of a license fee, a minimum  royalty within two years and future per
unit royalties  which continue for an unspecified  term,  STMicroelectronics  SA
licensed Advancel's  tiny2J(TM) for Java(TM) (the T2J-processor core) to combine
it  with  its  proven  secure  architecture  and  advanced   nonvolatile  memory
technology,  to offer a new generation of secure microcontrollers for smart card
applications.  The T2J-processor core is designed to accelerate the execution of
Javacard(TM)-based smart card applications such as electronic purse credit/debit
card functions,  identification cards that provide authorized access to networks
and  subscriber  identification  modules  that secure  various  cellular  phones
against fraud.  This  agreement  resulted in revenue of $0.2 million in 1998 and
$2.2  million in 1999.  We  anticipate  royalty  revenue from this source may be
significant  in the  future.  Royalty  payments  (based  on an  amount  per  T2J
microprocessor  core unit) from  STMicroelectronics  commenced  during 2003.  In
accordance  with the 1998  agreement,  as  amended,  50% of the  earned  royalty
payments  will not be paid until ST exhausts  the  $900,000  minimum  royalty it
prepaid  in 1999;  the other 50% will be paid to us and  recognized  as  royalty
revenue when billed by us (our billings are based upon royalty reports  provided
to us  quarterly  by ST).  For the year  ended  December  31,  2003,  we  earned
approximately $28,000 in royalties from ST and recognized  approximately $14,000
in royalty  revenue.  As of December 31, 2003, the remaining  balance of prepaid
royalty was approximately $886,000.

     Delphi Automotive Systems (U.S.)

     On May 3, 2000,  Delphi  Automotive  Systems licensed NCT's  ClearSpeech(R)
noise,  acoustic  echo and live echo  cancellation  algorithms  for use in their
mobile multimedia  computing  platform for hands-free  cellular  communications.
NCT's patented  ClearSpeech  algorithm  cancels  approximately 95% of background
road,  tire,  wind,  engine and traffic  noise from  hands-free  communications,
allowing the party receiving the communication to hear speech more clearly.  NCT
has recognized approximately $30,000 of royalty revenue from Delphi for the year
ended December 31, 2003.

     Sharp Corporation (Japan)

     In August 2001, NCT and Sharp  executed a license  agreement for an initial
term of three years. Under the agreement, which included an up-front development
fee of $75,000 and future per unit  royalties  to NCT (due upon sale of licensed
products),  Sharp licensed our  ClearSpeech(R)  adaptive speech filter algorithm
for use with Sharp's  current and future  wireless  communication  products.  In
2002, Sharp Japan's  Communication  Division  incorporated NCT's  ClearSpeech(R)
adaptive  speech filter  algorithm  into its new line of Third  Generation  Cell
Phones (3G Phones).  The adaptive  speech  filter cleans  background  noise from
transmitted   speech  for  improved   voice  quality,   listening   comfort  and
intelligibility.  Sharp  pays NCT a  royalty  for each  licensed  product  sold,
leased,  distributed or otherwise transferred by Sharp. Each licensed product is
a "unit" for  purposes  of the  royalty  calculation,  each unit has one or more
"channels"  defined  as  each  simultaneous  or  concurrent  channel  of  signal
processing  embodying  or  employing  all or part  of the  licensed  patents  or
technology.  The per unit royalty is as follows: $0.50 per channel for the first
500,000  channels;  $0.45  per  channel  in excess of  500,000  channels  to and
including 1,000,000;  and $0.30 per channel in excess of 1,000,000.  To date, we
have  received  only one  royalty  payment of  approximately  $3,400  from Sharp
(received in the third quarter of 2002).

H.   Marketing and Sales

     In addition to  licensing  its  technologies,  NCT markets its products and
services  through  its  subsidiaries  in  a  variety  of  ways.  Generally,  the
subsidiaries take a distribution channel approach, as opposed to direct selling.
NCT assists each subsidiary  with executing  marketing  communications  programs
that maximize the reach into the target  audience while  minimizing the expense.
We employ public  relations in addition to other targeted direct efforts such as
direct mail and e-mail marketing.  Where  appropriate,  we advertise in industry
trade magazines as well as attend and exhibit at trade shows. As of February 29,
2004, NCT and its  subsidiaries  had an internal sales and marketing force of 13
employees.

                                       20
<PAGE>


     Financial  information relating to domestic and foreign sales and sales for
the years ended December 31, 2001, 2002 and 2003 is set forth in Note 26 - notes
to the  consolidated  financial  statements.  NCT does  not  have a  significant
foreign exchange  transaction risk because the majority of its non-U.S.  revenue
is denominated and settled in U.S. dollars. The remaining  intercompany revenue,
eliminated in  consolidation,  is in British pounds  sterling and our underlying
cost is also in pounds sterling, creating a natural foreign exchange protection.

I.   Revenue

     The following  table sets forth the percentage  contribution of each of our
operating segments in relation to total revenue for the years ended December 31,
2001,  2002 and 2003.  The 2001  revenue and  percentage  contribution  includes
$222,000  technology  licensing  fee revenue we  recognized  on licenses (in the
media  business  segment)  that we  subsequently  determined  to reacquire  (see
below).  Please note that in the following table,  "other" represents amounts to
reconcile the reportable segment data to the consolidated  financial statements,
primarily  items  eliminated in  consolidation  (refer to Note 25 - notes to the
consolidated financial statements).


<TABLE>
<CAPTION>

         (In thousands of dollars)

                                                     Years Ended December 31,
                ---------------------------------------------------------------------------------------------
                            2001                             2002                             2003
                ---------------------------      ---------------------------      ---------------------------
                   Amount      % of Total          Amount       % of Total          Amount        % of Total
                ------------  -------------      -----------   -------------      -----------   -------------
<S>              <C>              <C>             <C>               <C>            <C>               <C>
Communications   $  8,019         75.6%           $  5,963          81.5%          $  3,681          75.8%
Media               2,612         24.6%              2,270          31.0%             2,272          46.7%
Technology          1,028          9.7%                  -             -                 14           0.3%
Other              (1,047)        (9.9%)              (914)        (12.5%)           (1,109)        (22.8%)
                ------------  -------------      -----------   -------------      -----------   -------------
    Total        $ 10,612        100.0%           $  7,319         100.0%          $  4,858         100.0%
                ============  =============      ===========   =============      ===========   =============
</TABLE>


     The following table sets forth the percentage  contribution of the separate
operating segments in relation to NCT's technology licensing and royalty revenue
for the years ended December 31, 2001, 2002 and 2003.


<TABLE>
<CAPTION>

         (In thousands of dollars)

                                                     Years Ended December 31,
                ---------------------------------------------------------------------------------------------
                           2001                              2002                             2003
                ---------------------------      ---------------------------      ---------------------------
                   Amount      % of Total          Amount       % of Total          Amount        % of Total
                ------------  -------------      -----------   -------------      -----------   -------------
<S>              <C>              <C>             <C>               <C>            <C>               <C>
Communications   $  2,639         46.8%           $  2,334          52.0%          $    843          28.0%
Media               1,834         32.6%              2,140          47.6%             2,140          71.0%
Technology          1,028         18.3%                  -             -                 14           0.5%
Other                 132          2.3%                 19           0.4%                16           0.5%
                ------------  -------------      -----------   -------------      -----------   -------------
    Total        $  5,633        100.0%           $  4,493         100.0%          $  3,013         100.0%
                ============  =============      ===========   =============      ===========   =============

</TABLE>


     Technology licensing fees and royalties were approximately 53.1%, 61.4% and
62.0% of total  revenue for the years ended  December 31,  2001,  2002 and 2003,
respectively.  Our 2003 technology licensing fees were primarily attributable to
recognition of deferred  revenue from license  agreements  entered into prior to
2002. We do not expect to receive cash or other  consideration from our deferred
revenue.  In some cases,  the  consideration we received for licenses was for an
amount  less than we  recorded as deferred  revenue.  In  addition,  our revenue
includes  DMC  licenses  we  subsequently  reacquired  ($222,000  of the revenue
recognized in 2001).  Our  repurchased  license cost was $19.3  million,  net of
reduction  of  deferred  revenue  in 2001 and  $9.2  million  in 2002.  Our 2003
technology  licensing  fees and royalty  revenue was primarily  attributable  to
recognition of deferred  revenue of $2.1 million from the New  Transducers  Ltd.
License and did not  represent  cash.  Our 2002  technology  licensing  fees and
royalty revenue was primarily attributable to recognition of deferred revenue of
$2.1 million from the New Transducers Ltd. license and $1.9 million from Teltran
International  Group,  Inc.  license  and  did  not  represent  cash.  Our  2001

                                       21
<PAGE>


technology  licensing fees and royalty  revenue were primarily  attributable  to
recognition of deferred  revenue of $1.6 million from the New  Transducers  Ltd.
license,  $2.3 million from Teltran  International  Group,  Inc.  license,  $1.0
million from Infinite  Technology  Corporation  license and  approximately  $0.2
million from DMC licenses and did not represent cash.

     Aggregate DMC license fees recognized were $222,000 in 2001  (approximately
$111,000 for each of Brookepark and Eagle Assets) and zero in 2002 and 2003. DMC
had licensed  the New York  designated  market area to Eagle  Assets  Limited in
March 2000 and in 1999 to investors who  transferred  their  licenses to DMC New
York,  Inc.  (DMC  NY).  Please  refer to  "Certain  Relationships  and  Related
Transactions" for a description of our reacquisition of licenses from DMC NY for
which we incurred  charges of $18.0  million  and  approximately  $9.2  million,
respectively, in 2001 and 2002.

     In 2001,  we agreed to  reacquire  the  license  issued to Eagle  Assets to
develop a portion of the New York microbroadcasting region and have accrued $2.0
million for such  reacquisition  with the form of consideration  currently being
negotiated.  Also in  2001,  we  agreed  to  reacquire  the  license  issued  to
Brookepark  Limited  for the right to operate in Israel for $2.0  million and we
have  accrued  that  amount  in  our  consolidated  financial  statements.   The
reacquisition was to be 50% from Brookepark and 25% from each of two transferees
from Brookepark: Austost Anstalt Schaan and Balmore S.A. This Israel license has
not yet  been  reacquired  but  only  the  terms  with  respect  to the  form of
consideration  are in  negotiation.  Upon our decision to reacquire DMC licenses
previously  sold to  Brookepark  and Eagle  Assets,  we  reduced  the  remaining
deferred  revenue  to zero (we  recorded  an  expense  of $1.3  million  expense
representing  our $4.0  million  reacquisition  price for the Eagle  Assets  and
Brookepark  licenses,  less $2.7  million  reduction  of  unrecognized  deferred
revenue;  these  were part of the  aggregate  $19.3  million,  net,  repurchased
license  charge in 2001).  For the DMC licenses held by each of Eagle Assets and
Brookepark,  we negotiated and agreed in principle that the  reacquisition  cost
would be $2.0  million  for each;  thus,  the amount we accrued is one we expect
will not be subject to further negotiation. We do not have written agreements to
reacquire the licenses.  Our negotiations  were with the investment  advisors of
Brookepark and Eagle Assets who  represented to us that they were  authorized to
negotiate on behalf of the licensees. The ongoing negotiation is with respect to
the form of  consideration  that the  $2.0  million  to be paid to each of Eagle
Assets and Brookepark.  We have agreed that the reacquisition price will be paid
with debt or equity  securities of NCT or its  subsidiaries  (not cash).  Due to
poor performance of NCT and its subsidiaries over the last two years, the entity
from  which the debt or equity  securities  will be issued  and the form of that
consideration  have not been agreed upon by the parties.  From time to time,  we
have had  discussions  about  the  form of  consideration  with  the  investment
advisors for the  licensees.  Our DMC  licensees  have not generated any revenue
with the  technology DMC licensed to them nor have they used the DMC licenses to
distribute the Sight & Sound(R) systems.

     NCT's product  revenue for the years ended December 31, 2001, 2002 and 2003
is primarily  attributable  to its  communications  operating  segment.  Product
revenue was  approximately  $4.6 million (43.0% of total revenue),  $2.7 million
($36.8% of total  revenue)  and $1.7  million  (35.2% of total  revenue) for the
years ended December 31, 2001, 2002 and 2003, respectively. Product gross profit
for the years ended  December 31,  2001,  2002 and 2003 was $1.2  million,  $1.4
million, and $0.9 million, respectively.

     Advertising  revenue (media operating  segment) was $279,000,  $105,000 and
$88,000,  respectively, for the years ended December 31, 2001, 2002 and 2003 and
represented  2.6%,  1.4% and 1.8% of total revenue for the years ended  December
31, 2001,  2002 and 2003,  respectively.  Our  advertising  placements have been
limited because of limited financial resources to outfit establishments,  which,
in turn,  result in limited reach  available to advertisers.  Advertising  gross
profit for the years  ended  December  31,  2001,  2002 and 2003 was  $(53,000),
$90,000, and $74,000, respectively.

J.   Concentrations of Credit Risk

     As outlined below, our three largest technology  licensing fees and royalty
customers accounted for approximately 97.7% of technology  licensing and royalty
revenue during 2003.

                                       22
<PAGE>


 (In thousands of dollars)

                                                  As of December 31, 2003
                                                and For the Year then Ended
                                             ---------------------------------
                Customer                      Receivable           Revenue
 ----------------------------------------    -------------      --------------
 New Transducers Ltd. (NXT)                     $       -          $    2,140
 Fairpoint Broadband, Inc.                              -                 437
 OKI Electronic Industry Co., Ltd.                      -                 366
 Ultra Electronics, Ltd.                               16                  16
 STMicroelectronics                                     7                  14
 Delphi Automotive Systems                              5                  30
 All Others (a)                                       284                  10
                                             -------------      --------------
      Total licensing fees and royalties        $     312          $    3,013
                                             =============      ==============

Footnote:
---------
(a) $250 of receivable is reserved.

     As outlined  below,  our three  largest  product  customers  accounted  for
approximately  29.9% of product revenue during 2003 and 12.6% of aggregate gross
accounts receivable at December 31, 2003.

 (In thousands of dollars)

                                                  As of December 31, 2003
                                                and For the Year then Ended
                                             ---------------------------------
                Customer                      Receivable           Revenue
 ----------------------------------------    -------------      --------------
 HM Electronics                                 $      65          $      203
 Muzak                                                  7                 194
 3M Corporation                                         3                 114
 McDonalds                                             16                 102
 AM-COM                                                 -                  12
 Velocity Internet, LLC                                10                  10
 All Others                                           183               1,073
                                             -------------      --------------
      Total product                             $     284          $    1,708
                                             =============      ==============

     NCT sells its products and  services to original  equipment  manufacturers,
distributors and end users in various industries worldwide.  Although our policy
is to collect  receivables in cash,  from time to time, our revenue and accounts
receivable  may be  settled  in  securities  of  the  customer's  company  or in
securities of NCT or its subsidiaries held by the customer rather than cash, and
we may not realize cash in the amount recorded for the transaction.

     Our payment  terms are dependent on the type of revenue.  Generally,  trade
receivables  are due 30 to 60 days after the invoice date;  royalty  receivables
are due 30 to 90 days after they are earned; and license fee receivables are due
normally upon execution of the agreement.

     NCT does not  require  collateral  or other  security  to support  customer
receivables. NCT regularly assesses the realizability of its accounts receivable
and  performs  a  detailed  analysis  of  its  aged  accounts  receivable.  When
quantifying  the   realizability   of  accounts   receivable,   NCT  takes  into
consideration  the value of past due receivables and the  collectibility of such
receivables, based on the creditworthiness of the customer.

     Financial  instruments,  which potentially  subject NCT to concentration of
credit  risk,  consist  principally  of cash  and  cash  equivalents  maintained
primarily in banks and in trade receivables.  NCT's cash equivalents  consist of
commercial paper and other  investments  that are readily  convertible into cash
and have original maturities of three months or less.

                                       23
<PAGE>


K.   Competition

     We have a number  of  direct  competitors.  To our  knowledge,  each of our
competitors  is  pursuing  its  own   technology,   either  on  its  own  or  in
collaboration with others,  and has commenced  attempts to commercially  exploit
such technology.  NCT believes that a number of other large  companies,  such as
the  major  domestic  and  foreign  communications,   computer,  automobile  and
appliance manufacturers,  as well as aircraft parts suppliers and manufacturers,
have  research  and  development  efforts  underway  that  could be  potentially
competitive to NCT. These companies are well established and have  substantially
greater  management,  technical,  financial,  marketing and product  development
resources than NCT.

     Competition faced by our products and services includes:

<TABLE>
<CAPTION>

                                                                                          Competitive
                                                            ------------------------------------------------------------------------
  Product/Service                 Competition                           Advantages                         Disadvantages
  ---------------                 -----------                           ----------                         -------------
<S>                      <C>
NoiseBuster(R) headphone     Sony, Bose                     High performing active noise reduction;     Limited name recognition;
                                                            low cost product                            limited marketing and
                                                                                                        distribution; long lead
                                                                                                        times for production

Pro Tech lightweight         Plantronics, Inc.,             Superior design and construction; low       Limited name recognition;
telephone headsets           GN Netcom, Inc.                cost product                                limited marketing and
                                                                                                        distribution; long lead
                                                                                                        times for production

Gekko(TM)flat speakers       Sony, Aiwa, and any other      Flat wall-mounting design; greater sound    Limited name recognition;
                             speaker manufacturer           dispersion; wide choice of decorator        limited marketing; long
                                                            facades                                     lead times for production

ClearSpeech(R) noise and     Lucent, Texas Instruments,     High-quality noise and echo cancellation;   Limited name recognition;
echo cancellation            other large communications     minimal voice quality degradation           limited marketing
                             companies

Sight & Sound(R) system      In-store music providers       Ongoing cash incentives to site owners;     Limited name recognition;
                             such as Muzak; other           demographically targeted opportunity for    limited marketing
                             advertising media              advertisers

Artera Turbo(TM) service     Internet accelerator services  Speeds up all types of access including     Limited name recognition;
                             from Propel, Proxyconn and     dialup, ISDN, DSL, cable, satellite,        limited marketing
                             Slipstream; broadband          wireless; greater functionality including
                             Internet access services       firewall and parental controls; addresses
                                                            more markets with single-user residential
                                                            version and LAN-version for small
                                                            business and enterprise

</TABLE>


L.   Environmental Regulation Compliance

     Compliance  with  federal,   state  and  local  provisions  regulating  the
discharge  of  materials  into the  environment,  or  otherwise  relating to the
protection  of the  environment,  does  not have any  material  effect  upon our
capital expenditures, earnings or competitive position.

M.   Employees

     NCT and its  subsidiaries  had 68 employees  as of February  29, 2004.  The
employees include 13 in sales and marketing;  13 in executive and administrative
roles;  14  in  the  areas  of  finance,  accounting,  human  resources,  legal,
information   technology  and  intellectual  property;  22  in  engineering  and
development;  and 6 in  operations and

                                       24
<PAGE>


production. None of our employees is represented by a labor union. NCT considers
its relationships with employees to be satisfactory.

N.   Recent Financing Transactions

     Our  financing  transactions  during  the  year  ended  December  31,  2003
consisted of  convertible  notes issued to Carole  Salkind and others  (refer to
Note 12 - notes to the consolidated financial statements).

     During the  fourth  quarter of 2003,  we  reached  an oral  agreement  with
Crammer Road LLC to cancel the July 2002 private  equity  credit  agreement  and
replace it with a new private  equity credit  agreement.  The new private equity
agreement will have similar business terms to the existing agreement but it will
include enhanced  disclosures that we believe will be more easily  understood by
our shareholders.

     From January 1, 2003 through  December 31, 2003,  we issued an aggregate of
approximately  $41.7 million debt to Carole Salkind that included  approximately
$10.4  million  from  cash  invested  by  Ms.   Salkind  in  2003  and  included
approximately  $25.9  million of  principal  that we rolled  over into new debt,
along with approximately $2.4 million in default penalties (10% of the principal
in default),  approximately  $1.9 million in accrued interest and  approximately
$1.0  million  additional   consideration.   Such  rollover  principal  included
approximately $23.9 million of principal in default on matured convertible notes
that we did not repay and approximately $2.0 million that was not in default but
the underlying  notes were  consolidated  at Ms.  Salkind's  request (along with
interest and additional  consideration)  into a new note, payable on demand. The
notes held by Ms. Salkind are convertible into shares of NCT at fixed conversion
prices  or  exchangeable  for  shares  of any NCT  subsidiary  (except  Pro Tech
Communications,  Inc.) that makes a public  offering of its common stock (at the
public offering price). See the section below called "Certain  Relationships and
Related Transactions."

     On  April  22,  2003,  NCT  issued  a  convertible  note to  Alpha  Capital
Aktiengesellschaft  for  $235,000.  The note matures on April 22, 2005 and bears
interest at 8% per annum, payable January 1, 2004 and annually  thereafter,  and
at maturity.  From April 10, 2004 until the note is paid in full,  Alpha has the
right to convert any outstanding principal of the note, and at Alpha's election,
the interest accrued on the note into shares of NCT common stock at a conversion
price  per  share of  $0.04.  The  company  would be  required  to make  certain
liquidating  damages  payments  if it fails to effect a  conversion  in a timely
manner. NCT has an obligation to register for resale the underlying common stock
(see below).

     On  September  4, 2003,  NCT  issued a  convertible  note to Alpha  Capital
Aktiengesellschaft  in the  principal  amount of $400,000  and to Libra  Finance
S.A.,  as finder,  in the  principal  amount of $40,000.  These notes  mature on
September 4, 2005.  Interest  accrues at the rate of 8% per annum and is payable
January 1, 2004 and annually  thereafter,  and at maturity.  From April 10, 2004
until the notes are paid, the holders have the right to convert any  outstanding
principal of the notes, and at the election of the holder,  the interest accrued
on the notes into shares of NCT common stock at a conversion price of 80% of the
average  of the  closing  bid  price  for the five  days  immediately  preceding
conversion.  The company would be required to make certain  liquidating  damages
payments  if it fails to  effect a  conversion  in a timely  manner.  NCT has an
obligation to register for resale the underlying common stock (see below).

     For the April 22, 2003 and the September 4, 2003 notes, NCT is obligated to
file a registration  statement with the Securities and Exchange Commission (SEC)
covering  140% of the  underlying  common shares for resale within 45 days after
the  latest of the  effectiveness  of,  abandonment  of or failure to pursue the
declaration  of  effectiveness  of three other  registration  statements  (NCT's
pending  registration  statement,  a registration  statement covering the shares
issuable upon the conversion of our series H preferred  stock and a registration
statement  covering the shares for our private  equity credit  agreement).  Such
registration statement must be declared effective within 150 days of its filing.
If the filing and  effectiveness  deadlines  are not met or the number of shares
covered by an effective  registration  statement is less than 120% of the amount
needed for conversion of the outstanding notes, liquidated damages accrue at the
rate of 2% per  month of the  principal  outstanding  and of the  principal  and
interest attributable to the note amounts converted into shares. Such liquidated
damages are due in immediately available funds within 10 days of demand.

                                       25
<PAGE>


O.   Operating segments

     For a full discussion of operating  segments and geographic areas, refer to
Notes 25 and 26 - notes to the consolidated financial statements.

P.   Available Information

     You  may  visit  our  website  at  http://www.nctgroupinc.com  for  further
information about our business.  We file annual,  quarterly and special reports,
proxy  statements  and  other  information  with  the  Securities  and  Exchange
Commission. You may review and copy these reports at the Securities and Exchange
Commission's  Public Reference Room at 450 Fifth Street,  N.W.,  Washington,  DC
20549. Information on the operation of the Public Reference Room may be obtained
by calling  the  Securities  and  Exchange  Commission  at  1-800-SEC-0330.  Our
Securities and Exchange Commission filings are also available to the public from
the Securities and Exchange Commission's website at http://www.sec.gov.

ITEM 2. PROPERTIES

     Our principal  executive  office and corporate  headquarters are located in
Westport,  Connecticut where we lease approximately  18,700 square feet of space
that is adequate for our purposes.  The lease expires in March 2010 and provides
for monthly rental of approximately $28,000 for the first five years and $31,000
for the next five years.  This facility  also houses the corporate  headquarters
for  several  of our  subsidiaries  including  DMC,  Advancel,  Artera  and  DMC
HealthMedia and our sales and marketing offices.

     We entered into a lease agreement effective March 21, 2002 for 2,400 square
feet of space located at 7525 Connelley Drive, Suite C, Hanover,  Maryland for a
term of three years,  which expires  March 2005, at a monthly  rental of $2,400.
This facility is used for NCT Hearing engineering.

     Pro  Tech's   executive,   sales  and   manufacturing   facilities   occupy
approximately  13,000 square feet of space located at 4492 Okeechobee Road, Fort
Pierce,  Florida,  pursuant to a lease  agreement which expires in February 2006
and  provides  for  monthly  rental  of  approximately   $5,000   increasing  to
approximately $8,000 over the five-year term.

     Artera's  sales and product  development  operations  occupy  approximately
6,400  square  feet  of  space  located  at 900  Straits  Turnpike,  2nd  Floor,
Middlebury,  Connecticut pursuant to a five-year lease agreement,  which expires
March 2004,  for an average  monthly  rental of  approximately  $10,600.  We are
negotiating the terms of an extension of the existing lease.

     Our European operations are conducted primarily in Cambridge, England where
we lease 4,000 square feet of space under a lease,  which  expires in April 2007
and provides for a current monthly rental of  approximately  $5,000,  subject to
annual  inflationary  adjustments.  In addition,  we occupy  approximately 2,100
square feet of space in  Staffordshire,  England  pursuant to a three-year lease
agreement,  which  expires  February  2006,  for an  average  monthly  rental of
approximately $1,050.

     We believe our facilities  provide us with adequate space for the near term
consistent with our current business plans. We do not intend to lease additional
space during 2004.

ITEM 3. LEGAL PROCEEDINGS

     Theater Radio Network - InsiderStreet (Neometrix) Litigation

     On December 6, 2000, our subsidiary DMC Cinema  (formerly  known as Theater
Radio Network) filed suit against  InsiderStreet.com,  Inc. in the Circuit Court
of the  Thirteenth  Judicial  Circuit  for  Hillsborough  County,  Florida.  The
complaint  alleges  that  InsiderStreet  breached  a  May  5,  2000  advertising
agreement  with  Theater  Radio  Network and seeks a  declaratory  judgment  and
specific performance of the agreement.  The agreement provided that, in exchange
for advertising services performed by Theater Radio Network, InsiderStreet would
deliver to Theater  Radio  Network $3 million in common stock of  InsiderStreet,
with an adjustment in the number of shares to

                                       26
<PAGE>


ensure that the total stock  delivered was worth at least  $2,000,000 on May 10,
2001 and with  registration of all stock  delivered.  InsiderStreet  has to date
made only a partial  delivery of shares and has not registered any of the shares
delivered.  Discovery in this litigation has begun. On October 23, 2001, Theater
Radio Network  terminated its  representation  by outside counsel in this action
due to a possible  conflict of interest.  On February 28,  2002,  Theater  Radio
Network (DMC Cinema) ceased  operations,  although that does not preclude it (or
an assignee) from further prosecuting the Theater Radio Network claims. On March
26, 2002, Theater Radio Network retained new counsel in this action. On or about
October 9, 2002, InsiderStreet.com,  Inc. changed its name to Neometrix Corp. On
or  about  April  14,  2003,  Neometrix  Corp.  changed  its  name to  Neometrix
Technology Group, Inc.

     Production Resource Group Litigation

     On June 6, 2001,  Production  Resource Group (PRG) began legal  proceedings
against NCT and our subsidiary,  Distributed Media Corporation,  in the Superior
Court  for  the  Judicial  District  of  Fairfield  County,  Connecticut.  PRG's
complaint  alleged that NCT and DMC breached the terms of a July 19, 1999 lease,
promissory  note and warrant  entered into in connection  with the lease of some
DMC Sight & Sound(R)  equipment.  The  complaint  also  alleged that NCT and DMC
breached a January 11, 2001  resolution  agreement  designed to settle  disputes
between the parties concerning the July 19, 1999 transactions,  that we breached
a May 11,  2001  agreement  designed  to settle  disputes  between  the  parties
concerning the July 19, 1999  transactions  and the January 11, 2001  resolution
agreement,  and that we engaged in  misrepresentations  and fraud in  connection
with these matters.  On July 26, 2001,  the court granted a pre-judgment  remedy
giving PRG the right to attach or garnish up to $2.1 million of specified assets
of NCT and DMC.  On  October  4,  2001,  we filed an answer  to the  plaintiff's
complaint,  denying  PRG's  material  allegations,   seeking  dismissal  of  the
complaint  and  counterclaiming  for  breach  of  PRG's  obligation  to  deliver
equipment.

     On December 20, 2001,  NCT and DMC accepted an Offer of Judgment  requiring
NCT and DMC to pay PRG $2.0  million.  That  judgment was entered on January 17,
2002 along  with costs of $0.2  million.  In  December  2001,  we  recorded  all
anticipated  liability  related to payment of this  judgment.  PRG is conducting
post-judgment  discovery regarding enforcement of the judgment. In June 2003, in
furtherance of its efforts to collect on the judgment, PRG filed the judgment in
the Circuit Court for Anne Arundel County,  Maryland;  the Superior Court of New
Jersey,  Hudson  County;  and the Circuit  Court of St. Lucie  County,  Florida.
Beginning February 2003, PRG has served papers on NCT and DMC seeking to enforce
the  judgment  against  their  assets.   PRG  has  also  served  papers  on  the
subsidiaries of NCT and DMC, and on various third parties with which NCT and DMC
do business,  seeking to enforce the judgment  against any assets of NCT and DMC
in the  possession of those served.  As of February 29, 2004,  PRG had collected
approximately  $135,000 in NCT's and DMC's cash or cash  equivalent  assets as a
result of the judgment (including the pre-judgment remedy referred to above). On
or about  December 10, 2003, PRG filed a motion for an Order in Aid of Execution
requiring NCT and DMC to turn over to a Connecticut state marshal,  for possible
sale  for the  benefit  of PRG,  equity  and  debt  securities  NCT and DMC hold
(including equity in their subsidiaries) sufficient to satisfy the approximately
$2.1 million remaining on the judgment. In connection therewith, on February 25,
2004, NCT turned over to the marshal,  for possible sale for the benefit of PRG,
NCT's 5,876 shares of common stock of NCT Audio Products, Inc. representing 100%
of the issued and outstanding  shares of NCT Audio. At the same time, DMC turned
over to the  marshal,  for  possible  sale for the benefit of PRG,  DMC's 20,000
shares of common stock of DMC Cinema,  Inc.  representing  84% of the issued and
outstanding  shares  of DMC  Cinema,  its 100  shares  of  common  stock  of DMC
HealthMedia Inc.  representing 100% of the issued and outstanding  shares of DMC
HealthMedia,  a $153,956  principal  amount  promissory  note from (and  related
security agreement with) DMC Cinema and a $1,388,666 principal amount promissory
note from (and related security agreement with) DMC HealthMedia. NCT reported to
the court that all of the other equity and debt securities NCT owns could not be
so turned over because they are covered by security interests in favor of Carole
Salkind and are in her  possession.  To the extent that  further  payment of the
judgment  is in cash or in  securities  turned  over and sold for the benefit of
PRG, such payment could be material to our financial position.

     On January 2, 2002, outside the scope of the judgment entered into with NCT
and DMC, PRG amended its Connecticut complaint to allege that NCT's Chairman and
Chief Executive Officer Michael Parrella,  in dealing with PRG on behalf of NCT,
committed  breaches of good faith and fair dealing,  unfair trade  practices and
fraud.  NCT has agreed to indemnify Mr. Parrella for any liabilities  (including
legal  fees) he may  incur as a result  of the PRG  claims  against  him in this
action.  On July 15, 2002,  Mr.  Parrella  moved to strike the portions of PRG's
amended  complaint  that pertain to him  personally.  On February 25, 2003,  the
court granted Mr. Parrella's motion in part,

                                       27
<PAGE>


striking  those  portions  of the  amended  complaint  against him that allege a
breach of an obligation of good faith and fair dealing,  but declining to strike
those  portions of the amended  complaint  against him that allege  unfair trade
practices and fraud.  On August 8, 2003, Mr. Parrella filed a motion for summary
judgment on all remaining  allegations.  On March 11, 2004, the court denied the
motion.  Trial has been  tentatively  scheduled for September 2004. Mr. Parrella
has told NCT that he intends to deny and defend against all pending allegations.
To the extent that NCT may  ultimately  indemnify Mr.  Parrella for  liabilities
arising out of these allegations and for related legal fees, we believe that our
directors and officers indemnification  insurance (subject to certain exceptions
under the  insurance  policy and after  payment of a $100,000  deductible)  will
cover such payments. Discovery as to Mr. Parrella has begun.

     On or about  December  15,  2003,  PRG filed a  complaint  in the  Delaware
Chancery  Court in and for New  Castle  County  against  NCT,  DMC,  Michael  J.
Parrella   (Chairman  and  Chief  Executive  Officer  of  NCT),  Irene  Lebovics
(President and a Director of NCT), John J. McCloy II (a Director of NCT) and Sam
Oolie (a  Director  of NCT).  On or about  January  6,  2004,  PRG  amended  its
complaint to add Cy E. Hammond (Chief Financial  Officer of NCT) as a defendant.
On February 13, 2004, the defendants filed a motion to dismiss all claims in the
amended complaint.  On or about March 30, 2004, PRG again amended its complaint,
this time to refine and expand  some of its  allegations.  PRG's  complaint  (as
amended) alleges that NCT and DMC are insolvent,  that during the insolvency the
individual named  defendants owe a fiduciary duty to PRG as a judgment  creditor
in  the  Connecticut   litigation  described  above,  and  that  the  individual
defendants  breached  that  duty  and  mismanaged  the  affairs  of NCT  and its
subsidiaries  (including  DMC). The complaint (as amended) seeks the appointment
of a receiver  over the  business  and  assets of NCT and DMC and money  damages
against the  individual  defendants in an amount at least equal to the amount of
the Connecticut judgment remaining unsatisfied.  NCT has agreed to indemnify the
individual defendants for any liabilities  (including legal fees) they may incur
as a result of the PRG claims  against  them in this  Delaware  action.  NCT has
submitted  those  claims for  director  and  officer  indemnification  insurance
coverage by two insurers.  On February 25, 2004, one of those insurers initially
denied  coverage.  NCT is considering  whether to challenge that initial denial.
The other insurer has not yet stated its position with respect to coverage.  NCT
and DMC intend, and the individual defendants have told NCT that they intend, to
deny and defend against all allegations. Discovery in the action has begun.

     Maryland Lease Litigation

     On or about January 31, 2002, West Nursery Land Holding Limited Partnership
brought an action against NCT in the District Court of Maryland for Anne Arundel
County.  This action sought  repossession of premises at 1025 West Nursery Road,
Linthicum,  Maryland and an award of  approximately  $89,000 in connection  with
NCT's shutdown of its offices at, and abandonment of, such premises. On or about
February 7, 2002, the court entered  judgment as requested in the complaint.  On
or about  July 11,  2002,  West  Nursery  brought an action  against  NCT in the
Superior  Court for the  Judicial  District  of  Fairfield  County,  Connecticut
seeking to enforce the Maryland judgment in Connecticut.  On August 5, 2002, the
Connecticut court issued a pre-judgment remedy prohibiting NCT from disposing of
its assets other than in the ordinary course of business. On September 23, 2002,
West  Nursery  moved for a default  judgment on its  Connecticut  complaint.  On
October 29, 2002, NCT filed an objection to the motion for default  judgment and
filed an answer to the complaint in which it denied the material  allegations of
the  complaint.   Through   December  31,  2002,   West  Nursery  had  collected
approximately  $27,000 on this  judgment.  On December  31,  2002,  NCT and West
Nursery  executed a settlement  agreement under which all claims of West Nursery
against NCT are being  discharged  in  consideration  of the  issuance by NCT of
1,248,170 shares of its common stock  (approximately  $56,000 in stock priced at
$.0448  per  share).  On March 3,  2003,  the  Connecticut  court  approved  the
settlement agreement. On or about April 1, 2003, NCT issued the 1,248,170 shares
of common  stock to West  Nursery.  Dismissal  of the  Connecticut  action  with
prejudice  occurred on August 18, 2003.  Dismissal  of the Maryland  action with
prejudice is expected shortly.

     Alpha, Austost, Balmore and Libra v. NCT and Artera

     On or about  December  17,  2002,  an action was  brought by Alpha  Capital
Aktiengesellschaft,  Austost Anstalt Schaan, Balmore S.A. and Libra Finance S.A.
against NCT Group,  Inc. and Artera Group, Inc. in Supreme Court of the State of
New York,  County of New York. In their complaint,  plaintiffs  alleged that NCT
and Artera  breached a number of payment and stock  registration  obligations in
connection with the January 9, 2001  convertible  notes of Artera,  the March 2,
2001  series A  convertible  preferred  stock of  Artera,  the  March  14,  2001
convertible

                                       28
<PAGE>


notes of NCT, the April 4, 2001 convertible notes of Artera,  the April 12, 2001
convertible  notes of NCT, the June 29, 2001  convertible  notes of Artera,  the
July 30, 2002 series B convertible  preferred stock of Pro Tech  Communications,
Inc.,  the January 10,  2002  convertible  note of Artera and the March 11, 2002
convertible note of NCT.  Registration rights claims were alleged against NCT in
connection  with notes and  preferred  stock of Artera and Pro Tech because such
notes and preferred stock are exchangeable into common stock of NCT.  Plaintiffs
sought  damages  in the  aggregate  amount  of  $12.2  million,  which  included
approximately   $4.1  million  note  principal   allegedly  in  default  due  to
non-payment upon respective  maturity dates, plus interest,  attorneys' fees and
costs.

     On or about  April 7, 2003,  before an answer  was filed in the case,  NCT,
Artera and the plaintiffs executed a settlement agreement. After hearings on May
15, 2003 and  September  16, 2003,  the court on September 16, 2003 approved the
settlement  agreement,  thereby causing it to become effective.  Pursuant to the
settlement  agreement,  the plaintiffs granted releases from the monetary claims
in the complaint (i) against NCT and Artera and pertaining to interest allegedly
accrued  through April 7, 2003 on all notes  described in the complaint and (ii)
against NCT for NCT's  non-payment  of  liquidated  damages  allegedly  due as a
result of a failure by NCT to register  the shares of its common stock for which
the notes and preferred  stock  described in the complaint  are  convertible  or
exchangeable.  In  consideration  of  these  releases  and  as  required  by the
settlement  agreement,  on September 18, 2003,  NCT issued to the  plaintiffs an
aggregate  of  61,776,062  new shares of its  common  stock,  representing  $4.0
million in stock  priced at $.06475  per share (the  average of the ten  closing
prices of the common stock  immediately  preceding the initial hearing for court
approval of the settlement  agreement).  The settlement shares were allocated as
follows:   14,109,883  shares  ($913,615  worth)  to  Alpha,  20,868,729  shares
($1,351,250  worth) to Austost,  21,076,266 shares ($1,364,688 worth) to Balmore
and 5,721,189 shares ($370,447 worth) to Libra.  Also included in the settlement
agreement was the release of claims,  not originally  asserted in the complaint,
(x) against Artera and pertaining to interest allegedly accrued through April 7,
2003 on a May 25, 2001 note of Artera and (y) against NCT for NCT's  non-payment
of liquidated  damages allegedly due as a result of a failure by NCT to register
the  shares of its common  stock for which  such May 25,  2001 note of Artera is
exchangeable.  On November 12, 2003, pursuant to the settlement  agreement,  the
action was dismissed, with prejudice as to the claims released by the settlement
agreement  and without  prejudice  as to the claims not so released  (primarily,
approximately  $4.1 million in principal  allegedly due and payable on the notes
described  in the  complaint).  As noted,  only  accrued  interest  charges  and
liquidated damages were settled,  not note principal  allegedly due and payable.
Upon court approval of the settlement  agreement in September  2003, NCT reduced
previously  recorded  accrued  interest of $0.9 million and previously  recorded
liquidated damages for non-registration of common shares underlying  convertible
and  exchangeable  notes and preferred stock of $8.0 million and recorded a $4.9
million gain on litigation settlement.  Please note that interest and liquidated
damages  continued to accrue between the settlement  date and the date the court
approved the settlement and such additional costs were recorded in NCT's records
resulting in a reversal of $8.9 million of costs,  not the expected $8.1 million
($12.2 million in damages sought compared to the $4.0 million settlement).

     Artera International U.K. Section 214 Indemnification

     On or  about  December  5,  2002,  Michael  Parrella  (Chairman  and  Chief
Executive  Officer  and a Director  of NCT),  Irene  Lebovics  (President  and a
Director of NCT) and Cy Hammond  (Treasurer and Chief Financial  Officer of NCT)
received  letters  from the  Liquidator  of NCT's  indirect  subsidiary,  Artera
International located in the United Kingdom,  informing them that the Liquidator
is  considering  asserting  claims  against  them under  Section 214 of the U.K.
Insolvency Act. Under that provision of the Insolvency Act, individuals who were
Directors of a U.K.  corporation prior to its liquidation can be held personally
liable to the liquidation  estate,  under certain  circumstances,  for up to the
amount by which the net liabilities of the corporation increased between (i) the
time the Directors  knew or ought to have concluded that there was no reasonable
prospect that the corporation  would avoid liquidation and (ii) the commencement
of liquidation  proceedings.  The  Liquidator  asserted that such amount in this
instance is approximately $6.3 million. Each of the recipients of the letter was
a  Director  of Artera  International  prior to its  liquidation.  NCT agreed to
indemnify Messrs. Parrella and Hammond and Ms. Lebovics for any liabilities that
may arise  against  them from these U.K.  Section 214 claims and to provide them
with  legal  representation  with  respect  to the  claims.  NCT  does  not have
directors and officers'  indemnification  insurance  coverage for the claims. On
March 25,  2003,  Messrs.  Parrella and Hammond and Ms.  Lebovics  filed a joint
response  to the  Liquidator's  claims in which  they  denied any  liability  or
wrongdoing.  On November  26, 2003,  the  Liquidator  issued  letters to Messrs.
Parrella and Hammond and Ms. Lebovics stating that he would not be asserting any
Section 214 claims against them.

                                       29
<PAGE>


     Artera Trademark Oppositions

     On December 17, 2002 and December 23, 2002, in connection with all of NCT's
pending U.S.  trademark  registration  applications  for "Artera Turbo" and with
some of NCT's pending U.S.  trademark  registration  applications  for "Artera,"
Altera Corporation filed oppositions to the granting of such registrations.  The
alleged  basis for the  oppositions  is, in essence,  that the Artera  marks are
confusingly  similar  to  Altera   Corporation's  mark  of  "Altera"  which  was
registered  in a number of product and service  categories  prior to the initial
filing of the  "Artera  Turbo" and  "Artera"  applications  being  opposed.  NCT
intends to defend against these oppositions vigorously.

     NCT believes  there are no other patent  infringement  claims,  litigation,
matters or unasserted  claims other than the matters  discussed above that could
have a  material  adverse  effect  on  our  financial  position  or  results  of
operations.   In  the  circumstances,   based  upon  the  information  presently
available,  management believes that adequate provisions have been estimated and
included in the consolidated financial statements for these matters.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were  submitted to a vote of security  holders during the fourth
quarter of 2003.


                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our common stock currently  trades on the NASD OTC Bulletin Board under the
symbol  "NCTI." Prior to the January 6, 1999  delisting of NCT common stock from
NASDAQ's  National Market System,  our common stock was listed on the NASDAQ/NMS
under the symbol "NCTI." High and low sales price  information  for NCT's common
stock for specified quarterly periods is set forth below:

                            2002                  2003
                     -----------------     -------------------
                       High      Low         High       Low
                     -------   -------     -------    --------
      1st Quarter    $0.159     $0.078     $0.075      $0.028
      2nd Quarter    $0.150     $0.050     $0.081      $0.027
      3rd Quarter    $0.102     $0.058     $0.078      $0.031
      4th Quarter    $0.095     $0.040     $0.057      $0.037

     As of February 29, 2004,  there were  approximately  4,000  shareholders of
record  representing  approximately  38,000  beneficial  owners of NCT's  common
stock.

     The company has neither  declared  nor paid any  dividends on its shares of
common stock since inception. Any decision as to the future payment of dividends
will depend on the earnings and financial position of the company and such other
factors as the Board of Directors deems relevant.  The company  anticipates that
it  will  retain  earnings,  if  any,  in  order  to  finance  expansion  of its
operations,  and has no  intention of declaring  dividends  for the  foreseeable
future.

     Please refer to Note 17 - notes to the  consolidated  financial  statements
for a discussion of outstanding options and warrants as of December 31, 2003 and
activity  for the three  years  then  ended.  In  September  2003,  the Board of
Directors  accelerated  the  vesting  schedules  to 100%  vested for the options
granted on October 25, 2002 in gratitude for continuing  employee dedication and
the  suspension of salary  increases.  In October  2002,  the Board of Directors
accelerated the vesting  schedules to 100% vested for all options granted before
October 25, 2002 to acknowledge  its gratitude for ongoing  employee  dedication
during the company's 2002  restructuring  and  cost-saving  measures,  including
suspension of employee salary increases.  The table that follows  summarizes our
equity compensation plan information as of December 31, 2003.

                                       30
<PAGE>


<TABLE>
<CAPTION>

                                 Number of securities                                Number of securities
                                   to be issued upon                               remaining available for
                                     exercise of             Weighted-average       future issuance under
                                 outstanding options,        exercise price of     equity plans (excluding
                                warrants and rights as      outstanding options,   securities reflected in
           Category              of December 31, 2003       warrants and rights           Column (a))
           --------             ----------------------      -------------------           -----------
                                         (a)                        (b)                       (c)
    <S>                                  <C>                         <C>

      Equity compensation
      plans approved by
      security holders               110,864,282*                $0.2080                       -

      Equity compensation
      plans not approved by
      security holders               712,380,337                 $0.0525                  Not limited
                                     -----------
          Total                      823,244,619                 $0.0735
                                     ===========

</TABLE>


     *Approximately  49.1 million of the options granted are subject to approval
by the company's  stockholders of a sufficient  increase in the number of shares
of common stock (1) authorized and (2) covered by the 2001 Plan.

     Please refer to Note 16 - notes to the  consolidated  financial  statements
for a discussion of issuance of our common stock upon  conversions  or exchanges
of other securities and a description of sales of unregistered securities by NCT
and its  subsidiaries  during  the  three  years  ended  December  31,  2003 and
Liquidity  and  Capital  Resources  within  the  "Management's   Discussion  and
Analysis"  section for  discussion  of sales of our  unregistered  securities in
2003.  The table below  identifies the  unregistered  sales of our securities to
purchasers  during the previous three years, as well as the amount and nature of
the  consideration  paid by each  purchaser.  The issuance of these  securities,
except as otherwise  indicated,  was deemed to be exempt from registration under
the  Securities  Act in  reliance  on Section  4(2) of the  Securities  Act,  or
Regulation  D  promulgated  thereunder,  as a sale by an issuer not  involving a
public offering.


<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------------
SECURITY SOLD                                          PURCHASER(S)                        CONSIDERATION
--------------- -------------------------------------- ----------------------------------- --------------------------------
                                                       Name of Person/Entity to whom
Date of Sale    Amount and Type                        securities were sold                Aggregate Amount and Type
--------------- -------------------------------------- ----------------------------------- --------------------------------
<S>    <C> <C>                                                                             <C>              <C>
       1/9/01   NCT Networks, Inc. Convertible Notes   Austost Anstalt Schaan;             $1,000,000 cash; $1,000,000
                ($5,040,000 principal amount)          Balmore S.A.;                       non-recourse notes; 1,190,000
                                                       Amro International, S.A.;           shares of Pro Tech
                                                       Nesher Ltd.;                        Communications, Inc. common
                                                       Talbiya B. Investments Ltd.;        stock
                                                       The Gross Foundation, Inc.;
                                                       Libra Finance S.A. (as finder)
--------------- -------------------------------------- ----------------------------------- --------------------------------
       2/9/01   2,863,894 shares of NCT common stock   15 shareholders of Midcore          Fill-up provision
                                                       Software, Inc.
                                                       (Midcore acquisition)
--------------- -------------------------------------- ----------------------------------- --------------------------------
       2/9/01   2,455,248 shares of NCT common stock   5 shareholders of TRN               Fill-up provision
                                                       (TRN acquisition)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      2/13/01   NCT Convertible Note ($500,000         Carole Salkind                      $500,000 cash
                principal amount); matured 4/14/01
--------------- -------------------------------------- ----------------------------------- --------------------------------
      2/13/01   NCT warrant to acquire $500,000 of     Carole Salkind                      Exercisable for cash at $0.071
                NCT common stock                                                           per share per 12/20/01
                                                                                           amendment
--------------- -------------------------------------- ----------------------------------- --------------------------------
      2/22/01-  7,831,908 shares of NCT common stock   Austost Anstalt Schaan; Balmore     937 shares of
      4/11/01                                          S.A.; Zakeni Limited                ConnectClearly.com, Inc.
                                                                                           common stock
--------------- -------------------------------------- ----------------------------------- --------------------------------

                                       31
<PAGE>


---------------------------------------------------------------------------------------------------------------------------
SECURITY SOLD                                          PURCHASER(S)                        CONSIDERATION
--------------- -------------------------------------- ----------------------------------- --------------------------------
                                                       Name of Person/Entity to whom
Date of Sale    Amount and Type                        securities were sold                Aggregate Amount and Type
--------------- -------------------------------------- ----------------------------------- --------------------------------
      2/27/01   8,299 shares of Artera Group, Inc.     Internet Business Management        Acquisition of Teltran Web
                Series A Preferred Stock               Limited; Four Pitt, Inc.; Teltran   Factory Limited
                                                       International Group, Ltd.;
                                                       Austost Anstalt Schaan; Amro
                                                       International, S.A.; Balmore
                                                       S.A.; Berkeley Group, Ltd.; ICT
                                                       N.V.; Leval Trading, Inc. Nesher,
                                                       Ltd.; Talbiya B. Investments
                                                       Ltd.; The Gross Foundation, Inc.;
                                                       United Securities Services, Inc.;
                                                       Libra Finance S.A.; John
                                                       Chalfin/Offchurch Nominees
                                                       Limited; John Chalfin/Hillhurst
                                                       Investments, Ltd.; Teltran
                                                       International Ltd (Web Factory
                                                       acquisition)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      3/14/01   NCT Convertible Notes ($267,500        Alpha Capital Aktiengesellschaft;   $250,000 cash
                aggregate principal amount)            Libra Finance S.A. (as finder)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      3/16/01-  7,218,150 shares of NCT common stock   Endeavour Capital Fund, S.A.        767 shares of Series G
      5/25/01                                                                              Preferred Stock
--------------- -------------------------------------- ----------------------------------- --------------------------------
      3/30/01   3,850,000 shares of NCT common stock   NXT plc                             Surrender of option and 532
                                                                                           shares of NCT Audio Products,
                                                                                           Inc.
--------------- -------------------------------------- ----------------------------------- --------------------------------
       4/4/01   Artera Group, Inc. Convertible Notes   Amro International, S.A.;           $700,000 cash
                ($875,000 aggregate principal amount)  Alpha Capital Aktiengesellschaft
--------------- -------------------------------------- ----------------------------------- --------------------------------
      4/12/01   NCT Convertible Notes ($133,750        Alpha Capital Aktiengesellschaft;   $125,000 cash
                aggregate principal amount)            Libra Finance S.A. (as finder)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      4/12/01   13,333,333 shares of NCT common stock  Crammer Road LLC                    2,000 shares of DMC New York,
                                                                                           Inc.
--------------- -------------------------------------- ----------------------------------- --------------------------------
      4/12/01   NCT Convertible Note ($1 million       Crammer Road LLC                    1,000 shares of DMC New York,
                principal amount), maturing 12/31/01                                       Inc.
--------------- -------------------------------------- ----------------------------------- --------------------------------
      4/12/01   NCT Video Displays, Inc. Convertible   Crammer Road LLC                    $500,000 cash
                Note ($500,000 principal amount),
                maturing 12/31/01
--------------- -------------------------------------- ----------------------------------- --------------------------------
      4/12/01   $50,000,000 NCT common stock           Crammer Road LLC                    Cash and shares of DMC New
                issuable under credit line;                                                York, Inc. common stock
                $17,000,000 minimum commitment amount
--------------- -------------------------------------- ----------------------------------- --------------------------------
      4/12/01   NCT warrant for 250,000 shares of      Crammer Road LLC                    Exercisable for cash at $0.14
                NCT common stock                                                           per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      4/17/01-  15,340,680 shares of NCT common stock  Austost Anstalt Schaan;             $2,015,000 Artera Group, Inc.
      7/25/01                                          Balmore S.A.;                       January 9, 2001 convertible
                                                       Amro International, S.A.;           notes
                                                       Nesher Ltd.;
                                                       Talbiya B. Investments Ltd.;
                                                       The Gross Foundation, Inc.
--------------- -------------------------------------- ----------------------------------- --------------------------------
       5/2/01   702,045 shares of NCT common stock     Arab Commerce Bank, Ltd.            39 shares of NCT Audio
                                                                                           Products, Inc.
--------------- -------------------------------------- ----------------------------------- --------------------------------
      5/14/01   NCT warrant for 500,000 shares         Carole Salkind                      Exercisable for cash at $0.071
                                                                                           per share per 12/20/01
                                                                                           amendment
--------------- -------------------------------------- ----------------------------------- --------------------------------

                                       32
<PAGE>


---------------------------------------------------------------------------------------------------------------------------
SECURITY SOLD                                          PURCHASER(S)                        CONSIDERATION
--------------- -------------------------------------- ----------------------------------- --------------------------------
                                                       Name of Person/Entity to whom
Date of Sale    Amount and Type                        securities were sold                Aggregate Amount and Type
--------------- -------------------------------------- ----------------------------------- --------------------------------
      5/14/01   NCT Convertible Note ($1,361,615       Carole Salkind                      Cancellation and surrender of
                principal amount)                                                          $1,000,000 NCT Convertible
                                                                                           Note; dated 1/26/99 accrued
                                                                                           interest; default penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
      5/18/01   4,302,425 shares of NCT common stock   Carole Salkind                      Conversion of NCT Convertible
                                                                                           Note ($500,000 principal
                                                                                           amount issued 2/13/01)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      5/25/01   Artera Group, Inc. Convertible Notes   Alpha Capital Aktiengesellschaft;   $300,000 cash
                ($375,000 principal amount),           Amro International, S.A.
                maturing 5/25/02
--------------- -------------------------------------- ----------------------------------- --------------------------------
       6/4/01-  2,499,576 shares of NCT common stock   Zakeni Limited                      273 shares of Pro Tech Series
      7/19/01                                                                              A Preferred Stock
--------------- -------------------------------------- ----------------------------------- --------------------------------
      6/29/01   Artera Group, Inc. Convertible Notes   Alpha Capital Aktiengesellschaft;   $700,000 cash and $300,000
                ($1,250,000 principal amount),         Amro International, S.A.; The       Subscription receivable
                maturing 6/29/02                       Gross Foundation, Inc.; Leval
                                                       Trading, Inc.; Nesher Ltd.;
                                                       Talbiya B. Investments Ltd.
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/30/01   500 shares of Pro Tech                 Alpha Capital Aktiengesellschaft    $457,000 cash, net of expenses
                Communications, Inc. Series B
                Convertible Preferred Stock
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/30/01   Pro Tech Communications, Inc.          Alpha Capital Aktiengesellschaft    Exercisable for cash
                warrant to purchase 1,000,000 shares
                of common stock
--------------- -------------------------------------- ----------------------------------- --------------------------------
       8/7/01-  4,510,753 shares of NCT common stock   Austost Anstalt Schaan;             $503,500 Artera Group, Inc.
     10/15/01                                          Balmore S.A.                        January 9, 2001 convertible
                                                       Amro International, S.A.;           notes
                                                       Nesher Ltd.;
                                                       Talbiya B. Investments Ltd.;
                                                       The Gross Foundation, Inc.
--------------- -------------------------------------- ----------------------------------- --------------------------------
      8/22/01   NCT Convertible Note ($1,673,393       Carole Salkind                      Cancellation and surrender of
                principal amount)                                                          $250,000, $250,000, $500,000
                                                                                           and $250,000 NCT Convertible
                                                                                           Notes; accrued interest;
                                                                                           default penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
      8/22/01   NCT warrant for 625,000 shares         Carole Salkind                      Exercisable for cash at $0.071
                                                                                           per share per 12/20/01
                                                                                           amendment
--------------- -------------------------------------- ----------------------------------- --------------------------------
      8/22/01   612,893 shares of NCT common stock     Michael J. Parrella                 $56,999 in cash
--------------- -------------------------------------- ----------------------------------- --------------------------------
      8/22/01   171,342 shares of NCT common stock     Irene Lebovics                      $15,935 in cash
--------------- -------------------------------------- ----------------------------------- --------------------------------
      8/22/01   215,765 shares of NCT common stock     Cy E. Hammond                       $20,066 in cash
--------------- -------------------------------------- ----------------------------------- --------------------------------
      8/28/01   568,770 shares of NCT common stock     Interep National Radio Sales        Advertising services
-------------- -------------------------------------- ----------------------------------- --------------------------------
      9/10/01   1,980,198 shares of NCT common stock   Tycon Equity Partners LLC           Consulting services
--------------- -------------------------------------- ----------------------------------- --------------------------------
      9/10/01   1,000,000 shares of NCT common stock   Carole Salkind                      $93,000 in cash
--------------- -------------------------------------- ----------------------------------- --------------------------------

                                       33
<PAGE>


---------------------------------------------------------------------------------------------------------------------------
SECURITY SOLD                                          PURCHASER(S)                        CONSIDERATION
--------------- -------------------------------------- ----------------------------------- --------------------------------
                                                       Name of Person/Entity to whom
Date of Sale    Amount and Type                        securities were sold                Aggregate Amount and Type
--------------- -------------------------------------- ----------------------------------- --------------------------------
      9/28/01   Warrant for 1,000,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.071
                common stock                                                               per share per 12/20/01
                                                                                           amendment
--------------- -------------------------------------- ----------------------------------- --------------------------------
      9/28/01   NCT Convertible Note ($2,535,469       Carole Salkind                      $1,000,000 cash and
                principal amount)                                                          cancellation and surrender of
                                                                                           $1,361,615 NCT Convertible
                                                                                           Note along with accrued
                                                                                           interest and default penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
     10/11/01   192,632 shares of NCT common stock     Zakeni Limited                      14 shares of Pro Tech
                                                                                           Communications, Inc. Series A
                                                                                           Preferred Stock
--------------- -------------------------------------- ----------------------------------- --------------------------------
     10/23/01-  6,014,029 shares of NCT common stock   Crammer Road LLC                    NCT Video Note dated 4/12/01
     10/29/01
--------------- -------------------------------------- ----------------------------------- --------------------------------
     10/25/01   5,000,000 shares of NCT common stock   Libra Finance S.A.                  $397,600 cash and settlement
                                                                                           of $2,400 in consulting fees;
                                                                                           warrant exercised at $0.08 per
                                                                                           share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     10/25/01   Warrant for 20,000,000 shares of NCT   Libra Finance S.A.                  Exercisable for cash at $0.09
                common stock                                                               per share; price amended
                                                                                           January 10, 2002 to the lower of
                                                                                           $0.07 or the lowest closing bid
                                                                                           price from 1/10/02 through
                                                                                           6/28/02, as amended through
                                                                                           6/28/03 (see 6/28/02 below)
--------------- -------------------------------------- ----------------------------------- --------------------------------
     10/30/01   3,275,864 shares of NCT common stock   Alpha Capital Aktiengesellschaft    $293,750 stated value 5/25/01
                                                                                           Artera convertible note
--------------- -------------------------------------- ----------------------------------- --------------------------------
      11/7/01   283,770 shares of NCT common stock     Zakeni Limited                      20 shares of Pro Tech
                                                                                           Communications, Inc. series A
                                                                                           preferred stock
--------------- -------------------------------------- ----------------------------------- --------------------------------
     11/27/01   357,927 shares of NCT common stock     James McManus                       Employment termination
                                                                                           agreement
--------------- -------------------------------------- ----------------------------------- --------------------------------
      12/6/01   5,000,000 shares of NCT common stock   Libra Finance S.A.                  $330,500 in cash, settlement
                                                                                           of note in amount of $65,000
                                                                                           and $4,500 of consulting fees;
                                                                                           exercised at $0.08 per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/20/01   Warrant for 1,250,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.071
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/20/01   NCT Convertible Note ($2,014,270       Carole Salkind                      $1,000,000 cash and
                principal amount)                                                          cancellation and surrender of
                                                                                           $500,000 and $250,000 NCT
                                                                                           Convertible Notes along with
                                                                                           accrued interest and default
                                                                                           penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/21/01-  3,783,156 shares of NCT common stock   Austost Anstalt Schaan              $300,000 face value of 1/9/01
     12/26/01                                                                              Artera notes
--------------- -------------------------------------- ----------------------------------- --------------------------------
      1/23/02   328,717 shares of NCT common stock     Robert Crisp                        Settlement of amounts due
--------------- -------------------------------------- ----------------------------------- --------------------------------
       1/1/02   Warrant for 500,000 shares of NCT      Piedmont Consulting, Inc.           Exercisable for cash at $0.20
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
       1/2/02   300,000 shares of NCT common stock     Piedmont Consulting, Inc.           Per consulting agreement
--------------- -------------------------------------- ----------------------------------- --------------------------------

                                       34
<PAGE>


---------------------------------------------------------------------------------------------------------------------------
SECURITY SOLD                                          PURCHASER(S)                        CONSIDERATION
--------------- -------------------------------------- ----------------------------------- --------------------------------
                                                       Name of Person/Entity to whom
Date of Sale    Amount and Type                        securities were sold                Aggregate Amount and Type
--------------- -------------------------------------- ----------------------------------- --------------------------------
       1/8/02-  Option to acquire 8,350,000 shares     Leben Care, Inc.                    Exercisable for cash at prices
      1/25/02   of NCT common stock                                                        ranging from $0.079 to $0.13
                                                                                           per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      1/10/02   $550,000 Convertible Note              Alpha Capital Aktiengesellschaft    Settlement of $465,000 bridge
                                                                                           financing notes dated 11/14/01
                                                                                           and 12/27/01 and cash of
                                                                                           approximately $84,000
--------------- -------------------------------------- ----------------------------------- --------------------------------
      1/10/02   Warrant for 5,000,000 shares of NCT    Libra Finance S.A.                  Exercisable for cash at the
                common stock                                                               lower of $0.07 or the lowest
                                                                                           closing bid price from 1/10/02
                                                                                           through 6/28/02, as amended
                                                                                           through 6/28/03 (see 6/28/02
                                                                                           below)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      1/11/02   Warrant for 2,789,082 shares of NCT    Carole Salkind                      Exercisable for cash at $0.079
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      1/11/02   NCT Convertible Note ($2,231,265       Carole Salkind                      $350,000 cash and cancellation
                principal amount)                                                         and surrender of the August
                                                                                          22, 2001 NCT Convertible Note
                                                                                          along with accrued interest
                                                                                          and default penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
      1/11/02   Option to acquire 10% equity           Carole Salkind                      New indebtedness
                interest in Artera Group, Inc.
--------------- -------------------------------------- ----------------------------------- --------------------------------
      1/25/02   NCT Convertible Note ($650,000         Carole Salkind                      $650,000 cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      1/25/02   NCT Convertible Note ($250,000         Carole Salkind                      $250,000 cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      1/25/02   Warrant for 812,500 shares of NCT      Carole Salkind                      Exercisable for cash at $0.09
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      1/25/02   Warrant for 312,500 shares of NCT      Carole Salkind                      Exercisable for cash at $0.09
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      1/31/02   Warrant for 104,167 shares of NCT      Robert C. Lau (as designee of       Exercisable for cash at $0.13
                common stock                           Clayton Dunning & Company, Inc.)    per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      2/27/02   NCT Convertible Note ($827,412         Carole Salkind                      $800,000 cash and accrued
                principal amount)                                                          interest and default penalty
                                                                                           on the 1/25/02 note in
                                                                                           principal amount of $250,000
--------------- -------------------------------------- ----------------------------------- --------------------------------
      2/27/02   Warrant for 1,034,226 shares of NCT    Carole Salkind                      Exercisable for cash at $0.079
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      2/27/02   Option to acquire 3,375,000 shares     Stop Noise, Inc.                    Exercisable for cash at prices
                of NCT common stock                                                        ranging from $0.79 to $0.12
                                                                                          per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      2/28/02   2,142,073 shares of NCT common stock   James McManus                       Exchange of 6.43 common shares
                                                                                           of DMC received upon exercise
                                                                                           of DMC option

--------------- -------------------------------------- ----------------------------------- --------------------------------
       3/1/02   NCT Convertible Note ($350,000         Carole Salkind                      $350,000 cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
       3/1/02   Warrant for 437,500 shares of NCT      Carole Salkind                      Exercisable for cash at $0.079
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------

                                       35
<PAGE>


---------------------------------------------------------------------------------------------------------------------------
SECURITY SOLD                                          PURCHASER(S)                        CONSIDERATION
--------------- -------------------------------------- ----------------------------------- --------------------------------
                                                       Name of Person/Entity to whom
Date of Sale    Amount and Type                        securities were sold                Aggregate Amount and Type
--------------- -------------------------------------- ----------------------------------- --------------------------------
      3/11/02   3,930,818 shares of NCT common stock   Swedbank Luxembourg                 Exchange for 160 common shares
                                                                                           of NCT Audio Products, Inc.
--------------- -------------------------------------- ----------------------------------- --------------------------------
      3/11/02   Convertible Note ($400,000 principal   Alpha Capital Aktiengesellschaft    $352,500 in cash, net of
                amount)                                                                    $47,500 in legal fees and
                                                                                           finder's fees paid to a third
                                                                                           party that arranged the
                                                                                           financing
--------------- -------------------------------------- ----------------------------------- --------------------------------
      3/12/02   3,748,478 shares of NCT common stock   Alpha Capital Aktiengesellschaft    Conversion of $250,000 8% note
                                                                                           dated April 12, 2001
--------------- -------------------------------------- ----------------------------------- --------------------------------
      3/12/02   1,863,204 shares of NCT common stock   Alpha Capital Aktiengesellschaft    Conversion of $125,000 8% note
                                                                                           dated March 4, 2001
--------------- -------------------------------------- ----------------------------------- --------------------------------
       5/2/02   NCT Convertible Note ($1,275,483       Carole Salkind                      Settlement and cancellation of
                principal amount)                                                          $1,000,000 note dated 3/27/00
                                                                                           along with accrued interest
                                                                                           and default penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
       5/2/02   NCT Convertible Note ($1,425,000       Carole Salkind                      $1,425,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
       5/2/02   Warrant for 3,188,708 shares of NCT    Carole Salkind                      Exercisable for cash at $0.094
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
       5/2/02   Warrant for 3,562,500 shares of NCT    Carole Salkind                      Exercisable for cash at $0.094
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      5/29/02   NCT Convertible Note ($350,000         Carole Salkind                      $350,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      5/29/02   Warrant  for 1,500,000 shares of NCT   Carole Salkind                      Exercisable for cash at $0.095
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      5/31/02   281,534 shares of NCT common stock     Amro International, S.A.            Exchanged $25,000 Artera
                                                                                           Group, Inc. January 9, 2001
                                                                                           convertible note
--------------- -------------------------------------- ----------------------------------- --------------------------------
       6/2/02   NCT Convertible Note ($300,000         Carole Salkind                      $300,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
       6/2/02   Warrant for 1,500,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.097
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
       6/6/02   200,000 shares of NCT common stock     Steven M. Esrick                    Settlement of legal action
                (exempt under Section 3(a)(10) of
                the Securities Act of 1933)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      6/13/02   NCT warrant to acquire 250,000         Blue Future, Inc.                   Exercisable for cash at $0.16
                shares of common stock                                                     per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      6/17/02   NCT warrant to acquire 350,000         Thomas Cotton                       Exercisable for cash at $0.081
                shares of common stock                                                     per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      6/17/02   NCT warrant to acquire 400,000         Barry H. Chappel                    Exercisable for cash at $0.081
                shares of common stock                                                     per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      6/17/02   NCT warrant to acquire 400,000         John M. Capozzi                     Exercisable for cash at $0.081
                shares of common stock                                                     per share
--------------- -------------------------------------- ----------------------------------- --------------------------------

                                       36
<PAGE>


---------------------------------------------------------------------------------------------------------------------------
SECURITY SOLD                                          PURCHASER(S)                        CONSIDERATION
--------------- -------------------------------------- ----------------------------------- --------------------------------
                                                       Name of Person/Entity to whom
Date of Sale    Amount and Type                        securities were sold                Aggregate Amount and Type
--------------- -------------------------------------- ----------------------------------- --------------------------------
      6/24/02   1,800 shares of Series H Convertible   Crammer Road LLC                    $120,000 cash and exchange of
                Preferred Stock                                                            12,000 shares of DMC New York,
                                                                                           Inc.
--------------- -------------------------------------- ----------------------------------- --------------------------------
      6/28/02   Extension of time to determine the     Libra Finance S.A.                  Exercisable at the lower of
                exercise prices of two warrants                                            $0.07 or the lowest closing
                previously granted to acquire shares                                       bid price from 6/28/02 through
                of NCT common stock in the amount of                                       6/28/03
                20,000,000 (10/25/01) and 5,000,000
                (1/10/02)
--------------- -------------------------------------- ----------------------------------- --------------------------------
       7/2/02   662,167 shares of NCT common stock     Amro International, S.A.            Exchange for $50,000 Artera
                                                                                           Group, Inc. January 9, 2001
                                                                                           convertible note
--------------- -------------------------------------- ----------------------------------- --------------------------------
       7/3/02   NCT Convertible Note ($350,000         Carole Salkind                      $350,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
       7/3/02   Warrant for 1,500,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.078
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/12/02   Warrant for 20,000,000 shares of NCT   Carole Salkind                      Exercisable for cash at $0.075
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/15/02   NCT Convertible Note ($350,000         Carole Salkind                      $350,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/15/02   Warrant for 1,500,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.075
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/23/02   NCT Convertible Note ($525,000         Carole Salkind                      $525,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/23/02   Warrant for 2,250,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.059
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      8/14/02   NCT Convertible Note ($350,000         Carole Salkind                      $350,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      8/14/02   Warrant for 1,500,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.082
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      8/26/02   694,711 shares of NCT common stock     Amro International, S.A.            Exchange for $50,000 Artera
                                                                                           Group, Inc. January 9, 2001
                                                                                           convertible note
--------------- -------------------------------------- ----------------------------------- --------------------------------
      8/29/02   NCT Convertible Note ($490,000         Carole Salkind                      $490,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      8/29/02   Warrant for 2,100,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.076
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
       9/9/02   NCT Convertible Note ($350,000         Carole Salkind                      $350,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
       9/9/02   Warrant for 1,500,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.077
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      9/18/02   480,272 shares of NCT common stock     Nesher Ltd.                         Exchange for $37,500 Artera
                                                                                           Group, Inc. January 9, 2001
                                                                                           convertible note
--------------- -------------------------------------- ----------------------------------- --------------------------------
      9/18/02   480,272 shares of NCT common stock     Talbiya B. Investments Ltd.         Exchange for $37,500 Artera
                                                                                           Group, Inc. January 9, 2001
                                                                                           convertible note
--------------- -------------------------------------- ----------------------------------- --------------------------------
      9/30/02   Warrant for 10,000,000 shares of NCT   Carole Salkind                      Exercisable for cash at $0.070
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------

                                       37
<PAGE>


---------------------------------------------------------------------------------------------------------------------------
SECURITY SOLD                                          PURCHASER(S)                        CONSIDERATION
--------------- -------------------------------------- ----------------------------------- --------------------------------
                                                       Name of Person/Entity to whom
Date of Sale    Amount and Type                        securities were sold                Aggregate Amount and Type
--------------- -------------------------------------- ----------------------------------- --------------------------------
      9/30/02   NCT Convertible Note ($3,770,098.38    Carole Salkind                      $800,000 cash and cancellation
                principal amount)                                                          and surrender of $2,535,469
                                                                                           convertible note dated 9/28/01
                                                                                           along with accrued interest
                                                                                           and default penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
      9/30/02   Warrant for 16,157,565 shares of NCT   Carole Salkind                      Exercisable for cash at $0.070
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      9/30/02   Option to acquire 50,000,000 shares    Acme Associates, Inc.               Exercisable for cash at $0.070
                of NCT common stock                                                        per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     10/11/02   Warrant for 2,000,000 shares of NCT    FairPoint Communications, Inc.      Exercisable for cash at $0.150
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     10/17/02   5,938,081 shares of NCT common stock   Linford Group Limited               Settlement of guarantee of
                (exempt under Section 3(a)(10) of                                          subsidiary's payment
                the Securities Act of 1933)                                                obligation for office
                                                                                           refurbishment services
                                                                                           rendered in the United
                                                                                           Kingdom
--------------- -------------------------------------- ----------------------------------- --------------------------------
      11/7/02   NCT Convertible Note ($400,000         Carole Salkind                      $400,000 cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      11/7/02   Warrant for 1,750,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.072
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     11/20/02   NCT Convertible Note ($400,000         Carole Salkind                      $400,000 cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
     11/20/02   Warrant for 1,750,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.054
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     11/21/02   NCT Convertible Note ($1,463,449.36    Carole Salkind                      Cancellation and surrender of
                principal amount)                                                          $1,275,482.97 convertible note
                                                                                           dated 5/2/02 along with
                                                                                           accrued interest and default
                                                                                           penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
     11/21/02   Warrant for 6,271,926 shares of NCT    Carole Salkind                      Exercisable for cash at
                common stock                                                               $0.0535 per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     11/22/02   Warrant for 300,000 shares of NCT      Gavin Brackenridge                  Exercisable for cash at $0.054
                common stock                                                               per share
--------------- --------------------------------------- ----------------------------------- --------------------------------
      12/2/02   NCT Convertible Note ($350,000         Carole Salkind                      $350,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      12/2/02   Warrant for 1,500,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.048
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      12/6/02   Warrant for 1,400,000 shares of NCT    Alpha Capital                       Exercisable for cash at the
                common stock                           Aktiengesellschaft                  lower of $0.07 or the lowest
                                                                                           closing bid price from 12/6/02
                                                                                           through 12/6/03
--------------- -------------------------------------- ----------------------------------- --------------------------------

                                       38
<PAGE>


---------------------------------------------------------------------------------------------------------------------------
SECURITY SOLD                                          PURCHASER(S)                        CONSIDERATION
--------------- -------------------------------------- ----------------------------------- --------------------------------
                                                       Name of Person/Entity to whom
Date of Sale    Amount and Type                        securities were sold                Aggregate Amount and Type
--------------- -------------------------------------- ----------------------------------- --------------------------------
      12/6/02   Warrant for 15,000,000 shares of NCT   Alpha Capital                       Exercisable for cash at $0.01
                common stock                           Aktiengesellschaft                  per share.  Vests as to
                                                                                           2,000,000 shares if penalty
                                                                                           provisions associated with
                                                                                           prior transactions are not
                                                                                           discharged as of 4/7/03.
                                                                                           Remainder vests if 12/6/02
                                                                                           promissory note maturing 4/7/03
                                                                                           defaults, later extended to
                                                                                           5/30/03 (see 9/4/03).
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/11/02   Warrant for 1,250,000 shares of NCT    KEQ Partners III                    Exercisable for cash at $0.063
                common stock                           (as designee of Kalkines, Arky,     per share
                                                       Zall & Bernstein LLP, HealthNet
                                                       Connections LLC and HNC New York
                                                       Representatives LLC)
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/16/02   NCT Convertible Note ($400,000         Carole Salkind                      $400,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/16/02   Warrant for 1,750,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.042
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/16/02   Warrant for 200,000 shares of NCT      Robert L. Bernstein                 Exercisable for cash at
                common stock                                                               $0.0515 per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/16/02   Warrant for 200,000 shares of NCT      Gavin Brackenridge                  Exercisable for cash at
                common stock                                                               $0.0125 per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/16/02   Warrant for 250,000 shares of NCT      Gavin Brackenridge                  Exercisable for cash at $0.08
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/16/02   Warrant for 250,000 shares of NCT      Gavin Brackenridge                  Exercisable for cash at $0.15
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/16/02   Warrant for 67,000 shares of NCT       Dr. Henry Murray (as designee of    Exercisable for cash at $0.10
                common stock                           The Murray Group)                   per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/16/02   Warrant for 33,000 shares of NCT       Diana T. Murray (as designee of     Exercisable for cash at $0.10
                common stock                           The Murray Group)                   per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/16/02   Warrant for 100,000 shares of NCT      Dr. Henry Masur (as designee of     Exercisable for cash at $0.10
                common stock                           The Murray Group)                   per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/16/02   Warrant for 300,000 shares of NCT      Steven Keenan                       Exercisable for cash at $0.099
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/16/02   Warrant for 200,000 shares of NCT      B. Michael Pisani/                  Exercisable for cash at $0.10
                common stock                           Granite Securities Corporation      per share
---------------  -------------------------------------- ----------------------------------- --------------------------------
     12/16/02   Warrant for 200,000 shares of NCT      Charles T. Lanktree                 Exercisable for cash at $0.10
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/16/02   Warrant for 50,000 shares of NCT       Robert F. Callahan (as designee     Exercisable for cash at $0.10
                common stock                           of C & C Partners, Inc.)            per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/16/02   Warrant for 25,000 shares of NCT       Robert F. Callahan (as designee     Exercisable for cash at $0.25
                common stock                           of C & C Partners, Inc.)            per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/16/02   Warrant for 25,000 shares of NCT       Robert F. Callahan (as designee     Exercisable for cash at $0.50
                common stock                           of C & C Partners, Inc.)            per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/16/02   Warrant for 25,000 shares of NCT       Robert F. Callahan (as designee     Exercisable for cash at $0.75
                common stock                           of C & C Partners, Inc.)            per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/16/02   Warrant for 50,000 shares of NCT       Sandy Eisemann/NRI, Inc. (as        Exercisable for cash at $0.10
                common stock                           designee of C & C Partners, Inc.)   per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/16/02   Warrant for 25,000 shares of NCT       Sandy Eisemann/NRI, Inc. (as        Exercisable for cash at $0.25
                common stock                           designee of C & C Partners, Inc.)   per share
--------------- -------------------------------------- ----------------------------------- --------------------------------

                                       39
<PAGE>


---------------------------------------------------------------------------------------------------------------------------
SECURITY SOLD                                          PURCHASER(S)                        CONSIDERATION
--------------- -------------------------------------- ----------------------------------- --------------------------------
                                                       Name of Person/Entity to whom
Date of Sale    Amount and Type                        securities were sold                Aggregate Amount and Type
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/16/02   Warrant for 25,000 shares of NCT       Sandy Eisemann/NRI, Inc. (as        Exercisable for cash at $0.50
                common stock                           designee of C & C Partners, Inc.)   per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/16/02   Warrant for 25,000 shares of NCT       Sandy Eisemann/NRI, Inc. (as        Exercisable for cash at $0.75
                common stock                           designee of C & C Partners, Inc.)   per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/17/02   40,000,000 shares of NCT common        Crammer Road LLC                    Settlement of legal action
                stock and the right to acquire
                28,000,000 additional shares on 65
                days notice (exempt under Section
                3(a)(10) of the Securities Act of
                1933)
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/26/02   NCT Convertible Note ($2,381,487       Carole Salkind                      Cancellation and surrender of
                principal amount)                                                          $2,014,270 convertible note
                                                                                           dated 12/20/01 along with
                                                                                           accrued interest and default
                                                                                           penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/26/02   Warrant for 10,206,373 shares of NCT   Carole Salkind                      Exercisable for cash at $0.042
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/26/02   Option to acquire 23,000,000 shares    Motorworld, Incorporated            Exercisable for cash at $0.042
                of NCT common stock                                                        per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/30/02   NCT Convertible Note ($350,000         Carole Salkind                      $350,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/30/02   Warrant for 1,500,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.041
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/31/02   Warrant for 250,000 shares of NCT      Michael Dickerson                   Exercisable for cash at $0.10
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      1/15/03   NCT Convertible Note ($450,000         Carole Salkind                      $450,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      1/15/03   Warrant for 2,000,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.041
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      1/23/03   NCT Convertible Note ($2,747,634.92    Carole Salkind                      Cancellation and surrender of
                principal amount)                                                          $2,231,265.04 convertible note
                                                                                           dated 1/11/02 along with
                                                                                           accrued interest and default
                                                                                           penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
      1/23/03   Warrant for 11,775,579 shares of NCT   Carole Salkind                      Exercisable for cash at $0.04
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      1/23/03   Option to acquire 23,000,000 shares    Inframe, Inc.                       Exercisable for cash at $0.042
                of NCT common stock                                                        per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      1/30/03   NCT Convertible Note ($350,000         Carole Salkind                      $350,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      1/30/03   Warrant for 1,500,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.041
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      2/11/03   NCT Convertible Note ($1,252,592.41    Carole Salkind                      Cancellation and surrender of
                principal amount)                                                          $650,000 convertible note
                                                                                           dated 1/25/02 along with
                                                                                           accrued interest and default
                                                                                           penalty and $450,000 cash
--------------- -------------------------------------- ----------------------------------- --------------------------------
      2/11/03   Warrant for 5,500,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.04
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      2/11/03   Option to acquire 7,000,000 shares     Avant Interactive, Inc.             Exercisable for cash at $0.04
                of NCT common stock                                                        per share
--------------- -------------------------------------- ----------------------------------- --------------------------------

                                       40
<PAGE>


---------------------------------------------------------------------------------------------------------------------------
SECURITY SOLD                                          PURCHASER(S)                        CONSIDERATION
--------------- -------------------------------------- ----------------------------------- --------------------------------
                                                       Name of Person/Entity to whom
Date of Sale    Amount and Type                        securities were sold                Aggregate Amount and Type
--------------- -------------------------------------- ----------------------------------- --------------------------------
       3/4/03   NCT Convertible Note ($450,000         Carole Salkind                      $450,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
       3/4/03   Warrant for 2,000,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.035
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
       3/5/03   3,033,981 shares of NCT common stock   Balmore S.A.                        Exchange for $125,000 Artera
                                                                                           Group, Inc. January 9, 2001
                                                                                           convertible note
--------------- -------------------------------------- ----------------------------------- --------------------------------
      3/12/03   Option to acquire 13,500,000 shares    Avant Interactive, Inc.             Exercisable for cash at $0.031
                of NCT common stock                                                        per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      3/13/03   NCT Convertible Note ($980,802.25      Carole Salkind                      Cancellation and surrender of
                principal amount)                                                          $827,412.26 convertible note
                                                                                           dated 2/27/02 along with
                                                                                           accrued interest and default
                                                                                           penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
      3/13/03   NCT Convertible Note ($864,615.56      Carole Salkind                      Cancellation and surrender of
                principal amount)                                                          $350,000 convertible note
                                                                                           dated 3/1/02 along with
                                                                                           accrued interest and default
                                                                                           penalty and $450,000 cash
--------------- -------------------------------------- ----------------------------------- --------------------------------
      3/13/03   Warrant for 4,250,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.031
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      3/13/03   Warrant for 3,750,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.031
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
       4/1/03   1,248,170 shares of NCT common stock   West Nursery Land Holding Limited   Settlement of legal action
                (exempt under Section 3(a)(10) of      Partnership
                the Securities Act of 1933)
--------------- -------------------------------------- ----------------------------------- --------------------------------
       4/2/03   NCT Convertible Note ($450,000         Carole Salkind                      $450,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
       4/2/03   Warrant for 2,000,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.029
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
       4/3/03   Option to acquire 2,000,000 shares     Avant Interactive, Inc.             Exercisable for cash at $0.029
                of NCT common stock                                                        per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
       4/7/03   1,158,940 shares of NCT common stock   Balmore S.A.                        Exchange for $35,000 Artera
                                                                                           Group, Inc.  January 9, 2001
                                                                                           convertible note
--------------- -------------------------------------- ----------------------------------- --------------------------------
      4/11/03   2,321,263 shares of NCT common stock   Mesa Partners, Inc.                 Settlement of legal action
                (exempt under Section 3(a)(10) of
                the Securities Act of 1933)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      4/11/03   NCT Convertible Note ($450,000         Carole Salkind                      $450,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      4/11/03   Warrant for 2,000,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.031
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      4/11/03   Option to acquire 2,000,000 shares     Avant Interactive, Inc.             Exercisable for cash at $0.031
                of NCT common stock                                                        per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      4/15/03   3,164,556 shares of NCT common stock   Alpha Capital Aktiengesellschaft    Exchange for $100,000 Artera
                                                                                           Group, Inc. April 4, 2001
                                                                                           convertible note
--------------- -------------------------------------- ----------------------------------- --------------------------------
      4/17/03   Option to acquire 2,000,000 shares     Turbo Networks, Inc.                Exercisable for cash at $0.037
                of NCT common stock                                                        per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      4/21/03   NCT Convertible Note ($450,000         Carole Salkind                      $450,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------

                                       41
<PAGE>


---------------------------------------------------------------------------------------------------------------------------
SECURITY SOLD                                          PURCHASER(S)                        CONSIDERATION
--------------- -------------------------------------- ----------------------------------- --------------------------------
                                                       Name of Person/Entity to whom
Date of Sale    Amount and Type                        securities were sold                Aggregate Amount and Type
--------------- -------------------------------------- ----------------------------------- --------------------------------
      4/21/03   Warrant for 2,000,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.037
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      4/22/03   Convertible Note in principal amount   Alpha Capital Aktiengesellschaft    Convertible into shares of NCT
                of $235,000                                                                common stock at $0.04 per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      4/30/03   3,703,704 shares of NCT common stock   Alpha Capital Aktiengesellschaft    Exchange for $200,000 Artera
                                                                                           Group, Inc. April 4, 2001
                                                                                           convertible note
--------------- -------------------------------------- ----------------------------------- --------------------------------
       5/8/03   28,000,000 shares of NCT common stock  Crammer Road LLC                    See 12/17/02 transaction above
                (exempt under Section 3(a)(10) of
                the Securities Act of 1933)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      5/15/03   NCT Convertible Note ($450,000         Carole Salkind                      $450,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      5/15/03   Warrant for 2,000,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.046
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      5/22/03   Option to acquire 18,550,000 shares    Turbo Networks, Inc.                Exercisable for cash at $0.042
                of NCT common stock                                                        per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      5/22/03   NCT Convertible Note ($1,692,462.74    Carole Salkind                      Cancellation and surrender of
                principal amount)                                                          $1,425,000 convertible note
                                                                                           dated 5/2/02 along with
                                                                                           accrued interest and default
                                                                                           penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
      5/22/03   Warrant for 7,500,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.042
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      5/28/03   NCT Convertible Note ($415,000         Carole Salkind                      $415,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      5/28/03   Warrant for 1,900,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.044
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      6/05/03   Warrant for 2,250,000 shares of NCT    NATCO, LLC                          Exercisable for cash at $0.048
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      6/12/03   NCT Convertible Note ($2,449,811.87    Carole Salkind                      Cancellation and surrender of
                principal amount)                                                          $1,463,449, $350,000, and
                                                                                           $300,000 convertible notes dated
                                                                                           11/21/02, 5/29/02 and 6/2/02,
                                                                                           respectively, along with accrued
                                                                                           interest and default penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
      6/12/03   Warrant for 10,500,000 shares of NCT   Carole Salkind                      Exercisable for cash at $0.044
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      6/12/03   NCT Convertible Note ($435,000         Carole Salkind                      $435,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      6/12/03   Warrant for 2,000,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.044
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      6/12/03   Option to acquire 23,000,000 shares    Maple Industries, Inc.              Exercisable for cash at $0.044
                of NCT common stock                                                        per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      6/28/03   NCT Convertible Note ($410,000         Carole Salkind                      $410,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      6/28/03   Warrant for 2,000,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.038
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      6/28/03   Option to acquire 2,000,000 shares     Turbo Networks, Inc.                Exercisable for cash at $0.04
                of NCT common stock                                                        per share
--------------- -------------------------------------- ----------------------------------- --------------------------------

                                       42
<PAGE>


---------------------------------------------------------------------------------------------------------------------------
SECURITY SOLD                                          PURCHASER(S)                        CONSIDERATION
--------------- -------------------------------------- ----------------------------------- --------------------------------
                                                       Name of Person/Entity to whom
Date of Sale    Amount and Type                        securities were sold                Aggregate Amount and Type
--------------- -------------------------------------- ----------------------------------- --------------------------------
       7/3/03   5,142,297 shares of NCT common stock   Crammer Road LLC                    Conversion of 14 shares of NCT
                                                                                           series H preferred stock
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/14/03   Warrant for 2,000,000 shares of NCT    Carole Salkind                      Exercisable for cash at
                common stock                                                               $0.0312 per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/14/03   Warrant for 2,000,000 shares of NCT    Carole Salkind                      Exercisable for cash at
                common stock                                                               $0.0312 per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/14/03   Warrant for 750,000 shares of NCT      John Harris (as designee of Stop    Exercisable for cash at
                common stock                           Noise, Inc.)                        $0.0312 per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/14/03   Option to acquire 25,000,000 shares    Acme Associates, Inc.               Exercisable for cash at
                of NCT common stock                                                        $0.0312 per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/14/03   NCT Convertible Note ($410,000         Carole Salkind                      $410,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/14/03   NCT Convertible Note ($414,480.93      Carole Salkind                      Cancellation and surrender of
                principal amount)                                                          $350,000 convertible note
                                                                                           dated 7/3/02 along with
                                                                                           accrued interest and default
                                                                                           penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/15/03   5,368,098 shares of NCT common stock   Balmore S.A.                        Exchange of $175,000 1/9/01
                                                                                           Artera convertible notes
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/28/03   NCT Convertible Note ($414,750.19      Carole Salkind                      Cancellation and surrender of
                principal amount)                                                          $350,000 convertible note
                                                                                           dated 7/15/02 along with
                                                                                           accrued interest and default
                                                                                           penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/28/03   NCT Convertible Note ($410,000         Carole Salkind                      $410,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/28/03   Warrant for 2,000,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.042
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/28/03   Warrant for 2,000,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.042
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/28/03   5,924,171 shares of NCT common stock   Alpha Capital Aktiengesellschaft    Exchange of $250,000 4/4/01
                                                                                           Artera convertible notes
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/28/03   4,739,336 shares of NCT common stock   Balmore S.A.                        Exchange of $200,000 1/9/01
                                                                                           Artera convertible notes
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/31/03   7,000,000 shares of NCT common stock   Balmore S.A.                        Exchange of $312,200 1/9/01
                                                                                           Artera convertible notes
--------------- -------------------------------------- ----------------------------------- --------------------------------
      7/31/03   8,000,000 shares of NCT common stock   Austost Anstalt Schaan              Exchange of $356,800 1/9/01
                                                                                           Artera convertible notes
--------------- -------------------------------------- ----------------------------------- --------------------------------
      8/07/03   NCT Convertible Note ($622,529.18      Carole Salkind                      Cancellation and surrender of
                principal amount)                                                          $525,000 convertible note
                                                                                           dated 7/23/02 along with
                                                                                           accrued interest and default
                                                                                           penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
      8/07/03   Warrant for 2,750,000 shares of NCT    Carole Salkind                      Exercisable for cash at
                common stock                                                               $0.0539 per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      8/18/03   NCT Convertible Note ($425,000         Carole Salkind                      $425,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      8/18/03   Warrant for 2,000,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.045
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      8/22/03   15,080,938 shares of NCT common stock  Crammer Road LLC                    Conversion of 51 shares of NCT
                                                                                           series H preferred stock
--------------- -------------------------------------- ----------------------------------- --------------------------------

                                       43
<PAGE>


---------------------------------------------------------------------------------------------------------------------------
SECURITY SOLD                                          PURCHASER(S)                        CONSIDERATION
--------------- -------------------------------------- ----------------------------------- --------------------------------
                                                       Name of Person/Entity to whom
Date of Sale    Amount and Type                        securities were sold                Aggregate Amount and Type
--------------- -------------------------------------- ----------------------------------- --------------------------------
      8/28/03   NCT Convertible Note ($414,884.82      Carole Salkind                      Cancellation and surrender of
                principal amount)                                                          $350,000 convertible note
                                                                                           dated 8/14/02 along with
                                                                                           accrued interest and default
                                                                                           penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
      8/28/03   Warrant for 2,000,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.055
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      8/28/03   NCT Convertible Note ($375,000         Carole Salkind                      $375,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      8/28/03   Warrant for 2,000,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.055
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      9/04/03   NCT Convertible Notes ($440,000        Alpha Capital Aktiengesellschaft;   $390,000 in cash
                aggregate principal amount)            Libra Finance S.A. (as finder)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      9/04/03   Cancellation of 2,500,000 shares       Alpha Capital Aktiengesellschaft    12,500,000 shares of the
                from the December 6, 2002 Warrant                                          December 6, 2002 warrant
                for 15,000,000 shares of NCT common                                        vested on May 30, 2003 and
                stock                                                                      remain in force.  The remaining
                                                                                           2,500,000 shares of the December
                                                                                           6, 2002 warrant vested on May
                                                                                           30, 2003 and are cancelled on
                                                                                           September 4, 2003.
--------------- -------------------------------------- ----------------------------------- --------------------------------
      9/11/03   NCT Convertible Note ($580,650.27      Carole Salkind                      Cancellation and surrender of
                principal amount)                                                          $490,000 convertible note
                                                                                           dated 8/29/02 along with
                                                                                           accrued interest and default
                                                                                           penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
      9/11/03   Warrant for 2,500,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.050
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      9/11/03   Option for 7,500,000 shares of NCT     Acme Associates, Inc.               Exercisable for cash at $0.052
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      9/12/03   NCT Convertible Note ($400,000         Carole Salkind                      $400,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      9/12/03   Warrant for 2,000,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.050
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
      9/18/03   14,109,883 shares of NCT common        Alpha Capital Aktiengesellschaft    Settlement of legal action
                stock (exempt under Section 3(a)(10)
                of the Securities Act of 1933)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      9/18/03   20,868,729 shares of NCT common        Austost Anstalt Schaan              Settlement of legal action
                stock (exempt under Section 3(a)(10)
                of the Securities Act of 1933)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      9/18/03   21,076,266 shares of NCT common        Balmore S.A.                        Settlement of legal action
                stock (exempt under Section 3(a)(10)
                of the Securities Act of 1933)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      9/18/03   5,721,189 shares of NCT common stock   Libra Finance S.A.                  Settlement of legal action
                (exempt under Section 3(a)(10) of
                the Securities Act of 1933)
--------------- -------------------------------------- ----------------------------------- --------------------------------
      9/22/03   2,834,526 shares of NCT common stock   Crammer Road LLC                    Conversion of 10 shares of NCT
                                                                                           series H preferred stock
--------------- -------------------------------------- ----------------------------------- --------------------------------

                                       44
<PAGE>


---------------------------------------------------------------------------------------------------------------------------
SECURITY SOLD                                          PURCHASER(S)                        CONSIDERATION
--------------- -------------------------------------- ----------------------------------- --------------------------------
                                                       Name of Person/Entity to whom
Date of Sale    Amount and Type                        securities were sold                Aggregate Amount and Type
--------------- -------------------------------------- ----------------------------------- --------------------------------
     10/02/03   NCT Convertible Note ($816,096.49      Carole Salkind                      $400,000 in cash plus
                principal amount)                                                          cancellation and surrender of
                                                                                           $350,000 convertible note
                                                                                           dated 9/9/02 along with
                                                                                           accrued interest and default
                                                                                           penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
     10/02/03   Warrant for 4,000,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.043
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     10/03/03   Option to acquire 5,750,000 shares     Acme Associates, Inc.               Exercisable for cash at $0.043
                of NCT common stock                                                        per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     10/14/03   NCT Convertible Note ($4,469,018.84    Carole Salkind                      Cancellation and surrender of
                principal amount)                                                          $3,770,098.38 convertible note
                                                                                           dated 9/30/02 along with
                                                                                           accrued interest and default
                                                                                           penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
     10/14/03   Warrant for 19,250,000 shares of NCT   Carole Salkind                      Exercisable for cash at $0.044
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     10/14/03   NCT Convertible Note ($400,000.00      Carole Salkind                      $400,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
     10/14/03   Warrant for 2,000,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.044
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     10/14/03   Option to acquire 44,000,000 shares    Acme Associates, Inc.               Exercisable for cash at $0.044
                of NCT common stock                                                        per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     11/03/03   NCT Convertible Note ($400,000.00      Carole Salkind                      $400,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
     11/03/03   Warrant for 2,000,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.044
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     11/03/03   Option to acquire 2,000,000 shares     Acme Associates, Inc.               Exercisable for cash at $0.045
                of NCT common stock                                                        per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     11/21/03   NCT Convertible Note ($474,154.08      Carole Salkind                      Cancellation and surrender of
                principal amount)                                                          $400,000 convertible note
                                                                                           dated 11/07/02 along with
                                                                                           accrued interest and default
                                                                                           penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
     11/21/03   Warrant for 2,250,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.041
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     11/21/03   NCT Convertible Note ($425,000.00      Carole Salkind                      $425,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
     11/21/03   Warrant for 2,500,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.041
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     11/21/03   Option to acquire 6,500,000 shares     Acme Associates, Inc.               Exercisable for cash at $0.041
                of NCT common stock                                                        per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     11/22/03   NCT Convertible Note ($400,000.00      Carole Salkind                      $400,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
     11/22/03   Warrant for 2,500,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.041
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------

                                       45
<PAGE>


---------------------------------------------------------------------------------------------------------------------------
SECURITY SOLD                                          PURCHASER(S)                        CONSIDERATION
--------------- -------------------------------------- ----------------------------------- --------------------------------
                                                       Name of Person/Entity to whom
Date of Sale    Amount and Type                        securities were sold                Aggregate Amount and Type
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/15/03   NCT Convertible Note ($3,828,984.72    Carole Salkind                      Cancellation and surrender of
                principal amount)                                                          $400,000, $350,000, $450,000,
                                                                                           $1,692,462.74 and $415,000
                                                                                           convertible notes dated
                                                                                           11/20/02, 12/02/02, 05/15/03,
                                                                                           05/22/03 and 05/28/03 along
                                                                                           with accrued interest and
                                                                                           default penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/15/03   Warrant for 16,500,000 shares of NCT   Carole Salkind                      Exercisable for cash at $0.037
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/15/03   NCT Convertible Note ($400,000.00      Carole Salkind                      $400,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/15/03   Warrant for 2,500,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.037
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/17/03   Option to acquire 99,750,000 shares    Acme Associates, Inc.               Exercisable for cash at $0.037
                of NCT common stock                                                        per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/31/03   NCT Convertible Note ($7,479,384.54    Carole Salkind                      Cancellation and surrender of
                principal amount)                                                          $400,000, $2,381,486.89,
                                                                                           $350,000, $2,449,811.87,
                                                                                           $435,000 and $410,000
                                                                                           convertible notes dated
                                                                                           12/16/02, 12/26/02, 12/30/02,
                                                                                           06/12/03, 06/12/03 and 06/28/03
                                                                                           along with accrued interest and
                                                                                           default penalty
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/31/03   Warrant for 32,250,000 shares of NCT   Carole Salkind                      Exercisable for cash at $0.040
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/31/03   NCT Convertible Note ($785,000.00      Carole Salkind                      $785,000 in cash
                principal amount)
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/31/03   Warrant for 5,500,000 shares of NCT    Carole Salkind                      Exercisable for cash at $0.040
                common stock                                                               per share
--------------- -------------------------------------- ----------------------------------- --------------------------------
     12/31/03   NCT Convertible Note ($3,050,000.00    Carole Salkind                      Cancellation and surrender of
                principal amount)                                                          $400,000, $816,096.49 $400,000
                                                                                           and $400,000 convertible notes
                                                                                           dated 09/12/03, 10/02/03,
                                                                                           10/14/03 and 11/03/03 along
                                                                                           with accrued interest and
                                                                                           $996,238 additional note
                                                                                           principal amount in
                                                                                           consideration of willingness for
                                                                                           continued funding provided by
                                                                                           Carole Salkind
--------------- -------------------------------------- ----------------------------------- --------------------------------

</TABLE>

                                       46
<PAGE>


ITEM 6. SELECTED FINANCIAL DATA

     The selected  consolidated  financial  data set forth below is derived from
our historical  financial  statements.  The data set forth below is qualified in
its  entirety  by and  should  be  read in  conjunction  with  our  consolidated
financial  statements  and  "Management's  Discussion  and Analysis of Financial
Condition and Results of Operations" that are included  elsewhere in this Annual
Report on Form 10-K.


<TABLE>
<CAPTION>


(in thousands of dollars, except per share amounts)

                                                                                Years Ended December 31,
                                                       --------------------------------------------------------------------------
                                                           1999            2000            2001            2002           2003
                                                       ------------    ------------     -----------    -----------    -----------
RESULTS OF OPERATIONS AND
 LOSS PER SHARE:
REVENUE:
<S>                                                      <C>             <C>             <C>             <C>            <C>
 Technology licensing fees and royalties                 $   3,552 (b)   $   9,928 (b)   $   5,633 (b)   $  4,493       $  3,013
 Product sales, net                                          2,208           2,001           4,568          2,697          1,708
 Advertising                                                     -             828             279            105             88
 Engineering and development services                        1,303              83             132             24             49
                                                       ------------    ------------    ------------    -----------    -----------
       Total revenue                                     $   7,063       $  12,840       $  10,612       $  7,319       $  4,858
                                                       ------------    ------------    ------------    -----------    -----------
COSTS, EXPENSES AND OTHER INCOME:
 Cost of product sales                                   $   2,767       $   2,127       $   3,340       $  1,279       $    787
 Cost of advertising                                             -             814             332             15             14
 Cost of engineering and development services                2,216              55               2              8             53
 Selling, general and administrative                        11,878          11,408          18,983 (f)     14,850         17,519 (m)
 Research and development                                    6,223           4,412           5,966          4,711          3,684
 Other operating (income) expense, net                       7,032 (c)       2,661 (d)      35,841 (g)     11,439 (k)       (244)
                                                       ------------    ------------    ------------    -----------    -----------
       Operating costs, expenses and other income           30,116          21,477          64,464         32,302         21,813
Non-operating items:
 Other (income) expense, net                                   166            (162)         16,099 (h)      7,411 (l)       (943)(n)
 Interest (income) expense, net                                552           1,849           6,127 (i)      7,711         14,288 (o)
                                                       ------------    ------------    ------------    -----------    -----------
       Total costs and expenses                          $  30,834       $  23,164       $  86,690       $ 47,424       $ 35,158
                                                       ------------    ------------    ------------    -----------    -----------

Net loss before cumulative effect
    of change in accounting principle                    $ (23,771)      $ (10,324)      $ (76,078)      $(40,105)      $(30,300)
Cumulative effect of change in accounting principle              -               -          (1,582)(j)          -              -
                                                       ------------    ------------    ------------    -----------    -----------

NET LOSS                                                 $ (23,771)      $ (10,324)      $ (77,660)      $(40,105)      $(30,300)
Less:
Beneficial conversion features                              10,567           5,667 (e)         392             46              -
Preferred stock dividends                                      494             113             969          2,817          2,948
                                                       ------------    ------------    ------------    -----------    -----------

Loss attributable to common stockholders                 $ (34,832)      $ (16,104)      $ (79,021)      $(42,968)      $(33,248)
                                                       ============    ============    ============    ===========    ===========

Loss per share:                                          $   (0.18)      $   (0.06)      $   (0.20)      $  (0.10)      $  (0.06)
Loss before cumulative effect
       of change in accounting principle                         -               -           (0.01)             -              -
                                                       ------------    ------------    ------------    -----------    -----------
 Basic and diluted net loss per share                    $   (0.18)      $   (0.06)      $   (0.21)      $  (0.10)      $  (0.06)
                                                       ============    ============    ============    ===========    ===========
Weighted average common shares outstanding -
       Basic and diluted (a)                               190,384         292,758         377,084        446,423        563,543
                                                       ============    ============    ============    ===========    ===========

</TABLE>

                                       47
<PAGE>


<TABLE>
<CAPTION>

                                                                       As of December 31,
                                             -------------------------------------------------------------------------
                                                 1999           2000            2001           2002           2003
                                             ------------   ------------    ------------   ------------   ------------
BALANCE SHEET DATA:
<S>                                          <C>            <C>             <C>            <C>            <C>
 Total assets                                $   13,377     $   39,382      $   20,009     $   13,569     $   12,775
 Total current liabilities                        7,728         23,386          56,959         53,542         62,927
 Total long term liabilities                      4,107          3,761           7,765          5,011          2,746
 Accumulated deficit                           (131,475)      (141,799)       (219,459)      (259,564)      (289,864)
 Stockholders' equity (capital deficit)(p)         (367)         9,858         (53,463)       (53,673)       (61,211)
 Working capital deficit                         (3,281)        (9,727)        (52,636)       (51,409)       (60,816)

</TABLE>


Footnotes:
----------
     (a)  Excludes  shares  issuable  upon the  exercise  of  outstanding  stock
          options,  warrants,  convertible  preferred stock and convertible debt
          since their effect would be antidilutive.

     (b)  Includes  revenue  recognized  upon DMC licensing  activities  for DMC
          licenses  that  during  2002 we  subsequently  reacquired,  or plan to
          reacquire, as follows: 1999 - $850,000; 2000 - $1,055,545;  and 2001 -
          $222,220.

     (c)  Includes a $2.4 million charge in connection  with NCT's write down of
          its  investment  in Top Source  Automotive,  Inc. to its estimated net
          realizable   value;  a  $1.8  million  reserve  for  an  uncollectible
          promissory note and pre-acquisition  costs related to Precision Power,
          Inc.; and a $3.1 million charge for the impairment of goodwill.

     (d)  Includes $3.1 million charge for the impairment of goodwill.

     (e)  Includes  $1.0 million  adjustment to  beneficial  conversion  feature
          previously   reported   by  our  82%   owned   subsidiary,   Pro  Tech
          Communications, Inc.

     (f)  Increase  compared  to 2000 is  primarily  due to higher  compensation
          costs,  litigation and patent expenses,  depreciation and amortization
          and costs attributable to acquired companies.

     (g)  Primarily  consists  of $1.9  million  charge  for  costs  of  exiting
          activities  attributable to closing facilities and certain operations;
          $14.1  million  charge for the  impairment  of  goodwill  (net of $2.1
          million  reduction  of deferred  revenue);  $19.3  million,  net,  for
          repurchased  licenses  (composed of $18.0  million  write down for the
          acquisition of shares of DMC New York, Inc., representing  repurchased
          licenses and accrual for obligation to acquire remaining  licenses and
          $1.3 million,  net of $2.7 million reduction of deferred revenue,  for
          reacquisition  of other DMC  licenses  from two  licensees);  and $1.5
          million write down of investment in Top Source Automotive.

     (h)  Primarily consists of $7.0 million for  other-than-temporary  declines
          in value of  available-for-sale  securities;  $2.3 million for finance
          costs  associated  with   non-registration  of  shares;  $2.3  million
          realized  loss on sale  of  trading  securities  (NXT);  $1.4  million
          decline in the fair value of a warrant; $1.2 million default penalties
          on debt; and $1.0 million reserve for notes receivable.

     (i)  Includes $3.3 million  amortization of original debt  discounts;  $0.9
          million relating to the amortization of beneficial conversion features
          on convertible  debt; $0.7 million from debt issuance costs;  and $1.2
          million interest charges on indebtedness.

     (j)  Upon adoption of SFAS No. 138 effective January 1, 2001, the reduction
          in the fair  value of  derivatives,  which  consists  of a warrant  to
          purchase  common  stock of a licensee,  was  reported as a  cumulative
          effect of change in accounting principle.

     (k)  Primarily consists of $9.2 million charge for repurchased licenses due
          to additional costs incurred to acquire 12,000 shares of DMC New York,
          Inc.  in  exchange  for our series H  preferred  stock,  $2.1  million
          impairment  of  other  intangible  assets  and  $0.3  million  for the
          impairment of goodwill.

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<PAGE>


     (l)  Primarily  consists of $6.1 million for finance costs  associated with
          non-registration  of shares;  $0.8  million  for  other-than-temporary
          declines in value of available-for-sale  securities;  and $0.4 million
          default penalties on debt.

     (m)  Includes a $3.8  million  increase  in  consulting  expenses  from the
          issuance of options.

     (n)  Primarily  consists of $2.2 million for finance costs  associated with
          non-registration  of shares;  $2.1 million default  penalties on debt;
          and $(5.3) million gain on litigation settlements.

     (o)  Includes $5.3 million of amortization of original debt discounts; $4.9
          million relating to the amortization of beneficial conversion features
          on convertible  debt; $2.9 million  interest  charges on indebtedness;
          $1.1 million amortization of additional debt discounts.

     (p)  NCT has never declared nor paid cash dividends on its common stock.


ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     The  following   discussion   should  be  read  in  conjunction   with  our
consolidated  financial statements and the notes thereto included in this Annual
Report on Form 10-K. In addition,  we caution readers that our actual results in
fiscal  2004 and beyond  may  differ  materially  from  those  expressed  in any
forward-looking statements made by, or on behalf of, us.

     Caution Concerning Forward-Looking Statements

     The Securities  and Exchange  Commission  encourages  companies to disclose
forward-looking  information so that investors can better understand a company's
future prospects and make informed investment  decisions.  This Annual Report on
Form 10-K contains such  "forward-looking  statements" within the meaning of the
Private  Securities  Litigation  Reform  Act of  1995.  Such  statements  can be
identified  by the  use  of  forward-looking  terminology  such  as  "believes,"
"expects," "may," "estimates," "will," "should," "plans" or "anticipates" or the
negative thereof or other variations  thereon or comparable  terminology,  or by
discussions  of strategy.  Readers are cautioned  that any such  forward-looking
statements  are not  guarantees of future  performance  and involve  significant
risks and uncertainties,  and that actual results may vary materially from those
in the forward-looking  statements as a result of any number of factors, many of
which are beyond the control of management.

     NCT operates in a highly  competitive and rapidly changing  environment and
operating segments that are dependent on our ability to: achieve  profitability;
achieve a competitive position in design, development, licensing, production and
distribution  of  products;  produce  a cost  effective  product  that will gain
acceptance in relevant consumer and other product markets; increase revenue from
products  and  services;   realize  funding  from  technology   licensing  fees,
royalties, product sales, and engineering and development revenue to sustain our
current  level of  operation;  introduce,  on a timely  basis,  new products and
services;  continue  its  current  level  of  operations  to  support  the  fees
associated with NCT's patent portfolio; maintain satisfactory relations with its
customers;  attract and retain key personnel;  maintain and expand our strategic
relationships;  and  protect  our  know-how,  inventions  and  other  secret  or
unprotected  intellectual property. NCT's actual results could differ materially
from  management's  expectations  because of changes in these factors.  New risk
factors can arise and it is not possible for  management to predict all of these
risk  factors,  nor can it assess the impact of all of these risk factors on the
company's business or the extent to which any factor, or combination of factors,
may cause  actual  results  to differ  materially  from those  contained  in any
forward-looking  statements.  Given  these  risks and  uncertainties,  investors
should not place undue reliance on forward-looking statements as a prediction of
actual results.

     Investors  should  also be aware that  while NCT might,  from time to time,
communicate  with securities  analysts,  it is against our policy to disclose to
them any non-public  information or other confidential  commercial  information.
Accordingly,  investors  should not assume that NCT agrees with any statement or
report  issued by any analyst  irrespective  of the content of the  statement or
report.  Furthermore,  NCT has a policy against issuing or confirming  financial
forecasts  or  projections  issued by others.  Thus,  to the extent that reports
issued by securities  analysts or others contain any  projections,  forecasts or
opinions,  such reports are not the  responsibility  of NCT. All  references  to
years,  unless otherwise noted, refer to our fiscal year, which ends on December
31. All references to quarters, unless otherwise noted, refer to the quarters of
our fiscal year.

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<PAGE>


     Overview

     Our  business  operations  are  organized  into three  operating  segments:
communications,  media and technology.  NCT's operating  revenue is comprised of
technology  licensing  fees  and  royalties,   product  sales,  advertising  and
engineering and  development  services.  Operating  revenue in 2003 consisted of
approximately 62.0% in technology licensing fees and royalties, 35.2% in product
sales, 1.8% in advertising and 1.0% in engineering and development services. For
the five years  ended  December  31,  2003,  our revenue  consisted  of 62.4% in
technology  licensing  fees and  royalties,  30.9%  in  product  sales,  3.0% in
advertising  and 3.7% in engineering and  development  services.  Such five-year
revenue  included  approximately  $2.1 million for DMC license fees for licenses
that we  subsequently  reacquired and that resulted in charges to our statements
of operations ($19.3 million, net, in 2001 and $9.2 million in 2002).  Excluding
the  revenue  recognized  from the  sale of DMC  licenses  that we  subsequently
determined to reacquire,  our revenue for the five years ended December 31, 2003
consisted of  approximately  60.4% in technology  licensing  fees and royalties,
32.5%  in  product  sales,  3.2% in  advertising  and  3.9% in  engineering  and
development  services.   Our  revenue  recognition  policies  are  described  in
"Critical  Accounting Policies" below. The mix of our revenue sources during any
reporting period may have a material impact on our results.  In particular,  our
execution  of  technology  licensing  agreements  and the timing of the  revenue
recognized therefrom has not been predictable.

     We  had  actively  pursued  an  acquisition   strategy  through  2001.  Our
statements  of  operations  include the results of acquired  companies  from the
respective dates of acquisition. In 2001, we acquired Artera Group International
Limited (formerly known as Teltran Web Factory Limited) and 25% of DMC New York,
Inc. In June 2002, pursuant to an exchange agreement,  we acquired the remaining
75% of DMC New York,  Inc. and  $120,000  cash from Crammer Road in exchange for
1,800 shares of our series H preferred stock.  Please refer to Note 2 - notes to
our  consolidated   financial  statements  for  further  information  about  our
acquisitions.

     In  December  2001,  management  decided  to close the  company's  Maryland
research facility. During 2002, due to under-performance, we ceased the business
operations of DMC Cinema and Artera Group  International  Limited. In connection
with these actions,  the company reduced the number of its employees from 135 at
December  31, 2001 to 74 at  December  31,  2002,  a 45.2%  decrease.  We had 75
employees at December 31, 2003 and 68 at February 29, 2004.

     NCT continued its practice of marketing its technologies  through licensing
to third parties for fees,  generally by obtaining  technology license fees when
initiating strategic  relationships with new partners, and subsequent royalties.
We have entered into a number of licensing agreements with established firms for
the integration of our technologies  into products.  The speed with which we can
achieve the  commercialization  of our  technologies  and  subsequently  receive
royalties  depends,  in part,  upon the time  taken by these  firms for  product
testing and their  assessment of how best to integrate our technology into their
products and manufacturing operations. While we work with these firms on product
testing and  integration,  we are not always able to influence  how quickly this
process can be completed and a resulting revenue stream can be generated.

     Presently,  we are  selling  products  through  several  of our  licensees,
including:  Ultra is installing  aircraft cabin quieting systems in the SAAB 340
turboprop  aircraft;  Oki is integrating  ClearSpeech(R)  algorithms  into large
scale integrated circuits for communications  applications;  and Thales Avionics
In-flight  Systems  (formerly  known  as BE  Aerospace)  and  Long  Prosper  are
providing NoiseBuster(R) components for United Airlines' in-flight entertainment
and information systems.

     Going Concern Risks

     Since its inception,  NCT has experienced substantial recurring losses from
operations,  which  amounted to $289.9  million on a  cumulative  basis  through
December 31, 2003.  NCT's  internally  generated  funds from its revenue sources
have not been  sufficient  to cover its  operating  costs.  The  ability  of our
revenue sources,  especially technology license fees,  royalties,  product sales
and advertising,  to generate significant cash for our operations is critical to
our  long-term  success.  We cannot  predict  whether we will be  successful  in
obtaining market acceptance of our new products or technologies or in completing
our  current  licensing  agreement  negotiations.  To the extent our  internally
generated funds are not adequate, management believes additional working capital
financing must be obtained  through the private  placement or public offering of
additional equity of NCT or its subsidiaries in the form

                                       50
<PAGE>


of common stock,  convertible  preferred stock and/or convertible debt. There is
no assurance that our  shareholders  would approve a sufficient  increase in our
authorized  shares.  There is no assurance any such financing is or would become
available. There can be no assurance that sufficient funding will be provided by
our revenue sources or additional capital.

     Management  believes that currently  available funds will not be sufficient
to sustain NCT  operations  at its current  levels  through the next six months.
Such funds  consist of available  cash and the funding  derived from our revenue
sources.  Cash and cash equivalents  amounted to $1.0 million as of December 31,
2003 and the working  capital  deficit was $60.8  million.  NCT has been able to
continue its operations by raising  additional  capital to fund its  operations.
NCT has been  primarily  dependent  upon funding from Carole Salkind in 2003. At
December 31, 2003, NCT is in default on $6.7 million of its  indebtedness and is
subject to a judgment of $2.1  million.  Please refer to  Liquidity  and Capital
Resources  below.  In the event that  external  financing  is not  available  or
timely, NCT would have to substantially  reduce its level of operations in order
to  conserve  cash.  These  reductions  could  have an  adverse  effect on NCT's
relationships  with its customers and suppliers  (refer to Note 1 - notes to the
consolidated  financial  statements).  Reducing  operating  expenses and capital
expenditures  alone may not be adequate,  and continuation as a going concern is
dependent  upon the level of funding  realized  from our  internal  and external
funding sources, all of which are presently  uncertain.  Uncertainty exists with
respect to the adequacy of current funds to support  NCT's  activities or to pay
awards or judgments against the company until positive cash flow from operations
can be achieved and with  respect to the  availability  of financing  from other
sources to fund any cash deficiencies.

     NCT's  consolidated  financial  statements have been prepared assuming that
NCT  will  continue  as  a  going  concern,  which  contemplates  continuity  of
operations,  realization  of  assets  and  satisfaction  of  liabilities  in the
ordinary  course of business.  The propriety of using the going concern basis is
dependent  upon,  among  other  things,  the  achievement  of future  profitable
operations and the ability to generate  sufficient cash from operations,  public
and private  financings and other funding sources to meet its  obligations.  The
uncertainties  described in the preceding  paragraphs raise substantial doubt at
December  31, 2003 about NCT's  ability to  continue as a going  concern.  NCT's
accompanying  consolidated  financial  statements do not include any adjustments
relating to the  recoverability of the carrying amount of recorded assets or the
amount of liabilities that might result from the outcome of these uncertainties.

     Critical Accounting Policies

     The  preparation of our financial  statements  requires  management to make
estimates  and  assumptions   that  affect  the  reported   amounts  of  assets,
liabilities,  revenue and expenses,  and related disclosure of contingent assets
and liabilities.  Management bases its estimates on historical experience and on
various  other  assumptions  that  are  believed  to  be  reasonable  under  the
circumstances, the results of which form the basis of making judgments about the
carrying  values of assets and  liabilities  that are not readily  apparent from
other sources.  Actual results may differ from these  estimates  under different
assumptions or conditions.

     An accounting  policy is deemed to be critical if it requires an accounting
estimate  to be made  based  upon  assumptions  about  matters  that are  highly
uncertain at the time the  estimate is made,  and if  different  estimates  that
reasonably could have been used, or changes in the accounting estimates that are
reasonably likely to occur  periodically,  could materially impact the financial
statements.  Management  believes the  following  critical  accounting  policies
reflect its more  significant  estimates and assumptions used in the preparation
of the consolidated financial statements.

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<PAGE>


Revenue Recognition

     Revenue is recognized when earned.  Technology licensing fees are generally
recognized  upon  execution  of the  agreement  but are  deferred  if subject to
completion of any  performance  criteria then  recognized  once the  performance
criteria have been met.  Revenue from  royalties is recognized  ratably over the
royalty period based upon periodic  reports  submitted by the royalty obligor or
based on minimum royalty requirements.  Revenue from product sales is recognized
when the product is shipped.  Revenue from advertising  sales is recognized when
the  advertisements  are  aired  or  displayed.  Revenue  from  engineering  and
development  services is  generally  recognized  and billed as the  services are
performed.  Our  preference  is to  collect  amounts  due  from  the sale of our
technologies,  services  and  products  in  cash.  However,  from  time to time,
receivables  may be settled by securities  transferred  to us by the customer in
lieu of cash payment and such other  consideration may or may not be realized by
us in cash.

     At December 31, 2003, our deferred revenue  aggregated $3.3 million.  We do
not expect to realize any cash in connection with  recognizing  revenue from our
deferred revenue.

Goodwill, Patent Rights and Other Intangible Assets

     The  excess of the  consideration  paid over the fair  value of net  assets
acquired in business  combinations  is  recorded as  goodwill.  Goodwill is also
recorded  by NCT  upon  the  acquisition  of  some or all of the  stock  held by
minority  shareholders  of a  subsidiary,  except where such  accounting  is, in
substance,   the  purchase  of  licenses   previously   sold  to  such  minority
shareholders  or their  affiliates.  Effective  January  1, 2002,  goodwill  and
intangibles with indefinite lives are no longer  amortized.  Prior to January 1,
2002,  goodwill was amortized using the straight-line  method over the estimated
period of  benefit  (generally  ranging  from five to  twenty  years).  Goodwill
amortization expense for the year ended December 31, 2001 was $1.7 million.

     Annually,  or if an event  occurs or  circumstances  change that would more
likely  than not reduce the fair value of a  reporting  unit below its  carrying
amount, the company tests its goodwill for impairment.

     Our annual  evaluation is conducted in December.  At December 31, 2003, the
company  evaluated the goodwill  allocated to its Advancel  reporting  unit, NCT
Hearing  reporting  unit and  Midcore/Artera  reporting  unit and  determined no
impairment  existed.  The fair value of the reporting units was determined using
the  income  approach  by  discounting  future  benefits.  Our  key  assumptions
underlying the projections for our reporting units included the following:

Advancel Reporting Unit
o    Revenue  projections  were  based  upon the  royalties  due  Advancel  from
     STMicroelectronics  whose  product  sales  started in 2003.  Our revenue is
     projected  to  increase  approximately  850% in the  first  two  years  and
     increase annually thereafter at rates ranging from 42% to 18%.
o    Based upon our  projected  revenue,  we calculated  our market  penetration
     would be less than 1% in 2004;  we  estimated  significant  growth in years
     2005  to  2008  and  our   projected   market   penetration   increases  to
     approximately  6% of the smart card market.  We believe such an increase is
     feasible since Advancel's technology  introduces multiple  functionality to
     smart cards and ST is a market-leading supplier of smart card chips.
o    We  believe   expenses   will  be  nominal  (we  assumed   these  would  be
     approximately  10% of royalty revenue) since no further  significant  costs
     are expected to be incurred by us.
o    Although we have not  historically  achieved  profitability  or significant
     revenue growth in any of our operations, our projections include profitable
     operations  from 2004  through  2008 (our  projection  covered a  five-year
     period).
o    Discount  rate  of 10% was  used  (considered  consistent  with  the  risks
     involved as implementation  will be performed by ST resulting in an annuity
     stream to us and no further investment is required by us).
o    We used a  probability-weighted  approach to assess the  likelihood of five
     possible outcomes.

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<PAGE>


NCT Hearing Reporting Unit
o    Fair  value  testing  was based on NCT  Hearing's  operations  and only our
     controlling  interest in ProTech (a  81.6%-owned  subsidiary of NCT Hearing
     Products,   Inc.);   our   valuation   estimate   included   reliance  upon
     knowledgeable  officers and  employees  with  extensive  experience  in the
     headset and communications industry.
o    Our projections covered a five-year period.

o    Material  revenue  was  projected  from  products  for  which  there are no
     historical sales;  however,  our projections also represent current product
     lines that have existing,  established  distribution  channels;  as well as
     revenue   projected   for  products   incorporating   the   ANR/ClearSpeech
     technology. We estimated the projected sales by identifying the products to
     be improved,  the timing to achieve the results and expected sales based on
     our experience with current products.  We estimated  different sales levels
     and selling  prices,  applied an estimated  probability  of  achieving  the
     projected  levels to arrive at our final  projected  amounts.  Our  revenue
     projections  reflected  annual  increases  ranging  from  106% to 18%.  New
     products  comprise  approximately  from 44% to 68% of  revenue  during  the
     projected period.
o    Profitability  is projected for 2004 through 2008  although this  reporting
     unit has not been profitable since 1995. From 2004 through 2008,  projected
     net profit increases from 6.4% of revenue to 29.0% of revenue.
o    20% discount rate was used (considered  consistent with the risks involved;
     approximates cost of equity capital).
o    Additional,  third party  financing  for working  capital was  projected at
     approximately $250,000.

Artera/Midcore Reporting Unit

o    Our  subscribers  are  projected  to  comprise a mix of  approximately  14%
     residential and 86% small business and enterprise users; revenues projected
     reflect our share of revenues under  arrangements  with third  parties.  We
     projected significant annual increases in number of subscribers although we
     have no  historical  basis  for  generating  revenue  (or  profit)  in this
     business  operation.  Artera  Turbo 2.0 was  released  in October  2002 and
     Artera Turbo 3.1 became available in December 2003.
o    Our  revenue is  projected  to increase  annually  beyond the first year at
     rates  ranging  from  approximately  140% to  approximately  7%,  averaging
     approximately   134%  for  the  second  and  third   years  and   averaging
     approximately 22% for the next three years. The substantial increase during
     the first years reflects the anticipated increase in enterprise revenue.
o    Our projections covered a six-year period.
o    We estimated that our market penetration would be less than 1% of worldwide
     dial-up Internet users throughout the projection period.
o    We have projected  profitability  beginning in 2005 although this operation
     has   not   historically    achieved    profitability.
o    We anticipated  that working capital  financing of up to $5.0 million would
     be required in 2004.
o    We used a  probability-weighted  approach to assess the  likelihood  of six
     possible outcomes.
o    35% discount rate was used which was considered  consistent  with the risks
     involved and Artera's expected future cost of borrowing.

     These evaluations required informed, but subjective judgment in forecasting
revenues and expenses  especially given that these reporting units are either in
a start-up phase or have no recent historical record for generating  revenues or
positive  cash flows.  In all cases,  we  considered  objective  evidence  where
available.  Although we have not historically  been profitable,  we believe that
profitability  may be achieved in the future if the  necessary  sales levels are
reached.

     If the financing  noted above is not received,  changes to our  assumptions
will be required in connection with further testing for impairment. In addition,
future  events  such as market  conditions  or  operational  performance  of our
reporting units could cause us to modify our assumptions.

     The company also  recognizes an impairment  loss on goodwill  acquired upon
the  acquisition of stock held by minority  shareholders  of subsidiaries if the
subsidiary's  minority  interest has no carrying  value,  the  subsidiary  has a
capital deficit and the projected future operating results of the subsidiary are
not positive. Impairment of goodwill, net for the years ended December 31, 2001,
2002 and 2003 was  $14.1  million,  $0.3  million  and  zero,  respectively.  At
December 31, 2003, the carrying value of our goodwill, net was $7.2 million.

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<PAGE>


     Patent rights and other intangible  assets with finite useful lives,  which
includes the cost to acquire rights to patents and other rights under  licenses,
are stated at cost and are  amortized  using the  straight-line  method over the
remaining useful lives, ranging from one to fifteen years.  Amortization expense
for the years ended  December 31,  2001,  2002 and 2003 was $0.4  million,  $0.5
million and $0.3 million, respectively.

     The company  evaluates the remaining useful life of intangible  assets with
finite  useful  lives each  reporting  period to  determine  whether  events and
circumstances warrant a revision to the remaining period of amortization. If the
evaluation  determines  that the intangible  asset's  remaining  useful life has
changed,  the remaining  carrying  amount of the  intangible  asset is amortized
prospectively over that revised remaining useful life. The company evaluates its
intangible  assets with finite useful lives for  impairment  whenever  events or
other  changes in  circumstances  indicate  that the carrying  amount may not be
recoverable.  The testing for impairment  includes  evaluating the  undiscounted
cash flows of the asset and the remaining period of amortization or useful life.
The factors used in evaluating  the  undiscounted  cash flows  include:  current
operating  results,  projected future  operating  results and cash flows and any
other  material  factors that may effect the continuity or the usefulness of the
asset. If impairment  exists,  the intangible  asset is written down to its fair
value based upon discounted cash flows.  Impairment of other intangibles for the
years ended  December 31, 2001,  2002 and 2003 was zero,  $2.1 million and zero,
respectively. At December 31, 2003, our patent rights and other intangibles, net
were $1.3 million.

     Recent Authoritative Accounting Guidance

     On January 1, 2003, we adopted the  following  standards as a result of the
issuance of new accounting  pronouncements by the Financial Accounting Standards
Board (FASB) in 2002:
          o    Statement  of  Financial  Accounting  Standards  (SFAS) No.  145,
               "Rescission of FASB  Statements  No. 4, 44, and 64,  Amendment of
               FASB Statement No. 13, and Technical Corrections"
          o    SFAS No.  146,  "Accounting  for  Costs  Associated  with Exit or
               Disposal Activities"
          o    FASB  Interpretation  No. (FIN) 45,  "Guarantor's  Accounting and
               Disclosure   Requirements  for  Guarantees,   Including  Indirect
               Guarantees of Indebtedness of Others"

     On July 1, 2003,  we adopted  the  following  standards  as a result of the
issuance of new accounting  pronouncements  by the FASB in 2003:
          o    SFAS  No.  149,   "Amendment   of  Statement  133  on  Derivative
               Instruments and Hedging Activities"
          o    SFAS No. 150, "Accounting for Certain Financial  Instruments with
               Characteristics of both Liabilities and Equity"

     On January 17,  2003,  the FASB issued FIN 46,  "Consolidation  of Variable
Interest Entities." On December 24, 2003, the FASB issued a complete replacement
of FIN No. 46, entitled FIN 46 Revised,  which clarifies certain complexities of
FIN 46.

     For more detailed  information  regarding any pronouncements and the impact
thereof on our business,  results of operations and financial position, refer to
Note 3 - notes to our consolidated financial statements.

     Results of Operations

Year ended December 31, 2003 compared to year ended December 31, 2002.

     Total revenue in 2003 decreased by $2.4 million,  or 32.9%, to $4.9 million
from $7.3 million in 2002 reflecting  decreases in most of our revenue  sources.
Total costs and expenses during the same period  decreased by $12.2 million,  or
25.7%, primarily due to: (a) $9.2 million reduction in write downs of investment
and  repurchased  licenses,  net;  and  (b)  $5.3  million  gain  on  litigation
settlements.

     Technology  licensing fees and royalties  decreased $1.5 million, or 33.3%,
to  $3.0  million  from  $4.5  million  in  2002.   The  decrease  is  primarily
attributable to the absence of licensing fees of $1.9 million related to Teltran
for 2003 partially offset by licensing fees of $0.4 million related to FairPoint
for 2003. Our  recognition of technology  licensing fee revenue for both periods
was due primarily to recognition of deferred  revenue from NXT.  During 2003, we
received  $0.3 million in cash under our 2002  FairPoint  agreement.  During the
fourth quarter of 2003, the 2002 FairPoint agreement was replaced which resulted
in Artera meeting all specific performance criteria under that

                                       54
<PAGE>


agreement  and the  recognition  of all $0.4  million of  deferred  revenue.  At
December 31, 2003,  our deferred  revenue  related to NXT was $2.7  million.  No
additional cash will be realized from our NXT deferred revenue.

     Product sales  decreased $1.0 million,  or 37.0%, to $1.7 million from $2.7
million in 2002. The decrease was primarily due to $0.5 million of lower product
sales recognized by Pro Tech due to reduced fast-food headset purchases by major
distributors  and a $0.2  million  decrease  as a  result  of the  cessation  of
operations  of  Artera  International  in  March  2002.  Our  principal  product
customers  for 2003,  HM  Electronics,  Muzak,  3M  Corporation  and  McDonalds,
accounted for $0.6 million of total  product  sales  compared to $0.7 million in
2002.  Sales to  Muzak,  3M  Corporation  and  McDonalds  consisted  of Pro Tech
headsets and  accessories.  Sales to HM Electronics  consisted of chips that use
our  ClearSpeech  algorithms.  Total sales to these  customers were less in 2003
compared to 2002 due to a weaker  economy.  There can be no  assurance  that our
product customers will continue to place orders with us at the same levels as in
the prior  years.  The loss of one or more  customers,  a reduction in orders or
increased product returns could adversely affect our operating results.

     Gross profit on product sales,  as a percentage of product sales,  improved
to 53.9% in 2003 from 52.6% for the same period in 2002.

     Revenue from  advertising  remained  consistent in 2003 compared to 2002 at
$0.1 million.  Advertising  revenue is derived from the sale of audio and visual
advertising  in the Sight & Sound  locations.  We  experienced  an  increase  in
revenue  from  health  venues,  which was offset by a decrease  in revenue  from
non-health  venues.  Although  our  limited  cash  resources  have  reduced  our
expectations,  we  anticipate  increasing  revenue  from  the  Sight &  Sound(R)
locations in health  venues.  We believe it is reasonable  to expect  revenue to
increase in the future  because (i) our  network of  installed  sites is growing
and, as a result, our reach into the market and number of impressions  delivered
is increasing which makes the network more compelling to advertisers;  (ii) each
site is  supported  by at least one  paying  advertiser,  in most  cases  health
insurance plans,  and generally their  commitments are for one to two years; and
(iii)  additional  site and  advertiser  opportunities  are in  negotiation.  At
December  31,  2003,  twenty sites in  hospitals  and  neighborhood  family care
centers are operational.  Cost of advertising  also remained  consistent in 2003
compared to 2002. These costs include the amounts due to the installed locations
(as compensation for our use of the facilities where the Sight & Sound system is
located) and communication expenses for the Sight & Sound locations. At December
31, 2003, revenue from health care venues was 100% of total advertising  revenue
as compared to 66% for the same period in 2002.

     Selling,  general  and  administrative  expenses  in  2003  increased  $2.7
million,  or 18.2%, to $17.5 million from $14.8 million in 2002 due primarily to
a $4.2 million  increase in consulting  expense from the issuance of options and
$0.3 million  accrual for asserted  minimum  royalties  due to a licensor.  This
increase was  partially  offset by an $0.8 million  decrease in legal and patent
expenses as a result of finalizing  legal matters and a $0.1 million decrease in
each of salary and  related  benefits,  corporate  and office  related  expenses
relating to a reduced workforce.

     Research and development  expenditures  in 2003 decreased $1.0 million,  or
21.3%,  to $3.7  million  from  $4.7  million  in 2002.  This  decrease  was due
primarily  to:  (i) a $0.6  million  decrease  in  prototype  parts and  product
development;  and (ii) a $0.4 million decrease in depreciation and amortization.
Research and development  costs consist  primarily of  compensation  and benefit
costs  (ranging  from 70% to 75% of total),  depreciation  (approximately  7% of
total),  parts,  and  development  costs and  services  of  outside  firms.  Our
principal  projects during 2003 include  development of other  components of our
Artera  Turbo  subscription  service,   ClearSpeech  algorithm  development  and
development of safety earmuff (next generation  active noise reduction,  or ANR,
ProActive).  The  company  expects  research  and  development  expenditures  to
continue at similar levels as those experienced during 2003.

     Included in NCT's  total  costs and  expenses  were  non-cash  expenditures
including depreciation and amortization of $0.7 million and $1.3 million in 2003
and 2002, respectively, impairment of other intangibles of zero and $2.1 million
in 2003 and 2002, respectively,  impairment of goodwill of zero and $0.3 million
in 2003 and 2002, respectively,  realized loss in value of marketable securities
deemed  other-than-temporary  of  zero  and  $0.8  million  in  2003  and  2002,
respectively,  and interest expense of $14.3 million in 2003 and $7.7 million in
2002 due to an increase in debt financing.

                                       55
<PAGE>


     Interest  expense was $14.3  million for 2003  compared to $7.7 million for
2002, an increase of $6.6 million,  or 85.7%. This increase was due primarily to
the  increase  in debt  financing  during  2003 and our  issuance of warrants in
conjunction  with the debt.  Interest  includes  $5.3  million  of  amortization
related to discounts,  $4.9 million of  amortization  of  beneficial  conversion
features,  $2.9  million  of  interest  expense  on debt  and  $1.1  million  of
amortization of additional debt discounts.

     NCT had estimated  net  operating  loss  carryforwards  of $157.5  million,
estimated   capital  loss   carryforwards  of  $3.6  million  and  research  and
development  credit  carryforwards  of  approximately  $2.4  million for federal
income tax  purposes at December 31,  2003.  No tax benefit for these  operating
losses has been recorded in NCT's financial  statements.  Our ability to utilize
our net  operating  loss and  capital  loss  carryforwards  may be subject to an
annual  limitation.  The limitation of these  carryforwards  may be triggered by
ownership  changes,   specifically  any  tax-free  reorganization  or  a  change
involving  a  5%  shareholder.  Under  contractual  restrictions,  many  of  the
beneficial  owners of 5% of NCT  common  stock are  prohibited  from  holding in
excess of 9.99% of our common  stock at any given  time.  Carole  Salkind has no
such contractual restriction. At her election at any time, she may convert notes
issued by NCT and accrued  interest  thereon into shares of NCT common stock (if
sufficient   authorized  shares  are  available  for  such  conversion)  thereby
triggering an ownership change which would result in a limitation of our ability
to utilize net operating loss carryforwards.

Year ended December 31, 2002 compared to year ended December 31, 2001.

     Total  revenue in 2002  decreased  by $3.3  million,  or 31.1%,  from $10.6
million in 2001 to $7.3  million  in 2002  reflecting  decreases  in each of our
revenue  sources.  Total costs and expenses during the same period  decreased by
45.3%,  or $39.3  million,  primarily  due to: (a) $13.8  million  reduction  in
goodwill  impairment;  (b) $11.6 million reduction in write-downs on investments
and   repurchased   licenses,   net;   and  (c)  $6.2   million   reduction   in
other-than-temporary loss in value of available-for-sale securities.

     Technology  licensing fees and royalties  decreased $1.1 million, or 19.6%,
from $5.6  million in 2001 to $4.5  million in 2002.  The  decrease is primarily
attributable  to the absence of licensing  fees  related to Infinite  Technology
Corporation (ITC) for 2002.  Despite repeated attempts to obtain invoices on the
development  work  performed and an accounting of NCT shares sold by ITC, all of
which had been sold by the end of March 2002, no such  accounting  was provided.
As such, we recognized no revenue and expense under the ITC arrangement in 2002.
However,  we believe ITC  performed  work in 2002  pursuant to the  research and
development  contract  (refer  to Note 4 - notes to the  consolidated  financial
statements).  Our basis for belief that ITC performed  development  work in 2002
was  attributable  to the sales by ITC of shares of NCT common stock that we had
issued to ITC for the  express  purpose of funding  its  development  work.  Our
belief was based upon a phone  conversation and no documentation was provided to
us, as required by the  agreement,  to support the assertion  that the remaining
shares  had  been  sold;  consequently,  no  adjustment  has  been  made  to the
liability.  The nature of the work  performed  was software  engineering  to add
functionality  to the  microprocessor  chip.  Based upon  invoices  that ITC had
provided in 2001, that work was performed in both the United States and Armenia.
Our  recognition  of  technology  licensing  fee  revenue  for both  periods was
primarily due to  recognition of deferred  revenue from NXT and Teltran.  During
the fourth quarter of 2002,  FairPoint agreed to distribute Artera Turbo,  which
is expected to generate  future  revenue.  Artera Turbo 2.0 became  available in
October 2002. At December 31, 2002, our deferred revenue related to NXT was $4.8
million. No additional cash will be realized from our NXT deferred revenue.

     Product sales decreased $1.9 million,  or 41.3%,  from $4.6 million in 2001
to $2.7 million in 2002. The decrease was primarily due to $0.5 million of lower
product sales recognized by Pro Tech due to reduced  fast-food headset purchases
by major  distributors  and a $1.0 million decrease as a result of the cessation
of operations of Artera  International in March 2002. Product revenue recognized
by Artera  International  was $0.2 million for the year ended  December 31, 2002
and $1.2 million for the same period in 2001. Our principal  product  customers,
Muzak,  AM-COM and  McDonalds,  accounted for $0.8 million of 2002 product sales
compared to $0.9 million in 2001. Sales to Muzak and McDonalds  consisted of Pro
Tech  headsets  and  accessories.  Sales  to  AM-COM  consisted  of  ClearSpeech
microphones and accessories used by ham radio operators. In each case, our sales
to these  customers were less in 2002 compared to 2001 due to a weaker  economy.
There can be no  assurance  that our product  customers  will  continue to place
orders with us at the same levels as in the prior years. The loss of one or more
of these customers,  the reduction in orders or increased  product returns could
adversely affect our operating results.

                                       56
<PAGE>


     Gross profit on product sales,  as a percentage of product sales,  improved
to 52.6% in 2002  from  26.9%  for the same  period  in 2001.  Excluding  Artera
International's  contribution  to gross profit,  gross profit  improved to 55.0%
from 26.9%.

     Revenue  from  advertising  decreased  $0.2  million,  or 66.7%,  from $0.3
million in 2001 to $0.1 million in 2002. Advertising revenue is derived from the
sale of audio and visual advertising in the Sight & Sound(R) locations.  Cost of
advertising  revenue  decreased $0.3 million,  or approximately  100%, from $0.3
million  in 2001 to less than $0.1  million in 2002.  These  costs  include  the
amounts  due to the  installed  locations  (as  compensation  for our use of the
facilities  where the Sight and Sound(R)  system is located)  and  communication
expenses for the Sight & Sound(R)  locations.  These decreases are primarily due
to the  termination  of  operations  of DMC Cinema in  February  2002.  Although
constrained by our limited cash resources, we anticipate increasing revenue from
the Sight & Sound(R)  locations  in health care  venues.  At December  31, 2002,
revenue from health care venues was 66% of total advertising revenue as compared
to zero for the same period in 2001.

     Selling,  general  and  administrative  expenses  in  2002  decreased  $3.9
million,  or 20.9%,  to $14.8 million from $18.7 million in 2001,  primarily due
to: (i) a $1.7 million decrease in amortization  expense related to the adoption
of SFAS No. 142 effective January 1, 2002; (ii) a $1.1 million decrease in legal
and patent expenses; (iii) a $1.9 million decrease in salary and related benefit
costs as a result of a reduction in workforce; and (iv) an $0.9 million decrease
which  represents an overall  reduction in sales related costs,  such as travel,
trade shows and  commissions.  These decreases were partially offset with a $3.0
million  increase in consulting  expenses due primarily to non-cash charges from
the issuance of warrants and options.

     Research and development  expenditures  in 2002 decreased $1.3 million,  or
21.7%,  to $4.7  million  from  $6.0  million  in 2001.  This  decrease  was due
primarily to: (i) a $1.0 million decrease in product  development  costs related
to Infinite Technology  Corporation;  (ii) a $1.1 million decrease in salary and
related benefit costs related to a reduced  workforce;  and (iii) a $0.3 million
decrease  in rent  related to the  closing of our  Maryland  facility  offset by
increases in depreciation and amortization ($0.4 million),  parts for prototypes
($0.3 million),  support for our UK office ($0.2 million) and reduction in costs
reclassified  as cost of sales ($0.2 million).  Research and  development  costs
consist  primarily of compensation  and benefit costs (ranging from 70% - 75% of
total),  depreciation (approximately 11% of total), parts, and development costs
and  services of outside  firms.  Our  principal  projects  during 2002  include
development  of other  components  of our  Artera  Turbo  subscription  service,
ClearSpeech  algorithm  development  and  development  of safety  earmuff  (next
generation  active noise  reduction,  or ANR,  ProActive).  The company  expects
research and  development  expenditures  to continue at similar  levels as those
experienced during 2002.

     Included in NCT's  total  costs and  expenses  were  non-cash  expenditures
including depreciation and amortization of $1.3 million and $3.0 million in 2002
and 2001, respectively, impairment of other intangibles of $2.1 million and zero
in 2002 and 2001, respectively, impairment of goodwill of $0.3 million and $14.1
million (net of reduction in deferred  revenue) in 2002 and 2001,  respectively,
realized loss in value of marketable securities deemed  other-than-temporary  of
$0.8 million and $7.0 in 2002 and 2001,  respectively,  and interest  expense of
$7.7  million  in 2002  and $6.2  million  in 2001  due to an  increase  in debt
financing.

     Interest  expense  increased by 24.2%, or $1.5 million,  to $7.7 million in
2002 from $6.2  million in 2001.  The 2002  increase  was  primarily  due to the
increase  in  debt  financing  during  2002  and our  issuance  of  warrants  in
conjunction  with the debt.  Interest  includes  $2.9  million  of  amortization
related to discounts,  $2.3 million of interest expense on debt, $2.3 million of
amortization of beneficial conversion features, and $0.1 million of amortization
of debt issuance costs.

     NCT had estimated  net  operating  loss  carryforwards  of $121.0  million,
estimated   capital  loss   carryforwards  of  $2.3  million  and  research  and
development  credit  carryforwards  of  approximately  $2.5  million for federal
income tax  purposes at December 31,  2002.  No tax benefit for these  operating
losses has been recorded in NCT's financial  statements.  Our ability to utilize
our net  operating  loss and  capital  loss  carryforwards  may be subject to an
annual  limitation.  The limitation of these  carryforwards  may be triggered by
ownership  changes,   specifically  any  tax-free  reorganization  or  a  change
involving  a  5%  shareholder.  Under  contractual  restrictions,  many  of  the
beneficial  owners of 5% of NCT  common  stock are  prohibited  from  holding in
excess of 9.99% of our common  stock at any

                                       57
<PAGE>


given time. Carole Salkind has no such contractual restriction.  At her election
at any time,  she may convert notes issued by NCT and accrued  interest  thereon
into shares of NCT common stock  thereby  triggering  an ownership  change which
would  result in a  limitation  of our  ability to utilize  net  operating  loss
carryforwards.

     Liquidity and Capital Resources

     Please  refer  to  "Going   Concern  Risks"  above  for  a  description  of
uncertainties  that raise  substantial  doubt at  December  31, 2003 about NCT's
ability to continue as a going  concern.  We believe  our  internally  generated
resources are  insufficient  to meet our short-term and long-term  requirements.
Refer to the table  and  discussion  below  under  the  subheading  "Contractual
Obligations." NCT has experienced  substantial  losses from operations since its
inception,  which  have been  recurring  and  amounted  to $289.9  million  on a
cumulative  basis through  December 31, 2003.  These  losses,  which include the
costs for development of technologies and products for commercial use, have been
funded primarily from:

     o    the sale of our and our subsidiaries' common stock;
     o    the sale of our and our subsidiaries' preferred stock convertible into
          common stock;
     o    issuance of our and our subsidiaries' convertible debt;
     o    technology licensing fees and royalties;
     o    product sales;
     o    advertising revenue; and
     o    engineering and development services.

     We  recently  entered  into  financing   transactions   because  internally
generated   funding  sources  were  insufficient  to  maintain  our  operations,
including:

     o    NCT Convertible Notes Issued to Carole Salkind
     o    Other Debt Financings

     In 2003, we have been primarily dependent upon funding from Carole Salkind.
Although we do not have a formal  agreement  requiring  her to do so, we believe
that  Carole  Salkind  will  continue to provide  funds to NCT.  Our belief that
funding from her will continue is based primarily upon her continued  funding of
NCT during 2002 and 2003 despite  NCT's  failure to repay her notes as the notes
matured.  Commencing  January 2001, upon the maturity of Ms.  Salkind's  initial
note to NCT dated January 1999,  NCT has  established a history of defaulting on
the repayment of obligations owed to Carole Salkind as such  obligations  become
due. Ms.  Salkind has allowed NCT to roll over  maturing note  principal,  along
with  accrued  interest  (including  interest at the default rate of 13% for the
period  after  maturity  until  settlement)  and a default  penalty  (10% of the
principal  amount in default),  into new notes that generally mature upon demand
or from six  months  to one  year  from the  date of the  rolled-over  note.  In
addition to the financing  provided by rolling over maturing notes,  Ms. Salkind
has continued to provide NCT with new funds. However, NCT has no legally binding
assurance  that Ms.  Salkind will continue  funding NCT in the near-term or that
the amount,  timing and duration of funding from her will be adequate to sustain
our business operations.

     At December  31,  2003,  NCT's cash and cash  equivalents  aggregated  $1.0
million.  NCT's working  capital deficit was $60.8 million at December 31, 2003,
compared to a deficit of $51.4  million at December  31,  2002,  a $9.4  million
increase in the working capital deficit. Current liabilities increased primarily
due to the net  increase of related  party  convertible  notes of  approximately
$14.4  million (net of  discounts)  partially  offset by the decrease in accrued
non-registration fees of $3.9 million.

     NCT is in default of an aggregate of $6.7  million of its  indebtedness  at
December 31, 2003 comprised of $3.2 million of notes payable and $3.5 million of
convertible  notes  (refer  to  Notes  11 and  12 -  notes  to the  consolidated
financial  statements).  Of such defaults,  $5.7 million is  attributable to our
failure to repay  indebtedness upon maturity and $1.0 million is attributable to
a cross-default  provision.  The following table  summarizes our indebtedness in
default at December 31, 2003.

                                       58
<PAGE>


<TABLE>
<CAPTION>

(In millions)

                                                           New              Defaults
                                 Indebtedness           Defaults             Cured           Indebtedness
                                  In Default             during              during           In Default
Notes Payable:                     12/31/02            the Period          the Period          12/31/03
                               -----------------     ---------------    ----------------   -----------------
<S>                                  <C>                 <C>               <C>                 <C>
Obligation to prior owner
  of Web Factory                     $      2.4 (a)      $      0.3 (d)    $          -        $        2.7 (a)
Top Source Automotive                       0.2 (a)               -                (0.2)                  -
Former Employees / Other                    0.3 (a)             0.4                (0.2)                0.5 (a)
                               -----------------     ---------------    ----------------   -----------------
  Subtotal                           $      2.9          $      0.7        $       (0.4)       $        3.2
                               -----------------     ---------------    ----------------   -----------------

Convertible Notes:
Carole Salkind Notes                 $      2.9 (b)      $     21.0        $      (23.9)       $          -
6% Notes                                    4.2 (a)               -                (1.7)                2.5 (a)
8% Notes                                    1.0 (c)               -                   -                 1.0 (c)
                               -----------------     ---------------    ----------------   -----------------
  Subtotal                           $      8.1          $     21.0        $      (25.6)       $        3.5
                               -----------------     ---------------    ----------------   -----------------
Grand Total                          $     11.0          $     21.7        $      (26.0)       $        6.7
                               =================     ===============    ================   =================

</TABLE>


        Footnotes:
        ----------
          (a)  Default due to nonpayment.
          (b)  Default due to judgment against us in excess of amounts permitted
               under the notes.
          (c)  Default due to cross-default  provision  (default on other debt).
               (d) Foreign exchange rate fluctuations.

     Net cash used in operating  activities for the year ended December 31, 2003
was $10.3  million  primarily  due to funding the 2003 net loss,  as adjusted to
reconcile to net cash. The operating cash flow characteristics of our technology
licensing efforts include the following:

o    Our technology licensing activities have resulted in unpredictable  streams
     of  revenue  recognition,  in  part,  due to the  unpredictable  timing  of
     executing new license agreements;
o    Significant   new  license   agreements   usually  result  only  after  the
     prospective licensee has made a lengthy review of our technologies;
o    Receipt of licensing compensation and the related revenue recognition often
     occur in different operating periods;
o    From time to time,  we accept  licensing  compensation  in forms other than
     cash, typically equity securities;
o    Assets acquired in the past, as compensation for license  agreements,  have
     lost value rapidly resulting in material write-offs;
o    Most of our licensing  agreements provide for one-time license fees and for
     long-term royalty streams; and
o    To  date,  most of our  licensing  activities  have  resulted  in  one-time
     licensing fees and insignificant long-term royalty streams.

     Our deferred  revenue  balance at December 31, 2003 was $3.3 million,  $2.7
million of which was  attributed  to NXT.  We do not expect to realize  any cash
from our deferred revenue balance.  Our NXT deferred revenue balance  originated
at the value of the securities received from our licensee,  not all of which was
realized in cash  because the value of the  securities  declined  before we sold
them.  We recorded  $8.6  million of net  deferred  revenue  upon the receipt of
shares of NXT in connection with the March 2001 NXT agreements ; such revenue is
being  recognized  over four  years.  We sold all of the NXT  shares in 2001 for
approximately $6.9 million resulting in a loss of $2.3 million. The net proceeds
were used in accordance with our NXT agreements.  As such, no additional cash is
expected from our NXT deferred revenue balance.  From time to time, our deferred
revenue  balances  originate  at the  value  of  securities  received  from  our
licensees,  which would not be  realized in cash if the value of the  underlying
securities declines before we sell such securities.

     Net cash used in investing  activities  was $0.2 million  December 31, 2003
due to  purchases of capital  equipment  primarily by Artera Group as it expands
the Artera Turbo data centers in anticipation of future growth.

                                       59
<PAGE>


     Net cash  provided by financing  activities  was $10.7 million for the year
ended  December  31,  2003 and was  primarily  due to the  issuance  and sale of
related party convertible notes.

     At December 31, 2003,  the aggregate face value of NCT's  outstanding  debt
was  $41.4  million,  presented  on  the  balance  sheet  net  of  discounts  of
approximately $5.2 million ($36.2 million, net of discounts). Of the total debt,
$35.5  million,  net of  discounts,  is  short-term.  Presently,  we do not have
sufficient  internally  generated  funds to provide for  short-term or long-term
debt  service.   Please  see  further  discussion  below  under  the  subheading
"Contractual Obligations."

     At December 31, 2003,  the  company's  short-term  debt was $35.5  million,
(principally comprised of $32.1 million of face value of outstanding convertible
notes,  net and  $3.4  million  of  outstanding  notes  payable),  shown  net of
discounts of  approximately  $5.2  million on the  consolidated  balance  sheet,
compared to $22.0 million of short-term  debt  (presented net of $4.1 million of
discounts) at December 31, 2002. The cash proceeds from debt issued in 2003 were
primarily used for general corporate  purposes.  The increase in short-term debt
at December 31, 2003 compared to December 31, 2002 was primarily attributable to
issuance of debt to Carole Salkind. During the year ended December 31, 2003, NCT
issued an aggregate  of  approximately  $41.7  million of  convertible  notes to
Carole Salkind as consideration for approximately  $10.4 million of cash and the
rollover  of  approximately  $23.9  million of  principal  in default on matured
convertible  notes  (includes all of the notes  outstanding  at December  2002),
approximately  $2.4 million of default penalties (10% of the principal amount in
default),  approximately $1.9 million of interest and approximately $3.1 million
for  convertible  notes  consolidated in advance of maturity (along with accrued
interest and additional consideration).

     As described  above, as of December 31, 2003, we are in default  (primarily
from non-payment) on $6.7 million of our indebtedness, including $3.2 million of
notes payable and $3.5 million of convertible notes.

     NCT  believes  that the level of  financial  resources  available  to it is
critical to its ability to continue as a going  concern.  From time to time, NCT
may need to raise  additional  capital through equity or debt financing in order
to sustain its operations or capitalize upon business  opportunities  and market
conditions.  NCT expects that from time to time its outstanding  short-term debt
may be replaced with new short or long-term borrowings. Although we believe that
we can continue to access the capital  markets in 2003 on  acceptable  terms and
conditions, our flexibility with regard to long-term financing activity could be
limited by:

o    the liquidity of our common stock on the open market;
o    our current level of short-term debt; and
o    our credit ratings.

     In addition,  many of the factors  that affect NCT's  ability to access the
capital  markets,  such as the liquidity of the overall  capital markets and the
current  state of the  economy,  are outside of NCT's  control.  There can be no
assurance  that NCT will  continue  to have  access to the  capital  markets  on
favorable  terms.  In addition,  the company's  subsidiaries  are not at a stage
where they may  separately  be able to obtain  financing or other  funding based
upon their lack of or limited performance history and borrowing base assets.

     We intend to use the July 2002  private  equity  credit  agreement  (or its
replacement private equity credit agreement) for cash as soon as the contractual
conditions for doing so are satisfied.  However, the 2002 equity credit line may
not be a reliable  source of new cash  capital  for NCT. In order for us to have
the right to make puts of our common stock to draw capital,  those shares of our
common stock must be authorized  and available for issuance and  registered  for
resale  with the SEC.  Completion  of the  registration  process  may require an
extensive  amount of time and the  speed at which a  registration  statement  is
declared  effective by the SEC is not completely  within NCT's  control.  If the
registration  statement covering the shares underlying the private equity credit
agreement is not declared  effective  within 120 days from the date it is filed,
or if any  blackout  period,  as  defined,  exceeds  30 days,  Crammer  Road may
terminate  its  investment  obligation  under  the 2002  private  equity  credit
agreement.  Further,  NCT must maintain an active  trading market able to absorb
large  quantities of traded  shares of our common  stock.  If the market for our
common stock has an insufficient  volume of shares traded,  large  quantities of
shares of our common  stock sold by Crammer  Road to satisfy  our puts may drive
down the price of our common stock due to lack of demand for those  shares.  The
issuance of our common stock at a price discounted 10% from the market price may
depress  our stock  price and  dilute  the  investment  of holders of our common
stock. Further, the terms of our

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<PAGE>


private equity credit  agreement do not prohibit  selling short. A short sale is
the sale of securities that are not owned by the seller (typically borrowed from
a broker-dealer or  institutional  investor) but are promised to be delivered by
the seller to the lender  (selling first and buying later).  The seller plans to
buy the securities,  which he will then turn around and sell, at a price that he
hopes  will be  declining  so that the price he pays will be less than the price
for which he sells them. Our common  stockholders may be exposed to market price
risks from potential  low-risk short selling  strategies by Crammer Road.  Since
the put into our common  stock is 90% of the  average of the lowest  closing bid
price  for any  three  trading  days  during  the 10  trading  days  immediately
following  the put date,  our common  stock  could be sold short in an effort to
drive down the price of the common  stock by creating an  imbalance of sell-side
interest.  Such a  strategy  is low risk to  Crammer  Road  due to the  discount
represented by the put price that provides a hedge against price increases.

     From time to time,  we may change the terms of  options,  warrants or other
securities. In some instances, this has been to generate cash.

     NCT has no lines of credit with banks or other  lending  institutions  and,
therefore, has no unused borrowing capacity.

Capital Expenditures

     NCT intends to continue  its  business  strategy  of working  with  supply,
manufacturing,   distribution  and  marketing   partners  to  commercialize  its
technology. The benefits of this strategy include:

o    dependable  sources of electronic and other components,  which leverages on
     their purchasing power, provides important cost savings and accesses the
     most advanced technologies;
o    utilization  of  the  manufacturing  capacity  of  our  business  partners,
     enabling us to integrate our technology  into products with limited capital
     investment; and
o    access  to   well-established   channels  of  distribution   and  marketing
     capability of leaders in several market segments.

     At December 31, 2003,  we have 33 of the  approximately  400 Barnes & Noble
College Bookstores  operating our Sight & Sound(R) system, and as negotiated and
as our capital  resources  allow,  may  install  the Sight & Sound(R)  system in
additional  stores.  Our average cost for  outfitting  a store is  approximately
$18,000.  We have not  identified  the source of  funding  to proceed  with such
installations.  We  have  no  assurance  that  sufficient  capital  will  become
available.  Other than this,  there were no  material  commitments  for  capital
expenditures as of December 31, 2003 and no material commitments are anticipated
in the near future.

Contractual Obligations

     The impact that our  contractual  obligations  as of December  31, 2003 are
expected to have on our liquidity and cash flow in future periods is as follows:


<TABLE>
<CAPTION>


(In thousands of dollars)
                                                                    Payments Due by Period
                             ----------------------------------------------------------------------------------------
                                 Total        Less than 1 Year    1 - 3 Years       3 - 5 Years     More than 5 Years
                             ---------------  ----------------  ----------------  ---------------  ------------------
<S>                             <C>              <C>                <C>               <C>                <C>
Convertible Notes Payable       $ 37,949         $ 37,274           $    675          $     -            $      -
Notes Payable                      3,403            3,403                  -                -                   -
Leases                             2,888              590              1,467              738                  93
Purchase Obligations                   -                -                  -                -                   -
Other Long-Term Liabilites             -                -                  -                -                   -
                             ---------------  ----------------  ----------------  ---------------  ------------------
     Total                      $ 44,240         $ 41,267           $  2,142          $   738            $      93
                             ===============  ================  ================  ===============  ==================
</TABLE>


     We  believe  that  our   internally   generated   resources  are  presently
insufficient to meet our short-term or long-term  financing  obligations as they
become due. As outlined  above, we have been borrowing funds from Carole

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<PAGE>


Salkind to sustain  our  operations.  Of the total  obligations  outlined in the
table above,  approximately  93% will become due before  December  31, 2004.  We
anticipate  that Carole Salkind may continue to extend us financing and allow us
to roll over convertible notes due her as those notes mature.  However,  NCT has
no legally binding  assurance that Ms. Salkind will continue  funding NCT in the
near-term  or that the amount,  timing and  duration of funding from her will be
adequate to sustain our business operations.  We also anticipate that other note
holders  will convert into or exchange for shares of our common stock once those
underlying  shares are  authorized.  We have no assurance that our  shareholders
will approve an adequate increase in the number of our authorized shares.

Off-Balance Sheet Arrangements

     As part of our ongoing business, we do not participate in transactions that
generate  relationships with unconsolidated  entities or financial  partnerships
which would have been  established for the purpose of  facilitating  off-balance
sheet  arrangements or other  contractually  narrow or limited  purposes.  As of
December  31,  2003,  we  are  not  involved  in  any  material   unconsolidated
transactions.

Indemnifications

     We  enter  into  contractual  arrangements  under  which  we may  agree  to
indemnify the third party to such arrangement from any losses incurred  relating
to the services they perform on behalf of NCT or for losses arising from certain
events as  defined  within  the  particular  contract,  which may  include,  for
example, litigation or claims relating to past performance. Such indemnification
obligations may not be subject to maximum loss clauses.  Historically,  payments
made related to these indemnifications have been immaterial.

     From time to time,  NCT has agreed to indemnify  its directors and officers
for liabilities  that may arise against them from legal actions.  For additional
information,  see the section below called  "Certain  Relationships  and Related
Transactions" under the subheading Indemnification of Management.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     NCT's primary market risk exposures include  fluctuations in interest rates
and foreign  exchange rates. NCT is exposed to interest rate risk on some of its
obligations.  We do not use derivative financial instruments to hedge cash flows
for such obligations.  In the normal course of business, NCT employs established
policies and procedures to manage these risks.

     Based upon a hypothetical 10% proportionate increase in interest rates from
the average level of interest  rates during the last twelve  months,  and taking
into  consideration  commissions paid to selling agents,  growth of new business
and the expected  borrowing level of variable-rate  debt, the expected effect on
net income related to our financial instruments would be immaterial.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The  report  of the  independent  auditors  Eisner  LLP and  the  financial
statements  and  accompanying  notes are filed as part of this Annual  Report on
Form 10-K. Please refer to the index on page 98.

ITEM 9. CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
        FINANCIAL DISCLOSURE

     On February 12, 2002,  NCT notified its principal  independent  accountant,
Goldstein  Golub Kessler LLP (GGK),  that the auditing  services of GGK would no
longer be required.  GGK's  dismissal  was approved by NCT's Board of Directors.
GGK  originally  was selected as NCT's  independent  accountant  in July 2000 to
audit  NCT's  consolidated  financial  statements  as of and for the year  ended
December 31, 2000.

     During  NCT's fiscal year ended  December 31, 2001,  and during the interim
period preceding its dismissal as NCT's  independent  accountant,  there were no
disagreements  with GGK on any matters of  accounting  principles  or practices,
financial  statement   disclosure,   or  auditing  scope  or  procedure,   which
disagreement(s),  if not resolved to the  satisfaction of GGK, would have caused
it to make reference to the subject matter of the disagreement(s) in

                                       62
<PAGE>


connection  with its report.  The report of GGK,  dated April 9, 2001,  on NCT's
consolidated financial statements as of and for the year ended December 31, 2000
did not contain an adverse opinion and was not qualified or modified as to audit
scope or accounting principles.

     On  February  12,  2002,  NCT  engaged  the  accounting  firm of Eisner LLP
(formerly  Richard  A.  Eisner  &  Company,   LLP)  (Eisner)  as  its  principal
independent accountant to audit the consolidated financial statements of NCT for
the fiscal year ending December 31, 2001. The engagement was authorized by NCT's
Board of  Directors.  During the fiscal year ended  December 31,  2001,  and the
subsequent  period to  February  12,  2002,  neither NCT nor any person on NCT's
behalf   consulted   Eisner  regarding  either  the  application  of  accounting
principles to a specified transaction, either completed or proposed, or the type
of  audit  opinion  that  might be  rendered  on  NCT's  consolidated  financial
statements,  except for consultations regarding NCT's responses to comments from
the  Securities  and Exchange  Commission  with respect to the December 31, 1999
financial  statements  audited  by Eisner  included  in prior  filings  with the
Securities and Exchange Commission.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

     NCT's  principal  executive  officer and its principal  financial  officer,
based on their  evaluation of the company's  disclosure  controls and procedures
(as defined in Exchange Act Rules  13a-15(e) and 15d-15(e)) as of the end of the
period  covered by this  Annual  Report on Form 10-K,  have  concluded  that the
company's  disclosure  controls and  procedures  are effective for ensuring that
information required to be disclosed by the company in the reports that it files
or submits  under the  Securities  Exchange Act of 1934 is recorded,  processed,
summarized and reported within the time periods specified in the SEC's rules and
forms.

Changes in internal controls

     There were no changes in the  company's  internal  control  over  financial
reporting  that  occurred  during the  company's  last fiscal  quarter that have
materially  affected,  or  are  reasonably  likely  to  materially  affect,  the
company's internal control over financial reporting.


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF NCT

     The following table sets forth the names,  ages,  positions and the offices
held by each of the  executive  officers  and  directors  of NCT as of March 17,
2004.

  Name                          Age      Positions and Offices
  ----                          ---      ---------------------
  Michael J. Parrella           56       Chairman of the Board of Directors and
                                         Chief Executive Officer
  John J. McCloy II             66       Director
  Samuel A. Oolie               67       Director
  Irene Lebovics                50       Director, President
  Cy E. Hammond                 49       Director, Senior Vice President,
                                         Chief Financial Officer,
                                         Treasurer and Assistant Secretary
  Jonathan M. Charry, Ph.D.     55       Senior Vice President, Corporate
                                         Development
  R. Wayne Darville             51       Chief Operating Officer of Artera
                                         Group, Inc.
  Irving M. Lebovics            52       Senior Vice President, Global Sales
  Mark Melnick                  45       Vice President, General Counsel and
                                         Secretary

     No family relationships exist among any of the company's executive officers
or directors,  except that Irving Lebovics, Senior Vice President, Global Sales,
is the spouse of Irene Lebovics, a director of NCT and its President.

                                       63
<PAGE>


     Michael  J.  Parrella  currently  serves  as Chief  Executive  Officer  and
Chairman of the Board of Directors of NCT. Mr. Parrella was elected  Chairman of
the Board of Directors of NCT on April 21, 2000,  on which date he  relinquished
the  position of  President.  From August 1995 to April 21, 2000,  Mr.  Parrella
served as NCT's  President and Chief  Executive  Officer.  From November 1994 to
July 1995,  Mr.  Parrella  served as Executive  Vice  President of NCT. Prior to
that,  from February 1988 until  November 1994, he served as President and Chief
Operating  Officer  of NCT.  He  initially  became  a  director  in  1986  after
evaluating the application potential of NCT's noise cancellation technology.  At
that time,  he formed an  investment  group to  acquire  control of the Board of
Directors  and to raise new  capital to  restructure  NCT and its  research  and
development  efforts.  Mr. Parrella also serves as Chief  Executive  Officer and
Chairman of the Board of Directors of Artera  Group,  Inc., a subsidiary of NCT,
positions he has held since the  formation  of Artera.  Mr.  Parrella  serves as
Chief  Executive  Officer and Acting  President of NCT Audio  Products,  Inc., a
subsidiary  of NCT, a position to which he was elected on September 4, 1997.  He
became a director of NCT Audio Products,  Inc. on August 25, 1998. On January 5,
2001, Mr. Parrella was elected Acting Chief Executive  Officer of Advancel Logic
Corporation,  a subsidiary of NCT. Mr.  Parrella is a director of Advancel Logic
Corporation, serves as Chairman of the Board of Distributed Media Corporation, a
subsidiary of NCT, and serves as Chairman of the Board of NCT Hearing  Products,
Inc., a subsidiary of NCT. Mr.  Parrella  became a director of NCT  subsidiaries
acquired in 2000, including Midcore Software,  Inc. and Pro Tech Communications,
Inc. In 2000 and 2001, he became a director of NCT  subsidiaries  formed in 2000
and 2001,  including DMC Cinema,  Inc., NCT Video Displays,  Inc., DMC New York,
Inc.,  ConnectClearly.com,  Inc.,  DMC  HealthMedia  Inc.,  Artera Group,  Inc.,
Distributed   Media   Corporation   International   Limited  and  Artera   Group
International Limited.

     John J. McCloy II currently serves as a director of NCT. He served as Chief
Executive Officer of NCT from September 1987 to November 1994 and as Chairman of
the Board of Directors of NCT from September 1986 to November 1994. In addition,
he served as NCT's Chief  Financial  Officer from November 1990 to February 1993
and as its  Secretary-Treasurer  from October 1986 to September 1987. Mr. McCloy
was  appointed a director of NCT Audio on November 14, 1997.  Since 1981, he has
been a private  investor  concentrating  on  venture  capital  and  early  stage
investment  projects in a variety of  industries.  Mr. McCloy is the Chairman of
Gravitas  Technology,  Inc.  He is a director  of the Sound  Shore  Fund,  Inc.,
Ashland Management and the American Council on Germany.

     Sam Oolie  currently  serves as a director of NCT. Since his appointment on
September 4, 1997,  Mr. Oolie has also served as a director of NCT Audio.  He is
Chairman of NoFire  Technologies,  Inc., a manufacturer of high performance fire
retardant  products,  and has held that position  since August 1995.  Since July
1985,  he has also  served  as  Chairman  of Oolie  Enterprises,  an  investment
company. Mr. Oolie currently serves as a director of Comverse Technology, Inc.

     Irene  Lebovics  currently  serves as a director  and  President of NCT and
President  of NCT Hearing  Products,  Inc.  She served as  Secretary of NCT from
February 1999 until  September  2001. On April 25, 2001, Ms.  Lebovics  became a
director of NCT. On January 5, 2000,  Ms.  Lebovics  was  elected  Acting  Chief
Marketing Officer and Secretary of Advancel Logic Corporation. In July 1989, she
joined NCT as a Vice President and as President of NCT Medical Systems,  Inc., a
subsidiary of NCT. In January 1993,  she was appointed  Senior Vice President of
NCT. In November 1994, Ms.  Lebovics became  President of NCT Hearing  Products,
Inc. In 1999,  Ms.  Lebovics was appointed as Executive Vice  President,  and in
April 2000,  she became  President  of NCT.  She has held  various  positions in
product  marketing  with  Bristol-Myers,  a consumer  products  company,  and in
advertising  with  McCaffrey  and McCall.  Ms.  Lebovics is the spouse of Irving
Lebovics,  NCT's Senior Vice President of Global Sales. Ms. Lebovics also serves
as  director  of  various  NCT  subsidiaries,   as  follows:  Distributed  Media
Corporation,  ConnectClearly.com,  Inc., NCT Hearing  Products,  Inc., NCT Video
Displays,   Inc.,  DMC  New  York,  Inc.,  Artera  Group,   Inc.,  Artera  Group
International Limited, Midcore Software,  Inc., Advancel Logic Corporation,  Pro
Tech Communications,  Inc., Distributed Media Corporation International Limited,
DMC HealthMedia Inc. and DMC Cinema, Inc.

     Cy E. Hammond  currently  serves as a director  and Senior Vice  President,
Chief Financial Officer,  Treasurer and Assistant Secretary of NCT. On March 17,
2004,  Mr.  Hammond  became a director  of NCT. He joined NCT as  Controller  in
January 1990 and was appointed a Vice  President in February  1994. On September
4, 1997, Mr. Hammond was elected to serve as Acting Chief Financial  Officer and
Treasurer  of NCT Audio  Products,  Inc.  On January 5, 2000,  he was elected to
serve as Acting Chief Financial Officer,  Treasurer and Assistant  Secretary for
Advancel Logic Corporation. On August 20, 2002, Mr. Hammond was elected to serve
as President

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<PAGE>


and  Treasurer  of DMC New  York,  Inc.  He also  serves  as  Treasurer  for the
following NCT subsidiaries: Artera Group, Inc., Chaplin Patents Holding Company,
Inc.,  Distributed Media  Corporation,  DMC HealthMedia Inc.,  Midcore Software,
Inc., NCT Far East, Inc., NCT Hearing Products,  Inc., NCT Muffler, Inc. and NCT
Video  Displays,  Inc. During 1989, he was Treasurer and Director of Finance for
Alcolac,  Inc., a multinational  specialty chemical producer.  Prior to 1989 and
from  1973,  Mr.  Hammond  served in several  senior  finance  positions  at the
Research Division of W.R. Grace & Co., the last of which included  management of
the  division's  worldwide  financial  operations.  Mr.  Hammond  also serves as
director  of  various  NCT  subsidiaries,   as  follows:   Artera  Group,  Inc.,
ConnectClearly.com,  Inc.,  DMC  Cinema,  Inc.,  DMC New York,  Inc.,  NCT Video
Displays,  Inc.,  Pro Tech  Communications,  Inc.,  Artera  Group  International
Limited and Noise Cancellation Technologies (Europe) Ltd.

     Jonathan M.  Charry,  Ph.D.  currently  serves as Senior Vice  President of
Corporate Development, a position he has held since January 2000. Dr. Charry was
Chairman and Chief Executive  Officer of Digital Power Networks,  Inc. from 1992
to 1999 and  Chairman  and Chief  Executive  Officer of  Environmental  Research
Information,  Inc. from 1984 to 1992. He has held  appointments as a Rockefeller
Foundation Fellow and Assistant Professor at the Rockefeller University, Adjunct
Professor  in  Applied  Social  Psychology  at New York  University,  and Senior
Research  Scientist at the New York Institute of Basic Research.  He is a member
of the American Psychological Association, The Rockefeller University Chapter of
Sigma Xi, the American  Association for the Advancement of Science,  and the New
York  Academy  of  Sciences.  Dr.  Charry  currently  serves  as a  director  of
ConnectClearly.com, Inc.

     R. Wayne Darville  currently  serves as Chief  Operating  Officer of Artera
Group,  Inc., a subsidiary of NCT Group,  Inc., and has held this position since
August  15,  2002.  Prior  to that  and from May 1,  2002,  he  served  as Chief
Information Officer of Artera Group, Inc. From March 1, 1999 to January 1, 2002,
Mr. Darville was Vice President of Technology and Information Systems, and acted
as Vice  President  of  Networks,  of Interoute  Telecommunications,  Inc.  From
September 1, 1995 to February 28, 1999,  he was Vice  President of  Westinghouse
Communications,   overseeing   operations   and   security  of  that   company's
international  networks.  From August 1, 1989 to August 31, 1995, he was General
Manager of CC&S Services,  Inc., a subsidiary of Frontier  Communications  (MI),
where he directed the creation of data centers  serving  information  technology
systems for incumbent local exchange carriers.

     Irving M. Lebovics currently serves as Senior Vice President, Global Sales,
of NCT. He joined NCT in February 1998 as Vice President,  Worldwide Sales. From
January 1996 to February 1998, Mr.  Lebovics was a principal of Enhanced  Signal
Processing,   which  exclusively  sold  NCT's  technologies  to  large  original
equipment  manufacturers.  From  1993  to  1996,  Mr.  Lebovics  served  as Vice
President  of Sales for  Kasten  Chase  Applied  Research,  a wide area  network
hardware and software  provider to companies such as Dow Jones and the Paris and
Madrid stock exchanges. From 1985 to 1993, Mr. Lebovics served as Vice President
of Sales for Relay Communications,  a provider of PC-to-mainframe communications
software and Microcom,  Inc.  (which acquired Relay  Communications),  a leading
provider  of modems and local  area  network  equipment  including  bridges  and
routers.  Irving M. Lebovics is the spouse of Irene Lebovics,  a director of NCT
and its President.

     Mark  Melnick  currently  serves as Vice  President,  General  Counsel  and
Secretary of NCT Group,  Inc.,  positions he has held since  September  2001. He
also serves as Secretary of Distributed Media Corporation, DMC Cinema, Inc., DMC
HealthMedia  Inc., NCT Audio  Products,  Inc., NCT Hearing  Products,  Inc., NCT
Medical Systems, Inc., ConnectClearly.com,  Inc., Midcore Software, Inc., Artera
Group,  Inc.,  Advancel Logic  Corporation,  NCT Muffler,  Inc., Chaplin Patents
Holding Company, Inc., NCT Far East, Inc. and NCT Video Displays, Inc. Effective
January 1, 2002, Mr. Melnick was elected  Secretary of Pro Tech  Communications,
Inc.  From 1989 to 2000,  Mr.  Melnick  was  Counsel,  Senior  Counsel  and then
Assistant General Counsel of CBS Cable and its  predecessor-in-interest  Group W
Satellite  Communications (a division of Westinghouse  Broadcasting Co.), in the
cable television  field.  From 1984 to 1988, he was an associate at the law firm
of Stults & Marshall (now known as Balber Pickard Battistoni Maldonado & Van Der
Tuin,  PC) in New York,  NY. From 1982 to 1984,  he was an  associate at the law
firm of Seyfarth, Shaw, Fairweather & Geraldson (now known as Seyfarth Shaw LLP)
in New York, NY.

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<PAGE>


Committees of the Board of Directors

     Our Board of Directors  has  established  a  Compensation  Committee and an
Audit Committee.

     The  Compensation   Committee   reviews  and  determines  the  compensation
policies,  programs and procedures of the company as they relate to NCT's senior
management.  The Compensation Committee is presently comprised of Messrs. McCloy
and Oolie and held one meeting  during the fiscal year ended  December 31, 2003.
The Compensation Committee provides for the administration of stock option plans
and  addresses  matters  relating to the grant of warrants or options to acquire
shares of the company's common stock and other securities.

     The Audit  Committee is responsible for the review of the activities of the
company's  independent  accountants  and  for  other  aspects  of the  company's
financial reporting. The Audit Committee is composed of Messrs. McCloy and Oolie
and held six meetings during the fiscal year ended December 31, 2003.  Effective
April 25, 2001, the Board of Directors  adopted a written  charter for the Audit
Committee.  In addition, the Board of Directors determined that all of the Audit
Committee  members are  independent  and that John McCloy is an audit  committee
financial expert.

Code of Ethics

     NCT has adopted a Code of Ethics (as defined in Item 406 of Regulation S-K)
that  applies  to our  Chief  Executive  Officer  (or those  performing  similar
functions) as well as any and all senior financial officers (including our Chief
Financial  Officer).  The Code of Ethics is filed as Exhibit  14 to this  Annual
Report on Form 10-K for the year ended December 31, 2003.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16(a) of the Securities Exchange Act of 1934, as amended,  requires
directors  and  executive  officers,  and  persons  who own  more  than 10% of a
registered class of our equity securities,  to file reports of ownership of, and
transactions in, NCT's  securities with the Securities and Exchange  Commission.
Such directors, executive officers and shareholders are also required to furnish
the company with copies of all Section 16(a) forms they file.  Based solely on a
review of the copies of such forms furnished to us, and written  representations
from  certain  reporting  persons,  NCT  believes  that all filing  requirements
applicable  to its  directors,  executive  officers  and 10%  shareholders  were
complied with during the fiscal year ended December 31, 2003,  except for: (a) a
grant of options made on  September  10, 2003 under the 2001 Plan to each of the
following directors and executive officers:  Messrs.  Parrella,  McCloy,  Oolie,
Hammond,  Charry, Lebovics and Melnick and Ms. Lebovics were not timely reported
on Form 4 (these eight Form 4s were filed  late);  (b) a grant of options to Mr.
Darville made on September 10, 2003 under the 2001 Plan was not reported on Form
4 nor did Mr. Darville timely file his initial  ownership  information on Form 3
(Mr. Darville  subsequently  filed a Form 5 for 2003 that was not timely filed);
(c) Acme Associates,  Inc. did not timely file Form 4s upon grants of options to
acquire shares of NCT common stock (two  transactions  prior to becoming a group
filer with Carole Salkind),  but filed late Form 4s covering these transactions;
and (d)  Carole  Salkind  did not  timely  file Form 4 reports  during  2003 for
convertible  note,  warrant and option  transactions  (total of 91  transactions
during  2003) but filed late Form 4s covering 71  transactions  (a group  filing
with  Acme  Associates,   Inc.)  and  subsequently   filed  the  remaining  2003
transactions  on a Form 5 which was not timely  filed (a group  filing with Acme
Associates, Inc.).

                                       66
<PAGE>


ITEM 11. EXECUTIVE COMPENSATION

     Set forth below is  information  for the three fiscal years ended  December
31, 2003,  2002 and 2001 relating to  compensation  received by: (1) NCT's Chief
Executive  Officer;  and (2) the other four most  highly  compensated  executive
officers  of NCT whose total  annual  salary and bonus for the fiscal year ended
December  31,  2003  exceeded   $100,000   (collectively  the  "Named  Executive
Officers").


<TABLE>
<CAPTION>

                                                                   Summary Compensation Table
                                                                                                   Securities
                                                                                                   Underlying            All
    Name and Principal                                                      Other Annual        Options/Warrants        Other
        Position               Year     Salary ($)       Bonus ($)        Compensation ($)(a)       SARs (#)        Compensation ($)
----------------------------  -----    -----------    ---------------     -------------------   ----------------    ----------------

<S>                           <C>       <C>            <C>                      <C>                <C>                 <C>
Michael J. Parrella           2003      $ 320,016      $  433,412  (b)          $  20,688          9,260,000  (e)      $       -
   Chief Executive            2002        320,016         136,473  (c)             20,688         14,000,000  (f)              -
   Officer and Chairman       2001        320,016         299,142  (d)             20,688          5,324,505  (g)              -
   of the Board

Irene Lebovics                2003        200,000         143,526  (b)             12,000          4,000,000  (e)              -
   President and              2002        200,000          45,036  (c)             12,000          2,350,000  (f)              -
   Director                   2001        200,000          98,717  (d)             12,000            800,000  (h)              -

Cy E. Hammond                 2003        180,000         216,706  (b)             12,000          3,600,000  (e)              -
   Senior Vice President,     2002        180,000          68,237  (c)             12,000          1,950,000  (f)              -
   Chief Financial Officer    2001        180,000         149,571  (d)             12,000            760,000  (i)              -
   and Treasurer

Jonathan M. Charry            2003        200,000               -                       -            800,000  (e)              -
   Senior Vice President,     2002        200,000               -                       -          1,175,000  (f)              -
   Corporate Development      2001        200,000          56,170  (d)                  -            400,000                   -

R. Wayne Darville (j)         2003        200,000               -                       -            680,000  (e)              -
   Chief Operating Officer    2002        118,750               -                       -            460,000  (f)              -
   Artera Group, Inc.

</TABLE>

Footnotes:
---------
(a)  Other annual  compensation  is comprised of  automotive  lease  payments or
     automotive allowances paid to the Named Executive Officers.

(b)  Bonus  amounts  accrued and unpaid as of December 31, 2003 and the years in
     which the amounts were earned are as follows:


<TABLE>
<CAPTION>

                                        Amounts Accrued and Unpaid at December 31, 2003
                                                          Relating To:
                          --------------------------------------------------------------------------
                               2001                2002               2003                Total
                          ----------------    ---------------    ---------------    ----------------
<S>                       <C>                 <C>                <C>                <C>
Michael J. Parrella       $      61,597       $    136,473       $   433,412        $    631,482
Irene Lebovics                        -                  -           108,434             108,434
Cy E. Hammond                         -                  -           162,741             162,741
Jonathan M. Charry               24,000                  -                 -              24,000
                          ----------------    ---------------    ---------------    ----------------
                          $      85,597       $    136,473       $   704,587        $    926,657
                          ================    ===============    ===============    ================
</TABLE>


(c)  Bonus  amounts  accrued and unpaid as of December 31, 2002 and the years in
     which the amounts were earned are as follows:


                             Amounts Accrued and Unpaid at December 31, 2002
                                                 Relating To:
                          ------------------------------------------------------
                               2001                2002              Total
                          ----------------    ---------------    ---------------
Michael J. Parrella       $      61,597       $   136,473        $   198,070
Irene Lebovics                        -            38,908             38,908
Cy E. Hammond                     5,298            68,237             73,535
Jonathan M. Charry               24,000                 -             24,000
                          ----------------    ---------------    ---------------
                          $      90,895       $   243,618        $   334,513
                          ================    ===============    ===============

                                       67
<PAGE>


(d)  Bonus amounts accrued and unpaid as of December 31, 2001 were  attributable
     to amounts earned in 2001, as follows:

     Michael J. Parrella          $    61,597
     Irene Lebovics                    20,327
     Cy E. Hammond                     30,798
     Jonathan M. Charry                24,000
                                 --------------
                                  $   136,722
                                 ==============

(e)  Current  year  options  are  comprised  of one  grant for each of the Named
     Executive Officers. Please refer to the table "Options and Warrants Granted
     in 2003." The options granted to the Named Executive  Officers were granted
     subject to approval by NCT shareholders of a sufficient increase in (1) the
     authorized  shares of common stock and (2) the authorized  number of shares
     under  the 2001  Plan.  At the time of such  shareholder  approval,  if the
     market value of the company's  common stock  exceeds the exercise  price of
     the subject  options,  the company will incur a non-cash charge to earnings
     equal to the spread between the exercise price of the option and the market
     price,  times the number of option shares involved.  If the increase is not
     approved,  granted  options  would  be  reduced  pro  rata  for the  excess
     unauthorized shares.

(f)  2002 options are  comprised  of two grants for each of the Named  Executive
     Officers  granted  subject to approval by NCT  shareholders of a sufficient
     increase  in (1)  the  authorized  shares  of  common  stock  and  (2)  the
     authorized  number  of  shares  under  the 2001  Plan.  At the time of such
     shareholder  approval,  if the market value of the  company's  common stock
     exceeds the exercise price of the subject options, the company will incur a
     non-cash  charge to earnings equal to the spread between the exercise price
     of the  option  and the market  price,  times the  number of option  shares
     involved. If the increase is not approved, granted options would be reduced
     pro rata for the excess unauthorized shares.

(g)  Includes  2,824,505  shares that remained an obligation of NCT from a grant
     in 2000. Due to an insufficient  number of shares  available under the 1992
     Plan in 2000, the Board of Directors  reduced a grant made in December 2000
     to Mr.  Parrella to acquire  6,000,000  shares of common stock by 2,824,505
     shares but remained obligated to provide such grant.

(h)  Includes 50,000 shares under a replacement  grant of an option that expired
     in 2001. The expiration date of the new grant is February 11, 2004, and the
     exercise price is $0.75, the exercise price of the expired option.

(i)  Includes 10,000 shares under a replacement  grant of an option that expired
     in 2001. The expiration date of the new grant is February 11, 2004, and the
     exercise price is $0.75, the exercise of the expired option.

(j)  Mr. Darville was hired as Chief  Information  Officer of Artera Group, Inc.
     effective May 1, 2002. He was promoted to Chief Operating Officer of Artera
     on August 15, 2002. The 2002 salary amount reflects his  compensation  from
     his  date of hire.  In  accordance  with  his  letter  of  employment,  Mr.
     Darville's  compensation was established with a base salary of $150,000 per
     annum  and a bonus of up to 25% of his base  salary.  Upon  his  hire,  Mr.
     Darville was granted an initial stock option to acquire  430,000  shares at
     an exercise price of $0.081 per share.  Since August 15, 2002, Mr. Darville
     has received a salary of $200,000 per annum.

                                       68
<PAGE>


                      Options and Warrants Granted in 2003

     The following table  summarizes the Named Executive  Officers' stock option
and warrant activity during 2003:


<TABLE>
<CAPTION>

                                                                                     Potential Realized Value
                         Shares          Percent of                                     at Assumed Annual
                       Underlying      Total Options                                   Rates of Stock Price
                        Options         And Warrants                                  Appreciation for Option
                          And            Granted to      Exercise                       and Warrant Term (b)
                        Warrants          Employees        Price     Expiration    -------------------------------
       Name             Granted          in 2003 (a)     Per Share      Date              5%              10%
--------------------   ---------       ---------------  -----------  -----------   --------------   --------------
<S>                    <C>                      <C>         <C>        <C>   <C>      <C>              <C>
Michael J. Parrella    9,260,000  (c)           39.3%       $ 0.054    09/10/10       $ 203,566        $ 474,396

Irene Lebovics         4,000,000  (d)           17.0%         0.054    09/10/10          87,934          204,923

Cy E. Hammond          3,600,000  (d)           15.3%         0.054    09/10/10          79,140          184,431

Jonathan M. Charry       800,000  (d)            3.4%         0.054    09/10/10          17,587           40,985

R. Wayne Darville        800,000  (d)            3.4%         0.054    09/10/10          17,587           40,985

</TABLE>

Footnotes:
----------
(a)  Percentages  for the grants listed above are based upon the aggregate total
     granted in 2003 under the 2001 Plan less amounts granted to consultants and
     non-employee  directors (i.e., Messrs. McCloy and Oolie). These options are
     subject  to  shareholder  approval  of a  sufficient  increase  in (1)  the
     authorized  shares of common stock and (2) the authorized  number of shares
     under the 2001 Plan.

(b)  The dollar amounts in these columns are the result of  calculations  of the
     respective  exercise prices at the assumed 5% and 10% rates of appreciation
     compounded  annually through the applicable  expiration dates. Actual gains
     realized,  if any, on stock option  exercises and common stock holdings are
     dependent  on the future  performance  of NCT's  common  stock and  overall
     market conditions.

(c)  These  options were granted  under the 2001 Plan with an exercise  price of
     $0.054 per share,  a value that was equal to the fair market value of NCT's
     common stock on the date of grant. These options are subject to shareholder
     approval of a sufficient  increase in (1) the  authorized  shares of common
     stock and (2) the  authorized  number of shares under the 2001 Plan.  These
     options vest as follows:  as to 50%,  date of grant;  balance  prior to the
     closing of any one of the following:  (1) third party acquires the right to
     a 10% equity  interest in NCT Group,  Inc.;  (2) third party  acquires  the
     right to a 10% equity interest in NCT's subsidiary, Artera Group, Inc.; (3)
     third party licenses NCT or subsidiary's  intellectual  property or commits
     to distribute  products for $15 million in aggregate license fee or minimum
     royalties.  In any event,  all options vest three years from date of grant.
     The vesting requirement under all options granted prior to October 25, 2002
     was  accelerated  to 100%  vested as of October  25,  2002 and the  vesting
     requirement  under all options  granted on October 25, 2002 was accelerated
     to 100% vested as of September 10, 2003.

(d)  Options to acquire these shares were granted pursuant to the 2001 Plan with
     an exercise  price of $0.054 per share,  a value that was equal to the fair
     market value of NCT's common stock on the date of grant.  These options are
     subject  to  shareholder  approval  of a  sufficient  increase  in (1)  the
     authorized  shares of common stock and (2) the authorized  number of shares
     under the 2001 Plan.  These  options  vest as  follows:  40% on the date of
     grant  (September  10,  2003)  and  30% on  each of the  first  and  second
     anniversaries  of the date of  grant.  The  vesting  requirement  under all
     options granted prior to October 25, 2002 was accelerated to 100% vested as
     of October 25, 2002 and the vesting  requirement  under all options granted
     on October 25, 2002 was  accelerated  to 100%  vested as of  September  10,
     2003.

                                       69
<PAGE>


                2003 Aggregated Option and Warrant Exercises and
                   December 31, 2003 Option and Warrant Values

     The following table sets forth  information with respect to the exercise of
options  and  warrants  to purchase  common  stock  during the fiscal year ended
December 31, 2003, and the  unexercised  options and warrants held and the value
thereof at that date, by each of the Named Executive Officers.

<TABLE>
<CAPTION>

                                                               Number of Shares
                                                                   Underlying                   Value of Unexercised
                           Number of                           Unexercised Options              In-the-Money Options
                            Shares                              and Warrants at                     And Warrants at
                           Acquired                            December 31, 2003                   December 31, 2003
                              On           Value      --------------------------------------  -----------------------------
       Name               Exercise (#)    Realized    Exercisable (#)      Unexercisable (#)   Exercisable    Unexercisable
--------------------     -------------   -----------  ---------------      -----------------  -------------   -------------

<S>                                        <C>            <C>                   <C>              <C>             <C>
Michael J. Parrella                -       $      -       47,056,634            4,630,000        $      -        $     -

Irene Lebovics                     -              -        8,243,323            2,400,000               -              -

Cy E. Hammond                      -              -        5,439,024            2,160,000               -              -

Jonathan M. Charry                 -              -        3,273,049              480,000               -              -

R. Wayne Darville                  -              -        1,000,000              480,000               -              -

</TABLE>

Compensation of Directors

     None of our directors  received fees, as such, for his or her services as a
director during 2003. Mr. Parrella and Ms. Lebovics received salaries and earned
bonuses  in 2003 from NCT.  See above at  "Executive  Compensation  and  Summary
Compensation  Table"  and  below  at  "Compensation  Arrangements  with  Certain
Officers and Directors."

     During 2003,  each director was granted  options to acquire shares of NCT's
common stock under the 2001 Plan.  The options were granted  subject to approval
by NCT  shareholders  of a sufficient  increase in (1) the authorized  shares of
common stock and (2) the  authorized  number of shares under the 2001 Plan.  The
shares of common stock  underlying  options  granted in 2003 under the 2001 Plan
were 1,350,000 for each of Messrs. McCloy and Oolie,  9,260,000 for Mr. Parrella
and 4,000,000 for Ms. Lebovics. The options expire seven years from the dates of
grant. The exercise price was $0.054 per share, a value equal to the fair market
value of NCT's common stock on the date of grant. The vesting  schedules for the
directors,  other than Ms.  Lebovics,  are as  follows:  50% vest on the date of
grant  (September  10,  2003);  balance  prior to the  closing of any one of the
following:  (1) third party  acquires the right to a 10% equity  interest in NCT
Group,  Inc.;  (2) third party  acquires  the right to a 10% equity  interest in
NCT's  subsidiary,   Artera  Group,  Inc.;  (3)  third  party  licenses  NCT  or
subsidiary's  intellectual  property or commits to  distribute  products for $15
million in aggregate license fee or minimum royalties. In any event, all options
vest three years from date of grant.  The vesting  terms of Ms.  Lebovics'  2003
grant is outlined above in footnotes to the table, "Options and Warrants Granted
in 2003." The vesting requirement under all options granted prior to October 25,
2002 was  accelerated  to 100%  vested as of October  25,  2002 and the  vesting
requirement  under all options  granted on October 25, 2002 was  accelerated  to
100% vested as of September 10, 2003.

                                       70
<PAGE>


Compensation Arrangements with Certain Officers and Directors

         Certain of NCT's executive officers, including two who serve as
directors of NCT, are eligible for an incentive bonus consisting of a cash
override on the value derived by NCT and its subsidiaries, in cash or otherwise,
upon the execution of transactions with unaffiliated parties. Cash override
refers to NCT's payment in cash to certain participants of amounts that
represent a percentage of the value of the transactions consummated by NCT and
its subsidiaries. The participants included in this arrangement, the effective
date participation began and the percentage cash overrides are as follows:

        Participant           Date Participation Commenced         Percent
 ------------------------    -------------------------------     -----------
   Michael J. Parrella              February 1, 1996                1.00%
   Irene Lebovics                    January 1, 2001                0.33%
   Cy E. Hammond                    September 4, 1997               0.50%

     Jonathan Charry, Ph.D., NCT's Senior Vice President, Corporate Development,
receives an annual base  salary of $150,000  and a $50,000 per annum  guaranteed
draw  against  future  commissions.  Dr.  Charry  also  has an  incentive  bonus
arrangement  based on  performance  milestones  and cash  overrides on specified
financings and licensing or strategic alliance agreements.

     Effective May 1, 2002, NCT hired R. Wayne Darville as its Chief Information
Officer of Artera  Group,  Inc. He was  promoted to Chief  Operating  Officer of
Artera on August 15, 2002.  In  accordance  with his letter of  employment,  Mr.
Darville's compensation was established with a base salary of $150,000 per annum
and a bonus of up to 25% of his base salary. Since August 15, 2002, Mr. Darville
has received a salary of $200,000 per annum.

Compensation Committee Interlocks and Insider Participation

     During the fiscal year ended  December 31, 2003,  John McCloy and Sam Oolie
served as members of the  Compensation  Committee  of NCT's Board of  Directors.
Each of  Messrs.  McCloy  and  Oolie  also  served  as  members  of the Board of
Directors of NCT Audio  Products,  Inc. since their  respective  appointments in
1997.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table sets forth,  as of  February  29,  2004,  information
concerning the shares of common stock beneficially owned by:

o    each person who,  to the  knowledge  of NCT, is the holder of 5% or more of
     the common stock of NCT;
o    each person who presently serves as a director of NCT;
o    the five most highly compensated executive officers of NCT (including NCT's
     Chief Executive Officer) in the fiscal year ended December 31, 2003; and
o    all executive officers and directors of NCT as a group.

                                       71
<PAGE>


     Except as otherwise  noted,  each beneficial  owner has sole investment and
voting power with respect to the listed shares.


                                            Amount and
                                             Nature of             Approximate
                                             Beneficial           Percentage of
        Name of Beneficial Owner            Ownership (a)           Class (a)
---------------------------------------    ---------------        --------------

  Michael J. Parrella                          49,329,260   (b)             7.2%
  John J. McCloy                                3,937,012   (c)                *
  Sam Oolie                                     4,221,825   (d)                *
  Irene Lebovics                               11,612,347   (e)             1.8%
  Cy E. Hammond                                 5,619,789   (f)                *
  Jonathan M. Charry                            3,273,049   (g)                *
  R. Wayne Darville                             1,000,000   (h)                *
  All Executive Officers and Directors
     as a Group (9 persons)                    80,793,282   (i)            11.4%
  Carole Salkind                            1,595,435,047   (j)            71.8%
  Crammer Road LLC                            559,791,497   (k)            47.0%
  Alpha Capital Aktiengesellschaft             93,652,731   (l)            13.0%
  Acme Associates, Inc.                       240,500,000   (m)            27.3%
  Libra Finance S.A.                           51,728,290   (n)             7.5%
  Austost Anstalt Schaan                       52,572,481   (o)             7.8%
  Balmore S.A.                                 55,792,081   (p)             8.4%

     * Less than one percent.


Footnotes:
----------
(a)  Assumes the exercise of currently  exercisable  options  (including options
     granted in 2002 and 2003 subject to a sufficient increase in (i) authorized
     shares of common stock and (ii) shares under the 2001 Stock Incentive Plan)
     or warrants to purchase  shares of common  stock.  The  percentage of class
     ownership is calculated  separately for each person based on the assumption
     that the person  listed on the table has exercised all options and warrants
     currently  exercisable by that person,  but that no other holder of options
     or warrants has exercised such options or warrants.

(b)  Mr. Parrella's business address is 20 Ketchum Street, Westport, Connecticut
     06880.  Includes  45,244,634  shares  issuable  upon  the  exercise  of his
     currently exercisable options,  13,333 shares held by or in custody for Mr.
     Parrella's  children,  3,000,000  shares  issuable  upon  the  exercise  of
     currently  exercisable  options  transferred in 2002 by Mr. Parrella to his
     children (Mr. Parrella disclaims beneficial ownership of the shares held by
     his  children) and 458,400  shares  issuable upon the exercise of currently
     exercisable  options held by his son, Michael J. Parrella,  Jr., an officer
     of Artera  Group,  Inc.,  a  wholly-owned  subsidiary  of the company  (Mr.
     Parrella  disclaims  beneficial  ownership of these shares).  Also includes
     612,893 shares of common stock held by Mr. Parrella's spouse,  shares as to
     which Mr. Parrella disclaims beneficial ownership.

(c)  Mr. McCloy's  business  address is 475 Park Avenue South,  33rd Floor,  New
     York,  New York 10016.  Includes 5,000 shares from a stock award granted by
     NCT,  3,632,012 shares issuable upon the exercise of currently  exercisable
     options and 300,000  shares held by the John J. McCloy II Family  Trust for
     which the named person's  spouse serves as trustee,  shares as to which Mr.
     McCloy has no voting or investment power.

(d)  Mr. Oolie's business address is 21 Industrial  Avenue,  Upper Saddle River,
     New Jersey 07458.  Includes 20,000 shares from stock awards granted by NCT,
     3,882,012  shares  issuable  upon the  exercise  of  currently  exercisable
     options,  75,000 shares owned by the named  person's  spouse,  shares as to
     which Mr. Oolie has no voting or investment  power,  20,000 shares owned by
     Oolie  Enterprises,  and 44,313  shares  held by the Oolie  Family  Support
     Foundation, shares as to which Mr. Oolie has no voting or investment power.

                                       72
<PAGE>


(e)  Ms. Lebovics' business address is 20 Ketchum Street, Westport,  Connecticut
     06880.  Includes  7,992,073  shares issuable upon the exercise of currently
     exercisable options and 590,517 shares owned jointly with her spouse. Irene
     Lebovics is married to Irving Lebovics who is an executive  officer of NCT,
     serving as its Senior Vice  President,  Global Sales.  Mr.  Lebovics  holds
     various  options to acquire an aggregate of 3,338,415  shares of NCT common
     stock.  Also  includes  2,858,415  shares  issuable  upon the  exercise  of
     currently exercisable options held by Mr. Lebovics,  shares as to which Ms.
     Lebovics has no voting or investment power.

(f)  Mr. Hammond's business address is 20 Ketchum Street, Westport,  Connecticut
     06880.  Includes  5,404,024  shares issuable upon the exercise of currently
     exercisable options.

(g)  Dr. Charry's business address is 20 Ketchum Street,  Westport,  Connecticut
     06880. Consists of 3,273,049 shares issuable upon the exercise of currently
     exercisable options.

(h)  Mr. Darville's business address is 20 Ketchum Street, Westport, Connecticut
     06880. Consists of 1,000,000 shares issuable upon the exercise of currently
     exercisable options.

(i)  Includes  75,086,219  shares  issuable to nine persons upon the exercise of
     currently exercisable options and 25,000 shares from stock awards issued by
     NCT to two directors.  Excludes options to acquire  12,580,000  shares from
     NCT that are not presently  exercisable but become exercisable over time by
     the nine executive  officers and directors of NCT as a group. Also includes
     3,458,400  shares  issuable  to  children  of Michael  Parrella  upon their
     exercise of currently exercisable options,  shares as to which Mr. Parrella
     disclaims beneficial ownership.

(j)  Ms.  Salkind's  address  is c/o  Sills  Cummis  Epstein & Gross  P.C.,  One
     Riverfront Plaza,  Newark,  New Jersey 07102.  Includes  866,043,232 shares
     issuable upon the  conversion of convertible  notes in aggregate  principal
     amount of $34,249,483  and 33,628,629  shares for interest  thereon through
     February 29, 2004  (including  interest  calculated  at the default rate as
     applicable),  calculated  at the  respective  conversion  prices  under the
     convertible notes ranging from $0.029 to $0.055.  Also includes  20,093,615
     shares for default  penalty  (10% of the shares  issuable on  principal  in
     default)  issuable  to Ms.  Salkind at February  29,  2004.  Also  includes
     288,715,753  shares  issuable to Ms. Salkind upon the exercise of currently
     vested  warrants.  Also includes 5,000 shares owned by Morton Salkind,  Ms.
     Salkind's  husband and a former director of NCT, and currently  exercisable
     options held by Morton  Salkind to acquire  2,175,000  shares of NCT common
     stock,  shares  as to which  she has no  voting  or  investment  power  and
     disclaims beneficial ownership. Also includes currently exercisable options
     held by Acme Associates,  Inc. to acquire  240,500,000 shares of NCT common
     stock;  currently  exercisable options held by Motorworld,  Incorporated to
     acquire  23,000,000  shares  of NCT  common  stock;  currently  exercisable
     options held by Inframe,  Inc. to acquire  23,000,000  shares of NCT common
     stock;  currently  exercisable  options held by Avant Interactive,  Inc. to
     acquire  24,500,000  shares  of NCT  common  stock;  currently  exercisable
     options held by Turbo Networks,  Inc. to acquire  22,550,000  shares of NCT
     common stock; and currently  exercisable  options held by Maple Industries,
     Inc. to acquire  23,000,000  shares of NCT common stock.  Carole Salkind is
     the  sole   shareholder  of  Acme  Associates  (see  footnote  (m)  below),
     Motorworld,  Inframe,  Avant,  Turbo  Networks  and  Maple.  Also  includes
     currently  exercisable  options  held  by  Leben  Care,  Inc.  (whose  sole
     shareholder is Carole  Salkind's son, Steven Salkind) to acquire  8,350,000
     shares of NCT common stock and currently  exercisable  options held by Stop
     Noise, Inc. (whose sole shareholder is Steven Salkind) to acquire 3,375,000
     shares of NCT common  stock,  shares as to which Carole  Salkind  disclaims
     beneficial ownership.

(k)  Crammer Road LLC's business address is P.O. Box 866, George Town,  Anderson
     Square Building,  Shedden Road, Grand Cayman, Cayman Islands,  British West
     Indies.  David Sims of Navigator Management Ltd. has voting and dispositive
     control of NCT's  shares on behalf of Crammer  Road.  Includes  446,366,127
     shares issuable upon conversion of the series H preferred stock, along with
     accretion,  calculated at $0.0413  (NCT's closing bid price on February 29,
     2004 less the 25% discount per the agreement).  Includes 101,010,101 shares
     issuable pursuant to the private equity credit agreement minimum commitment
     amount of $5.0 million  calculated at $0.0495  (NCT's  closing bid price on
     February 29, 2004 less a 10%  discount).  Also  includes  1,250,000  shares
     issuable under currently  exercisable  warrants.  Pursuant to a contractual
     restriction  between NCT and Crammer Road,  Crammer Road is prohibited from
     holding in excess of 9.9% of our common stock at any given time.

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(l)  Alpha Capital  Aktiengesellschaft's  business  address is Pradafant 7, 9490
     Furstentums,  Vaduz, Liechtenstein.  Konrad Ackermann, Director, has voting
     and  dispositive  control  of NCT's  shares  on  behalf  of Alpha  Capital.
     Includes currently exercisable warrants to acquire 13,900,000 shares of NCT
     common  stock at a  weighted  average  exercise  price of $0.012 per share,
     32,153,088  shares  issuable  upon  exchange of various  convertible  notes
     issued by Artera Group, Inc. along with accrued interest, 12,539,228 shares
     issuable   upon   exchange  of  series  B  preferred   stock  of  Pro  Tech
     Communications,  Inc. and accretion thereon, and 22,351,735 shares issuable
     upon  conversion  of three NCT  notes  along  with  accrued  interest,  all
     calculated  at $0.055  (NCT's  closing bid price on February 29, 2004) less
     applicable discounts.  Pursuant to contractual restrictions between NCT and
     Alpha Capital Aktiengesellschaft,  Alpha Capital is prohibited from holding
     in excess of 9.99% of our common stock at any given time.

(m)  Acme Associates,  Inc.'s business address is 322 Green Pond Road, Hibernia,
     New Jersey  07842.  As noted in footnote (j) above,  Carole  Salkind is the
     sole  shareholder  of Acme  Associates.  Consists of currently  exercisable
     options to acquire  240,500,000  shares of NCT's common stock at a weighted
     average exercise price of $0.0453 per share.

(n)  Libra Finance  S.A.'s  business  address is c/o Trident Trust Company (BVI)
     Limited,  Trident  Chambers,  Box 146, Road Town,  Tortola,  British Virgin
     Islands.  Seymour Braun has voting and dispositive  control of NCT's shares
     on behalf of Libra  Finance.  Includes  currently  exercisable  warrants to
     acquire  25,000,000  shares of NCT  common  stock at an  exercise  price of
     $0.027 per share,  20,367,621  shares  issuable  upon  exchange of series A
     preferred stock of Artera Group, Inc. and accretion thereon, 639,480 shares
     issuable upon conversion of NCT convertible  notes dated March 14, 2001 and
     April 12, 2001 and interest  thereon,  and 9,445,579  shares  issuable upon
     conversion of a NCT  convertible  note dated September 4, 2003 and interest
     thereon,  all calculated at $0.055 (NCT's closing bid price on February 29,
     2004) less applicable discounts.

(o)  Austost  Anstalt   Schaan's   business   address  is  Landstrasse  8,  9496
     Fuerstentum,   Balzers,   Liechtenstein.   Thomas   Hackl  has  voting  and
     dispositive  control  of  NCT's  shares  on  behalf  of  Austost.  Includes
     21,935,928  shares  issuable upon  exchange of series A preferred  stock of
     Artera Group, Inc. and accretion thereon and 5,841,924 shares issuable upon
     exchange of a convertible  note issued by Artera  Group,  Inc. and interest
     thereon,  calculated  at $0.055  (NCT's  closing bid price on February  29,
     2004).

(p)  Balmore S.A.'s business address is c/o Trident Chambers, P.O. Box 146, Road
     Town,  Tortola,  British  Virgin  Islands.  Gissela  Kindle  has voting and
     dispositive  control  of  NCT's  shares  on  behalf  of  Balmore.  Includes
     21,935,928  shares  issuable upon  exchange of series A preferred  stock of
     Artera Group,  Inc. and accretion  thereon and 756,253 shares issuable upon
     exchange of a convertible  note issued by Artera  Group,  Inc. and interest
     thereon,  calculated  at $0.055  (NCT's  closing bid price on February  29,
     2004).

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Secured Convertible Notes and Warrants Issued to Carole Salkind

     Beginning in 1999, NCT has issued  convertible  notes to Carole Salkind,  a
stockholder and spouse of a former director of NCT. As of December 31, 2003, the
aggregate  principal balance  outstanding of these notes was approximately $33.8
million.  Substantially  all the assets of NCT Group,  Inc. secure the notes. We
have  sustained  our  operations  in 2002 and 2003  primarily  from the  funding
received  from Carole  Salkind and are  dependent  upon such funding to continue
operations.  Although we do not have a formal agreement  requiring her to do so,
we believe that Carole Salkind will continue to provide funds to NCT. Our belief
that  funding  from her will  continue  is based  primarily  upon her  continued
funding of NCT during 2002 and 2003 despite  NCT's failure to repay her notes as
the notes matured.  Commencing  January 2001, upon the maturity of Ms. Salkind's
initial  note to NCT dated  January  1999,  NCT has  established  a  history  of
defaulting  on the  repayment  of  obligations  owed to Carole  Salkind  as such
obligations become due. Ms. Salkind has allowed NCT to roll over maturing notes,
along with accrued interest  (including  interest at a default rate equal to the
note's  stated rate plus 5% after  default)  and a default  penalty  (10% of the
principal in default),  into new notes that generally  mature upon demand or six
months to one year from the date of the  rolled-over  note.  In  addition to the
financing  provided by rolling over maturing notes, Ms. Salkind has continued to
provide NCT with new funds.  From time to time, NCT has obtained oral assurances
that Ms.

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Salkind will continue funding NCT. However, NCT has no legally binding assurance
that Ms. Salkind will continue  funding NCT in the near-term or that the amount,
timing and duration of funding from her will be adequate to sustain NCT.

     At Ms.  Salkind's  election,  the notes are convertible  into shares of our
common  stock  and  exchangeable  for  shares  of  common  stock  of  any of our
subsidiaries that makes a public offering of its common stock (except Pro Tech).
The notes contain various events of default,  the occurrence of any one of which
provides,  at Ms. Salkind's  election,  that the outstanding  principal,  unpaid
interest and default  penalty become  immediately  due and payable.  To date, no
demands  for payment  under  these  notes have been made other than  demands for
payment at maturity.

     Of the debt owed  Carole  Salkind  as of  December  31,  2003,  $25,780,000
represents  cash loans made by Ms. Salkind (rather than non-cash items including
interest  and default  penalties  rolled into new notes).  Through  December 31,
2003,  Carole  Salkind has loaned NCT  $26,530,000  in cash.  She  converted one
$500,000  note into shares of NCT common  stock (on May 18, 2001) and was repaid
one $250,000 note (loaned on January 25, 2002 and repaid from an escrow  account
established as part of another transaction that was not consummated in which NCT
engaged with an unrelated  third party).  Summarized  below are the  convertible
notes issued to Carole Salkind that are outstanding as of December 31, 2003:

                                                           Conversion
    Issue Date        Due Date       Principal               Price
   ------------     -----------   -----------------      --------------
     01/15/03        01/15/04      $     450,000           $  0.0410
     01/23/03        01/23/04          2,747,635              0.0400
     01/30/03        01/30/04            350,000              0.0410
     02/11/03        02/11/04          1,252,592              0.0400
     03/04/03        03/04/04            450,000              0.0350
     03/13/03        03/13/04            980,802              0.0310
     03/13/03        03/13/04            864,616              0.0310
     04/02/03        04/02/04            450,000              0.0290
     04/11/03        04/11/04            450,000              0.0310
     04/21/03        04/21/04            450,000              0.0370
     07/14/03        01/14/04            410,000              0.0312
     07/14/03        01/14/04            414,481              0.0312
     07/28/03        01/28/04            414,750              0.0420
     07/28/03        01/28/04            410,000              0.0420
     08/07/03        02/07/04            622,529              0.0539
     08/18/03        02/18/04            425,000              0.0450
     08/28/03        02/28/04            414,885              0.0550
     08/28/03        02/28/04            375,000              0.0550
     09/11/03        03/11/04            580,650              0.0500
     10/14/03        04/14/04          4,469,019              0.0440
     11/21/03        05/21/04            474,154              0.0410
     11/21/03        05/21/04            425,000              0.0410
     11/22/03        05/22/04            400,000              0.0410
     12/15/03        06/15/04          3,828,985              0.0370
     12/15/03        06/15/04            400,000              0.0370
     12/31/03        06/30/04          7,479,385              0.0400
     12/31/03        06/30/04            785,000              0.0400
     12/31/03       On Demand          3,050,000              0.0400
                                  -----------------
                                   $  33,824,483
                                  =================

     In conjunction with the issuance of convertible  notes to Ms. Salkind,  NCT
issued Ms.  Salkind  warrants to acquire  shares of NCT common  stock.  As noted
below, we amended the exercise  prices on each of the warrants  granted prior to
December  20,  2001 to $0.071.  Further,  we granted  Ms.  Salkind  warrants  in
consideration  of her irrevocable  waiver of her rights to exchange  convertible
notes for,  or exercise a warrant  for,  shares of Pro Tech  common  stock.  The
warrants to purchase  shares of NCT common  stock  granted to Ms.  Salkind as of
December 31, 2003 are as follows:

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<PAGE>


                                                                     Shares
    Grant Date      Expiration Date        Exercise Price           Granted
   ------------   -------------------    ------------------     ----------------
     02/13/01          02/13/06              $   0.0710            7,042,254
     05/14/01          05/14/06                  0.0710              500,000
     08/22/01          08/22/06                  0.0710              625,000
     09/28/01          09/28/06                  0.0710            1,000,000
     12/20/01          12/20/06                  0.0710            1,250,000
     01/11/02          01/11/07                  0.0790            2,789,082
     01/25/02          01/25/07                  0.0900              812,500
     01/25/02          01/25/07                  0.0900              312,500
     02/27/02          02/27/07                  0.0790            1,034,266
     03/01/02          03/01/07                  0.0790              437,500
     05/02/02          05/02/07                  0.0940            3,188,708
     05/02/02          05/02/07                  0.0940            3,562,500
     05/29/02          05/29/07                  0.0950            1,500,000
     06/02/02          06/02/07                  0.0970            1,500,000
     07/03/02          07/03/07                  0.0780            1,500,000
     07/12/02          07/12/07                  0.0750           20,000,000
     07/15/02          07/15/07                  0.0750            1,500,000
     07/23/02          07/23/07                  0.0590            2,250,000
     08/14/02          08/14/07                  0.0820            1,500,000
     08/29/02          08/29/07                  0.0760            2,100,000
     09/09/02          09/09/07                  0.0770            1,500,000
     09/30/02          09/30/07                  0.0700           10,000,000
     09/30/02          09/30/07                  0.0700           16,157,565
     11/07/02          11/07/07                  0.0720            1,750,000
     11/20/02          11/20/07                  0.0540            1,750,000
     11/21/02          11/21/07                  0.0535            6,271,926
     12/02/02          12/02/07                  0.0480            1,500,000
     12/16/02          12/16/07                  0.0420            1,750,000
     12/26/02          12/26/07                  0.0420           10,206,373
     12/30/02          12/30/07                  0.0412            1,500,000
     01/15/03          01/15/08                  0.0410            2,000,000
     01/23/03          01/23/08                  0.0400           11,775,579
     01/30/03          01/30/08                  0.0410            1,500,000
     02/11/03          02/11/08                  0.0400            5,500,000
     03/04/03          03/04/08                  0.0350            2,000,000
     03/13/03          03/13/08                  0.0310            4,250,000
     03/13/03          03/13/08                  0.0310            3,750,000
     04/02/03          04/02/08                  0.0290            2,000,000
     04/11/03          04/11/08                  0.0310            2,000,000
     04/21/03          04/21/08                  0.0370            2,000,000
     05/15/03          05/15/08                  0.0460            2,000,000
     05/22/03          05/22/08                  0.0420            7,500,000
     05/28/03          05/28/08                  0.0440            1,900,000
     06/12/03          06/12/08                  0.0440           10,500,000
     06/12/03          06/12/08                  0.0440            2,000,000
     06/28/03          06/28/08                  0.0380            2,000,000
     07/14/03          07/14/08                  0.0312            2,000,000
     07/14/03          07/14/08                  0.0312            2,000,000
     07/28/03          07/28/08                  0.0420            2,000,000
     07/28/03          07/28/08                  0.0420            2,000,000
     08/07/03          08/07/08                  0.0539            2,750,000
     08/18/03          08/18/08                  0.0450            2,000,000
     08/28/03          08/28/08                  0.0550            2,000,000

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<PAGE>


                                                                     Shares
    Grant Date      Expiration Date        Exercise Price           Granted
   ------------   -------------------    ------------------     ----------------
     08/28/03          08/28/08                  0.0550            2,000,000
     09/11/03          09/11/08                  0.0500            2,500,000
     09/12/03          09/12/08                  0.0500            2,000,000
     10/02/03          10/02/08                  0.0430            4,000,000
     10/14/03          10/14/08                  0.0440           19,250,000
     10/14/03          10/14/08                  0.0440            2,000,000
     11/03/03          11/03/08                  0.0440            2,000,000
     11/21/03          11/21/08                  0.0410            2,250,000
     11/21/03          11/21/08                  0.0410            2,500,000
     11/22/03          11/22/08                  0.0410            2,500,000
     12/15/03          12/15/08                  0.0370           16,500,000
     12/15/03          12/15/08                  0.0370            2,500,000
     12/31/03          12/31/08                  0.0400           32,250,000
     12/31/03          12/31/08                  0.0400            5,500,000
                                                                ----------------
                                                                 281,965,753
                                                                ================

     The following outlines all of our convertible note transactions with Carole
Salkind through December 31, 2003:

     On January 26, 1999, Carole Salkind agreed to purchase convertible notes of
NCT in an  aggregate  principal  amount of $4.0  million.  The initial  two-year
convertible note for $1.0 million was issued to Ms. Salkind on January 26, 1999.
The note matured on January 25, 2001.  The note bore  interest at the prime rate
as  published  from time to time in The Wall Street  Journal from the issue date
until the note was paid.  Ms.  Salkind had the right to convert the  outstanding
amount of the note into shares of common stock of NCT at a conversion  price (as
amended on September  19,  1999) equal to the lesser of: (1) the lowest  closing
price for the common stock during  September 1999  ($0.172);  (2) the average of
the closing bid price for the common  stock for five  consecutive  trading  days
prior to conversion;  or (3) $0.17. In no event,  however,  could the conversion
price be less than $0.12 per share. Prior to the amendment, the fixed conversion
price was $0.237 per share,  and in no event could the conversion  price be less
than  $0.15 per  share.  The  amendment  was  entered  into for the  purpose  of
maintaining  good investor  relations in a market in which NCT's stock price was
declining.  Ms. Salkind purchased the remaining $3.0 million principal amount of
convertible  notes on various dates through March 27, 2000, and NCT issued notes
with the same terms and conditions as the note described above.

     On January 25, 2001,  NCT  defaulted  on the  repayment of the $1.0 million
convertible  note  issued to Ms.  Salkind  on  January  26,  1999.  The  default
provisions  in the note  imposed  a  default  penalty  of  $100,000  (10% of the
principal in default).  Default interest from the date of default accrued on the
principal  in default at the rate of prime plus 5%. On May 14,  2001,  NCT cured
this  default by canceling  the $1.0 million note and issuing a new  convertible
note to Ms. Salkind for $1,361,615 due September 14, 2001. Also on May 14, 2001,
we granted Ms. Salkind a five-year warrant for the purchase of 500,000 shares of
NCT common stock at $0.13 per share, the fair market value of NCT's common stock
on the date of grant.  On December  20, 2001,  we reduced the exercise  price on
that  warrant to $0.071 per share.  The May 14, 2001 note was  convertible  into
shares of our common  stock at $0.13 per share,  shares of Pro Tech common stock
at $0.22 per share or shares of common stock of any other public  subsidiary  of
NCT at the respective  initial public  offering  prices,  at the election of Ms.
Salkind.  On September 4, 2001,  NCT  defaulted on repayment of the May 14, 2001
note.  The default  provision in the note imposed a penalty of $136,162  (10% of
the principal in default).  Default interest from the date of default was due on
the  principal  in default at the rate of prime plus 5%. Ms.  Salkind  agreed to
fund another  $1,000,000 and to roll the amounts due under the May 14, 2001 note
in default  into a new note,  dated  September  28,  2001,  for an  aggregate of
$2,535,469.  This note  matured on September  28, 2002 and bore  interest at the
prime rate. In connection  with this new note, we issued Ms. Salkind a five-year
warrant to acquire  1,000,000 shares of NCT common stock at an exercise price of
$0.115 per share.  On December 20, 2001,  we reduced the exercise  price on that
warrant to $0.071 per share.  On July 12, 2002,  Ms. Salkind waived her right to
exchange the  September 28, 2001 note for shares of common stock of Pro Tech. On
September  28, 2002,  we defaulted  on  repayment of the  $2,535,469  note dated
September 28, 2001. On September 30, 2002, we issued a new note in the principal
amount of $3,770,098 to settle the September 28, 2001 note,  default penalty and
accrued interest thereon and included $800,000 additional cash received from Ms.
Salkind.  The

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<PAGE>


September  30, 2002 note bore  interest at 8% per annum and matured on September
30, 2003. The September 30, 2002 note was  convertible  into common stock of NCT
(at $0.070) and exchangeable for shares of common stock of any subsidiary of NCT
(other  than Pro Tech) that made a public  offering  of its common  tock (at the
public  offering  price  thereof).  In  conjunction  with  the  issuance  of the
September 30, 2002 note, we issued Carole Salkind a five-year warrant to acquire
16,157,565  shares of NCT common stock at an exercise price of $0.070 per share.
We defaulted on repayment of the September 30, 2002 note. As outlined below, the
September 30, 2002 note was rolled into a new note dated October 14, 2003.

     On February  13,  2001,  NCT issued Ms.  Salkind a  promissory  note in the
amount of $500,000  payable with accrued interest at the rate of 7% per annum on
April 14, 2001. The principal and interest were  convertible,  at Ms.  Salkind's
election, into NCT's common stock at a conversion price of $0.21 or exchangeable
for Pro Tech's common stock at an exchange  price of $0.44.  In connection  with
issuance of this note,  NCT issued Ms.  Salkind a five-year  warrant to purchase
$500,000 worth of either, at her election, NCT's common stock at $0.21 per share
or Pro Tech's common stock at $0.44 per share. We reduced the exercise prices on
this  warrant on  December  20,  2001 to $0.071  per share for NCT common  stock
(representing  the right to acquire  7,042,254  shares of NCT common  stock) and
$0.06 per share for Pro Tech common stock.  On July 12, 2002, Ms. Salkind waived
her right to  purchase  shares of Pro Tech upon  exercise of this  warrant.  NCT
defaulted on the repayment of the February 13, 2001 note. The default  provision
in the note imposed a penalty of 10% of the principal in default, or $50,000. On
May 18, 2001, Ms. Salkind  converted this $500,000 note into 4,303,425 shares of
our common stock at an agreed upon  conversion  price of $0.13 per share,  which
approximated the market price of our common stock on the conversion date.

     In  2001,  NCT  defaulted  on  repayment  to Ms.  Salkind  of  each  of its
convertible  notes dated June 4, 1999,  June 11, 1999, July 2, 1999 and July 23,
1999,  representing  an aggregate  principal  amount of $1,250,000.  The default
provisions  in the notes  imposed  an  aggregate  penalty  of  $125,000  (10% of
principal amount in default). Default interest from the dates of default was due
on the principal in default at the rate of prime plus 5%. On August 22, 2001, we
cured these defaults by canceling these notes aggregating $1,250,000 and issuing
a new convertible  note to Ms. Salkind for $1,673,393.  The August 22, 2001 note
bore  interest at the prime rate and was due December  22,  2001.  On August 22,
2001, we also granted Ms. Salkind a five-year warrant to purchase 625,000 shares
of NCT's common stock at an exercise price of $0.093 per share.  On December 20,
2001,  we reduced the  exercise  price on that  warrant to $0.071 per share.  We
defaulted  on the  repayment  of the August 22, 2001 note and incurred a penalty
(10% of the  principal  in  default)  and accrued  interest at the default  rate
(prime plus 5%). We settled  the amounts due along with an  additional  $350,000
cash received from Ms.  Salkind by issuing an 8% note on January 11, 2002 in the
principal  amount of $2,231,265  due January 11, 2003 (such note was rolled into
another  note  dated  January  23,  2003  as  outlined  below).  This  note  was
convertible  into  shares of NCT common  stock (at $0.079) or  exchangeable  for
shares of common  stock of any of NCT's  subsidiaries  that goes  public (at the
initial public offering price). Prior to a waiver agreement dated July 12, 2002,
the note had also  been  exchangeable  for  shares  of Pro Tech (at  $0.06).  In
conjunction  with the  issuance of the  January  11,  2002 note,  we granted Ms.
Salkind a five-year  warrant to acquire  2,789,082 shares of NCT common stock at
$0.079 per share and a five-year  option to acquire a 10% equity interest in our
subsidiary,  Artera  Group,  Inc. at an exercise  price of 10% of the  pre-money
enterprise  value  attributed  to Artera  Group,  Inc. in the first  transaction
following January 11, 2002 in which an unrelated  investor  purchases or commits
to purchase an equity interest in Artera Group,  Inc. for payment of at least $5
million. In other words, Ms. Salkind may acquire a 10% equity interest in Artera
Group based upon the value  attributed to Artera Group by an unrelated  investor
who pays at least $5  million  for an  equity  interest  in  Artera  Group.  For
example,  if an  unrelated  investor  pays $20  million to purchase a 20% equity
interest, Ms. Salkind may acquire 10% equity of Artera Group for $10 million.

     In 2001, NCT defaulted on repayment to Ms. Salkind of its convertible notes
dated  August  25,  1999 and  September  19,  1999,  representing  an  aggregate
principal  amount of $750,000.  The default  provisions  in the notes imposed an
aggregate  penalty of $75,000  (10% of  principal  amount in  default).  Default
interest  from the dates of default was due on the  principal  in default at the
rate of prime  plus 5%. On  December  20,  2001,  we issued  Ms.  Salkind  an 8%
convertible note in the principal amount of $2,014,270 due December 20, 2002 and
a five-year  warrant to purchase  1,250,000 shares of our common stock at $0.071
per share.  The December 20, 2001 note included  $1,000,000 new funding from Ms.
Salkind and the settlement of the notes to Ms. Salkind dated August 25, 1999 and
September 19, 1999. On December 26, 2002, the December 20, 2001 note (along with
accrued  interest and default penalty thereon) was rolled into a new note in the
amount of $2,381,487.  This note matured  December

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26, 2003 and was  convertible  into shares of NCT common  stock at a  conversion
price of $0.042.  The note was also  exchangeable  for shares of common stock of
any of NCT's  subsidiaries  that made a public  offering of its common stock (at
the initial public offering price). In connection with this rollover on December
26, 2002,  we issued a five-year  warrant to Ms.  Salkind to acquire  10,206,373
shares of NCT common stock at an exercise price per share of $0.042. As outlined
below,  the December 26, 2002 note was rolled into a new note dated December 31,
2003.

     Also on December 20, 2001 as  indicated  above,  we amended the  respective
exercise prices of Ms. Salkind's previously granted warrants to $0.071 per share
for the purchase of  approximately  9.2 million  shares of NCT common stock.  In
addition, under her February 14, 2001 warrant, we reduced the exercise price for
her purchase of shares of Pro Tech common stock from $0.44 to $0.06.

     On January 25, 2002, NCT issued Ms. Salkind two 8% convertible notes in the
principal  amounts of $650,000 (due January 25, 2003) and $250,000 (due February
8, 2002). On January 25, 2002 in conjunction  with the issuance of the notes, we
granted Ms. Salkind two five-year warrants to purchase an aggregate of 1,125,000
shares of NCT common stock at $0.09 per share.  Ms. Salkind paid NCT $650,000 on
January 25, 2002.  The $650,000 note was  convertible  into shares of NCT common
stock (at $0.09) and  exchangeable  for shares of common stock of any subsidiary
of NCT that made a public  offering of its common  stock (at the initial  public
offering price  thereof).  Prior to a waiver  agreement dated July 12, 2002, the
note had also been exchangeable for shares of Pro Tech (at $0.06). We rolled the
January 25, 2002 note for  $650,000  into a new note dated  February 11, 2003 as
described below.

     Ms. Salkind paid $250,000 on January 25, 2002, for the benefit of NCT, into
an escrow account and NCT issued a convertible  note in the principal  amount of
$250,000.  The escrow  account  was a part of another  transaction  in which NCT
engaged with an unrelated third party.  The note matured on February 8, 2002 and
was settled on February  27,  2002.  The January 25, 2002 note for  $250,000 was
satisfied as to principal by the release of $250,000 from escrow to Ms. Salkind.
On  February  27,  2002,  a new note was  issued  by NCT to Ms.  Salkind  in the
principal  amount of $827,412  for the  default  penalty  ($25,000)  and accrued
interest (less interest credited on the escrow account) due on the $250,000 note
along with  $800,000  cash loaned to NCT by Ms.  Salkind.  The February 27, 2002
note bore interest at 8% per annum payable at maturity (February 27, 2003). This
note was convertible  into common stock of NCT (at $0.079) and  exchangeable for
shares of common stock of any  subsidiary of NCT that made a public  offering of
its  common  stock (at the public  offering  price  thereof).  Prior to a waiver
agreement dated July 12, 2002, the note had also been exchangeable for shares of
Pro Tech (at $0.06). Also on February 27, 2002, in conjunction with the issuance
of the note  described  above,  we granted Ms.  Salkind a  five-year  warrant to
acquire  1,034,266 shares of our common stock at an exercise price of $0.079 per
share.  We rolled the February 27, 2002 note for $827,412  into a new note dated
March 13, 2003 as outlined below.

     On March 1,  2002,  NCT issued Ms.  Salkind an 8%  convertible  note in the
principal  amount  of  $350,000  due March 1, 2003 and a  five-year  warrant  to
acquire 437,500 shares of NCT common stock at $0.079 per share. Ms. Salkind paid
NCT $350,000 cash on March 1, 2002. This note was convertible  into common stock
of NCT (at $0.079) and exchangeable for shares of common stock of any subsidiary
of NCT that made a public  offering of its common stock (at the public  offering
price  thereof).  Prior to a waiver  agreement dated July 12, 2002, the note had
also been  exchangeable for shares of Pro Tech (at $0.06).  This note was rolled
into a new note dated March 13, 2003 as described below.

     We defaulted on repayment of the  $1,000,000  note dated March 27, 2000 due
March 27, 2002.  On May 2, 2002,  we issued a new note for  $1,275,483 to settle
the March 27, 2000 note, default penalty and accrued interest thereon. This note
bore  interest at 8% per annum and  matured on  November 2, 2002.  This note was
convertible  into common stock of NCT (at $0.094) and exchangeable for shares of
common stock of any subsidiary of NCT that made a public  offering of its common
stock (at the public offering price thereof).  Prior to a waiver agreement dated
July 12, 2002,  the note had also been  exchangeable  for shares of Pro Tech (at
$0.03).  In  conjunction  with the issuance of this May 2, 2002 note,  we issued
Carole  Salkind a five-year  warrant to acquire  3,188,708  shares of NCT common
stock at an  exercise  price of $0.094  per  share.  On  November  2,  2002,  we
defaulted on repayment of this May 2, 2002 note. On November 21, 2002, we issued
a new note in the  principal  amount of  $1,463,449  to settle  this May 2, 2002
note,  default penalty and accrued interest thereon.  The November 21, 2002 note
bore interest at 8% per annum,  matured on May 21, 2003 and was convertible into
common stock of NCT (at $0.0535) and  exchangeable for shares of common stock of
any  subsidiary of NCT (other than Pro Tech) that made a public

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offering  of its  common  stock  (at the  public  offering  price  thereof).  In
conjunction  with the issuance of the November 21, 2002 note,  we issued  Carole
Salkind a five-year  warrant to acquire  6,271,926 shares of NCT common stock at
an exercise  price of $0.0535 per share.  As described  below,  the November 21,
2002 note was rolled into a new note dated June 12, 2003.

     Also on May 2, 2002, we issued Carole  Salkind an 8%  convertible  note for
$1,425,000 due May 2, 2003, for funds we received from her as follows:  $300,000
on April 1,  2002,  $350,000  on April  15,  2002,  $350,000  on May 1, 2002 and
$425,000 on May 2, 2002.  This May 2, 2002 note was  convertible  into shares of
NCT common stock (at $0.094) and  exchangeable for shares of common stock of any
NCT  subsidiary  that made a public  offering of its common stock (at the public
offering price thereof).  Prior to a waiver  agreement dated July 12, 2002, this
note  had  also  been  exchangeable  for  shares  of Pro  Tech  (at  $0.03).  In
conjunction with the issuance of this note, we issued Carole Salkind a five-year
warrant to acquire  3,562,500 shares of NCT common stock at an exercise price of
$0.094 per share.  We  defaulted on the  repayment of this May 2, 2002 note.  As
described  below,  the May 2, 2002 note was rolled into a new note dated May 22,
2003.

     On May 29, 2002 and June 2, 2002, we issued Carole  Salkind 8%  convertible
notes for $350,000 and  $300,000,  respectively,  for which Ms.  Salkind paid us
$350,000 and $300,000,  respectively, in cash. The notes matured on May 29, 2003
and June 2, 2003, respectively, were convertible into shares of NCT common stock
at $0.095 and $0.097,  respectively,  and were exchangeable for shares of common
stock of any NCT subsidiary (other than Pro Tech) that made a public offering of
its stock  (at the  public  offering  price  thereof).  In  connection  with the
issuance of these notes, we issued Carole Salkind two five-year warrants each to
acquire  1,500,000  shares of NCT common stock at exercise  prices of $0.095 and
$0.097 per share, respectively.  As outlined below, the May 29, 2002 and June 2,
2002 notes were rolled into a new note dated June 12, 2003.

     On July 3, 2002,  we issued Carole  Salkind a note for $350,000,  for which
Ms. Salkind paid us $350,000 in cash. The note bore interest at 8% per annum and
matured  on July 3, 2003.  The note was  convertible  into  shares of NCT common
stock at $0.078 and was also  exchangeable for shares of common stock of any NCT
subsidiary (other than Pro Tech) that made a public offering of its common stock
(at the public offering price thereof).  In conjunction with the issuance of the
July 3, 2002  note,  we issued  Carole  Salkind a  five-year  warrant to acquire
1,500,000  shares of NCT common stock, at an exercise price of $0.078 per share.
As outlined below, this note was rolled into a new note dated July 14, 2003.

     On  July  12,  2002,  Carole  Salkind,  NCT and Pro  Tech  entered  into an
agreement  under which Ms.  Salkind  waived her right to exchange  NCT notes for
shares of Pro Tech common stock.  In  consideration  of the waiver,  NCT granted
Carole Salkind a five-year  warrant to acquire  20,000,000  shares of NCT common
stock at $0.075 per share.

     On July 15, 2002, we issued Carole Salkind an 8% note for $350,000 due July
15,  2003,  for  which  Ms.  Salkind  paid us  $350,000  in  cash.  The note was
convertible  into  shares of NCT  common  stock at $0.075 and  exchangeable  for
shares of  common  stock of any  subsidiary  (other  than Pro Tech)  that made a
public offering of its common stock (at the public  offering price thereof).  In
conjunction  with the  issuance  of the July 15,  2002  note,  we issued  Carole
Salkind a five-year  warrant to acquire  1,500,000 shares of NCT common stock at
an exercise price of $0.075 per share. As outlined  below,  this note was rolled
into a new note dated July 28, 2003.

     On July 23,  2002,  NCT issued Ms.  Salkind an 8%  convertible  note in the
principal  amount of  $525,000  due July 23,  2003 and a  five-year  warrant  to
acquire  2,250,00  shares of NCT common stock at $0.059 per share.  Ms.  Salkind
paid NCT $525,000 cash on July 23, 2002. This note was  convertible  into common
stock of NCT (at  $0.059)  and  exchangeable  for shares of common  stock of any
subsidiary  of NCT  (other  than Pro Tech)  that made a public  offering  of its
common stock (at the public  offering price thereof).  As outlined  below,  this
note was rolled into a new note dated August 7, 2003.

     On August 14, 2002, NCT issued Ms.  Salkind an 8%  convertible  note in the
principal  amount of $350,000  due August 14,  2003 and a  five-year  warrant to
acquire  1,500,000  shares of NCT common stock at $0.082 per share.  Ms. Salkind
paid NCT $350,000 cash on August 14, 2002. This note was convertible into common
stock of NCT (at  $0.082)  and  exchangeable  for shares of common  stock of any
subsidiary  of NCT  (other  than Pro Tech)  that made a public  offering  of its
common stock (at the public  offering price thereof).  As outlined  below,  this
note was rolled into a new note dated August 28, 2003.

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     On August 29, 2002, NCT issued Ms.  Salkind an 8%  convertible  note in the
principal  amount of $490,000  due August 29,  2003 and a  five-year  warrant to
acquire  2,100,000  shares of NCT common stock at $0.076 per share.  Ms. Salkind
paid NCT $490,000 cash on August 29, 2002. This note was convertible into common
stock of NCT (at  $0.076)  and  exchangeable  for shares of common  stock of any
subsidiary  of NCT  (other  than Pro Tech)  that made a public  offering  of its
common stock (at the public  offering price thereof).  As outlined  below,  this
note was rolled into a new note dated September 11, 2003.

     On September 9, 2002, NCT issued Ms. Salkind an 8% convertible  note in the
principal  amount of $350,000 due  September 9, 2003 and a five-year  warrant to
acquire  1,500,000  shares of NCT common stock at $0.077 per share.  Ms. Salkind
paid NCT  $350,000  cash on September 9, 2002.  This note was  convertible  into
common stock of NCT (at $0.077) and  exchangeable  for shares of common stock of
any  subsidiary of NCT (other than Pro Tech) that made a public  offering of its
common stock (at the public  offering price thereof).  As outlined  below,  this
note was rolled into a new note dated October 2, 2003.

     On September  30, 2002,  Carole  Salkind,  NCT and Pro Tech entered into an
agreement under which Ms. Salkind waived her right to acquire  $500,000 worth of
Pro Tech common stock at an amended exercise price of $0.06 per share (8,333,333
Pro  Tech  common   shares)  under  a  warrant  dated   February  13,  2001.  In
consideration for the waiver,  NCT granted Carole Salkind a five-year warrant to
acquire 10,000,000 shares of NCT common stock at $0.070 per share.

     On November 7, 2002,  we issued  Carole  Salkind a note for  $400,000,  for
which Ms.  Salkind  paid us $400,000 in cash.  The note bore  interest at 8% per
annum and matured on November 7, 2003. The note was  convertible  into shares of
NCT common  stock at $0.072 and  exchangeable  for shares of common stock of any
subsidiary (other than Pro Tech) that made a public offering of its common stock
(at the public offering price thereof).  In conjunction with the issuance of the
November 7, 2002 note, we issued Carole  Salkind a five-year  warrant to acquire
1,750,000  shares of NCT common stock at an exercise  price of $0.072 per share.
As  described  below,  this note was rolled into a new note dated  November  21,
2003.

     On November 20, 2002, NCT issued Ms. Salkind an 8% convertible  note in the
principal  amount of $400,000 due  November 20, 2003 and a five-year  warrant to
acquire  1,750,000  shares of NCT common stock at $0.054 per share.  Ms. Salkind
paid  NCT  $400,000  in cash on or  about  November  20,  2002.  This  note  was
convertible  into common stock of NCT (at $0.054) and exchangeable for shares of
common stock of any  subsidiary  of NCT (other than Pro Tech) that made a public
offering of its common stock (at the public offering price thereof). As outlined
below, this note was rolled into a new note dated December 15, 2003.

     On December 2, 2002, NCT issued Ms.  Salkind an 8% convertible  note in the
principal  amount of $350,000.  Ms. Salkind paid NCT cash for the note. The note
matured on December  2, 2003 and was  convertible  into common  stock of NCT (at
$0.048) and  exchangeable  for shares of common stock of any  subsidiary  of NCT
(except Pro Tech) that made a public offering of its common stock (at the public
offering price thereof). In conjunction with the issuance of the note, we issued
Ms. Salkind a five-year  warrant to acquire 1,500,000 shares of NCT common stock
at an  exercise  price per share of $0.048.  As  outlined  below,  this note was
rolled into a new note dated December 15, 2003.

     On December 16, 2002, NCT issued Ms. Salkind an 8% convertible  note in the
principal  amount of $400,000,  for which Ms. Salkind paid NCT $400,000 in cash.
The note matured on December 16, 2003 and was  convertible  into common stock of
NCT (at $0.042) and exchangeable for shares of common stock of any subsidiary of
NCT  (except Pro Tech) that made a public  offering of its common  stock (at the
public offering price thereof). In conjunction with the issuance of the note, we
issued Ms. Salkind a five-year warrant to acquire 1,750,000 shares of NCT common
stock at an exercise price per share of $0.042. As outlined below, this note was
rolled into a new note dated December 31, 2003.

     On December 30, 2002, NCT issued Ms. Salkind an 8% convertible  note in the
principal  amount of $350,000.  Ms. Salkind paid NCT $350,000 cash for the note.
The note matured on December 30, 2003 and was  convertible  into common stock of
NCT (at $0.0412) and  exchangeable  for shares of common stock of any subsidiary
of NCT (except Pro Tech) that made a public offering of its common stock (at the
public offering price thereof). In conjunction with the issuance of the note, we
issued Ms. Salkind a five-year warrant to acquire 1,500,000 shares of

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NCT common stock at an exercise price per share of $0.0412.  As outlined  below,
this note was rolled into a new note dated December 31, 2003.

     On January 15, 2003, NCT issued Ms.  Salkind an 8% convertible  note in the
principal  amount of $450,000.  Ms. Salkind paid NCT cash for the note. The note
matures on January 15, 2004 and may be  converted  into common  stock of NCT (at
$0.041) and may be exchanged for shares of common stock of any subsidiary of NCT
(except  Pro Tech) that  makes a public  offering  of its  common  stock (at the
public offering price thereof). In conjunction with the issuance of the note, we
issued Ms. Salkind a five-year warrant to acquire 2,000,000 shares of NCT common
stock at an exercise price per share of $0.041.

     On January  23,  2003,  we settled  the amount due upon our  default on the
repayment of the January 11, 2002 note  (principal  along with accrued  interest
and default penalty of 10% of the principal in default) by issuing an 8% note in
the principal  amount of $2,747,635 due January 23, 2004. That note had resulted
from rolling over four 1999 notes that were  initially due in June and July 2001
that had been  rolled  over two times  since the  initial  maturity  dates.  The
January 23, 2003 note may be  converted  into common stock of NCT (at $0.04) and
may be exchanged for shares of common stock of any subsidiary of NCT (except Pro
Tech) that makes a public  offering of its common stock (at the public  offering
price  thereof).  In  conjunction  with the issuance of the note,  we issued Ms.
Salkind a five-year warrant to acquire  11,775,579 shares of NCT common stock at
an exercise price per share of $0.04.

     On January 30, 2003, NCT issued Ms.  Salkind an 8% convertible  note in the
principal  amount of $350,000,  for which Ms. Salkind paid NCT $350,000 in cash.
The note matures on January 30, 2004 and may be  converted  into common stock of
NCT (at $0.041) and  exchanged  for shares of common stock of any  subsidiary of
NCT (except Pro Tech) that makes a public  offering of its common  stock (at the
public offering price thereof). In conjunction with the issuance of the note, we
issued Ms. Salkind a five-year warrant to acquire 1,500,000 shares of NCT common
stock at an exercise price per share of $0.041.

     On  February  11,  2003,  we settled the amount due upon our default on the
repayment of the January 25, 2002 note  (principal  along with accrued  interest
and default  penalty of 10% of the  principal  in  default)  and  $450,000  cash
received  from Ms.  Salkind  by issuing  an 8% note in the  principal  amount of
$1,252,592  due February  11, 2004.  The February 11, 2003 note may be converted
into common stock of NCT (at $0.04) and  exchanged for shares of common stock of
any  subsidiary  of NCT  (except  Pro Tech) that makes a public  offering of its
common stock (at the public  offering price  thereof).  In conjunction  with the
issuance  of the note,  we issued  Ms.  Salkind a  five-year  warrant to acquire
5,500,000 shares of NCT common stock at an exercise price per share of $0.04.

     On March 4,  2003,  NCT issued Ms.  Salkind an 8%  convertible  note in the
principal  amount of $450,000.  Ms. Salkind paid NCT cash for the note. The note
matures  on March 4,  2004 and may be  converted  into  common  stock of NCT (at
$0.035)  and  exchanged  for  shares of common  stock of any  subsidiary  of NCT
(except  Pro Tech) that  makes a public  offering  of its  common  stock (at the
public offering price thereof). In conjunction with the issuance of the note, we
issued Ms. Salkind a five-year warrant to acquire 2,000,000 shares of NCT common
stock at an exercise price per share of $0.035.

     On March 13,  2003,  we  settled  the  amount  due upon our  default on the
repayment of the February 27, 2002 note (principal  along with accrued  interest
and default penalty of 10% of the principal in default) by issuing an 8% note in
the  principal  amount of $980,802 due March 13, 2004.  This March 13, 2003 note
may be converted  into common stock of NCT (at $0.031) and  exchanged for shares
of common stock of any  subsidiary  of NCT (except Pro Tech) that makes a public
offering  of its  common  stock  (at the  public  offering  price  thereof).  In
conjunction  with the  issuance of the note,  we issued Ms.  Salkind a five-year
warrant to acquire 4,250,000 shares of NCT common stock at an exercise price per
share of $0.031.

     Also on March 13,  2003,  we settled the amount due upon our default on the
repayment of the March 1, 2002 note (principal  along with accrued  interest and
default  penalty of 10% of the principal in default) and an additional  $450,000
cash received from Ms. Salkind by issuing an 8% note in the principal  amount of
$864,616  due March 13,  2004.  This March 13, 2003 note may be  converted  into
common stock of NCT (at $0.031) and  exchanged for shares of common stock of any
subsidiary  of NCT (except Pro Tech) that makes a public  offering of its common
stock (at the public offering price thereof).  In conjunction  with the issuance
of the note, we issued Ms.

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Salkind a five-year  warrant to acquire  3,750,000 shares of NCT common stock at
an exercise price per share of $0.031.

     On April 2,  2003,  NCT issued Ms.  Salkind an 8%  convertible  note in the
principal  amount of $450,000.  Ms. Salkind paid NCT $450,000 cash for the note.
The note matures on April 2, 2004 and may be converted  into common stock of NCT
(at $0.029) and  exchanged  for shares of common stock of any  subsidiary of NCT
(except  Pro Tech) that  makes a public  offering  of its  common  stock (at the
public offering price thereof). In conjunction with the issuance of the note, we
issued Ms. Salkind a five-year warrant to acquire 2,000,000 shares of NCT common
stock at an exercise price per share of $0.029.

     On April 11, 2003,  NCT issued Ms.  Salkind an 8%  convertible  note in the
principal  amount of $450,000,  for which Ms. Salkind paid NCT $450,000 in cash.
The note matures on April 11, 2004 and may be converted into common stock of NCT
(at $0.031) and  exchanged  for shares of common stock of any  subsidiary of NCT
(except  Pro Tech) that  makes a public  offering  of its  common  stock (at the
public offering price thereof). In conjunction with the issuance of the note, we
issued Ms. Salkind a five-year warrant to acquire 2,000,000 shares of NCT common
stock at an exercise price per share of $0.031.

     On April 21, 2003,  NCT issued Ms.  Salkind an 8%  convertible  note in the
principal  amount of $450,000.  Ms. Salkind paid NCT $450,000 cash for the note.
The note matures on April 21, 2004 and may be converted into common stock of NCT
(at $0.037) and  exchanged  for shares of common stock of any  subsidiary of NCT
(except  Pro Tech) that  makes a public  offering  of its  common  stock (at the
public offering price thereof). In conjunction with the issuance of the note, we
issued Ms. Salkind a five-year warrant to acquire 2,000,000 shares of NCT common
stock at an exercise price per share of $0.037.

     On May 15,  2003,  NCT issued Ms.  Salkind  an 8%  convertible  note in the
principal amount of $450,000,  for which Ms. Salkind paid NCT $450,000 cash. The
note matured on November 15, 2003 and was  convertible  into common stock of NCT
(at $0.046) and exchangeable for shares of common stock of any subsidiary of NCT
(except Pro Tech) that made a public offering of its common stock (at the public
offering price thereof). In conjunction with the issuance of the note, we issued
Ms. Salkind a five-year  warrant to acquire 2,000,000 shares of NCT common stock
at an exercise price per share of $0.046.  As described  below, the May 15, 2003
note was rolled into a new note dated December 15, 2003.

     On May 22, 2003,  we cured the default on the  repayment of the May 2, 2002
note due May 2, 2003.  The  principal  due,  along with  accrued  interest and a
default penalty (10% of the principal in default), was rolled into a new 8% note
for $1,692,463  dated May 22, 2003.  The May 22, 2003 note matured  November 22,
2003 and was convertible  into common stock of NCT (at $0.042) and  exchangeable
for shares of common stock of any  subsidiary of NCT (except Pro Tech) that made
a public offering of its common stock (at the public offering price thereof). In
conjunction  with the issuance of the May 22, 2003 note, we issued Ms. Salkind a
five-year warrant to acquire 7,500,000 shares of NCT common stock at an exercise
price per share of $0.042.  As described below, the May 22, 2003 note was rolled
into a new note dated  December  15,  2003.

     On May 28,  2003,  NCT issued Ms.  Salkind  an 8%  convertible  note in the
principal  amount of $415,000.  Ms. Salkind paid NCT $415,000 cash for the note.
The note matured on November 28, 2003 and was  convertible  into common stock of
NCT (at $0.044) and exchangeable for shares of common stock of any subsidiary of
NCT  (except Pro Tech) that made a public  offering of its common  stock (at the
public offering price thereof). In conjunction with the issuance of the note, we
issued Ms. Salkind a five-year warrant to acquire 1,900,000 shares of NCT common
stock at an exercise price per share of $0.044.  As outlined below,  the May 28,
2003 note was rolled into a new note dated December 15, 2003.

     On June 12, 2003, we cured NCT defaults on repayment to Ms. Salkind of each
of its convertible notes dated May 29, 2002, June 2, 2002 and November 21, 2002,
representing an aggregate principal amount of $2,113,449. The default provisions
in the notes  imposed an  aggregate  penalty of $211,345  (10% of  principal  in
default).  Default  interest  from the dates of default was due on the principal
and accrued  interest in default at the rate of 13%. On June 12, 2003,  we cured
these defaults by canceling the notes and issuing a new 8%  convertible  note to
Ms.  Salkind for  $2,449,812  due December 12, 2003.  Also on June 12, 2003, NCT
issued Ms.  Salkind an 8% convertible  note in the principal  amount of $435,000
due  December  12, 2003,  for which Ms.  Salkind paid NCT

                                       83
<PAGE>


$435,000  in cash.  The notes  were  convertible  into  common  stock of NCT (at
$0.044) and  exchangeable  for shares of common stock of any  subsidiary  of NCT
(except Pro Tech) that made a public offering of its common stock (at the public
offering price  thereof).  In conjunction  with the issuance of these notes,  we
issued Ms.  Salkind  five-year  warrants to acquire an aggregate  of  12,500,000
shares of NCT common stock at an exercise price per share of $0.044. As outlined
below,  the June 12, 2003 notes were rolled into a new note dated  December  31,
2003.

     On June 28,  2003,  NCT issued Ms.  Salkind an 8%  convertible  note in the
principal  amount of $410,000,  for which Ms. Salkind paid NCT $410,000 in cash.
The note matured on December 28, 2003 and was  convertible  into common stock of
NCT (at $0.038) and exchangeable for shares of common stock of any subsidiary of
NCT  (except Pro Tech) that made a public  offering of its common  stock (at the
public offering price thereof). In conjunction with the issuance of the note, we
issued Ms. Salkind a five-year warrant to acquire 2,000,000 shares of NCT common
stock at an exercise price per share of $0.038. As described below, the June 28,
2003 note was rolled into a new note dated December 31, 2003.

     On July 14,  2003,  NCT issued Ms.  Salkind an 8%  convertible  note in the
principal  amount of $410,000.  Ms. Salkind paid NCT $410,000 cash for the note.
The note matures on January 14, 2004 and may be  converted  into common stock of
NCT (at $0.0312) and exchanged  for shares of common stock of any  subsidiary of
NCT (except Pro Tech) that makes a public  offering of its common  stock (at the
public offering price thereof). In conjunction with the issuance of the note, we
issued Ms. Salkind a five-year warrant to acquire 2,000,000 shares of NCT common
stock at an exercise price per share of $0.0312.

     Also on July 14, 2003,  we cured our default under the July 3, 2002 note by
issuing Ms. Salkind an 8% convertible  note in the principal amount of $414,481.
This amount  represents the principal  rolled over  ($350,000),  default penalty
($35,000) and accrued interest  ($29,481).  The note matures on January 14, 2004
and may be converted  into common stock of NCT (at $0.0312) and may be exchanged
for shares of common stock of any subsidiary of NCT (except Pro Tech) that makes
a public offering of its common stock (at the public offering price thereof). In
conjunction with this note issuance,  we issued Ms. Salkind a five-year  warrant
to acquire  2,000,000  shares of NCT common stock at an exercise price per share
of $0.0312.

     On July 28,  2003,  NCT issued Ms.  Salkind an 8%  convertible  note in the
principal  amount of $410,000.  Ms. Salkind paid NCT $410,000 cash for the note.
The note matures on January 28, 2004 and may be  converted  into common stock of
NCT (at  $0.042)  and  may be  exchanged  for  shares  of  common  stock  of any
subsidiary  of NCT (except Pro Tech) that makes a public  offering of its common
stock (at the public offering price thereof).  In conjunction  with the issuance
of the note,  we issued Ms.  Salkind a  five-year  warrant to acquire  2,000,000
shares of NCT common stock at an exercise price per share of $0.042.

     Also on July 28, 2003, we cured our default under the July 15, 2002 note by
issuing Ms. Salkind an 8% convertible  note in the principal amount of $414,750.
This amount  represents the principal  rolled over  ($350,000),  default penalty
($35,000) and accrued interest  ($29,750).  The note matures on January 28, 2004
and may be  converted  into common  stock of NCT (at $0.042) and  exchanged  for
shares of common stock of any  subsidiary  of NCT (except Pro Tech) that makes a
public offering of its common stock (at the public  offering price thereof).  In
conjunction with this note issuance,  we issued Ms. Salkind a five-year  warrant
to acquire  2,000,000  shares of NCT common stock at an exercise price per share
of $0.042.

     On August 7, 2003,  we cured our  default  under the July 23,  2002 note by
issuing Ms. Salkind an 8% convertible  note in the principal amount of $622,529.
This amount  represents the principal  rolled over  ($525,000),  default penalty
($52,500) and accrued interest  ($45,029).  The note matures on February 7, 2004
and may be converted  into common stock of NCT (at  $0.0539) and  exchanged  for
shares of common stock of any  subsidiary  of NCT (except Pro Tech) that makes a
public offering of its common stock (at the public  offering price thereof).  In
conjunction with this note issuance,  we issued Ms. Salkind a five-year  warrant
to acquire  2,750,000  shares of NCT common stock at an exercise price per share
of $0.0539.

     On August 18, 2003, NCT issued Ms.  Salkind an 8%  convertible  note in the
principal  amount of $425,000.  Ms. Salkind paid NCT $425,000 cash for the note.
The note matures on February 18, 2004 and may be converted  into common stock of
NCT (at $0.045) and  exchanged  for shares of common stock of any  subsidiary of
NCT (except Pro Tech) that makes a public  offering of its common  stock (at the
public offering price thereof). In

                                       84
<PAGE>


conjunction  with the  issuance of the note,  we issued Ms.  Salkind a five-year
warrant to acquire 2,000,000 shares of NCT common stock at an exercise price per
share of $0.045.

     On August 28, 2003, NCT issued Ms.  Salkind an 8%  convertible  note in the
principal amount of $375,000,  for which Ms. Salkind paid NCT $375,000 cash. The
note matures on February 28, 2004 and may be converted  into common stock of NCT
(at $0.055) and  exchanged  for shares of common stock of any  subsidiary of NCT
(except  Pro Tech) that  makes a public  offering  of its  common  stock (at the
public offering price thereof). In conjunction with the issuance of the note, we
issued Ms. Salkind a five-year warrant to acquire 2,000,000 shares of NCT common
stock at an exercise price per share of $0.055.

     Also on August 28,  2003,  we cured our  default  under the August 14, 2002
note by issuing Ms.  Salkind an 8% convertible  note in the principal  amount of
$414,885.  This amount represents the principal rolled over ($350,000),  default
penalty ($35,000) and accrued interest  ($29,885).  The note matures on February
28, 2004 and may be converted into common stock of NCT (at $0.055) and exchanged
for shares of common stock of any subsidiary of NCT (except Pro Tech) that makes
a public offering of its common stock (at the public offering price thereof). In
conjunction  therewith,  we issued Ms.  Salkind a  five-year  warrant to acquire
2,000,000 shares of NCT common stock at an exercise price per share of $0.055.

     On September  11, 2003, we cured our default under the August 29, 2002 note
by  issuing  Ms.  Salkind  an 8%  convertible  note in the  principal  amount of
$580,650.  This amount represents the principal rolled over ($490,000),  default
penalty ($49,000) and accrued interest ($41,650).  The note matures on March 11,
2004 and may be converted into common stock of NCT (at $0.050) and exchanged for
shares of common stock of any  subsidiary  of NCT (except Pro Tech) that makes a
public offering of its common stock (at the public  offering price thereof).  In
conjunction with this note, we issued Ms. Salkind a five-year warrant to acquire
2,500,000 shares of NCT common stock at an exercise price per share of $0.050.

     On September 12, 2003, NCT issued Ms. Salkind an 8% convertible note in the
principal  amount of $400,000 due March 12, 2004, for which Ms. Salkind paid NCT
$400,000 in cash. The note was convertible  into common stock of NCT (at $0.050)
and exchangeable for shares of common stock of any subsidiary of NCT (except Pro
Tech) that made a public  offering of its common  stock (at the public  offering
price  thereof).  In  conjunction  with the issuance of the note,  we issued Ms.
Salkind a five-year  warrant to acquire  2,000,000 shares of NCT common stock at
an exercise  price per share of $0.050.  As described  below,  the September 12,
2003 note was consolidated  with other  outstanding  notes into a new note dated
December 31, 2003.

     On October 2, 2003,  we cured our default  under the September 9, 2002 note
by  issuing  Ms.  Salkind  an 8%  convertible  note in the  principal  amount of
$816,096.  This amount represents the principal rolled over ($350,000),  default
penalty  ($35,000),  accrued interest ($31,096) and $400,000 in cash paid by Ms.
Salkind  to NCT.  The note was due on April  4,  2004 and was  convertible  into
common stock of NCT (at $0.043) and  exchangeable  for shares of common stock of
any  subsidiary  of NCT  (except  Pro Tech) that made a public  offering  of its
common stock (at the public  offering price thereof).  In conjunction  with this
note issuance,  we issued Ms. Salkind a five-year  warrant to acquire  4,000,000
shares  of NCT  common  stock at an  exercise  price  per  share of  $0.043.  As
described  below,  the  October  2,  2003  note  was  consolidated   with  other
outstanding notes into a new note dated December 31, 2003.

     On October 14, 2003, we cured our default under the September 30, 2002 note
by  issuing  Ms.  Salkind  an 8%  convertible  note in the  principal  amount of
$4,469,019.  This amount  represents  the  principal  rolled over  ($3,770,098),
default penalty ($377,010) and accrued interest ($321,911).  The note matures on
April 14, 2004 and may be  converted  into  common  stock of NCT (at $0.044) and
exchanged for shares of common stock of any  subsidiary of NCT (except Pro Tech)
that makes a public  offering of its common stock (at the public  offering price
thereof).  In  conjunction  with this note  issuance,  we issued  Ms.  Salkind a
five-year  warrant  to  acquire  19,250,000  shares  of NCT  common  stock at an
exercise price per share of $0.044.

     Also on October 14, 2003, NCT issued Ms. Salkind an 8% convertible  note in
the  principal  amount of $400,000,  for which Ms.  Salkind paid NCT $400,000 in
cash. The note was due on April 14, 2004 and was  convertible  into common stock
of NCT (at $0.044) and exchangeable for shares of common stock of any subsidiary
of NCT (except Pro Tech) that made a public offering of its common stock (at the
public offering price thereof). In conjunction with the issuance of the note, we
issued Ms. Salkind a five-year warrant to acquire 2,000,000 shares of

                                       85
<PAGE>


NCT common stock at an exercise price per share of $0.044.  As described  below,
this October 14, 2003 note was consolidated  with other outstanding notes into a
new note dated December 31, 2003.

     On November 3, 2003, NCT issued Ms.  Salkind an 8% convertible  note in the
principal  amount of $400,000,  for which Ms. Salkind paid NCT $400,000 in cash.
The note was due on May 3, 2004 and was convertible into common stock of NCT (at
$0.044) and  exchangeable  for shares of common stock of any  subsidiary  of NCT
(except Pro Tech) that made a public offering of its common stock (at the public
offering price thereof). In conjunction with the issuance of the note, we issued
Ms. Salkind a five-year  warrant to acquire 2,000,000 shares of NCT common stock
at an exercise price per share of $0.044.  As described  below,  the November 3,
2003 note was consolidated  with other  outstanding  notes into a new note dated
December 31, 2003.

     On November 21, 2003,  we cured our default under the November 7, 2002 note
by  issuing  Ms.  Salkind  an 8%  convertible  note in the  principal  amount of
$474,154  representing  the principal  rolled over,  default penalty (10% of the
principal in default) and accrued interest. The note matures on May 21, 2004 and
may be converted  into common stock of NCT (at $0.041) and  exchanged for shares
of common stock of any  subsidiary  of NCT (except Pro Tech) that makes a public
offering  of its  common  stock  (at the  public  offering  price  thereof).  In
conjunction with this note issuance,  we issued Ms. Salkind a five-year  warrant
to acquire  2,250,000  shares of NCT common stock at an exercise price per share
of $0.041.

     Also on November 21, 2003, NCT issued Ms. Salkind an 8% convertible note in
the  principal  amount of $425,000,  for which Ms.  Salkind paid NCT $425,000 in
cash. The note matures on May 21, 2004 and may be converted into common stock of
NCT (at $0.041) and  exchanged  for shares of common stock of any  subsidiary of
NCT (except Pro Tech) that makes a public  offering of its common  stock (at the
public  offering  price  thereof).  In conjunction  with this note issuance,  we
issued Ms. Salkind a five-year warrant to acquire 2,500,000 shares of NCT common
stock at an exercise price per share of $0.041.

     On November 22, 2003, NCT issued Ms. Salkind an 8% convertible  note in the
principal  amount of $400,000.  Ms. Salkind paid NCT $400,000 cash for the note.
The note matures on May 22, 2004 and may be  converted  into common stock of NCT
(at $0.041) and  exchanged  for shares of common stock of any  subsidiary of NCT
(except  Pro Tech) that  makes a public  offering  of its  common  stock (at the
public offering price thereof). In conjunction with the issuance of the note, we
issued Ms. Salkind a five-year warrant to acquire 2,500,000 shares of NCT common
stock at an exercise price per share of $0.041.

     On December 15, 2003, NCT issued Ms. Salkind an 8% convertible  note in the
principal amount of $400,000,  for which Ms. Salkind paid NCT $400,000 cash. The
note matures on June 15, 2004 and may be converted  into common stock of NCT (at
$0.037)  and  exchanged  for  shares of common  stock of any  subsidiary  of NCT
(except  Pro Tech) that  makes a public  offering  of its  common  stock (at the
public offering price thereof). In conjunction with the issuance of the note, we
issued Ms. Salkind a five-year warrant to acquire 2,500,000 shares of NCT common
stock at an exercise price per share of $0.037.

     Also on December  15,  2003,  we cured our  defaults  under the notes dated
November 20, 2002, December 2, 2002, May 15, 2003, May 22, 2003 and May 28, 2003
by  issuing  Ms.  Salkind  an 8%  convertible  note in the  principal  amount of
$3,828,985.   This  amount  represents  the  aggregate   principal  rolled  over
($3,307,463),  default penalty ($330,746) and accrued interest  ($190,776).  The
note matures on June 15, 2004 and may be converted  into common stock of NCT (at
$0.037)  and  exchanged  for  shares of common  stock of any  subsidiary  of NCT
(except  Pro Tech) that  makes a public  offering  of its  common  stock (at the
public offering price thereof). In conjunction therewith,  we issued Ms. Salkind
a  five-year  warrant to  acquire  16,500,000  shares of NCT common  stock at an
exercise price per share of $0.037.

     On December 31, 2003, NCT issued Ms. Salkind an 8% convertible  note in the
principal  amount of $785,000,  for which Ms. Salkind paid NCT $785,000 in cash.
The note matures on June 30, 2004 and may be converted  into common stock of NCT
(at $0.040) and  exchanged  for shares of common stock of any  subsidiary of NCT
(except  Pro Tech) that  makes a public  offering  of its  common  stock (at the
public  offering  price  thereof).  In conjunction  with this note issuance,  we
issued Ms. Salkind a five-year warrant to acquire 5,500,000 shares of NCT common
stock at an exercise price per share of $0.040.

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<PAGE>


     Also on  December  31,  2003,  we cured our  default  under the notes dated
December 16, 2002, December 26, 2002, December 30, 2002, June 12, 2003, June 12,
2003 and June 28,  2003 by issuing  Ms.  Salkind an 8%  convertible  note in the
principal amount of $7,479,385  representing the aggregate principal rolled over
($6,426,299),  default  penalty  (10% of the  principal  in default) and accrued
interest.  The note  matures on June 30, 2004 and may be  converted  into common
stock of NCT (at  $0.040)  and  exchanged  for  shares  of  common  stock of any
subsidiary  of NCT (except Pro Tech) that makes a public  offering of its common
stock (at the public  offering price  thereof).  In  conjunction  with this note
issuance, we issued Ms. Salkind a five-year warrant to acquire 32,250,000 shares
of NCT common stock at an exercise price per share of $0.040.

     Also on December 31, 2003 at the request of Ms.  Salkind,  we  consolidated
four notes in advance of their  maturities  into one 8% convertible  note in the
principal  amount of  $3,050,000.  Consideration  for this note consisted of the
surrender of notes dated September 12, 2003,  October 2, 2003,  October 14, 2003
and  November 3, 2003 in aggregate  principal  amount of  $2,016,096  along with
accrued  interest  through  December  31,  2003  and  $996,238  additional  note
principal in  consideration  of willingness  for continued  funding  provided by
Carole Salkind. The note is due on demand and may be converted into common stock
of NCT (at $0.040) and exchanged for shares of common stock of any subsidiary of
NCT (except Pro Tech) that makes a public  offering of its common  stock (at the
public offering price thereof).

Consulting Agreements with Affiliates of Carole Salkind

     From time to time,  NCT has entered  into  consulting  agreements  with the
following entities that are affiliates of Carole Salkind: Acme Associates, Inc.;
Leben Care,  Inc.; Stop Noise,  Inc.  (formerly known as  Stopnoise.com,  Inc.);
Motorworld,   Incorporated;   Inframe,  Inc.;  Avant  Interactive,  Inc.;  Turbo
Networks, Inc. and Maple Industries, Inc. Carole Salkind is the sole shareholder
of Acme Associates, Motorworld, Inframe, Avant, Turbo Networks and Maple. Carole
Salkind's  son  Steven  Salkind is the sole  shareholder  of Leben Care and Stop
Noise.  As such, all of the options granted to the consultants are attributed to
Ms. Salkind.  We believe that the consulting  agreements made with affiliates of
Ms. Salkind are as fair to us as could have been made with unaffiliated parties.

     The consultants  provide such on-going  consulting services and advice in a
number of areas pertaining to NCT's business affairs as NCT and its subsidiaries
may from time to time reasonably  request,  including assisting NCT in corporate
development, evaluating merger and acquisition opportunities,  refining business
plans,  evaluating  marketing and product development plans,  strategy planning,
and  recruiting.  The actual  consulting  services  under these  agreements  are
performed  primarily  by Morton  Salkind,  spouse of Carole  Salkind,  acting on
behalf of the  consultants  (by John  Harris on  behalf of Stop  Noise).  Morton
Salkind is 71 years of age.  Mr.  Salkind  served as a member of NCT's  Board of
Directors  from his  appointment  in July 1997 until his  resignation in January
1999. He also served as a director of NCT Audio  Products,  Inc. from  September
1997 to January  1999.  Morton  Salkind  disclaims  beneficial  ownership of the
consultant option shares attributed to Carole Salkind.

     The business purpose for having the consulting services be provided through
corporations  rather than through  direct  contracts  with  Messrs.  Salkind and
Harris is that it is only with the liability and other  protections and benefits
of  the  corporate  form  that  the  consulting   services  were  offered.   The
arrangements have been with multiple  corporations  rather than one because that
is the only  manner in which  the  services  were  offered  to NCT and,  in some
instances,  because of the  differing  areas of  operation  as among the various
corporations.  Although  there is some overlap in the  consulting  periods,  the
consulting  services  are  different  in each case and are based on the evolving
needs and  objectives  of NCT and its  subsidiaries  and the need to draw on the
respective  areas  of  specialization  of the  consulting  entities  even  where
existing  agreements  have not yet lapsed.  To the date hereof,  the  consulting
services  rendered  have included the  following:  (1) advising on the strategic
direction  of  NCT  and  its  subsidiaries;   (2)  assisting  NCT  in  corporate
development; (3) evaluating merger, acquisition and joint venture opportunities;
(4) developing and refining  business plans; (5) developing  business and growth
strategies;  (6) advising on  recruiting;  (7)  discussing  product  development
issues and expansion;  (8) serving as a marketing  liaison and facilitator;  (9)
evaluating   marketing   plans;   and  (10)  assisting  with  various   contract
negotiations.  As noted above, primarily Morton Salkind acting on behalf of each
of the entities performs the consulting services. Morton Salkind is a successful
businessman  who has vast  experience in various  industries.  The basis for the
expertise  rendered  primarily by Morton Salkind  includes,  among other things,
education and  experience as an  entrepreneur,  ownership of various  companies,
seasoning as a  businessman  who has served as chief  executive  officer of many
business   ventures,   active

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<PAGE>


oversight of the  performance of companies,  determination  of the strategic and
tactical  direction  of  companies  and  an  understanding  of  our  proprietary
technologies and the marketplace. The consulting entities have material business
purposes other than providing consulting services to NCT, as follows:

<TABLE>
<CAPTION>

                                                          Material Business Purpose Other Than
            Consultant                                    Providing Consulting Services to NCT
    ---------------------------            --------------------------------------------------------------------
<S>                                       <C>
    Leben Care, Inc.                       Building age- and health-restricted residences
    Stop Noise, Inc.                       Applying active noise cancellation to roadworks and large outdoor
                                           public facilities
    Acme Associates, Inc.                  Packaging and delivering interactive electronic products
    Motorworld, Incorporated               Producing and distributing electronic games for theme parks
    Inframe, Inc.                          Developing advanced interactive systems for games
    Avant Interactive, Inc.                Developing interactive user interfaces for computers and
                                           electronic devices
    Turbo Networks, Inc.                   Selling electronic data network products to government and large
                                           business offices
    Maple Industries, Inc.                 Real estate development

</TABLE>

     As compensation for these consulting services,  NCT has often agreed to pay
cash fees and grant stock options to the consulting  entities and provide health
benefits  to Mr.  Salkind.  The  compensation  under the  consulting  agreements
results from negotiations  between the parties in anticipation of the quality of
services expected. For consulting agreements with a cash fee component, the cash
fee is normally a monthly retainer to be paid at the end of the initial one-year
consulting agreement term. The consulting agreements are automatically renewable
for a period of one year  provided the  agreements  are not  cancelled by either
party after the initial  period of the first year. To date, NCT has not made any
of the cash payments for these consulting fees.  Health benefits,  consisting of
health  insurance  premiums,  paid on behalf of Mr.  Salkind were  approximately
$1,300, $1,600 and $2,200 in 2001, 2002 and 2003, respectively. In addition, NCT
has  often  granted  five-year  stock  options  that  vest  immediately  to  the
consultant at the then current  market price of the NCT common stock.  There has
been no cash or non-cash consulting  compensation paid by NCT directly to Carole
Salkind  or  Morton  Salkind  or to any  members  of  their  families.  We incur
consulting  fee  expense  from our  accrual of cash fees and from the fair value
charges of options issued. NCT has incurred consulting  compensation to multiple
consulting  entities,  but the services provided by these entities have not been
contemporaneously  received services.  Instead, the services have been different
in the case of each entity,  based on the entity's area of operations and on the
quantity  of time  spent on,  and value of the  advice  provided  to, NCT by the
representative of the entity,  relative to the quantity of time and value of the
advice  contemplated  to be spent and  provided by the entity in its  consulting
agreement.  The consulting  engagements and compensation of entities represented
by Morton Salkind (Morton Salkind is not engaged or compensated directly) is not
dependent upon the ongoing funding provided by Carole Salkind,  Morton Salkind's
wife.

     At December 31, 2003, cash  compensation  under consulting  agreements with
affiliates of Carole Salkind is as follows:


                                  Initial Term of
          Affiliate                  Agreement                 Cash Fee
  -------------------------    ---------------------  --------------------------
  Leben Care, Inc.              01/25/02 - 01/25/03    $2,500 per month retainer
                                (Replaced agreement           due 01/25/03
                                  dated 01/19/99)
  Stop Noise, Inc.              07/01/01 - 07/01/02              None
  Acme Associates, Inc.         09/30/02 - 09/30/03    $2,500 per month retainer
                                                              due 09/30/03
  Motorworld, Incorporated      12/26/02 - 12/26/03    $2,500 per month retainer
                                                              due 12/26/03
  Inframe, Inc.                 01/23/03 - 01/23/04    $2,500 per month retainer
                                                              due 01/23/04
  Avant Interactive, Inc.       02/11/03 - 02/11/04    $2,500 per month retainer
                                                              due 02/11/04

                                       88
<PAGE>

                                  Initial Term of
          Affiliate                  Agreement                 Cash Fee
  -------------------------    ---------------------  --------------------------
  Turbo Networks, Inc.          04/17/03 - 04/17/04    $2,500 per month retainer
                                                              due 04/17/04
  Maple Industries, Inc.        06/12/03 - 06/12/04    $2,500 per month retainer
                                                              due 06/12/04

     As of  December  31,  2003,  options  (all of which are vested) to purchase
shares of NCT common stock granted to affiliates of Ms. Salkind are as follows:



<TABLE>
<CAPTION>

                                Grant        Expiration       Exercise             Shares
      Optionee                   Date           Date           Price               Granted
  ------------------------    ----------    ------------    ------------        --------------
<S>                            <C>   <C>      <C>   <C>      <C>                   <C>
  Leben Care, Inc.             01/08/02       01/24/07       $  0.0790             1,500,000
  Leben Care, Inc.             01/25/02       05/22/06          0.1300               600,000
  Leben Care, Inc.             01/25/02       05/22/06          0.1300               300,000
  Leben Care, Inc.             01/25/02       05/22/06          0.1300               450,000
  Leben Care, Inc.             01/25/02       05/22/06          0.1300               500,000
  Leben Care, Inc.             01/25/02       01/24/07          0.0900             5,000,000
                                                                                --------------
      Subtotal                                                                     8,350,000
                                                                                --------------

  Stop Noise, Inc.             02/27/02       06/30/06          0.1200               625,000
  Stop Noise, Inc.             02/27/02       10/08/06          0.0925             1,500,000
  Stop Noise, Inc.             02/27/02       02/26/07          0.0790             1,250,000
                                                                                --------------
      Subtotal                                                                     3,375,000
                                                                                --------------

  Acme Associates, Inc.        09/30/02       09/30/07          0.0700            50,000,000
  Acme Associates, Inc.        07/14/03       07/14/08          0.0312            25,000,000
  Acme Associates, Inc.        09/11/03       09/11/08          0.0520             7,500,000
  Acme Associates, Inc.        10/03/03       10/03/08          0.0430             5,750,000
  Acme Associates, Inc.        10/14/03       10/14/08          0.0440            44,000,000
  Acme Associates, Inc.        11/03/03       11/03/08          0.0450             2,000,000
  Acme Associates, Inc.        11/21/03       11/21/08          0.0410             6,500,000
  Acme Associates, Inc.        12/17/03       12/17/08          0.0370            99,750,000
                                                                                --------------
      Subtotal                                                                   240,500,000
                                                                                --------------

                                                                                --------------
  Motorworld, Incorporated     12/26/03       12/26/07          0.0420            23,000,000
                                                                                --------------

                                                                                --------------
  Inframe, Inc.                01/23/03       01/23/08          0.0420            23,000,000
                                                                                --------------

  Avant Interactive, Inc.      02/11/03       02/11/08          0.0400             7,000,000
  Avant Interactive, Inc.      03/12/03       03/12/08          0.0310            13,500,000
  Avant Interactive, Inc.      04/03/03       04/03/08          0.0290             2,000,000
  Avant Interactive, Inc.      04/11/03       04/11/08          0.0310             2,000,000
                                                                                --------------
      Subtotal                                                                    24,500,000
                                                                                --------------

  Turbo Networks, Inc.         04/17/03       04/17/08          0.0370             2,000,000
  Turbo Networks, Inc.         05/22/03       05/22/08          0.0420            18,550,000
  Turbo Networks, Inc.         06/28/03       06/28/08          0.0400             2,000,000
                                                                                --------------
      Subtotal                                                                    22,550,000
                                                                                --------------

                                                                                --------------
  Maple Industries, Inc.       06/12/03       06/12/08          0.0440            23,000,000
                                                                                --------------

      Total                                                                      368,275,000
                                                                                ==============
</TABLE>

                                       89
<PAGE>


SpringerRun, Inc.

     On July 2, 2003, NCT entered into a consulting  agreement with SpringerRun,
Inc.,  under  which  SpringerRun  provides  consulting  services  to NCT and its
subsidiaries,  consisting  primarily  of  raising  capital  and debt  financing,
identifying  potential  joint  ventures  and other  strategic  transactions  and
finding distributors, licensees and end users for products and technologies. The
term of the SpringerRun agreement is one year, with possible renewals. Under the
agreement, NCT will pay SpringerRun the following: for capital raised, 6% of the
amount  thereof plus 5% of the amount thereof in warrants to purchase NCT stock;
for debt  financing  raised,  1% of the amount  thereof;  for joint  ventures or
distribution  license  or end user  agreements  entered  into,  7% of NCT's  net
revenues therefrom for three years, 5% thereafter.  In lieu of cash, some of the
compensation  described above may, at SpringerRun's  request and if agreed to by
NCT, be given as stock of NCT or of a joint  venture  entered  into by NCT.  The
compensation  formula and other  material terms and conditions in this agreement
are  comparable  to  those  used  by  NCT  with  similarly  situated,  unrelated
consultants.  To date, NCT has not paid SpringerRun any  compensation  under the
agreement,  and none is owed to it.  John  McCloy II, a Director of NCT, is also
Chairman  of  the  Board  of  Directors,  Chief  Executive  Officer  and  a  40%
shareholder of  SpringerRun.  John McCloy II's son John McCloy III is President,
Treasurer,  Secretary,  a Director and a 25%  shareholder of  SpringerRun.  John
McCloy II's son Rush McCloy is a 25% shareholder of SpringerRun.

Spyder Technologies Group, LLC

     On October 24, 2002, Artera Group,  Inc. entered into a master  distributor
agreement with Spyder Technologies Group, LLC under which Spyder distributed the
Artera Turbo  service in Puerto Rico,  the U.S.  Virgin  Islands and a number of
countries  in the  Caribbean  region.  The  term of the  agreement  was  through
February 2008.  Compensation consisted of a commission to Spyder of 50% of gross
revenues on sales originated by local  distributors  that were brought to Artera
by Spyder,  out of which those  distributors were to be paid 30% to 40% of gross
revenues as a commission  from Spyder.  With some  exceptions in Puerto Rico and
the U.S. Virgin Islands,  Spyder's distribution rights were exclusive,  although
Artera had the right to  terminate  the  exclusivity  in  February  of each year
beginning 2004 if specified  revenue  thresholds were not met. The  compensation
structure,  commission  rate and  other  material  terms of the  agreement  were
comparable to those used by Artera with  similarly  situated,  unrelated  master
distributors  at the time. On October 1, 2003,  Artera and Spyder entered into a
new,  superseding master distributor  agreement for Puerto Rico, the U.S. Virgin
Islands and these same countries in the Caribbean. The new agreement changed the
compensation  structure  from one of  commissions  from  Artera  to  Spyder  for
distributors  brought by Spyder to Artera,  to one of  royalties  from Spyder to
Artera on sales to distributors by Spyder. The royalties are calculated on a per
unit  basis and vary  based  upon the size and  category  of the end user of the
product  and the  support  services  provided  by  Artera.  The  term of the new
agreement is through  February 2008. The compensation  structure,  royalty rates
and other material terms of the agreement are comparable to those used by Artera
with similarly situated, unrelated master distributors.

     On October 24, 2002,  Artera  entered into a master  distributor  agreement
with Spyder  under which  Spyder  distributed  the Artera  Turbo  service in the
United States.  The term of the agreement was through  October 2003, with either
party  having  the  right  to  terminate   upon  30  days'  notice   thereafter.
Compensation  consisted  of a commission  to Spyder of 50% of gross  revenues on
sales originated by U.S. distributors that were brought to Artera by Spyder, out
of which those  distributors  were to be paid 30% to 40% of gross  revenues as a
commission  from  Spyder.   Spyder's   distribution  rights  in  the  U.S.  were
non-exclusive.  The compensation  structure,  commission rate and other material
terms of the agreement  were  comparable to those used by Artera with  similarly
situated,  unrelated  master  distributors  at the time.  On  September 1, 2003,
Artera and Spyder entered into a new,  superseding master distributor  agreement
for the U.S., with expansion to cover Canada, South America and Central America.
The new agreement  changed the  compensation  structure  from one of commissions
from Artera to Spyder for  distributors  brought by Spyder to Artera,  to one of
royalties  from  Spyder  to  Artera  on sales to  distributors  by  Spyder.  The
royalties  are  calculated  on a per unit basis and vary based upon the size and
category of the end user of the product  and the  support  services  provided by
Artera. The term of the new agreement is five years. The compensation structure,
royalty rates and other  material terms of the agreement are comparable to those
used by Artera with similarly situated, unrelated master distributors.

     On September 1, 2003, Artera entered into a reseller  agreement with Spyder
under  which  Spyder  resells  the Artera  Turbo  service in the United  States,
Canada,  South  America  and Central  America.  Spyder is to pay Artera per

                                       90
<PAGE>


unit royalties that vary based upon the size and category of the end user of the
product.  The term of the  agreement is one year,  with possible  renewals.  The
compensation structure,  royalty rates and other material terms of the agreement
are  comparable  to those  used by Artera  with  similarly  situated,  unrelated
resellers.

     Under all of the Spyder agreements,  Spyder earned aggregate commissions of
$143 and $3,017 for the years ended  December  31, 2002 and 2003,  respectively,
and to date, Spyder has not paid Artera any royalties.

     In addition,  from time to time on an "as needed"  basis,  Spyder  provides
technical  consulting  services to Artera  pertaining to Artera  Turbo.  For the
years  ended  December  31, 2002 and 2003,  Spyder  earned  aggregate  technical
consulting fees of $12,330 and $86,840, respectively.

     Jonathan  Parrella,  the son of NCT's Chairman and Chief Executive Officer,
is  President  of  and  holds  a  45%  ownership  interest  in  Spyder.  Bulldog
Communications,   Inc.  holds  a  25%  ownership  interest  in  Spyder.  Bulldog
Communications,  Inc. is owned 20% by each of Michael Parrella,  Karen Parrella,
Michael  Parrella,  Jr., Jonathan Parrella and Daniel Parrella (the Chairman and
Chief  Executive  Officer of NCT, and,  respectively,  his wife and three sons).
Michael  Parrella,  Jr. is an officer of Artera Group.  Michael Parrella is also
the  Chairman  of the Board,  and Karen  Parrella is the  President,  of Bulldog
Communications.

     As of  December  31,  2003,  Jonathan  Parrella  held  options  to  acquire
1,000,000  shares of NCT common  stock at an exercise  price of $0.13 per share.
These options were transferred to him by his father in November 2002.

Indebtedness of Management

     On various  dates  commencing  in 2000,  Jonathan M. Charry,  Ph.D.,  NCT's
Senior Vice President, Corporate Development, entered into short-term promissory
notes to borrow funds from NCT in  anticipation  of cash overrides due him under
his  incentive   compensation   arrangement  described  above  in  "Compensation
Arrangements  with Certain  Officers and Directors."  Effective May 1, 2002, the
borrowed funds had not been repaid but were  consolidated  with interest into an
outstanding  promissory  note due January 15,  2003 for an  aggregate  principal
amount  owed to NCT of  $107,960.  The  due  date of  this  note  represents  an
extension from May 1, 2002 which itself was a product of prior extensions.  This
note went into default on January 15, 2003. NCT is seeking to collect on the May
1, 2002 note. However, NCT believes that incentive  compensation that is or will
be due Dr.  Charry may offset the amount owed NCT. The note bore  interest at an
annual rate of 6.0% through its due date of January 15, 2003, and bears interest
at prime plus 5% thereafter.

Indemnification of Management

     On or about  December 5, 2002, NCT agreed to indemnify  three  individuals,
NCT  directors  and  officers,  who had each also served as a Director of Artera
Group International Limited, a U.K.-based subsidiary, prior to its entering into
liquidation  proceedings (refer to Note 19 - notes to the consolidated financial
statements)  for any  liabilities  that may arise against them from claims under
Section  214 of  the  U.K.  Insolvency  Act  and  to  provide  them  with  legal
representation with respect to the claims. For additional information about this
matter, see the section "Legal Proceedings."

     On or about January 27, 2003,  NCT agreed to indemnify  NCT's  Chairman and
Chief  Executive  Officer for any  liabilities  that may arise  against him in a
lawsuit brought in Connecticut against him, NCT and NCT's subsidiary Distributed
Media  Corporation  by Production  Resource  Group (PRG) and to provide him with
legal representation in the suit. For additional  information about this matter,
see the section "Legal Proceedings."

     On or about January 14, 2004, NCT agreed to indemnify five individuals, NCT
directors and  officers,  for any  liabilities  that may arise against them in a
lawsuit brought in Delaware against them, NCT and NCT's  subsidiary  Distributed
Media  Corporation by PRG and to provide them with legal  representation  in the
suit.  This Delaware suit is separate from but related to the  Connecticut  suit
brought by PRG described  above. For additional  information  about this matter,
see the section "Legal Proceedings."

                                       91
<PAGE>


Management Guarantee of Indebtedness

     Michael  Parrella,  NCT's  Chairman  of the  Board of  Directors  and Chief
Executive   Officer,   personally   guaranteed   the  repayment  of  a  $400,000
bridge-financing  note  issued  by NCT to Alpha  Capital  Aktiengesellschaft  on
December 27, 2001.  The  guarantee  was  extinguished  in  conjunction  with new
financing  completed on January 10, 2002  ($550,000  convertible  note issued to
Alpha Capital).

Crammer Road LLC, former owner of DMC New York, Inc.

     In June 2002,  we completed our  acquisition  of 12,000 shares (75%) of DMC
New York,  Inc.  from  Crammer  Road LLC,  a Cayman  Islands  limited  liability
company.  This was pursuant to a June 21, 2002 exchange  agreement  with Crammer
Road to acquire the  remaining  12,000  shares of DMC NY in  exchange  for 1,800
shares  of our  series H  convertible  preferred  stock  and  $120,000  in cash.
Pursuant  to an  April  12,  2001  exchange  agreement  and an  April  12,  2001
securities  purchase  agreement,  NCT acquired a 25% interest in DMC NY for $4.0
million from Crammer Road,  then the sole  stockholder of DMC NY. DMC NY was the
owner of 16 licenses previously purchased from our subsidiary, Distributed Media
Corporation. The acquisitions resulted in charges to our consolidated statements
of  operations  because  DMC NY has  not  commenced  operations.  DMC NY has not
recorded any revenue,  and apart from its New York license rights,  has no other
assets or operations.  Our 2001 financial  statements include an aggregate $18.0
million  charge,  classified  as  "write  downs of  investment  and  repurchased
licenses" in our  consolidated  statement of operations,  for the acquisition of
4,000 shares of DMC NY and our obligation to acquire the remaining 12,000 shares
of DMC NY. Our 2002 financial  statements  include an additional  charge of $9.2
million  for this  acquisition  classified  as "write  downs of  investment  and
repurchased licenses" in our consolidated statement of operations.

     The  consideration  we paid to  Crammer  Road in 2001 for this  acquisition
consisted of a $1.0  million  convertible  note due December 31, 2001  (accruing
interest  at 2% per  month),  $1.0  million  in  cash  (an  escrow  account  was
established  with Crammer  Road's  counsel as a matter of convenience in funding
our purchase of 1,000 shares of DMC NY common  stock;  we received from Vidikron
in April 2001 $1 million cash paid into that escrow account on our behalf, which
we used to acquire  the 1,000  shares of DMC NY) and $2.0  million of our common
stock  (13,333,333  million  shares  subject to increase  based upon a repricing
provision).  Because we intended to acquire the remaining 75% interest in DMC NY
pursuant to an April 12, 2001 private equity credit agreement with Crammer Road,
we accrued $14.0 million in 2001, our cost of repurchasing  the remaining 12,000
shares of DMC NY under that the 2001 private equity credit  agreement.  However,
as a result of our completion of the purchase of the remaining  12,000 shares of
DMC NY pursuant to the June 2002  exchange  agreement,  our  acquisition  of all
16,000 shares of DMC NY totaled an aggregate of approximately  $27.2 million ($1
million  cash,  shares of our common  stock  valued at $2 million,  a $1 million
note,  $18  million in value of our series H preferred  stock and  approximately
$5.2 million  representing  the additional  value  resulting from the conversion
rate of 75% of the fair market value, as defined, of NCT common stock into which
the series H preferred  stock is  convertible).  Those  16,000  shares of DMC NY
(100% of DMC NY)  represented  the 16 New York area DMC licenses we had sold for
$4.0  million in cash and the exchange of 9,600  shares of our  preferred  stock
($9.6 million  stated value that investors had acquired for  approximately  $5.4
million in cash).  The  purchase  price was  arrived at in various  negotiations
between NCT and Crammer Road.  NCT believed the purchase  price was a reasonable
one because  the sale  resulted  in NCT's  control of the number one  designated
market area.  NCT  believed  that the  repurchase  of licenses  previously  sold
preserved their value because NCT retrieved the licenses from licensees who were
not exploiting them (by not securing  locations to house Sight & Sound units nor
securing  advertisers to air or display ads on the Sight & Sound units) and made
the licenses  available for sale again in the future at prices that would better
reflect anticipated  operational  revenue. We did not obtain a valuation from an
outside firm  regarding  the  acquisition  of DMC NY. While we are not currently
marketing the licenses,  we believe we will be able to resell the licenses for a
value in excess of $9.4 million.  We believe that the licenses  should command a
high price once the  advertising  industry has recovered and companies  increase
their  spending  on  advertising.  Our  expectation  is based  upon our  current
installations  proving the  viability  of the system and the ability to generate
revenue.  We believe that our system has unique  features that make it difficult
to replicate.  In addition,  we believe that the  establishment of an authorized
library  of music in  various  genres and a means for  monitoring  the  required
royalty  payments is a barrier to entry to  potential  competitors.  Please note
that we  increased  our Sight & Sound  installations  in health care  facilities
during 2003 at an increasing  rate compared to 2002. We had eight  installations
at December  31, 2002  compared to 20 as of December  31,  2003,  an increase of
150%. To date in 2004, we have already  increased  our

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<PAGE>


installations  in health  care  facilities  by more than  150%  compared  to the
installed  base  as of  December  31,  2003.  Further,  we  have  increased  our
advertising contracts, only some of which has been reflected in our revenue.

     Crammer Road obtained the 16 DMC licenses  from other  investors in private
transactions. In 2000, five investors in our series E and F preferred stock (see
below)  contributed  their 16 New York area DMC  licenses  to Crammer  Road in a
private  transaction,  in exchange for membership interests in Crammer Road. The
investors  holding the licenses  advised NCT and DMC of plans to contribute  the
licenses to Crammer Road. NCT and DMC did not object to those contributions. The
investors who initially owned the 16 DMC licenses had paid for them in 1999 with
$4 million in cash and by  surrendering  to NCT $9.6  million in stated value of
NCT series E and F preferred  stock (9,600  shares at the stated value of $1,000
per share) for which they had paid an aggregate of  approximately  $5.4 million;
thus their cash basis in the 16 DMC licenses was approximately $9.4 million. The
holders of our series E and F preferred  stock were the original  purchasers  of
the DMC licenses.  These  investors were not under common control at the time of
the 1999  transaction.  We issued 12,454 shares of our series E preferred  stock
from December 30, 1998 through April 13, 1999 for approximately  $4.0 million in
cash, 1,700 shares of our series C preferred stock and 2.1 million shares of our
common stock (approximately $617 per share). On August 10, 1999, we issued 8,500
shares of our series F preferred  stock for  approximately  $1.0 million in cash
(approximately  $118 per share).  The  relationship  of the stated  value of the
series F preferred stock to the consideration  received therefore reflected what
NCT was able to command for the  investment at the time.  The series F preferred
stock  subscription  agreement  provided,  at the company's  election,  that the
investors  would invest up to an additional $4.0 million in cash or in kind at a
future date. On September 10, 1999, these preferred stock investors entered into
a subscription agreement to acquire four DMC licenses for $4 million. Due to the
extreme  discount  of the  preferred  stock  stated  value to the  consideration
received, for accounting purposes, NCT treated the $4 million cash attributed to
the four DMC  licenses as  additional  consideration  for its series F preferred
stock as the series F  subscription  agreement  provided  that the investors may
invest up to $4.0  million at a future  date and there was a  proximity  in time
between  the two  distinct  transactions,  August  10,  1999  for the  series  F
preferred  stock  placement  and  September  10,  1999 for the $4.0  million DMC
license  subscription.  The  purchasers  of our series E and F  preferred  stock
(except one investor) were the same investors who contributed the 16 licenses to
Crammer  Road.  The capital  contribution  of  licenses to Crammer  Road was for
purposes  of  administrative  convenience  to  provide  for  such  contributors'
undertakings  in respect of their  investment in Crammer Road. In turn,  Crammer
Road's  purpose for  contributing  the 16 licenses to DMC NY was to provide it a
perceived  form of liquidity,  possibly  through an initial  public  offering or
through  the  acquisition  of DMC NY by  Distributed  Media  Corporation  or NCT
(possibly  using shares of NCT common stock issued under the 2000 private equity
credit  agreement).  The licensees  apparently lacked the ability or interest to
initiate services under the license agreements. More than nine months had lapsed
since the execution of the license agreements.  The licensees had not identified
any  locations  to  house  the  Sight & Sound  units  nor had they  secured  any
advertising  contracts.  Thus, by September 2000, we realized that the licensees
were unable to properly exploit the licenses in their  respective  market areas.
Concurrently,  due to a lack of capital (DMC  expected  some capital  would have
been  provided by  licensees'  payment of fees for  services  rendered by DMC on
their behalf and at their request),  DMC was unable to execute its business plan
to provide, install and operate its digital broadcast system at locations in the
New York area.  DMC intended to secure its own (national  account)  locations to
house the Sight & Sound units and obtain its own (national account) advertisers.
A large number of Sight & Sound  locations  were needed to attract  advertisers.
Because neither DMC nor the licensees had been successful in securing  locations
to house the Sight & Sound units or in obtaining advertising contracts,  Crammer
Road did not perceive  that it had an  opportunity  to exploit the licenses in a
viable business venture without a large infusion of cash. On September 27, 2000,
DMC NY, pursuant to a license  exchange  agreement,  issued 16,000 shares of its
common stock in exchange for 16 licenses held by Crammer Road.  Certain officers
and  directors of NCT  comprise  100% of the Board of Directors of DMC New York,
specifically,  Michael  Parrella  (NCT's  Chairman of the Board of Directors and
Chief Executive Officer), Irene Lebovics (NCT's President and a director of NCT)
and Cy Hammond  (NCT's  Senior Vice  President,  Chief  Financial  Officer and a
director of NCT).

     The entities that contributed  licenses to Crammer Road and the controlling
persons thereof were as follows:  Sovereign  Partners,  LP - Mr. Stephen Hicks /
Mr.  Daniel  Pickett;  Dominion  Capital Fund,  Ltd. - Mr. David Sims;  Canadian
Advantage Limited Partnership - Mr. Mark Valentine;  Atlantis Capital Fund, Ltd.
- Mr. David Sims. Mr. David Sims of Navigator  Management Limited has voting and
dispositive  control of NCT shares on behalf of Crammer Road LLC. Further,  each
of the following  entities are investors in Crammer Road LLC and were previously
investors in NCT:  Advantage  Bermuda Fund,  Ltd.;  Atlantis Capital Fund, Ltd.;
Canadian  Advantage  Limited  Partnership;  Dominion  Capital  Fund,  Ltd.;  and
Sovereign Partners,  LP. In addition, an affiliate of the prior

                                       93
<PAGE>


investors  in NCT has  advisory  roles with  respect to two of the  investors in
Crammer Road LLC: VMH Management Ltd. (an affiliate of Thomson  Kernaghan & Co.,
Ltd.) is the advisor to Advantage  Bermuda  Fund,  Ltd.  and Canadian  Advantage
Limited  Partnership (these latter two funds have merged into Canadian Advantage
Limited  Partnership  II).  Southridge  Capital  Management  is a sub advisor to
Dominion Capital Fund, Ltd. and serves as a consultant to Atlantis Capital Fund,
Ltd. and Canadian Advantage Limited Partnership II.

     As noted above, under the 2001 private equity credit agreement with Crammer
Road,  we intended to put shares of our common stock to Crammer Road in exchange
for a combination  of cash and the  remaining  shares of DMC NY common stock but
upon further  negotiations,  reacquired those 12,000 shares,  in connection with
the 2002 exchange  agreement,  in exchange for our series H preferred stock. The
June 2002 exchange  agreement  did not  supersede the April 2001 private  equity
credit agreement although these agreements contemplated the same transaction. On
July 25,  2002,  we entered  into a new private  equity  credit  agreement  with
Crammer  Road (this  credit  agreement  did not  replace  the April 2001  credit
agreement  because the parties had unresolved issues  outstanding,  as explained
below) that  provides  that shares of up to $50 million (the maximum  commitment
amount) of our common stock may be sold to Crammer Road  pursuant to put notices
delivered  by the  company  to  Crammer  Road.  The July 2002  credit  agreement
requires us to put at least $5 million  (the minimum  commitment  amount) of our
common  stock,  in exchange for cash,  at a discount to market of 10%.  Upon our
puts of shares of our common stock under this equity  credit line,  the existing
holders of our common stock will suffer immediate  dilution of their shares.  In
conjunction  with the execution of the July 2002 credit  agreement,  we issued a
five-year  warrant  to Crammer  Road for  1,000,000  shares of our common  stock
exercisable  at $0.07375  per share.  We are  obligated  to register  for resale
shares of our common stock for the warrant and the July 2002 credit agreement in
an amount no less than 112% of the maximum  commitment amount.  Moreover,  if we
fail to issue shares for the minimum  commitment  amount  during the  commitment
period (which terminates 24 months after  effectiveness of a resale registration
statement  relating to the shares or earlier as described in the agreement),  we
must  pay  Crammer  Road an  amount  equal  to the  product  of (i) the  minimum
commitment  amount,  less the  aggregate  shares of our  common  stock  actually
delivered to Crammer Road under the equity credit line and (ii) the 10% discount
(a maximum  "penalty" of $500,000  calculated as $5.0 million  times 10%).  This
penalty provision was as negotiated and agreed to by the parties.

     Crammer Road did not immediately release NCT from its obligations under the
April 2001 private equity credit agreement and disagreed with NCT about what was
required  of NCT  under a penalty  provision  in the April  2001  agreement.  In
September 2002, Crammer Road brought an action against us for claims arising out
of the April 12, 2001 private equity credit  agreement,  a  registration  rights
agreement  relating  thereto,  an  exchange  agreement,  a  registration  rights
agreement  relating thereto,  two promissory notes and an additional side letter
agreement.  On October 30,  2002,  NCT and Crammer  Road  executed a  settlement
agreement  calling for  dismissal of all claims of Crammer Road in the action or
otherwise  arising out of the April 12, 2001 agreements in  consideration of the
issuance  by NCT to  Crammer  Road of 68  million  shares  of its  common  stock
(approximately  $5.4  million  calculated  at the last sale price on October 30,
2002).  On December 11, 2002, the court approved the  settlement  agreement.  On
December 17, 2002, we issued  Crammer Road 40 million of the 68 million  shares.
The other 28 million shares were issuable on 65 days' demand by Crammer Road (as
agreed by the parties,  so that  Crammer  Road would not exceed its  contractual
restriction  of holding  no more than 9.99% of NCT common  stock at any point in
time). On May 8, 2003, we issued Crammer Road the other 28 million shares of our
common stock.  Issuance of these 68 million  shares to Crammer Road resolved all
issues in dispute with Crammer Road pertaining to the 2001 agreement.

     Prior to the issuance of the 68 million  settlement shares to Crammer Road,
NCT had  issued an  aggregate  of 22.2  million  shares of its  common  stock to
Crammer Road. Those shares were not registered and were not immediately tradable
by Crammer Road. Those issuances were in connection with:

     o    a $500,000 put to Crammer Road under the September 2000 private equity
          credit line (2.8 million shares);
     o    the purchase of 2,000  shares of common stock of DMC NY (13.3  million
          shares); and
     o    the exchange of a note issued on April 12, 2001 by NCT Video Displays,
          Inc., a wholly owned subsidiary of NCT (6.0 million shares).

                                       94
<PAGE>


Vidikron of America, Inc.

     On  September  29,  2000,  NCT and  Distributed  Media  Corporation  signed
separate  agreements  to  license  various  microbroadcasting   technologies  to
Vidikron  of  America,  Inc.  for an  aggregate  of $2  million.  Vidikron  is a
manufacturer  of high-end home theater  equipment.  Vidikron's  intention was to
develop  commercial video applications using the technology it licensed from NCT
and DMC. We recognized an aggregate of $2 million in technology  license revenue
in fiscal 2000 attributable to Vidikron. We used $1 million of the proceeds from
Vidikron  for working  capital and general  corporate  purposes and the other $1
million  to  acquire  1,000  shares  of  common  stock  of  DMC NY in  2001.  We
constructively  received $2 million from Vidikron in April 2001, comprised of $1
million cash and $1 million  paid into an escrow  account on our behalf which we
used to acquire 1,000 shares of DMC NY. An escrow account was  established  with
the seller's counsel as a matter of convenience in funding our purchase of 1,000
shares of DMC NY common stock. Crammer Road owned such shares of DMC NY. Crammer
Road's sole corporate director is Navigator Management Ltd. The sole director of
Navigator Management is David Sims.  Vidikron's majority shareholder is Markland
LLC. Markland's sole corporate director is also Navigator Management Ltd.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

     The following  table sets forth the aggregate fees billed or accrued by NCT
for the audit and other  services  provided  by Eisner  LLP for the years  ended
December 31, 2002 and 2003.

                                       Years Ended December 31,
                                   -------------------------------
                                       2002               2003
                                   --------------   --------------
    Audit Fees (a)                 $    167,000     $    177,000
    Audit-Related Fees (b)              100,000           95,000
    Tax Fees (c)                        100,000           65,000
    All Other Fees (d)
                                              -                -
                                   --------------   --------------
         Total                     $    367,000     $    337,000
                                   ==============   ==============

Footnotes:
----------
(a)  Represents fees billed and accrued for  professional  services  rendered in
     connection  with the annual  audit and  quarterly  review of the  financial
     statements  included  in our  annual  reports  on Form  10-K and  quarterly
     reports on Form 10-Q.
(b)  Represents  fees billed for  professional  services  rendered in connection
     with our filing of registration statements on Form S-1 with the SEC.
(c)  Represents fees billed for  professional  services  rendered in conjunction
     with federal and state tax return preparation and other tax matters.
(d)  Represents fees for professional services other than those reported above.

     The audit  committee  specifically  pre-approved  Eisner LLP's fees for the
company's 2002 and 2003 audits.


                                     PART IV

ITEM 15.        Exhibits, Financial Statement Schedules, and Reports on Form 8-K

Item 15(a)(1)   Financial Statements.

The following  financial  statements  are filed as part of this Annual Report on
Form 10-K:

Independent Auditors' Report

Consolidated Balance Sheets as of December 31, 2002 and December 31, 2003

                                       95
<PAGE>


Consolidated   Statements  of   Operations   and   Consolidated   Statements  of
Comprehensive Loss for the years ended December 31, 2001, 2002 and 2003

Consolidated  Statements of Stockholders' Equity (Capital Deficit) for the years
ended December 31, 2001, 2002 and 2003

Consolidated  Statements  of Cash Flows for the years ended  December  31, 2001,
2002 and 2003

Notes to the Consolidated Financial Statements

Item 15(a)(2)   Financial Statement Schedules.

Independent Auditors' Report on Schedule II

Schedule II.  Valuation and Qualifying Accounts

Other financial statement schedules are omitted because the conditions requiring
their filing do not exist or the information required thereby is included in the
consolidated financial statements filed or notes thereto.

Item 15(a)(3)   Exhibits.

The exhibits listed on the accompanying Index to Exhibits are filed as part of
this Annual Report on Form 10-K.

Item 15(b)      Reports on Form 8-K.

No reports were filed on Form 8-K during the last quarter of 2003.

                                       96
<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirement  of  Section  13 or 15(d)  of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on April 8, 2004.


                                        NCT Group, Inc.
                                        ---------------
                                        (Registrant)


                                        By: /s/  Michael J. Parrella
                                            ------------------------------------
                                              Michael J. Parrella
                                              Chief Executive Officer and
                                              Chairman of the Board of Directors
                                              (Principal Executive Officer)

                                        By: /s/  Cy E. Hammond
                                            ------------------------------------
                                              Cy E. Hammond
                                              Senior Vice President and
                                              Chief Financial Officer
                                              (Principal Financial Officer)


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.

       Signature                        Capacity                      Date
--------------------------------------------------------------------------------

                                Chief Executive Officer and
/s/ Michael J. Parrella      Chairman of the Board of Directors   April 8, 2004
---------------------------
    Michael J. Parrella


/s/ Irene Lebovics                President and Director          April 8, 2004
---------------------------
    Irene Lebovics


/s/ John J. McCloy                      Director                  April 8, 2004
---------------------------
    John J. McCloy II


/s/ Samuel A. Oolie                     Director                  April 8, 2004
---------------------------
    Samuel A. Oolie

                               Senior Vice President, Chief
/s/ Cy E. Hammond              Financial Officer and Director     April 8, 2004
---------------------------
    Cy E. Hammond

                                       97
<PAGE>


                        NCT GROUP, INC. AND SUBSIDIARIES
                     CONSOLIDATED FINANCIAL STATEMENT INDEX

<TABLE>
<CAPTION>

                                                                                      Page
                                                                                      ----

<S>                                                                                      <C>
Independent Auditors' Report                                                           F-1

Consolidated Balance Sheets as of December 31, 2002 and 2003                           F-2

Consolidated Statements of Operations and Consolidated Statements of                   F-3
Comprehensive Loss for the years F-3 ended December 31, 2001, 2002 and 2003

Consolidated Statements of Stockholders' Equity (Capital Deficit) for the years        F-4
ended December 31, 2001, 2002 and 2003

Consolidated Statements of Cash Flows for the years ended December 31, 2001,           F-5
2002 and 2003

Notes to the Consolidated Financial Statements                                         F-6

Independent Auditors' Report on Schedule II                                            F-58

Schedule II                                                                            F-59

</TABLE>

                                       98
<PAGE>


INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders of
NCT Group, Inc.


We have audited the accompanying  consolidated balance sheets of NCT Group, Inc.
and  subsidiaries  (the  "Company")  as of December  31, 2002 and 2003,  and the
related consolidated statements of operations, comprehensive loss, stockholders'
equity (capital deficit) and cash flows for each of the years ended December 31,
2001, 2002 and 2003. These financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the financial statements enumerated above present fairly, in all
material  respects,  the consolidated  financial position of NCT Group, Inc. and
subsidiaries  as of December 31, 2002 and 2003 and the  consolidated  results of
their operations and their  consolidated  cash flows for each of the years ended
December  31,  2001,  2002 and 2003 in  conformity  with  accounting  principles
generally accepted in the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial  statements,  the  Company  has  negative  cash flows  from  operating
activities and it has incurred net losses from inception,  has a working capital
deficiency,  is subject to a judgment  against  the Company and is in default on
certain  convertible notes payable.  These factors raise substantial doubt about
its  ability to  continue as a going  concern.  Management's  plans in regard to
these  matters are also  described in Note 1. The  financial  statements  do not
include any adjustments that might result from the outcome of this uncertainty.

As  discussed  in Note 3 to the  consolidated  financial  statements,  effective
January 1, 2002, the Company adopted a new method of accounting for its goodwill
and during 2003 the Company  adopted a new  accounting  standard  for its equity
instruments with characteristics of both liabilities and equity.


/s/ Eisner LLP
------------------
Eisner LLP


New York, New York
March 12, 2004


With respect to Note 28
March 31, 2004

                                 F-1
<PAGE>


<TABLE>
<CAPTION>

NCT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Notes 3, 11 and 12)
                                                                                        (In thousands of dollars, except share data)

                                                                                              December 31,         December 31,
                                                                                                  2002                  2003
                                                                                              -------------        -------------
ASSETS
Current assets:
<S>                                                                                            <C>                  <C>
  Cash and cash equivalents                                                                    $       806          $       988
  Investment in available-for-sale marketable securities (Note 5)                                      102                   49
  Accounts receivable, net (Note 6)                                                                    245                  255
  Inventories, net  (Note 7)                                                                           622                  509
  Other current assets (includes $108 and $138, respectively, due from officers) (Note 9)              358                  310
                                                                                              -------------        -------------
         Total current assets                                                                        2,133                2,111

Property and equipment, net (Note 8)                                                                   954                  641
Goodwill, net (Notes 2 and 3)                                                                        7,184                7,184
Patent rights and other intangibles, net (Note 3)                                                    1,519                1,223
Other assets (includes $31 and zero, respectively, due from officer)(Note 9)                         1,779                1,616
                                                                                              -------------        -------------
                                                                                               $    13,569          $    12,775
                                                                                              =============        =============

LIABILITIES AND CAPITAL DEFICIT
Current liabilities:
  Accounts payable                                                                             $     4,648          $     2,905
  Accrued expenses  (includes $1,242 and $1,128, respectively, related parties) (Note 10)           16,916               13,799
  Notes payable (Note 11)                                                                            3,540                3,403
  Related party convertible notes (due to a stockholder) (Notes 12 and 21)                          14,206               28,650
  Current maturities of convertible notes (Note 12)                                                  4,254                3,438
  Deferred revenue (Note 13)                                                                         2,877                2,763
  Shares of subsidiary subject to exchange into a variable number of shares (Note 14)                    -                  742
  Other current liabilities (Note 15)                                                                7,101                7,227
                                                                                              -------------        -------------
         Total current liabilities                                                                  53,542               62,927
                                                                                              -------------        -------------

Long-term liabilities:
  Deferred revenue (Note 13)                                                                         2,675                  535
  Convertible notes  (Note 12)                                                                         779                  675
  Other liabilities (Note 15)                                                                        1,557                1,536
                                                                                              -------------        -------------
         Total long-term liabilities                                                                 5,011                2,746
                                                                                              -------------        -------------

Commitments and contingencies (Note 24)

Minority interest in consolidated subsidiaries                                                       8,689                8,313
                                                                                              -------------        -------------
Capital deficit (Note 16):
Preferred stock, $.10 par value, 10,000,000 shares authorized:
  Convertible series H preferred stock, issued and outstanding, 1,800 and 1,725
   shares, respectively (redemption amount $18,900,000 and $20,700,000, respectively)
   (liquidation amount $18,376,767 and $18,300,822, respectively)                                   18,377               18,301
Common stock, $.01 par value, authorized 645,000,000 shares:
   issued and outstanding, 483,474,345 and 641,970,392 shares, respectively                          4,835                6,420
Additional paid-in capital                                                                         180,899              205,102
Accumulated other comprehensive income (loss)                                                         (516)              (1,170)
Accumulated deficit                                                                               (259,564)            (289,864)
Shares payable, 29,248,170 and 3,029,608 shares, respectively                                        2,296                    -
                                                                                              -------------        -------------
         Total capital deficit                                                                     (53,673)             (61,211)
                                                                                              -------------        -------------
                                                                                               $    13,569          $    12,775
                                                                                              =============        =============

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.
</TABLE>

                                      F-2
<PAGE>


<TABLE>
<CAPTION>

NCT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Note 3)

                                                                                 (In thousands of dollars, except per share amounts)
                                                                                            For the Years Ended December 31,
                                                                                 ---------------------------------------------------
REVENUE:                                                                               2001              2002             2003
                                                                                 ---------------    --------------    --------------
<S>                                                                               <C>                <C>               <C>
   Technology licensing fees and royalties                                        $     5,633        $    4,493        $    3,013
   Product sales, net                                                                   4,568             2,697             1,708
   Advertising                                                                            279               105                88
   Engineering and development services                                                   132                24                49
                                                                                 ---------------    --------------    --------------
          Total revenue                                                                10,612             7,319             4,858
                                                                                 ---------------    --------------    --------------

COSTS, EXPENSES AND OTHER INCOME:
   Cost of product sales                                                                3,340             1,279               787
   Cost of advertising                                                                    332                15                14
   Cost of engineering and development services                                             2                 8                53
   Selling, general and administrative (includes zero, $4,226, $8,514
       related party consulting expenses, respectively)(Note 21)                       18,734            14,773            17,511
   Research and development                                                             5,966             4,711             3,684
   Provision for doubtful accounts                                                        249                77                 8
   Impairment of goodwill, net (Notes 3 and 16)                                        14,114               300                 -
   Impairment of other intangibles (Note 3)                                                 -             2,116                 -
   Write downs of investment and repurchased licenses, net (includes $14,000,
      $9,199 and zero of related party expenses, respectively) (Notes 2 and 11)        20,778             9,199                 -
   Costs of exiting activities (Note 19)                                                1,886               145                 -
   Other (income) expense, net (Note 18)                                                 (937)             (321)             (244)
                                                                                 ---------------    --------------    --------------
          Total operating costs, expenses and other income                             64,464            32,302            21,813
Non-operating items:
   Other (income) expense, net (includes related party expenses of $2,106,
      $3,863 and $2,103, respectively) (Notes 18 and 21)                               16,099             7,411              (943)
   Interest expense (includes related party expenses of $1,864,
      $6,284 and $12,397, respectively)                                                 6,170             7,725            14,324
   Interest income                                                                        (43)              (14)              (36)
                                                                                 ---------------    --------------    --------------
          Total costs and expenses                                                     86,690            47,424            35,158
                                                                                 ---------------    --------------    --------------
LOSS BEFORE CUMULATIVE EFFECT
  OF CHANGE IN ACCOUNTING PRINCIPLE                                                   (76,078)          (40,105)          (30,300)
  Cumulative effect of change in accounting principle (Note 5)                         (1,582)                -                 -
                                                                                 ---------------    --------------    --------------

NET LOSS                                                                          $   (77,660)       $  (40,105)       $  (30,300)

Less:  Beneficial conversion features (Notes 12 and 16)                                   392                46                 -
       Preferred stock dividends (Note 16)                                                969             2,817             2,948
                                                                                 ---------------    --------------    --------------

LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS                                          $   (79,021)       $  (42,968)       $  (33,248)
                                                                                 ===============    ==============    ==============
Loss per share attributable to common stockholders:
   Loss attributable to common stockholders before cumulative
     effect of change in accounting principle                                     $     (0.20)       $    (0.10)       $    (0.06)
   Cumulative effect of change in accounting principle                                  (0.01)                -                 -
                                                                                 ---------------    --------------    --------------
   Basic and diluted                                                              $     (0.21)       $    (0.10)       $    (0.06)
                                                                                 ===============    ==============    ==============

Weighted average common shares outstanding -
   Basic and diluted                                                                  377,084           446,423           563,543
                                                                                 ===============    ==============    ==============

NCT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Note 3)
                                                                                              (In thousands of dollars)
                                                                                            For the Years Ended December 31,
                                                                                 ---------------------------------------------------
                                                                                       2001              2002             2003
                                                                                 ---------------    --------------    --------------

NET LOSS                                                                          $   (77,660)       $  (40,105)       $  (30,300)
Other comprehensive income (loss):
   Currency translation adjustment                                                         (8)             (566)             (601)
   Adjustment of unrealized gain or loss / (unrealized loss) on
     available-for-sale marketable securities                                           3,379                 -               (53)
                                                                                 ---------------    --------------    --------------
COMPREHENSIVE LOSS                                                                $   (74,289)       $  (40,671)       $  (30,954)
                                                                                 ===============    ==============    ==============

The accompanying notes are an integral part of the consolidated financial
statements.

</TABLE>

                                      F-3
<PAGE>


  NCT GROUP, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIT) (Note 3)
  (In thousands of dollars and shares)

<TABLE>
<CAPTION>


                                                                        Convertible Preferred Stock
                                                                    -------------------------------------
                                                                        Series G           Series H               Common Stock
                                                                    -----------------   -----------------     ----------------------
                                                                    Shares     Amount   Shares     Amount      Shares        Amount
                                                                    ------     ------   ------    -------     --------      --------
<S>                   <C> <C>                                          <C>     <C>                <C>          <C>          <C>
  Balance at December 31, 2000                                         1       $  574       -     $     -      334,150      $ 3,341
  Sale of common stock                                                 -            -       -           -        2,000           20
  Sale of preferred stock                                              -            -       -           -            -            -
  Conversion of preferred stock                                       (1)        (582)      -           -        7,218           72
  Dividend to preferred shareholders                                   -            8       -           -            -            -
  Exchange of series A preferred stock in subsidiary                   -            -       -           -        2,976           30
  Dividend and amortization of discount on beneficial conversion
     price to subsidiary preferred and common shareholders             -            -       -           -            -            -
  Exchange of subsidiary common stock for common stock                 -            -       -           -        7,832           78
  Conversion of convertible debt plus inducement of $190               -            -       -           -        4,303           43
  Exchange of subsidiary convertible debt for common stock             -            -       -           -       32,925          330
  Sale of excess exchange shares of common stock net of
     commissions of $36                                                -            -       -           -            -            -
  Shares issued for settlement obligations/prepayments                 -            -       -           -        3,838           38
  Expenses to be paid with common stock                                -            -       -           -            -            -
  Shares returned for deposit of acquisition                           -            -       -           -         (245)          (2)
  Shares issued for acquisition of subsidiaries, repurchased
     licenses and exercise of option, less expenses of $237            -            -       -           -       23,476          234
  Liability for make up of value on shares issued to ITC               -            -       -           -            -            -
  Warrants issued in conjunction with convertible debt                 -            -       -           -            -            -
  Beneficial conversion features on convertible debt                   -            -       -           -            -            -
  Net loss                                                             -            -       -           -            -            -
  Currency translation adjustment                                      -            -       -           -            -            -
  Shares issued upon exercise of warrants                              -            -       -           -       10,000          100
  Valuation of available-for-sale marketable securities                -            -       -           -            -            -
  Compensatory common stock grants                                     -            -       -           -          358            4
  Compensatory stock options and warrants                              -            -       -           -            -            -
                                                                    ------     ------   ------    -------     --------      --------
  Balance at December 31, 2001                                         -       $    -       -     $     -      428,831      $ 4,288
  Sale of preferred stock, net                                         -            -       2      18,000            -            -
  Dividend to preferred shareholders                                   -            -       -         377            -            -
  Charges for the non-registration of the underlying shares of NCT
      to subsidiary preferred shareholders                             -            -       -           -            -            -
  Dividend and amortization of discounts on beneficial conversion
     price to subsidiary preferred shareholders                        -            -       -           -            -            -
  Exchange of subsidiary common stock for common stock                 -            -       -           -        6,073           61
  Conversion of convertible debt                                       -            -       -           -        5,611           56
  Exchange of subsidiary convertible debt for common stock             -            -       -           -        2,599           26
  Shares issued for settlement obligations/prepayments                 -            -       -           -       46,438          465
  Shares payable for settlement obligations                            -            -       -           -            -            -
  Retirement of treasury stock                                         -            -       -           -       (6,078)         (61)
  Warrants issued in conjunction with convertible debt
     and related rights                                                -            -       -           -            -            -
  Beneficial conversion feature on convertible debt                    -            -       -           -            -            -
  Net loss                                                             -            -       -           -            -            -
  Currency translation adjustment                                      -            -       -           -            -            -
  Compensatory stock options and warrants                              -            -       -           -            -            -
  Expenses related to prior sale of stock                              -            -       -           -            -            -
                                                                    ------     ------   ------    -------     --------      --------
  Balance at December 31, 2002                                         -       $    -       2     $18,377      483,474      $ 4,835
  Conversion of preferred stock                                        -            -       -        (785)      23,058          231
  Dividend to preferred shareholders                                   -            -       -         709            -            -
  Charges for the non-registration of the underlying shares of NCT
      to subsidiary preferred shareholders                             -            -       -           -            -            -
  Dividend and amortization of discounts on beneficial conversion
     price to subsidiary preferred shareholders                        -            -       -           -            -            -
  Reversal of redemption adjustment on subsidiary preferred            -            -       -           -            -            -
  Exchange of subsidiary convertible debt for common stock             -            -       -           -       42,093          421
  Shares issued for settlement obligations/prepayments                 -            -       -           -       93,345          933
  Warrants issued in conjunction with convertible debt
     and related rights                                                -            -       -           -            -            -
  Beneficial conversion feature on convertible debt                    -            -       -           -            -            -
  Net loss                                                             -            -       -           -            -            -
  Currency translation adjustment                                      -            -       -           -            -            -
  Valuation of available-for-sale marketable securities                -            -       -           -            -            -
  Compensatory stock options and warrants                              -            -       -           -            -            -
  Adjustment of monetary value on subsidiary shares upon
     adoption of SFAS 150                                              -           -       -            -            -            -
  Expenses related to prior sale of stock                              -           -       -            -            -            -
                                                                    ------     ------   ------    -------     --------      --------
  Balance at December 31, 2003                                         -       $   -       2      $18,301      641,970      $ 6,420
                                                                    ======     ======   ======    =======     ========      ========

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.
====================================================================================================================================




                                                                                                     Accumulated
                                                                          Additional      Accumu-       Other
                                                                           Paid-in        lated      Comprehensive      Shares
                                                                           Capital       Deficit     Income/(Loss)      Payable
                                                                         -----------   ----------    -------------    -----------
  Balance at December 31, 2000                                           $ 154,838     $ (141,799)   $  (3,321)        $  (213)
  Sale of common stock                                                         166              -            -               -
  Sale of preferred stock                                                        -              -            -               -
  Conversion of preferred stock                                                510              -            -               -
  Dividend to preferred shareholders                                            (8)             -            -               -
  Exchange of series A preferred stock in subsidiary                           267              -            -               -
  Dividend and amortization of discount on beneficial conversion
     price to subsidiary preferred and common shareholders                  (1,353)             -            -               -
  Exchange of subsidiary common stock for common stock                       1,155              -            -               -
  Conversion of convertible debt plus inducement of $190                       707              -            -               -
  Exchange of subsidiary convertible debt for common stock                   3,329              -            -               -
  Sale of excess exchange shares of common stock net of
     commissions of $36                                                        164              -            -               -
  Shares issued for settlement obligations/prepayments                        (221)             -            -               -
  Expenses to be paid with common stock                                          -              -            -               -
  Shares returned for deposit of acquisition                                  (123)             -            -               -
  Shares issued for acquisition of subsidiaries, repurchased
     licenses and exercise of option, less expenses of $237                  2,138              -            -             213
  Liability for make up of value on shares issued to ITC                      (610)             -            -               -
  Warrants issued in conjunction with convertible debt                         747              -            -               -
  Beneficial conversion features on convertible debt                         1,748              -            -               -
  Net loss                                                                       -        (77,660)           -               -
  Currency translation adjustment                                                -              -           (8)              -
  Shares issued upon exercise of warrants                                      700              -            -               -
  Valuation of available-for-sale marketable securities                          -              -        3,379               -
  Compensatory common stock grants                                              30              -            -               -
  Compensatory stock options and warrants                                      437              -            -               -
                                                                         -----------   ----------    -------------    -----------
  Balance at December 31, 2001                                           $ 164,621     $ (219,459)   $      50         $     -
  Sale of preferred stock, net                                               5,309              -            -               -
  Dividend to preferred shareholders                                          (377)             -            -               -
  Charges for the non-registration of the underlying shares of NCT
      to subsidiary preferred shareholders                                  (2,086)             -            -               -
  Dividend and amortization of discounts on beneficial conversion
     price to subsidiary preferred shareholders                               (400)             -            -               -
  Exchange of subsidiary common stock for common stock                         409              -            -               -
  Conversion of convertible debt                                               348              -            -               -
  Exchange of subsidiary convertible debt for common stock                     193              -            -               -
  Shares issued for settlement obligations/prepayments                       3,260              -            -               -
  Shares payable for settlement obligations                                      -              -            -           2,296
  Retirement of treasury stock                                              (2,902)             -            -               -
  Warrants issued in conjunction with convertible debt
     and related rights                                                      4,492              -            -               -
  Beneficial conversion feature on convertible debt                          3,422              -            -               -
  Net loss                                                                       -        (40,105)           -               -
  Currency translation adjustment                                                -              -         (566)              -
  Compensatory stock options and warrants                                    4,747              -            -               -
  Expenses related to prior sale of stock                                     (137)             -            -               -
                                                                         -----------   ----------    -------------    -----------
  Balance at December 31, 2002                                           $ 180,899     $ (259,564)   $    (516)        $ 2,296
  Conversion of preferred stock                                                554              -            -               -
  Dividend to preferred shareholders                                          (709)             -            -               -
  Charges for the non-registration of the underlying shares of NCT
      to subsidiary preferred shareholders                                  (1,896)             -            -               -
  Dividend and amortization of discounts on beneficial conversion
     price to subsidiary preferred shareholders                               (343)             -            -               -
  Reversal of redemption adjustment on subsidiary preferred                    125              -            -               -
  Exchange of subsidiary convertible debt for common stock                   1,333              -            -               -
  Shares issued for settlement obligations/prepayments                       5,488              -            -          (2,296)
  Warrants issued in conjunction with convertible debt
     and related rights                                                      5,415              -            -               -
  Beneficial conversion feature on convertible debt                          5,959              -            -               -
  Net loss                                                                       -        (30,300)           -               -
  Currency translation adjustment                                                -              -         (601)              -
  Valuation of available-for-sale marketable securities                          -              -          (53)              -
  Compensatory stock options and warrants                                    8,429              -            -               -
  Adjustment of monetary value on subsidiary shares upon
     adoption of SFAS 150                                                     (138)             -            -               -
  Expenses related to prior sale of stock                                      (14)             -            -               -
                                                                         -----------   ----------    -------------    -----------
  Balance at December 31, 2003                                           $ 205,102     $ (289,864)   $  (1,170)        $     -
                                                                         ===========   ==========    =============    ===========

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.
====================================================================================================================================


                                                                     Unearned
                                                                     Portion of    Expenses
                                                                      Compen-     to be Paid
                                                                      satory         with           Treasury Stock
                                                                      Option/       Common        --------------------
                                                                      Warrant        Stock        Shares       Amount      Total
                                                                    -----------  -----------      -------    ---------   -----------
  Balance at December 31, 2000                                        $  (37)      $  (562)        6,078     $ (2,963)   $   9,858
  Sale of common stock                                                     -             -             -            -          186
  Sale of preferred stock                                                  -             -             -            -            -
  Conversion of preferred stock                                            -             -             -            -            -
  Dividend to preferred shareholders                                       -             -             -            -            -
  Exchange of series A preferred stock in subsidiary                       -             -             -            -          297
  Dividend and amortization of discount on beneficial conversion
     price to subsidiary preferred and common shareholders                 -             -             -            -       (1,353)
  Exchange of subsidiary common stock for common stock                     -             -             -            -        1,233
  Conversion of convertible debt plus inducement of $190                   -             -             -            -          750
  Exchange of subsidiary convertible debt for common stock                 -             -             -            -        3,659
  Sale of excess exchange shares of common stock net of
     commissions of $36                                                    -             -             -            -          164
  Shares issued for settlement obligations/prepayments                     -             -             -            -         (183)
  Expenses to be paid with common stock                                    -           562             -            -          562
  Shares returned for deposit of acquisition                               -             -             -            -         (125)
  Shares issued for acquisition of subsidiaries, repurchased
     licenses and exercise of option, less expenses of $237                -             -             -            -        2,585
  Liability for make up of value on shares issued to ITC                   -             -             -            -         (610)
  Warrants issued in conjunction with convertible debt                     -             -             -            -          747
  Beneficial conversion features on convertible debt                       -             -             -            -        1,748
  Net loss                                                                 -             -             -            -      (77,660)
  Currency translation adjustment                                          -             -             -            -           (8)
  Shares issued upon exercise of warrants                                  -             -             -            -          800
  Valuation of available-for-sale marketable securities                    -             -             -            -        3,379
  Compensatory common stock grants                                         -             -             -            -           34
  Compensatory stock options and warrants                                 37             -             -            -          474
                                                                    -----------  -----------      -------    ---------   -----------
  Balance at December 31, 2001                                        $    -       $     -         6,078     $ (2,963)   $ (53,463)
  Sale of preferred stock, net                                             -             -             -            -       23,309
  Dividend to preferred shareholders                                       -             -             -            -            -
  Charges for the non-registration of the underlying shares of NCT
      to subsidiary preferred shareholders                                 -             -             -            -       (2,086)
  Dividend and amortization of discounts on beneficial conversion
     price to subsidiary preferred shareholders                            -             -             -            -         (400)
  Exchange of subsidiary common stock for common stock                     -             -             -            -          470
  Conversion of convertible debt                                           -             -             -            -          404
  Exchange of subsidiary convertible debt for common stock                 -             -             -            -          219
  Shares issued for settlement obligations/prepayments                     -             -             -            -        3,725
  Shares payable for settlement obligations                                -             -             -            -        2,296
  Retirement of treasury stock                                             -             -        (6,078)       2,963            -
  Warrants issued in conjunction with convertible debt
     and related rights                                                    -             -             -            -        4,492
  Beneficial conversion feature on convertible debt                        -             -             -            -        3,422
  Net loss                                                                 -             -             -            -      (40,105)
  Currency translation adjustment                                          -             -             -            -         (566)
  Compensatory stock options and warrants                                  -             -             -            -        4,747
  Expenses related to prior sale of stock                                  -             -             -            -         (137)
                                                                    -----------  -----------      -------    ---------   -----------
  Balance at December 31, 2002                                        $    -       $     -             -     $      -    $ (53,673)
  Conversion of preferred stock                                            -             -             -            -            -
  Dividend to preferred shareholders                                       -             -             -            -            -
  Charges for the non-registration of the underlying shares of NCT
      to subsidiary preferred shareholders                                 -             -             -            -       (1,896)
  Dividend and amortization of discounts on beneficial conversion
     price to subsidiary preferred shareholders                            -             -             -            -         (343)
  Reversal of redemption adjustment on subsidiary preferred                -             -             -            -          125
  Exchange of subsidiary convertible debt for common stock                 -             -             -            -        1,754
  Shares issued for settlement obligations/prepayments                     -             -             -            -        4,125
  Warrants issued in conjunction with convertible debt
     and related rights                                                    -             -             -            -        5,415
  Beneficial conversion feature on convertible debt                        -             -             -            -        5,959
  Net loss                                                                 -             -             -            -      (30,300)
  Currency translation adjustment                                          -             -             -            -         (601)
  Valuation of available-for-sale marketable securities                    -             -             -            -          (53)
  Compensatory stock options and warrants                                  -             -             -            -        8,429
  Adjustment of monetary value on subsidiary shares upon
     adoption of SFAS 150                                                  -             -             -            -         (138)
  Expenses related to prior sale of stock                                  -             -             -            -          (14)
                                                                    -----------  -----------      -------    ---------   -----------
  Balance at December 31, 2003                                        $    -       $     -             -     $      -    $ (61,211)
                                                                    ===========  ===========      =======    =========   ===========

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.
====================================================================================================================================
</TABLE>

                                      F-4
<PAGE>


<TABLE>
<CAPTION>

NCT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Notes 3 and 20)
                                                                                                 (In thousands of dollars)
                                                                                              For the Years Ended December 31,
                                                                                          ------------------------------------------
                                                                                             2001          2002          2003
                                                                                          -----------   -----------   --------------
Cash flows from operating activities:
 <S>                                                                                       <C>           <C>           <C>
  Net loss                                                                                $ (77,660)    $ (40,105)    $ (30,300)
  Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation and amortization                                                            2,977         1,305           724
     Common stock, warrants and options issued as consideration for:
        Compensation                                                                             37           169             -
        Operating expenses (includes zero, $4,081 and $8,349, respectively,related
        party consulting expenses)                                                              637         4,792         8,429
     Provision for inventory                                                                    691            76          (122)
     Provision for doubtful accounts and uncollectible amounts                                1,249           239            21
     Loss on disposition of fixed assets                                                         30             5            33
     Gain on settlement of lawsuit                                                                -             -        (4,888)
     Finance costs associated with non-registration of common shares                          2,318         5,529         2,207
     Preferred stock dividends as interest                                                        -             -            11
     Default penalty on notes (related party)                                                 1,208           441         2,104
     Amortization of discounts on notes (includes $387, $2,700 and $5,715,
       respectively, with related parties)                                                    3,348         2,888         6,348
     Amortization of beneficial conversion feature on convertible notes (includes
       $845, $2,156 and $4,740, respectively, with related parties) (Note 12)                   946         2,305         4,900
     Related party convertible note induced conversion expense                                  190             -             -
     Write downs of investment and repurchased licenses, net (includes $14,000, $9,199
       and zero of related party expenses, respectively) (Notes 2, 11 and 18)                20,778         9,199             -
     Impairment of goodwill, net (Note 3)                                                    14,114           300             -
     Impairment of other intangibles (Note 3)                                                     -         2,116             -
     Issuance of convertible note and preferred stock of subsidiary for placement fees          656             -            40
     Costs of exiting activities (Note 19)                                                    1,886           145             -
     Realized loss on available-for-sale securities (Note 5)                                  7,036           765             -
     Realized loss on fair value of warrant (Note 5)                                          1,355           151             1
     Cumulative effect of change in accounting principle (Note 5)                             1,582             -             -
     Loss on sale of NXT ordinary shares (Note 4)                                             2,301             -             -
     Settlement of debt                                                                         (67)            -          (231)
     Minority interest loss                                                                    (473)         (458)            -
     Changes in operating assets and liabilities, net of acquisitions:
         Decrease (increase) in accounts receivable                                           2,432           132           (31)
         Decrease in inventories                                                                109           331           235
         (Increase) decrease in other assets                                                   (680)          971           210
         Increase in accounts payable and accrued expenses                                    4,760         3,164         2,131
         Decrease in other liabilities and deferred revenue                                  (3,784)       (4,140)       (2,154)
                                                                                          -----------   -----------   --------------
        Net cash used in operating activities                                             $ (12,024)    $  (9,680)    $ (10,332)
                                                                                          -----------   -----------   --------------
Cash flows from investing activities:
      Capital expenditures                                                                $  (1,377)    $      (3)    $    (150)
      Net cash paid for Artera Group International Limited acquisition                         (100)            -             -
      Payment for shares of DMC New York (repurchased licenses)                              (1,000)            -             -
      Proceeds from sale of equipment                                                            11            11             -
      Proceeds from sale of NXT ordinary shares                                               6,858             -             -
                                                                                          -----------   -----------   --------------
        Net cash provided by (used in) investing activities                               $   4,392     $       8     $     (150)
                                                                                          -----------   -----------   --------------
Cash flows from financing activities:
     Proceeds from:
        Issuance of related party convertible notes, net (Notes 12 and 21)                $   2,500     $   9,590     $  10,440
        Issuance of convertible notes and notes payable, net (Notes 11 and 12)                3,195         1,019           590
        Sale of subsidiary preferred stock, net                                                 418           110             -
        Sale of excess exchange shares                                                          164             -             -
        Sale of common stock                                                                    186             -             -
        Collection of subscription receivable                                                   213             -             -
        Exercise of stock options and warrants, net                                             800             -             -
        Repayment of notes                                                                     (436)         (497)         (322)
                                                                                          -----------   -----------   --------------
        Net cash provided by financing activities                                         $   7,040     $  10,222     $  10,708
                                                                                          -----------   -----------   --------------
Effect of exchange rate changes on cash                                                   $      (8)    $    (311)    $     (44)
                                                                                          -----------   -----------   --------------
Net increase (decrease) in cash and cash equivalents                                           (600)          239           182
Cash and cash equivalents - beginning of period                                               1,167           567           806
                                                                                          -----------   -----------   --------------
Cash and cash equivalents - end of period                                                 $     567     $     806     $     988
                                                                                          ===========   ===========   ==============
The accompanying notes are an integral part of the consolidated financial
statements.

</TABLE>

                                      F-5
<PAGE>


                        NCT GROUP, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.   Background:

     NCT  Group,  Inc.  and  subsidiaries   (collectively  referred  to  as  the
"company,"  "NCT,"  "we,"  "our"  or  "us")  is a  technology  developer  with a
portfolio of patents and related rights and other non-patented  technology.  Our
technologies  allow us to develop  products,  services and applications  that we
market to various  industries.  NCT operates in three segments:  communications,
media and technology.  Product offerings of our communications  segment include:
Artera Turbo (TM)  software-based,  high-speed,  data  communication and network
optimization   service;  an  aircraft  cabin  quieting  system;   ClearSpeech(R)
microphones,  speakers,  and a suite of noise and echo cancellation  algorithms;
and our telephony  communications,  consumer and  industrial  headsets.  Product
offerings of our media segment  include Sight & Sound(R)  place-based  audio and
billboard  media  and  Gekko(TM)  flat  speakers,  prints  and  subwoofers.  Our
technology segment provides Java(TM)-language based microprocessor cores.

     NCT has experienced substantial losses from operations since its inception,
which  cumulatively  amounted to $289.9 million through  December 31, 2003. Cash
and cash  equivalents  amounted to $1.0  million at December 31, 2003. A working
capital  deficit of $60.8 million exists at December 31, 2003. NCT is in default
of $3.2 million of its notes payable and $3.5 million of its  convertible  notes
at December  31, 2003 and is subject to a judgment of $2.1  million.  Management
believes that currently available funds will not be sufficient to sustain NCT at
present  levels.  NCT's  ability to continue as a going  concern is dependent on
funding from several sources,  including available cash and cash equivalents and
cash  inflows  generated  from  its  revenue  sources,  particularly  technology
licensing  fees and royalties and product  sales.  The level of  realization  of
funding  from  the  company's  revenue  sources  is  presently   uncertain.   If
anticipated  revenue  does not generate  sufficient  cash,  management  believes
additional  working  capital  financing  must be obtained.  We are attempting to
raise  additional  capital  through debt and equity  financings in order to fund
operations  (see Note 28).  There is no assurance any such financing is or would
become available.

     In the event that funding from internal sources is insufficient,  NCT would
have to substantially  cut back its level of spending which could  substantially
curtail its  operations.  These  reductions  could have an adverse effect on the
company's  relations with its existing and  prospective  customers.  Uncertainty
exists about the adequacy of current funds to support NCT's activities or to pay
awards or judgments against the company until positive cash flow from operations
can be  achieved,  and  uncertainty  exists about the  availability  of external
financing sources to fund any cash deficiencies (see Note 16).

     The  accompanying  consolidated  financial  statements  have been  prepared
assuming that the company will continue as a going concern,  which  contemplates
continuity of operations,  realization of assets and satisfaction of liabilities
in the ordinary  course of business.  The  propriety of using the going  concern
basis  is  dependent  upon,  among  other  things,  the  achievement  of  future
profitable   operations  and  the  ability  to  generate  sufficient  cash  from
operations,  public and private financings and other funding sources to meet its
obligations.  The  uncertainties  described in the  preceding  paragraphs  raise
substantial  doubt at December 31, 2003 about the company's  ability to continue
as a going concern.  The accompanying  consolidated  financial statements do not
include any adjustments relating to the recoverability and classification of the
carrying  amount  of  recorded  assets  or  the  amount  and  classification  of
liabilities  that might  result  should the  company be unable to  continue as a
going concern.

2.   Acquisitions:

DMC New York, Inc.

     We acquired a 25%  interest in DMC New York,  Inc.  ("DMC NY") on April 12,
2001 for $4.0 million. The consideration consisted of a $1.0 million convertible
note due  December 31, 2001 issued to Crammer  Road,  $1.0 million cash and $2.0
million of our common stock (13.3 million shares).  We had accrued $14.0 million
for the  remaining  75%  interest  in the second  quarter of 2001 based upon our
agreement to acquire such interest. Our consolidated statement of operations for
the year ended  December 31, 2001 includes an aggregate  charge of $18.0 million
for this  acquisition  classified as write downs of investment  and  repurchased
licenses,  net. In June 2002, we acquired the  remaining  12,000 shares (75%) of
the  outstanding  capital  stock of DMC NY in exchange  for 1,800  shares of our
series H preferred  stock and $0.1  million net  proceeds  from Crammer Road LLC
(see Note 16). DMC NY was the owner of 16 licenses previously purchased from our
subsidiary,  Distributed Media Corporation  ("DMC") in 1999. The purchase of the
remaining 75% of DMC NY has been valued at the  estimated  fair value of the NCT
common  stock  underlying  our series H preferred  stock of $23.2  million  ($18
million stated value and approximately $5.2 million  representing the additional
fair value resulting from the conversion rate of 75% of the

                                      F-6
<PAGE>


fair  market  value,  as  defined,  of NCT common  stock into which the series H
preferred stock is convertible). Because DMC NY has not commenced operations, we
recorded an aggregate  charge of $9.2 million for this  acquisition for the year
ended December 31, 2002 classified on our  consolidated  statement of operations
as write downs of  investment  and  repurchased  licenses,  net.  DMC NY has not
recorded  any  revenue  and apart from its New York  metropolitan  area  license
rights,  has  no  other  assets  or  operations.  The  aggregate  cost  for  our
acquisition  of these  16,000  shares  (25% in 2001 and 75% in 2002)  was  $27.2
million.  The purchase price was arrived at in various  negotiations between NCT
and  Crammer  Road.  The  acquisition  resulted in our control of the number one
designated  market  area.  We did  not  obtain  an  independent  valuation.  The
company's acquisition of DMC NY is summarized as follows:

<TABLE>
<CAPTION>

                                                        DMC New York
   Date          Consideration                         Shares Acquired            % Interest        Acquisition Price
   ----          -------------                         ---------------            ----------        -----------------
<S>   <C>   <C>                                            <C>                       <C>                <C>
 4/12/01    $1.0 million cash                              1,000                     6.25%              $1.0 million
 4/12/01    $1.0 million note                              1,000                     6.25%              $1.0 million
 4/12/01    13.3 million shares common stock               2,000                    12.50%              $2.0 million
 6/24/02    1,800 shares series H preferred stock         12,000                    75.00%             $23.2 million

</TABLE>


Artera Group International Limited

     Our wholly-owned subsidiary,  Artera Group, Inc., entered into an agreement
with Teltran International, Inc. ("Teltran") to acquire all of the capital stock
of Teltran's  subsidiary,  Teltran Web Factory  Limited,  and the  communication
equipment assets of Teltran's subsidiary, Internet Protocol Ltd. The Web Factory
was  a  U.K.-based  full  service  information  technology  solutions  provider,
offering Internet provider services,  web hosting,  domain hosting,  consulting,
web design  and  installation  services  to  businesses.  Artera  completed  its
acquisition  of the Web Factory on March 2, 2001,  and renamed the Web  Factory,
Artera Group International  Limited.  The aggregate purchase price, as adjusted,
was $3.1 million comprised of $350,000 in cash and $3.3 million of Artera Group,
Inc. series A preferred stock with a stated value of $6.6 million (see Note 16).
This  preferred  stock was valued  based  upon 6%  convertible  notes  issued in
January 2001 (see Note 12). The  acquisition  was  accounted  for as a purchase,
resulting  in  initial   goodwill  of   approximately   $6.2  million  that  was
subsequently  written  off (see  Note 3).  On June 29,  2001,  the  terms of the
preferred  stock were modified as to $4.3 million  stated value of this stock to
allow  conversion  of the  preferred  stock into shares of NCT. As a result,  an
additional $3.9 million of  consideration  and goodwill was recorded as purchase
price that was  subsequently  written  off (see Note 3). A summary of the assets
acquired and liabilities assumed, at estimated fair market value, is as follows:

     (In thousands of dollars)

            Current assets                               $        484
            Property, plant and equipment                         467
            Goodwill                                           10,095
            Current liabilities                                (4,031)
            Other liabilities                                     (45)
                                                     -----------------
            Fair market value of acquired entity         $      6,970
                                                     =================

     On December 18, 2001, the Board of Directors of Artera Group  International
Limited decided to suspend  underperforming  operations and reduce the number of
employees.   On  March  21,  2002,  the  Board  of  Directors  of  Artera  Group
International Limited determined to cease operations (see Note 19).

     The results of  operations  of the acquired  entities are included in NCT's
consolidated  statements of operations from the respective dates of acquisition.
The pro forma results listed below are unaudited and reflect purchase accounting
adjustments  assuming the  acquisitions had occurred at each of the beginning of
the year acquired and the beginning of the  immediately  preceding year. For the
years ended 2001 and 2002, pro forma adjustments include additional amortization
expense  of $0.1  million  and zero,  respectively.  The pro forma  results

                                      F-7
<PAGE>


are presented for informational purposes only and are not necessarily indicative
of the future  results of operations of the company or the results of operations
of the company had the  acquisitions  occurred on January 1, 2001 and January 1,
2002.

     (Unaudited; in thousands of dollars, except per share data)

                                                   Years Ended December 31,
                                               ---------------------------------
                                                  2001 (a,b)      2002 (b)
                                                  ----------      ----------
Net revenue                                      $   10,859      $    7,319
Net loss                                            (78,025)        (40,105)
Loss attributable to common stockholders            (79,386)        (42,968)
Loss per common share - basic and diluted        $    (0.21)     $    (0.10)


Footnotes:
----------
(a)  Includes Artera Group International Limited acquisition.
(b)  Includes DMC NY  acquisition  that did not have any effect on the pro forma
     results.

3.   Summary of Significant Accounting Policies:

Basis of Presentation:

     The consolidated  financial  statements include the accounts of the company
and  its  majority-owned  subsidiaries  after  elimination  of  all  significant
intercompany   transactions   and   accounts.   We  include   losses   from  our
majority-owned   subsidiaries  in  our  consolidated  statements  of  operations
exclusive  of amounts  attributable  to  minority  shareholders'  common  equity
interests only up to the basis of such minority shareholders' interests.  Losses
in  excess  of that  amount  are  borne  by NCT.  Such  amounts  from  Pro  Tech
Communications,  Inc. ("Pro Tech"),  our 82% owned subsidiary,  borne by NCT for
the years ended  December  31, 2002 and 2003  amounted to $2.0  million and $0.2
million, respectively.  Future earnings of our majority-owned subsidiaries which
would  otherwise be  attributable  to minority  shareholders'  interests will be
allocated to minority  shareholders only after future earnings are sufficient to
recover  the  cumulative  losses  absorbed  by NCT in excess of NCT's  allocable
percentage  ($2.2  million  at  December  31,  2003).  Investments  in less than
majority-owned  affiliates  over which we  exercise  significant  influence  are
accounted for under the equity method.  All other  investments in affiliates are
carried at cost.

Estimates:

     The  preparation  of  financial   statements  and  related  disclosures  in
conformity with accounting principles generally accepted in the United States of
America  requires  management to make estimates and assumptions  that affect the
reported amounts of assets and liabilities,  the disclosure of contingent assets
and  liabilities  at the  date of the  financial  statements,  and  revenue  and
expenses  during the period  reported.  These  estimates  include  assessing the
collectibility of accounts receivable,  the use and recoverability of inventory,
useful  lives  for  depreciation  and  amortization   periods  of  tangible  and
intangible  assets  and the  assumptions  underlying  projections  of cash flows
regarding  testing for  impairment  of  long-lived  assets.  The markets for the
company's products and services are characterized by intense competition,  rapid
technological  development,  evolving  standards,  all of which could impact the
future  realizability  of the company's  assets.  Estimates and  assumptions are
reviewed  periodically  and the effects of revisions are reflected in the period
that they are determined to be necessary. Actual results could differ from those
estimates.

Reclassifications:

     Some amounts in prior years' financial statements have been reclassified to
conform to the current year's presentation.

Income Taxes:

     Deferred  income  taxes  are  provided  for the  tax  effect  of  temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for tax purposes.

Cash and cash equivalents:

     Cash and cash  equivalents  include  all  highly  liquid  investments  with
original maturities at acquisition of three months or less.

                                      F-8
<PAGE>


Revenue Recognition:

     Revenue is recognized when earned. Revenue from product sales is recognized
when the product is shipped and title has passed. Revenue from advertising sales
is recognized  when the  advertisements  are aired and  displayed.  Revenue from
engineering and development  services is generally  recognized and billed as the
services are performed.  However,  for some engineering and development services
contracts, revenue is recognized using the percentage of completion method after
10% of the total  estimated  costs have been  incurred.  Under the percentage of
completion method,  revenue and gross profit are recognized as work is performed
based on the  relationship  of actual costs incurred to total estimated costs at
completion.  Estimated  losses are  recorded  when  identified.  No revenue  was
recognized  under the  percentage  of  completion  method  for the  years  ended
December 31, 2001, 2002 and 2003.

     For  technology  licensing  fees  paid by  joint  venturers,  co-venturers,
strategic partners or other licensees which are fixed and determinable, accepted
by the customer and  nonrefundable,  revenue is recognized upon execution of the
license agreement unless it is subject to completion of any performance criteria
specified  within  the  agreement,  in  which  case it is  deferred  until  such
performance  criteria is met.  Royalties  are  frequently  required  pursuant to
license  agreements  or  may be  the  subject  of  separately  executed  royalty
agreements. Revenue from royalties is recognized ratably over the royalty period
based upon periodic reports submitted by the royalty obligor or based on minimum
royalty requirements.

Marketable Securities:

     Marketable  securities that are bought and held principally for the purpose
of selling them in the near-term are classified as trading  securities.  Trading
securities  are  recorded at fair value,  with the change in market value during
the period included in the statements of operations.

     Marketable  debt securities that NCT has the positive intent and ability to
hold to maturity are classified as  held-to-maturity  securities and recorded at
amortized cost. Securities not classified as either  held-to-maturity or trading
securities are classified as available-for-sale  securities.  Available-for-sale
securities  are recorded at market value except as described in Note 9, with the
change in market  value  during  the  period  excluded  from the  statements  of
operations unless it is occasioned by an  other-than-temporary  decline in value
and recorded net of income taxes as a separate component of stockholders' equity
(capital  deficit).  The company reviews declines in value of its portfolio when
general  market  conditions  change or  specific  information  pertaining  to an
industry or individual  company  becomes  available.  The factors  considered in
assessing whether a decline is other than temporary  include:  our evaluation of
the length of the time and the extent to which the market  value of the industry
has been  depressed or the market value of the security has been less than cost;
evaluation  of financial  condition  and  near-term  prospects of the  business,
including  cash  sufficiency  and  new  product   developments;   assessment  of
observable  marketplace-determined values and trends; and our intent and ability
to retain our  investment  in the business  for a  sufficient  period of time to
allow for any  anticipated  recovery in market  value.  At December 31, 2002 and
2003,   all  of  the   company's   marketable   securities   have  been   deemed
available-for-sale securities.

Derivative Instruments:

     Derivatives  are reported at their fair values at each  reporting date with
any gains or losses  reported in the  company's  statements of  operations.  Our
adoption of  Statement  of  Financial  Accounting  Standards  ("SFAS")  No. 138,
"Accounting for Certain Derivative  Instruments - an Amendment of SFAS No. 133,"
effective  January 1, 2001,  resulted in a $1.6 million charge that is reflected
as  cumulative  effect of change in  accounting  principle  on the  consolidated
statements of  operations  for the year ended  December 31, 2001.  For the years
ended December 31, 2001, 2002 and 2003, fair value charges of $1.4 million, $0.2
million and less than $0.1 million, respectively, are included in other (income)
expense,  net (see Note 18). As of December 31,  2003,  the company does not own
any derivative instruments.

Inventories:

     Inventories  are stated at the lower of cost or market.  Cost is determined
using the first-in,  first-out  (FIFO) method for the operations of Pro Tech and
is  determined  using the  average  cost method for all other  inventories.  NCT
assesses the realizability of inventories by periodically  conducting a physical
inventory  and  reviewing  the movement of  inventory to determine  the value of
items that are slow moving and obsolete.  The  potential  for near-term  product
engineering changes and/or technological  obsolescence and current realizability
are considered in determining  the adequacy of inventory  reserves.  At December
31, 2002 and 2003, the company's  inventory  reserves were $0.4 million and $0.3
million, respectively (see Note 7).

                                      F-9
<PAGE>


Property and Equipment:

     Property and  equipment are stated at cost.  Depreciation  is computed over
the estimated  useful lives of the  depreciable  assets using the  straight-line
method.  Leasehold  improvements  are  amortized  over the shorter of the useful
lives or the related lease term (see Note 8).

Deferred Charges:

     Deferred  charges,  included on the  consolidated  balance  sheets in other
assets,  primarily  represent  costs  related  to the  installation  of  digital
broadcast station systems at customer locations. Such installation costs consist
of labor costs  attributable to contractor  installation and outside  management
fees and benefit the future.  The company  amortizes such deferred  charges over
the lesser of the estimated  useful life or the life of the site  agreement.  In
the event a site is removed,  the unamortized  deferred charges relating to that
site are then  expensed  in full.  In each of 2001,  2002 and 2003,  the company
amortized   approximately  $0.1  million  of  deferred  charges  and  wrote  off
unamortized charges relating to removals of approximately zero, $0.1 million and
less than $0.1  million,  respectively,  included  in research  and  development
expenses on the consolidated statements of operations.  At December 31, 2002 and
2003, deferred charges were $0.4 million and $0.2 million, respectively.

Software Costs:

     It is our  policy  to  capitalize  costs in  connection  with the  internal
development  or  purchase of computer  software  products to be sold,  leased or
otherwise marketed after  technological  feasibility has been established.  When
software costs are capitalized,  they are included in property and equipment and
amortized  over the  products  estimated  useful  life.  During the years  ended
December 31, 2002 and 2003, no software costs were capitalized.

Goodwill and Intangible Assets with Indefinite Useful Lives:

     The  excess of the  consideration  paid over the fair  value of net  assets
(including  identifiable  intangibles)  acquired  in  business  combinations  is
recorded  as  goodwill.  Goodwill  is also  recorded  by the  company  upon  the
acquisition  of some or all of the  stock  held by  minority  shareholders  of a
subsidiary,  except  where such  accounting  is, in  substance,  the purchase of
licenses previously sold to such minority shareholders or their affiliates.

     NCT adopted SFAS No. 142, "Goodwill and Other Intangible Assets," effective
January  1,  2002.  Under  SFAS No.  142,  we  ceased  amortizing  goodwill  and
intangible  assets with indefinite  useful lives and test them for impairment at
least  annually  and whenever  there is an  impairment  indicator.  All acquired
goodwill and  intangible  assets with  indefinite  useful lives were assigned to
reporting  units (an  operating  segment or a component of an operating  segment
that  constitutes  a  business  for  which  discrete  financial  information  is
available)  for  purposes  of  impairment  testing and  segment  reporting.  Our
reporting  units with  goodwill  consist of NCT Hearing  and  Midcore  Software,
Inc./Artera Group,  Inc., both of which are within the communications  operating
segment and Advancel Logic Corporation within the technology  operating segment.
We have no intangible assets with indefinite useful lives. The carrying value of
our goodwill by operating segment follows:


     (In thousands of dollars)

                       Communications       Media     Technology
                         Segment           Segment      Segment        Total
                      ---------------   -----------  -------------  ------------
Balance as of
  January 1, 2003            $ 6,845       $     -          $ 339     $ 7,184
Goodwill acquired                  -             -              -           -
Impairment losses                  -             -              -           -
                      ---------------   -----------  -------------  ------------
Balance as of
  December 31, 2003          $ 6,845       $     -          $ 339     $ 7,184
                      ===============   ===========  =============  ============


     Goodwill impairment is evaluated at the reporting unit level, comparing the
carrying value of the reporting unit with its estimated fair value.  If the fair
value exceeds its carrying value,  no impairment is recognized.  If the carrying
value of the reporting  unit exceeds its fair value,  then the carrying value of
the  goodwill  is compared to the  implied  fair value of the  goodwill.  If the
implied fair value of the goodwill  exceeds its carrying value, no impairment is
recognized. If the carrying value of the goodwill exceeds its implied fair value
then  impairment  is  recognized  to the extent of the excess.  We recognized no
impairment  upon  adoption  of SFAS No.  142 with  respect to our  goodwill.  We
recognized  an impairment  charge from goodwill of $0.3 million  during the year
ended

                                      F-10
<PAGE>


December 31, 2002 in connection with the step acquisition of shares of NCT Audio
(see Note 16). Based on our  evaluation,  as of December 31, 2003, we determined
no impairment exists. If SFAS No. 142 had been in effect at January 1, 2001, the
adjusted net loss  attributable to common  stockholders and loss per share would
have been as follows:


     (In thousands of dollars, except per share amount)

<TABLE>
<CAPTION>

                                                                  For the Years Ended December 31,
                                                              ------------------------------------------
                                                                 2001           2002            2003
                                                              ------------   -----------    ------------
<S>                                                            <C>            <C>            <C>
Loss attributable to common stockholders before
 cumulative effect of change in accounting principle           $ (77,439)     $ (42,968)     $ (33,248)
Cumulative effect of change in accounting principle               (1,582)             -              -
Add back:  Goodwill amortization                                   1,691              -              -
                                                              ------------   -----------    ------------
Adjusted net loss attributable to common stockholders          $ (77,330)     $ (42,968)     $ (33,248)
                                                              ============   ===========    ============

Basic and diluted loss per share
Loss per share attributable to common stockholders before      $   (0.20)     $   (0.10)     $   (0.06)
 cumulative effect of change in accounting principle
Cumulative effect of change in accounting principle                (0.01)             -              -
Goodwill amortization                                               0.01              -              -
                                                              ------------   -----------    ------------
Adjusted loss per share                                        $   (0.20)     $   (0.10)     $   (0.06)
                                                              ============   ===========    ============
</TABLE>


     Prior to the  adoption  of SFAS No. 142 on January  1, 2002,  goodwill  was
mortized  using the  straight-line  method over the estimated  period of benefit
(ranging  from five to twenty  years).  Goodwill  amortization  expense was $1.7
million  for  2001.  We  also   evaluated  the  carrying  value  and  period  of
amortization of our goodwill at each balance sheet date. The factors used in the
evaluation  included:  current  operating  results,  projected  future operating
results,  and any other  material  factors  that  effect the  continuity  of the
business.  The company recognized impairment loss from goodwill of $14.1 million
(net of reduction in deferred revenue of $2.1 million) in 2001 (see Note 16). On
June 29, 2001, in connection  with additional  rights granted certain  preferred
shareholders  of Artera Group,  Inc.,  the  preferred  stock was recorded at its
stated value that resulted in additional  goodwill of $3.9 million.  On December
18, 2001, the Board of Directors of Artera Group  International  Limited decided
to suspend  underperforming  operations and reduce the number of employees. As a
result,  the $9.8  million  carrying  value of the  goodwill as of that date was
considered  fully impaired in accordance with SFAS No. 121,  "Accounting for the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets to be Disposed Of."
Further,  in December  2001,  NCT decided to cease the operations of DMC Cinema,
Inc. ("DMC Cinema") due to its inability to meet operating goals.  Consequently,
approximately $1.3 million consisting of the carrying value of $3.4 million, net
of  reduction  in  deferred  revenue  of $2.1  million,  was fully  impaired  in
accordance with SFAS No. 121.

Patent Rights and Other Intangible Assets with Finite Useful Lives:

     Under the guidelines in SFAS No. 142 and SFAS No. 144,  "Accounting for the
Impairment  or Disposal of  Long-Lived  Assets,"  intangible  assets with finite
lives are  tested for  impairment  whenever  events or changes in  circumstances
indicate that its carrying amount may not be  recoverable.  We are also required
to evaluate  the useful  lives each  reporting  period.  We test our  intangible
assets with finite useful lives for  impairment  by using the  estimated  future
cash flows directly  associated with, and that are expected to arise as a direct
result of, the use of the  intangible  asset.  We do so by projecting the future
estimated revenue and costs and comparing the resultant  undiscounted cash flows
to the carrying  amount of the intangible  asset. If the carrying amount exceeds
the undiscounted cash flows, an impairment may be indicated. The carrying amount
is then compared to the discounted cash flows,  and if there is an excess,  such
amount is recorded as an impairment.

     Patent  rights  and other  intangible  assets,  which  include  the cost to
acquire  rights to patents and other rights under  licenses,  are stated at cost
and are amortized using the  straight-line  method over the remaining  estimated
useful lives, ranging from one to seventeen years. Amortization expense was $0.4
million,  $0.5 million and $0.3 million for 2001,  2002 and 2003,  respectively.
Accumulated  amortization of patent rights and other intangible

                                      F-11
<PAGE>


assets  was $3.9  million  and $4.3  million  at  December  31,  2002 and  2003,
respectively.  The other  intangibles  subject to  amortization  are categorized
below with an estimate of the amortization expense for the next five years.

     (In thousands of dollars)
                                                 December 31, 2003
                                     -------------------------------------------
                                     Gross Carrying  Accumulated      Carrying
                                         Amount      Amortization       Value
                                     --------------  -------------  ------------

Amortized intangible assets
  Patents                              $     4,147     $  (3,837)      $    310
  Licensed technology                        1,332          (419)           913
                                     --------------  -------------  ------------
Total                                  $     5,479     $  (4,256)      $  1,223
                                     ==============  =============  ============


Estimated amortization expense for the years ending:
----------------------------------------------------
December 31, 2004                                         $ 222
December 31, 2005                                         $ 191
December 31, 2006                                         $ 191
December 31, 2007                                         $ 190
December 31, 2008                                         $ 186


     Prior to the  adoption  of SFAS No. 142, at each  balance  sheet date,  NCT
evaluated the period of amortization  of other  intangible  assets.  The factors
used in  evaluating  the  period  of  amortization  include:  current  operating
results,  anticipated future operating  results,  and any other material factors
that  effect the  continuity  of the  business.  Based on our  evaluation  as of
December 31, 2002, we  determined an impairment  was present with respect to the
license granted to Pro Tech. The resulting impairment charge to Pro Tech, on its
accounting records, was $11.5 million.  Upon consolidation of Pro Tech's results
of  operations  in our  financial  statements,  we recorded an impairment in the
carrying  value of other  intangible  assets with finite  lives of $2.1  million
representing  the  minority  shareholders'  portion  of this  impairment  in our
consolidated statement of operations for the year ended December 31, 2002. Based
on our evaluation as of December 31, 2003, we determined no impairment exists.

Other Assets:

     Other  long-lived  assets are reviewed for  impairment  whenever  events or
changes in  circumstances  indicate that the carrying amount of an asset may not
be  recoverable.  Recoverability  of assets to be held and used is measured by a
comparison of the carrying  amount of an asset to  undiscounted  future net cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying  amount or fair value less
the costs to sell the assets. There were no such impairments for the years ended
December 31, 2001, 2002 and 2003.

Advertising:

     Advertising    expenses    include    commissions   paid   to   advertising
representatives and agencies and are expensed as incurred.  Advertising expenses
for the years ended  December 31, 2001,  2002 and 2003 were $0.5  million,  $0.1
million and $0.1 million, respectively, and are included in selling, general and
administrative expenses.

Comprehensive Loss:

     The company  reports  comprehensive  loss in accordance  with SFAS No. 130,
"Reporting  Comprehensive  Income." The  provisions for SFAS No. 130 require the
company to report the changes in stockholders' equity (capital deficit) from all
sources  during the period other than those  resulting  from  investments by and
distributions  to  shareholders.  Accordingly,  the  consolidated  statements of
comprehensive  loss  are  presented,   while  the  caption   "accumulated  other
comprehensive income (loss)" is included on the consolidated balance sheets as a
component of stockholders' capital deficit. Due to availability of net operating
losses and the deferred tax benefit  resulting  therefrom  being fully reserved,
there is no tax effect  associated  with any  component  of other  comprehensive
loss. Comprehensive loss is comprised of net loss and other comprehensive income
(loss).   Other   comprehensive   income  (loss)  includes  certain  changes  in
stockholders'  equity  (capital  deficit)  that are  excluded  from net  income,
including unrealized gains and losses on our  available-for-sale  securities and
foreign currency translation adjustments.

                                      F-12
<PAGE>


Foreign Currency Translation:

     Local currencies are generally  considered the functional  currency for our
foreign subsidiaries.  The company translates its foreign assets and liabilities
at the exchange rates in effect at each balance sheet date. Revenue and expenses
are translated using average rates for the year. The resulting  foreign currency
translation  adjustments are included in accumulated other comprehensive  income
(loss) as a component of  stockholders'  equity (capital  deficit).  The foreign
currency   transaction  gains  and  losses  are  included  in  the  consolidated
statements of operations  and were not material for the years ended December 31,
2001, 2002 and 2003. The foreign currency translation adjustment of $0.6 million
for each of the years ended  December 31, 2002 and 2003 is related to our United
Kingdom operations.

Loss per Common Share:

     The company  reports loss per common share in accordance with SFAS No. 128,
"Earnings Per Share." The per share  effects of potential  common shares such as
warrants, options, convertible debt and convertible preferred stock, aggregating
2,778,065,174 shares, have not been included as the effect would be antidilutive
(see  Notes 12, 14 and 16).  During  the third  quarter  of 2003,  NCT  received
requests to exchange 6% convertible note principal  aggregating $0.5 million, or
11.1 million shares; requests to exchange Artera series A preferred stock stated
value of $1.5  million,  or 28.8 million  shares;  elections to receive  royalty
payments of $1.7 million due to the founding  stockholders of Midcore  Software,
Inc.  ("Midcore") in 34.2 million shares; and a request to fulfill the look back
provision  which is valued at zero (see  Note 15)  associated  with the  Midcore
acquisition  and issue 26.2 million shares of its common stock that it could not
fulfill  because the  requests  were in excess of the number of shares of common
stock currently  authorized.  As such, we have included 3,029,608 (the remaining
number  authorized)  of the 26.2  million  look back shares  issuable  under the
Midcore acquisition  agreement in our weighted average common shares outstanding
on the  accompanying  consolidated  statement of  operations  for the year ended
December 31, 2003 and in shares  payable on our  consolidated  balance  sheet at
December  31, 2003.  These shares  issuable  under the above  requests,  but not
included  in shares  payable as  described  have also not been  included  in the
calculation  of weighted  average  shares used in the net loss per share as such
inclusion would be anti-dilutive.

     However,  when  preferred  stock is  convertible  into  common  stock at an
effective  conversion  rate that  represents  a discount  from the common  stock
market  price at the time of  issuance,  the  discounted  amount  is an  assured
incremental yield, the "preferred stock dividend  requirement," to the preferred
shareholders  and  is  accounted  for  as  an  embedded  dividend  to  preferred
shareholders.  In addition,  when warrants are issued in  conjunction  with such
convertible securities, the fair value of warrants is determined by applying the
Black-Scholes  option pricing  model.  In accordance  with Emerging  Issues Task
Force  ("EITF") Issue No. 96-13,  as codified in EITF 00-19,  these warrants are
considered  permanent equity instruments since they may only be actually settled
with the  issuance  of the  company's  stock.  The  proceeds  received  from the
transaction  are  allocated in  accordance  with EITF 98-05 and EITF 00-27.  The
allocated fair value is deemed to be a "preferred stock  beneficial  conversion"
feature and is accounted for as a component of additional  paid-in capital.  The
company has reflected such  beneficial  conversion  feature and preferred  stock
dividend  requirement as a preferred  stock dividend and as an adjustment to the
net loss attributable to common stockholders (see Note 16).

Concentrations of Credit Risk:

     Financial   instruments,   which   potentially   subject   the  company  to
concentration  of credit risk,  consist of cash and cash  equivalents  and trade
receivables.  The company  maintains cash and cash  equivalents in accounts with
various  financial  institutions in amounts which, at times, may be in excess of
the FDIC insurance  limit.  The company has not  experienced  any losses on such
accounts and does not believe it is exposed to any significant risk with respect
to cash and cash equivalents.

     The company sells its products and services to  distributors  and end users
in  various   industries   worldwide.   The  company   regularly   assesses  the
realizability of accounts receivable and also takes into consideration the value
of past due accounts receivable and the collectibility of such receivables based
on credit worthiness.  The company does not require collateral or other security
to support  customer  receivables.  The  company's  preference is to collect its
receivables in cash. However,  from time to time,  receivables may be settled by
securities transferred to the company by the customer in lieu of cash payment.

Significant Customers:

     In each of the years  ended  December  31,  2001,  2002 and  2003,  revenue
derived  from  certain  customers  comprised  more than 10% of our  consolidated
revenue  ("significant  customers").  In 2001 and 2002,  we had two  significant
customers one of whom was our only  significant  customer in 2003.  One of these
customers  accounted

                                      F-13
<PAGE>


for $2.3  million  and $1.9  million of our  consolidated  revenue for the years
ended December 31, 2001 and 2002, respectively. The other customer accounted for
$1.6 million,  $2.1 million and $2.1 million of our consolidated revenue for the
years ended December 31, 2001, 2002 and 2003,  respectively.  As of December 31,
2002 and 2003, the company had no accounts  receivable due from its  significant
customers.

Fair Value of Financial Instruments:

     The company's  financial  instruments consist of cash and cash equivalents,
short-term  investments,   accounts  receivable,  other  receivables,   accounts
payable, accrued expenses, notes payable and other liabilities.  At December 31,
2002 and 2003, the fair value of these instruments  approximated  their carrying
value (carried at cost) because of the short maturity of the  instruments.  Fair
values of other  investments  classified as  available-for-sale  were  estimated
based on  market  prices.  The fair  value of  notes  payable  approximates  the
carrying  value  based on interest  rates that are  currently  available  to the
company for issuance of debt with similar  terms and remaining  maturities.  The
fair value of  convertible  notes payable to Carole  Salkind is not  objectively
determinable  due to the related  party  nature of these  instruments.  The face
value of convertible  notes held by Carole Salkind at December 31, 2002 and 2003
was $18.1  million and $33.8  million,  respectively.  At December  31, 2002 and
2003,  these  outstanding  notes were  convertible  into 281.8 million and 857.5
million  shares,  respectively,  of NCT common  stock with a fair value of $12.1
million and $34.3 million, respectively.

Stock-Based Compensation:

     The company has adopted the  disclosure  only  provisions  of SFAS No. 123,
"Accounting  for  Stock-Based   Compensation,"  as  amended  by  SFAS  No.  148,
"Accounting  for  Stock-Based  Compensation  - Transition and  Disclosure,"  and
continues  to  apply  Accounting   Principles  Board  ("APB")  Opinion  No.  25,
"Accounting  for Stock  Issued to  Employees,"  and related  interpretations  in
accounting  for  its  stock-based  compensation  plans.  Under  APB No.  25,  no
compensation  costs are  recognized if the option  exercise price is equal to or
greater than the fair market price of the common stock on the date of the grant.
Under  SFAS  No.  123,  stock  options  are  valued  at  grant  date  using  the
Black-Scholes option pricing model and compensation costs are recognized ratably
over the vesting period. No stock-based employee  compensation cost is reflected
in our net loss  attributable to common  stockholders,  as options granted under
our plans have an exercise  price equal to or greater  than the market  value of
the underlying  common stock on the date of grant. Had  compensation  costs been
determined as prescribed by SFAS No. 123, the company's net loss attributable to
common stockholders and net loss per share would have been the pro forma amounts
indicated below:

     (In thousands of dollars, except per share amounts)


<TABLE>
<CAPTION>

                                                                        For the Years Ended December 31,
                                                            --------------------------------------------------------
                                                                  2001                2002               2003
                                                            -----------------   -----------------  -----------------

<S>                                                            <C>                 <C>                 <C>
Net loss attributable to common stockholders                   $  (79,021)         $ (42,968)          $ (33,248)
Total stock-based employee compensation
  expense determined under fair value based
  method for all awards, net of related tax effects                (1,701)            (1,696)             (1,077)
                                                            -----------------   -----------------  -----------------
Pro forma net loss attributable to common stockholders         $  (80,722)         $ (44,664)          $ (34,325)
                                                            =================   =================  =================
Net loss per common share (basic and diluted):
   As reported                                                 $    (0.21)         $   (0.10)          $   (0.06)
                                                            =================   =================  =================
   Pro forma                                                   $    (0.21)         $   (0.10)          $   (0.06)
                                                            =================   =================  =================

</TABLE>

     The  weighted-average  fair  values  at date of grant for  options  granted
during 2001, 2002 and 2003 were $0.07, $0.06 and $0.04,  respectively,  and were
estimated  using the  Black-Scholes  option  pricing  model  with the  following
weighted-average assumptions:

                                     Years ended December 31,
                        --------------------------------------------------------
                              2001              2002            2003
                              ----              ----            ----
Expected life in years             3               3.5           3.5
Interest rate             3.27%-5.41%       2.50%-3.61%         2.25%
Volatility                       100%              100%          100%
Dividend yield                     0%                0%            0%

                                      F-14
<PAGE>


Recent Accounting Pronouncements:

     In April 2002, the Financial  Accounting  Standards  Board ("FASB")  issued
SFAS No. 145,  "Rescission of FASB  Statements  No. 4, 44, and 64,  Amendment of
FASB Statement No. 13, and Technical  Corrections." The rescinded SFAS No. 4 had
required all gains and losses from extinguishments of debt to be aggregated and,
if material,  classified as an  extraordinary  item,  net of related  income tax
effect.  Upon  adoption of SFAS No.  145,  companies  are  required to apply the
criteria in APB Opinion No. 30, "Reporting the Results of Operations - Reporting
the Effects of Disposal of a Segment of a Business,  and Extraordinary,  Unusual
and  Infrequently   Occurring  Events  and  Transactions,"  in  determining  the
classification of gains and losses resulting from the  extinguishments  of debt.
We adopted this  statement on January 1, 2003.  The adoption of SFAS No. 145 did
not have a material impact on our results of operations or financial position.

     In June  2002,  the  FASB  issued  SFAS  No.  146,  "Accounting  for  Costs
Associated with Exit or Disposal Activities." SFAS No. 146 requires companies to
recognize costs associated with exit or disposal  activities at their fair value
when a liability has been incurred. Under previous guidance,  certain exit costs
were accrued at the date of management's commitment to an exit or disposal plan.
We adopted this  statement on January 1, 2003.  The adoption of SFAS No. 146 did
not have a material impact on our results of operations or financial position.

     In  November  2002,  the FASB issued FASB  Interpretation  No.  ("FIN") 45,
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect   Guarantees  of  Indebtedness  of  Others,"  in  its  entirety.   Such
Interpretation elaborates on the disclosures to be made by a guarantor about its
obligations under certain  guarantees issued. It also clarifies that a guarantor
is required to  recognize,  at the  inception  of certain  guarantees  issued or
modified  after  December  31,  2002,  a  liability  for the  fair  value of the
obligation  undertaken in issuing the  guarantee.  We adopted this  statement on
January 1, 2003.  The  adoption of FIN 45 did not have a material  impact on our
results of operations or financial position.

     On January 17,  2003,  the FASB issued FIN 46,  "Consolidation  of Variable
Interest  Entities." On December 24, 2003,  the FASB issued FIN 46 Revised ("FIN
46R") which clarifies certain  complexities of FIN 46. The primary objectives of
FIN 46 are to provide  guidance  on the  identification  of  entities  for which
control is achieved  through means other than through  voting rights  ("variable
interest  entities"  or "VIEs")  and how to  determine  when and which  business
enterprise  should  consolidate  the  VIE  (the  "primary  beneficiary").   This
interpretation of Accounting  Research Bulletin 51 for consolidation  applies to
an  entity  in which  either  (1) the  equity  investors  (if any) do not have a
controlling  financial  interest  or  (2)  the  equity  investment  at  risk  is
insufficient to finance that entity's  activities  without receiving  additional
subordinated  financial support from other parties. In addition, FIN 46 requires
that both the primary  beneficiary and all other  enterprises with a significant
variable  interest  in a VIE  make  additional  disclosures.  A  company  with a
variable  interest in a VIE must disclose certain  information.  A public entity
must  apply  the  provisions  of FIN 46R no  later  than  the  end of the  first
reporting  period that ends after March 31, 2004. We believe the adoption of FIN
46 will not have an impact on our results of operations or financial position.

     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative  Instruments and Hedging  Activities."  SFAS No. 149 clarifies when a
contract meets the characteristics of a derivative,  clarifies when a derivative
contains a financing component and amends certain other existing pronouncements.
We adopted this  statement on July 1, 2003. The adoption of SFAS No. 149 did not
have a material impact on our results of operations or financial position.

     In May  2003,  the  FASB  issued  SFAS No.  150,  "Accounting  for  Certain
Financial Instruments with Characteristics of both Liabilities and Equity." SFAS
No. 150 requires certain  financial  instruments that embody  obligations of the
issuer and have  characteristics of both liabilities and equity to be classified
as  liabilities.  The  provisions  of SFAS No. 150 are  effective  for financial
instruments  entered  into or  modified  after  May 31,  2003  and to all  other
instruments  that  exist as of the  beginning  of the  first  interim  financial
reporting  period  commencing  after June 15, 2003.  Effective  July 1, 2003, we
adopted  SFAS No. 150 and the effect on our  consolidated  balance  sheet was as
follows:   a  $0.6  million  decrease  in  minority   interest  in  consolidated
subsidiaries,  a $0.1 million decrease in additional  paid-in capital and a $0.7
million increase in current liabilities (see Note 14).

4.   Strategic Relationships:

     NCT has entered into  agreements to establish  joint ventures and strategic
alliances  related  to  the  design,  development,  manufacture,  marketing  and
distribution of its  technologies  and products  containing  such  technologies.
These agreements  generally provide that NCT license technology and contribute a
nominal  amount  of  initial   capital  and  that  the  other  parties   provide
substantially all of the funding to support the venture or alliance.

                                      F-15
<PAGE>


The  support  funding  may  include  amounts  paid  or  services   rendered  for
engineering  and  development.  In exchange for this funding,  the other parties
generally  receive a preference in the  distribution of cash and/or profits from
the joint  ventures or royalties from these  alliances  until such time that the
support  funding (plus an interest  factor in some  instances) is recovered.  At
December 31, 2002 and 2003, there were no preferred  distributions  due to joint
venture partners from future profits of the joint ventures.

     Technology  licensing fees and engineering and development services paid to
the company in  connection  with joint  ventures  are recorded as revenue to the
extent appropriate in accordance with the company's revenue  recognition policy.
Total revenue recorded by the company relating to these strategic  relationships
for  technology  licensing  fees  and  royalties,  engineering  and  development
services and product sales was as follows:

     (In thousands of dollars)

                                           For the Years Ended December 31,
                                   ---------------------------------------------
                                        2001          2002            2003
                                   -------------   -------------  --------------
New Transducers Ltd.                $   1,605       $   2,140      $   2,140
Oki Electric Industry Co., Ltd            219             402            366
Ultra Electronics, Ltd.                   114              19              5
Infinite Technology Corporation         1,028               -              -
                                   -------------   -------------  --------------
   Total                            $   2,966       $   2,561      $   2,511
                                   =============   =============  ==============

     Outlined below is a summary of the nature and terms of the above  strategic
relationships:

     New  Transducers  Ltd.  ("NXT"),  a  wholly-owned  subsidiary  of  NXT  plc
(formerly, Verity Group plc). On March 30, 2001, NXT plc, NXT, NCT Audio and the
company entered into several  agreements  terminating  previous  agreements from
1997 to 1999.  Under the new agreements,  NCT received 2.0 million  ordinary NXT
plc shares in  consideration  for the  cancellation of the 6% royalty payable by
NXT to NCT Audio.  The NXT plc shares issued had a value of  approximately  $9.2
million. Additionally, ownership of certain intellectual property, the rights to
which had been  previously  granted  to NXT,  was  transferred  to NXT.  NXT has
licensed  NCT and  its  subsidiaries  with  certain  NXT  and all  NCT-developed
intellectual property. NXT is to design a low-cost flat panel speaker for use by
DMC. A side letter with NXT was entered into on or about March 30, 2001, whereby
NCT agreed to pay NXT $0.6  million as a  non-refundable  design fee  related to
Gekko(TM)  loudspeakers.  The design fee was a prepayment of royalties due under
the four-year term of this side letter.  We offset the $9.2 million  license fee
due NCT with the $0.6 million  design fee owed to NXT  resulting in $8.6 million
of deferred  revenue.  The deferred  revenue  balance is being  recognized  on a
straight-line basis over the specific performance period of four years (see Note
13). In addition, NXT transferred its 4.8% equity holding in NCT Audio to NCT in
settlement of the exercise price  otherwise  payable upon exercise of the option
that NXT had on 3,850,000  shares of our common stock (see Note 16). We sold the
2.0 million NXT plc shares during the year ended December 31, 2001 for aggregate
proceeds of $6.9 million and realized a net loss of $2.3 million included in our
statements of operations (see Note 18).

     Oki Electric Industry Co., Ltd.  ("Oki").  In October 1997, the company and
Oki  executed  a license  agreement.  Under the  terms of the  agreement,  which
included an up-front license fee and future per unit royalties, Oki licensed the
company's  ClearSpeech(R)  noise  cancellation  algorithm for  integration  into
large-scale integrated circuits for communications applications. The company has
granted Oki the right to manufacture,  use and sell products  incorporating  the
algorithm. The company recognized $0.2 million, $0.4 million and $0.4 million in
royalty revenue in 2001, 2002 and 2003, respectively.

     Ultra Electronics Ltd. ("Ultra")  (formerly Dowty Maritime Limited) and the
company entered into a teaming  agreement in May 1993 and  subsequently  amended
such agreement and entered into a licensing and royalty agreement  commencing in
1998.  Such  teaming  agreement  calls  for  the  collaboration  on the  design,
manufacture  and  installation  of  products  to reduce  noise in the  cabins of
various  types of  aircraft.  In  accordance  with the  agreement,  the  company
provided  informational  and  technical  assistance  relating  to  the  aircraft
quieting  system and Ultra  reimbursed  the  company  for  expenses  incurred in
connection  with such  assistance.  Ultra was  responsible for the marketing and
sales  of  the  products.  The  company  was to  supply  Ultra  with  electronic
components  required for the aircraft  quieting system, at a defined cost, to be
paid by Ultra.  Such  licensing  and  royalty  agreement,  among  other  things,
included  a future  royalty  of 1.5% of sales  commencing  in  1998.  Under  the
agreement,  Ultra also acquired the company's active aircraft  quieting business
based in  Cambridge,  England,  leased a portion of the  Cambridge  facility and
employed  some of the  company's  employees.  The company  recognized  $114,000,
$19,000 and $5,000 in royalty revenue in 2001, 2002 and 2003, respectively.

                                      F-16
<PAGE>


     Infinite  Technology  Corporation  ("ITC").  On May  8,  2000,  as  amended
effective June 30, 2000, Advancel Logic Corporation  ("Advancel") entered into a
license agreement with ITC. Under the agreement,  Advancel granted ITC exclusive
rights to create,  make,  market,  sell and license  products  and  intellectual
property based upon  Advancel's  Java(TM)  Turbo-JTM  technology.  Advancel also
granted ITC  non-exclusive  rights to  Advancel's  Java(TM)  smartcard  core. In
consideration for this license, the company received 1.2 million shares of ITC's
common  stock valued at $6.0  million  determined  using the quoted price of the
stock on the date the shares were received and on-going unit royalties. With the
exception of specific rights granted to  STMicroelectronics in 1998, the license
granted ITC an exclusive,  irrevocable  worldwide license to design,  make, use,
transfer,  market and sell products and intellectual  property  incorporating or
based upon Advancel's TJ and t2J technology.

     Effective June 30, 2000, in conjunction with this license  agreement,  NCT,
Advancel and ITC entered into a strategic  alliance and  technology  development
amendment pursuant to which NCT would fund research and engineering  development
related to microprocessor  and  semiconductor  chips for which the company would
pay ITC $2.5 million.  The company issued  9,523,810  shares of its common stock
having a market value of $3.0 million to ITC as prepaid research and engineering
costs.  In the event ITC did not receive $2.5 million in proceeds  from the sale
of NCT shares,  NCT was  required to make up any  shortfall in cash or return to
ITC a  sufficient  number  of ITC  shares  of common  stock  received  by NCT as
outlined above.  The value NCT would receive upon return of the ITC shares would
be the agreed value of $5.00 per share,  the market value of the ITC shares when
NCT received them. Conversely, if ITC received $2.5 million in proceeds from the
sale of NCT shares and there were NCT shares remaining, ITC would have to return
the unsold  share  excess to NCT.  At each of December  31,  2002 and 2003,  the
shortfall  based  upon  the  sales of our  common  stock  reported  to us by ITC
amounted to $1.4 million,  included in other  liabilities.  Although the license
agreement and the strategic alliance and technology development amendment,  both
with ITC,  are  separate  and  unrelated,  we  determined  that  they  should be
accounted for as a single  transaction,  thus,  both agreements are combined for
financial reporting  purposes.  Prepaid research and engineering costs have been
recognized in expense as these  services are performed by ITC.  These costs were
billed by ITC based on the  number of hours  spent by ITC  personnel  developing
this chip during each period. In addition,  the company  recognized  license fee
revenue in amounts to match the research and engineering expense recognized. The
strategic  alliance  and  technology  development  amendment  does  not  have  a
definitive  expiration  date.  For the year ended December 31, 2001, the company
recognized  $1.0 million of license fee revenue and $1.0 million of research and
engineering  expenses which  represented  research and engineering  performed by
ITC. For each of the years ended December 31, 2002 and 2003, the company did not
recognize  license fee revenue or research and engineering  expenses  related to
ITC.

5.   Marketable Securities:

     Investment in marketable securities comprises available-for-sale securities
at fair market value. The following table sets forth the market value,  carrying
value,  and  realized  and  unrealized  gain  (loss)  of our  available-for-sale
securities:


     (In thousands of dollars)

(In thousands of dollars)
<TABLE>
<CAPTION>

             Cost                                Market      Adjusted                      Market
             Basis     Realized   Unrealized     Value       Cost Basis   Unrealized       Value
           01/01/02      Loss        Loss       12/31/02     01/01/03     Gain (Loss)     12/31/03
           --------  ----------- -----------  -----------   ---------     -----------    ---------
<S>         <C>       <C>         <C>           <C>          <C>           <C>            <C>
ITC         $ 798     $  (689)    $   (15)      $   94       $   94        $   (56)       $  38
Teltran        84         (76)          -            8            8              3           11
           --------  ----------- -----------  -----------   ---------     -----------    ---------
Totals      $ 882     $  (765)    $   (15)      $  102       $  102        $   (53)       $  49
           ========  =========== ===========  ===========   =========     ===========    =========
</TABLE>

     On October 26, 2000, Midcore executed a license agreement with Teltran. The
license  agreement  expires when patent or other rights expire under  applicable
law unless  terminated  earlier by written  agreement.  As consideration for the
license,  Teltran  agreed to issue Midcore 2.8 million  shares of Teltran common
stock and a warrant to purchase 6.0 million  shares of Teltran  common stock for
$0.125 per share as a  non-refundable  up-front license fee. At that time, these
shares represented  approximately 12% ownership interest in Teltran.  The shares
underlying the warrant represent  beneficial ownership of approximately 23%. The
warrant was valued using the Black-Scholes  option pricing model resulting in an
aggregate  fair value of $3.1 million.  The Teltran shares were valued at market
based upon the October 26, 2000  agreement  date at an  aggregate  value of $1.5
million. Teltran agreed to register the issued common stock and the common stock
underlying  the warrant on or before June 26,  2001.  As of December  31,  2003,
Teltran had not fulfilled its  registration  obligation.  The warrant expired on
October 26, 2003. Teltran was required to pay an ongoing,  per unit royalty. The
adoption of SFAS No. 138

                                      F-17
<PAGE>


effective January 1, 2001, resulted in a reduction to the carrying value of this
warrant  of  approximately  $1.6  million,  and that  charge  is  classified  as
cumulative  effect  of  change  in  accounting  principle  on  the  consolidated
statements of  operations.  During the years ended  December 31, 2001,  2002 and
2003, the company  recorded a loss of the carrying  amount of this derivative of
$1.4 million,  $0.2 million and less than $0.1 million,  respectively  (see Note
18).  Effective  January 10, 2001,  the date the 2.8 million  common shares were
issued,  the company  accounted for its investment in Teltran's  common stock in
accordance with SFAS No. 115,  "Accounting  for Certain  Investments in Debt and
Equity Securities."

     The company reviews declines in the value of its investment  portfolio when
general  market  conditions  change or  specific  information  pertaining  to an
industry or an individual company becomes available. NCT considers all available
evidence to evaluate the realizable  value of its  investments  and to determine
whether the decline in realizable value may be  other-than-temporary,  including
observable   marketplace-determined  values  and  trends  and  company  specific
developments  and cash  viability  prospects  among others.  For the years ended
December  31,  2001  and  2002,  the  company  recorded  impairment  charges  of
approximately  $7.0  million  and  $0.8  million,   respectively,   representing
other-than-temporary  declines in the value of marketable  securities  (see Note
18). At December 31, 2003, a net unrealized  loss of $0.1 million is included on
the consolidated balance sheet as part of accumulated other comprehensive income
(loss).


6.   Accounts Receivable:

     (In thousands of dollars)

                                                          December 31,
                                                 -------------------------------
                                                      2002             2003
                                                 --------------    -------------
Technology license fees and royalties             $       268       $      278
Joint ventures and affiliates                              34               34
Other receivables                                         283              284
                                                 --------------    -------------
                                                  $       585       $      596
Allowance for doubtful accounts                          (340)            (341)
                                                 --------------    -------------
     Accounts receivable, net                     $       245       $      255
                                                 ==============    =============


7.   Inventories:

     (In thousands of dollars)

                                                          December 31,
                                                 -------------------------------
                                                      2002             2003
                                                 --------------    -------------
Finished goods                                    $       799       $      588
Components                                                227              203
                                                 --------------    -------------
                                                  $     1,026       $      791
Reserve for obsolete and slow moving inventory           (404)            (282)
                                                 --------------    -------------
     Inventories, net                             $       622       $      509
                                                 ==============    =============


     At  December  31, 2002 and 2003,  net  inventories  determined  by the FIFO
method were $593 and $494,  respectively,  and net inventories determined by the
average cost method were $29 and $15, respectively. The reserve is primarily for
finished  goods at  December  31,  2002 and  2003.  The  reduction  in  reserves
primarily represents the sale of related inventory.

                                      F-18
<PAGE>


8.   Property and Equipment:

     (In thousands of dollars)

                                                          December 31,
                                                 -------------------------------
                                                      2002             2003
                                                 --------------    -------------
Machinery and equipment                           $     2,027       $    1,210
Furniture and fixtures                                    642              622
Leasehold improvements                                    972              392
Tooling                                                   631              632
Other                                                     478              429
                                                 -------------     -------------
                                                  $     4,750       $    3,285
Accumulated depreciation                               (3,796)          (2,644)
                                                 -------------     -------------
     Property and equipment, net                  $       954       $      641
                                                 ==============    =============


     Depreciation  expense for the years ended December 31, 2001,  2002 and 2003
was $0.9 million, $0.9 million and $0.4 million, respectively.

9.   Other Assets:

     (In thousands of dollars)

                                                          December 31,
                                                 -------------------------------
                                                      2002             2003
                                                 --------------    -------------

Notes receivable                                  $     1,000       $    1,000
Due from officers (Note 21)                               108              138
Other                                                     250              172
                                                 --------------    -------------
                                                  $     1,358       $    1,310
Reserve for uncollectible amounts (a)                  (1,000)          (1,000)
                                                 --------------    -------------
     Other current assets                         $       358       $      310
                                                 ==============    =============

Marketable ITC securities (b)                     $     1,320       $    1,320
Advances and deposits                                      75               73
Deferred charges                                          353              223
Due from officer                                           31                -
                                                 --------------    -------------
     Other assets (classified as long term)       $     1,779       $    1,616
                                                 ==============    =============


Footnotes:
----------
(a)  On January 9, 2001,  Artera  Group,  Inc.  accepted  an  aggregate  of $1.0
     million of non-recourse,  non-interest bearing notes receivable due January
     2, 2002, as partial consideration for its January 9, 2001 convertible notes
     payable to six accredited investors. The company fully reserved such amount
     in 2001 (see Notes 12 and 18). As of December 31, 2002 and 2003,  the notes
     remain unpaid.
(b)  Valued at agreed amount of $5.00 per share  returnable to ITC in settlement
     of obligation (see Note 15) at December 31, 2002 and 2003. The market value
     of these shares at December 31, 2002 and 2003 had they not been  returnable
     in  settlement of the  obligation  would be $0.1 million and less than $0.1
     million, respectively.

                                      F-19
<PAGE>


10.  Accrued Expenses:

     (In thousand of dollars)


                                                     December 31,
                                           --------------------------------
                                                2002              2003
                                           --------------    --------------
Non-registration fees                       $    7,005        $    3,147
Interest                                         1,405             1,484
Interest due to a related party                    809               818
Judgments                                        2,124             2,072
Default penalties due to a related party           288                 -
Consulting fees due to a related party             145               310
Incentive compensation due to officers             335               927
Other                                            4,805             5,041
                                           --------------    --------------
   Accrued Expenses                         $   16,916        $   13,799
                                           ==============    ==============

11.  Notes Payable:


<TABLE>
<CAPTION>

     (In thousands of dollars)
                                                                                                December 31,
                                                                                      ---------------------------------
                                                                                           2002              2003
                                                                                      ---------------   ---------------
<S>                                                                                       <C>               <C>
Logical eBusiness Solutions Limited (f/k/a DataTec) (a)                                   $ 2,414           $ 2,679
    Obligation of subsidiary to a prior owner of Web Factory;
    past due; payable in 1,500,000 British Pounds Sterling;
    interest accrues at 4% per annum above the base rate
    of National Westminister Bank plc (see Note 19).
Note due investor                                                                             385               385
    Interest at 8% per annum payable at maturity;  effective interest rate
    of 80.3% per annum resulting from the issuance of warrants and finders fees;
    matured April 7, 2003 (a); default interest accrues at 18% per annum.
Note due stockholder of subsidiary                                                            171               142
    Interest at 8.5% per annum; monthly payments (including interest)
    of $3.5 through May 2003, remainder matured June 27, 2003.
    Remainder rolled into note bearing interest at 8.5% per annum; monthly
    payments (including interest) of $3.5 through May 2004, remainder
    matures June 27, 2004.
Top Source Automotive                                                                         204                 -
    Default interest rate accrued at two times prime;
    included in settlement.
Notes due former employees                                                                    116               100
    $100 bears interest at 8.25% per annum, compounded annually;
    past due (a).   Remainder bore interest at 12% per annum, due on demand.
Other financings                                                                              284                97
    Interest ranging from 7% to 9% per annum;  $220 matured
    November 1, 2002 (a); $35 due July 15, 2003; $29 all other.
    Interest ranging from 7% to 9% per annum;
    $35 due July 15, 2003 (a); $62 all other.
                                                                                      ---------------   ---------------
                                                                                          $ 3,574           $ 3,403
Less: unamortized debt discounts                                                              (34)                -
                                                                                      ---------------   ---------------
                                                                                          $ 3,540           $ 3,403
                                                                                      ===============   ===============
</TABLE>

Footnote:
---------
(a) Notes payable in default due to nonpayment.

                                      F-20
<PAGE>


     On August 14,  1998,  NCT Audio,  a  majority-owned  subsidiary,  agreed to
acquire substantially all of the assets of Top Source Automotive,  Inc. ("TSA"),
an automotive audio system supplier and a subsidiary of Top Source Technologies,
Inc. ("TST").  In connection  therewith,  NCT Audio paid TST $3.5 million. On or
about July 15, 1999, NCT Audio determined it would not proceed with the purchase
of the assets of TSA, as structured,  due primarily to its difficulty in raising
the  requisite  cash  consideration.  Consequently,  NCT Audio  reduced  its net
investment in TSA to $1.5 million,  representing its 15% minority interest,  net
of penalties,  and recorded a $2.4 million  charge in the quarter ended June 30,
1999 for the write-down of its investment to its estimated net realizable value.
On September 30, 1999, Onkyo America  purchased  substantially all of the assets
of TSA and defined assets of TST used in TSA's operations. NCT Audio is claiming
and seeks its pro rata share of the  consideration  paid by Onkyo America,  less
the penalties.  The amount which TST and TSA owed NCT Audio was in dispute,  and
receipt  of the  funds  by NCT  Audio  was  contingent  on  the  outcome  of the
bankruptcy  proceedings  of TST and TSA.  In  December  2001,  NCT  reduced  its
investment  to zero as a result of the  bankruptcy  filing of TST, TSA and their
corporate  affiliates and recorded a charge of $1.5 million which is included in
write  downs  of  investment  and  repurchased   licenses  in  the  consolidated
statements of operations.

     In the bankruptcy case of Global Technovations,  Inc. (GTI) (formerly known
as Top Source  Technologies,  Inc.) and its  subsidiary  Top Source  Automotive,
Inc.),  on February 18, 2003, the  bankruptcy  court approved an amended Plan of
Reorganization and Disclosure Statement. Pursuant to the amended Plan, NCT Audio
Products,  Inc.  (i) was  granted  a  release  from  all  claims  of GTI and TSA
(including NCT Audio's alleged  obligations  under a $204,000  principal  amount
note due April 16,  1999 and its  alleged  obligation  to issue  $100,000 of its
preferred  stock under an agreement with TST);  (ii) received  $125,000 from the
bankruptcy  estate on March 25, 2003; (iii) has an uncontested claim against the
bankruptcy  estate for  $1,500,000;  and (iv)  released  the  debtors  and their
officers and directors from all claims other than the claim  described in clause
(iii)  above.  In  connection  with the  settlement,  we  recorded  income  from
litigation  settlement  of $429,000  (consisting  of $125,000  cash received and
release of obligations to: (a) repay a note for $204,000 and (b) issue preferred
stock for $100,000) included in non-operating other (income) expense, net on the
consolidated  statement of operations  for the year ended December 31, 2003 (see
Note 18).  There can be no assurance that NCT Audio will realize any amount from
(iii) above.


12.  Convertible Notes Payable:

<TABLE>
<CAPTION>

     (In thousands of dollars)
                                                                                               December 31,
                                                                                     ---------------------------------
                                                                                          2002              2003
Related Party Convertible Notes:                                                     ---------------   ---------------
<S>                                                    <C>                             <C>               <C>
Issued to Carole Salkind - related party (a) (see Note 21)                             $  18,064         $  33,824
Weighted average effective interest rate of 55.5% per annum; accrues
interest 8% per annum; collateralized by substantially all of the
assets of NCT; convertible into NCT common stock at prices ranging
from $0.029 - $0.055 or exchangeable for common stock of NCT
subsidiaries except for Pro Tech; maturing by quarter as follows:
                                   2002            2003
                               -------------    ------------
     On demand                   $      -         $   3,050
     March 31                       4,059            11,163
     June 30                        3,538            19,611
     September 30                   6,185
     December 31                    4,282
Less: unamortized debt discounts                                                          (3,858)           (5,174)
                                                                                     ---------------   ---------------
                                                                                       $  14,206         $  28,650
                                                                                     ===============   ===============
</TABLE>

                                      F-21
<PAGE>


<TABLE>
<CAPTION>

     (In thousands of dollars)
                                                                                                December 31,
                                                                                      ---------------------------------
                                                                                           2002              2003
Convertible Notes:                                                                    ---------------   ---------------
<C>                                                                                     <C>               <C>
8% Convertible Notes (b)                                                                $    976          $   1,651
Weighted average effective interest rate of 20.6% per annum;
convertible into NCT common stock at various rates; matures:
                                   2002             2003
                               -------------    ------------
     March 14, 2002                $     17        $     17
     April 12, 2002                       9               9
     January 10, 2004                   550             550
     March 11, 2004                     400             400
     April 22, 2005                                     235
     September 4, 2005                                  440

6% Convertible Notes (c)                                                                   4,228              2,474
Weighted average effective interest rate of 85.8% per annum;
convertible into NCT common stock at 100% of the five-day average
closing bid price preceding conversion; past due:
                                   2002             2003
                               -------------    ------------
     January 9, 2002               $  2,022        $    818
     April 4, 2002                      875             325
     May 25, 2002                        81              81
     June 29, 2002                    1,250           1,250
                                                                                      ---------------   ---------------
                                                                                        $  5,204          $   4,125
Less: unamortized debt discounts                                                            (171)               (12)
Less: amounts classified as long term                                                       (779)              (675)
                                                                                      ---------------   ---------------
                                                                                        $  4,254          $   3,438
                                                                                      ===============   ===============
</TABLE>


Footnotes:
----------
(a)  NCT has issued convertible notes collateralized by substantially all of the
     assets of NCT to  Carole  Salkind,  a  stockholder  and  spouse of a former
     director of NCT, since 1999.  During 2002, NCT issued an aggregate of $19.6
     million of convertible  notes as consideration for $9.6 million of cash and
     rollover  of $8.5  million  in  principal  for  matured  convertible  notes
     (includes all of the notes  outstanding at December 31, 2001), $0.6 million
     of  interest,  and $0.9 million of default  penalties.  We paid one note in
     2002 of approximately $0.3 million. We recorded original issue discounts of
     $2.8 million to the notes based upon the  relative  fair values of the debt
     and warrants granted to Ms. Salkind (see Note 17). We recorded discounts of
     $1.6 million for warrants issued as consideration  for irrevocable  waivers
     relating to Pro Tech common  stock  whereby the original  instrument  was a
     convertible  note or warrant issued in conjunction  with a convertible note
     (see Note 17). In addition,  beneficial  conversion  features totaling $3.1
     million have been recorded as a discount to the notes.  These discounts are
     being amortized over the term of the related notes. During 2003, NCT issued
     an aggregate of $41.7 million of  convertible  notes as  consideration  for
     $10.4  million of cash,  rollover of $23.9 million in principal for matured
     convertible  notes  (includes all of the notes  outstanding at December 31,
     2002) and $3.1 million for  convertible  notes  consolidated  in advance of
     maturity,  $1.9 million of interest, and $2.4 million of default penalties.
     We recorded  original  issue  discounts  of $4.8 million to the notes based
     upon the  relative  fair  values of the debt and  warrants  granted  to Ms.
     Salkind  (see  Note  17).  We  recorded   discounts  of  $1.0  million  for
     consideration  related  to  the  consolidation  of  convertible  notes.  In
     addition,  beneficial  conversion  features totaling $6.0 million have been
     recorded as a discount to the notes.  These  discounts are being  amortized
     over the term of the related notes.  For the years ended December 31, 2001,
     2002 and 2003,  respectively,  $1.1 million, $4.9 million and $10.5 million
     of  amortization  related to these  discounts  is  classified  as  interest
     expense in our consolidated statements of operations. Unamortized discounts
     of $3.9 million and $5.2 million have been  reflected as a reduction to the
     convertible notes in our consolidated balance sheet as of December 31, 2002
     and 2003,  respectively.  The default  provisions  in these notes  impose a
     penalty of 10% of the  principal  payments in default and default  interest
     from the date of default on the  principal in default at the rate stated in
     the note plus 5%. On  February 6, 2002,  due to a judgment in an  unrelated
     case having  been  entered  against NCT and DMC in excess of the  permitted
     maximum of $0.25  million (see Note 23), an event of default  occurred with
     respect to the notes  outstanding as of that date. As of December 31, 2002,
     $2.9  million  of the notes  were in  default as a result of this event and
     were  extinguished  when these  notes  were  rolled  over  during the first
     quarter of 2003. As of December 31, 2003, none of the notes outstanding are
     in default.  In addition,  because NCT had defaulted on repayment of all of
     the notes as they matured during 2001, 2002 and 2003, an aggregate  default
     penalty   expense  of  $1.2   million,   $0.4  million  and  $2.1  million,
     respectively,  has been

                                      F-22
<PAGE>


     reflected in our  statements of operations in other income  (expense)  (see
     Note 18). At December  31, 2002 and 2003,  respectively,  $0.3  million and
     zero of accrued  default  penalties  are included in accrued  expenses (see
     Note 10).

(b)  Notes with principal totaling  approximately $26,000 are convertible at 80%
     of the lowest closing bid price for the five days preceding  conversion;  a
     note totaling $0.6 million is  convertible  at the lower of $0.07 per share
     or 80% of the  lowest  closing  bid  price  for  the  five  days  preceding
     conversion;  a note  totaling  $0.4 million is  convertible  at $0.0647 per
     share;  a note totaling $0.2 million is  convertible at $0.04 per share and
     notes  totaling  approximately  $0.4 million are  convertible at 80% of the
     average of the closing bid price for the five days preceding conversion. On
     January 10, 2002, substantially all of the assets of our subsidiary, Artera
     Group,  Inc.,  were made collateral for a holder of a $0.6 million note. In
     connection  with  recording  debt  issued  in  2001  and  2002,  beneficial
     conversion  features  totaling $0.4 million had been recorded as a discount
     to the notes and are being  amortized  over the term of the related  notes.
     For the years ended December 31, 2001,  2002 and 2003,  respectively,  $0.1
     million, $0.1 million and $0.2 million of amortization related to discounts
     is  classified  as  interest  expense  in our  consolidated  statements  of
     operations.  Unamortized  discounts  of $0.2  million  and less  than  $0.1
     million have been reflected as a reduction to the convertible  notes in our
     consolidated balance sheet as of December 31, 2002 and 2003,  respectively.
     We did not fulfill  registration  obligations  and recorded  finance  costs
     associated with  non-registration of common shares of $0.1 million and $0.2
     million for the years ended December 31, 2002 and 2003, respectively,  (see
     Note 18). The company settled $0.1 million of accrued  interest payable and
     approximately  $0.1  million of accrued  non-registration  fees  payable on
     convertible  notes with four holders  through  April 7, 2003 by issuance of
     shares  of its  common  stock  (see Note 16).  The  notes  included  in the
     settlement  are accruing  interest from April 7, 2003 at the stated rate of
     8%. The company did not repay convertible  notes aggregating  approximately
     $26,000 upon maturity,  which are in default for non-payment.  In addition,
     on convertible  notes  aggregating  approximately  $1.0 million,  we are in
     default due to a cross default clause.

(c)  The cash  consideration  for the 6%  convertible  notes  issued to multiple
     investors  by Artera  Group,  Inc.  aggregated  $2.9  million,  net of $0.1
     million in  expenses,  of which $0.6  million was  received in 2000.  Other
     consideration consisted of Pro Tech common stock valued at $0.5 million and
     non-recourse  notes receivable of $1.0 million (see Note 9). Original issue
     discounts  aggregating $3.0 million due to the difference  between the face
     amount  of the  notes  and the  consideration  received  were  recorded  as
     discounts to the notes.  These discounts were amortized to interest expense
     over the term of the  respective  notes.  For the years ended  December 31,
     2001, 2002 and 2003,  respectively,  $2.8 million, $0.2 million and zero of
     amortization  related to these discounts is classified as interest  expense
     in our consolidated statements of operations. No unamortized discounts have
     been reflected as a reduction to the convertible  notes in our consolidated
     balance  sheet as of  December  31,  2002 and 2003.  On January  10,  2002,
     substantially all of the assets of our subsidiary, Artera Group, Inc., were
     made collateral for three holders of notes with principal  aggregating $3.1
     million. As a result of exchanges,  at December 31, 2003, the principal for
     these three holders  aggregated $1.3 million.  We were obligated but unable
     to register additional shares at various dates during 2001. As a result, we
     have recorded  finance costs  associated  with  non-registration  of common
     shares of  approximately  $1.6  million,  $2.6  million and $2.0 million in
     finance costs included in other (income)  expense,  net for the years ended
     December 31, 2001, 2002 and 2003, respectively,  (see Note 18). The company
     settled $0.8 million of accrued  interest  payable and  approximately  $4.6
     million of accrued  non-registration fees payable on convertible notes with
     four  holders  through  April 7, 2003 by  issuance  of shares of its common
     stock (see Note 16).  The notes  included in the  settlement  are  accruing
     interest  from  April  7,  2003 at the  stated  rate of 6%.  The  aggregate
     outstanding  principal amount of  approximately  $2.5 million is in default
     for  non-payment.  These  notes are senior debt of our  subsidiary,  Artera
     Group, Inc.

                                      F-23
<PAGE>


13.  Deferred Revenue:

     (In thousands of dollars)

                                                           December 31,
                                                --------------------------------
                                                      2002             2003
                                                ----------------  --------------
NXT                                                $   4,815        $    2,675
FairPoint                                                143                 -
Other                                                    594               623
                                                ----------------  --------------
                                                   $   5,552        $    3,298
Less: amount classified as current                    (2,877)           (2,763)
                                                ----------------  --------------
  Deferred revenue (classified as long term)       $   2,675        $      535
                                                ================  ==============

     As of December 31, 2003, NCT does not expect to realize any additional cash
from revenue that has been deferred.

     FairPoint  Broadband,  Inc.  ("FairPoint"),  a wholly-owned  subsidiary  of
FairPoint  Communications,  Inc.,  and  Artera  executed  a  ten-year  exclusive
marketing  license on October  11,  2002  whereby  FairPoint  would serve as the
exclusive master distributor of Artera Turbo(TM) to certain rural local exchange
carriers,  incumbent local exchange  carriers and Internet service  providers in
the United  States and Canada  and would have other  non-exclusive  rights  with
respect to Artera Turbo.  The terms of the  agreement  included a license fee of
approximately $2.0 million payable in cash over 24 months and per unit royalties
ranging from 40% to 50% of  subscriber  fees.  The license fee revenue was being
recognized  over the ten-year term of the agreement  (approximately  $16,800 per
month). In conjunction with this agreement, FairPoint Communications,  Inc., was
issued a five-year warrant to purchase 2.0 million shares of NCT common stock at
an  exercise  price of $0.15  per  share.  The  warrant  was  fully  vested  and
non-forfeitable on the date of grant. As such, the date of grant was used as the
measurement  date in accordance with EITF 96-18.  The fair value of this warrant
was   approximately   $0.1   million,   determined   using   the   Black-Scholes
option-pricing  model,  was recorded to deferred  revenue and  recognized in the
same  periods and in the same manner  (capitalized)  as if we had paid cash,  in
accordance with EITF 00-18. We recorded  $50,400 of license fee revenue that had
been reduced to zero (as a result of  amortizing  the fair value of the warrant)
for the year ended December 31, 2002 in our consolidated statement of operations
in  accordance  with EITF 01-09.  The  remainder  of the warrant  fair value was
offset  against  FairPoint   deferred  revenue  at  December  31,  2002  on  our
consolidated  balance sheet. Through December 31, 2002, we had received $252,000
of the Fairpoint license fee.

     On May 23, 2003,  FairPoint  Broadband and Artera entered into a memorandum
of understanding noting their mutual intent to amend, amend and restate or enter
into a new  agreement  to  supersede  the October 11, 2002  exclusive  marketing
license agreement with respect to the royalties  FairPoint would be obligated to
pay Artera and other matters.  The memorandum of understanding  provided that if
Artera and  FairPoint  did not execute a new  agreement by June 30, 2003,  then,
from July 1, 2003 to July 15,  2003,  either  party  could have  terminated  the
October 11, 2002  license  agreement  via written  notice to the other.  If such
termination occurred, Artera would be deemed to have waived its right to license
fees (but not royalties) from FairPoint for the period after April 30, 2003. The
parties did not execute a new  agreement by June 30, 2003 but neither party gave
written  notice of  termination  by July 15,  2003.  The  parties  continued  to
negotiate a new  agreement  to amend or replace  the October 11, 2002  agreement
pursuant to their mutual intent.

     On November 1, 2003,  FairPoint and Artera entered into a five-year  master
distributor  agreement  which amends and replaces the October 11, 2002 exclusive
master distributor  agreement,  the May 23, 2003 memorandum of understanding and
all prior agreements between FairPoint Communications,  Inc. and Artera. The new
agreement  provides  for:  (i) the  license fee as paid per the October 11, 2002
exclusive  marketing  license  agreement  to be fully  earned;  (ii) no  further
license  fee to be paid;  and (iii) per unit  royalties  based upon the level of
service  required from Artera ranging from $0.75 to $5.00 per end user.  Through
December  31, 2003,  we received an  aggregate of $0.5 million of the  FairPoint
license fee representing the period from October 2002 through mid April 2003 and
waived our right to the balance of license fees of $1.5  million.  Upon entering
into the new agreement, we recognized the remaining license fee revenue that had
been  deferred  of $0.5  million  during the fourth  quarter of 2003  because no
further performance was required.

                                      F-24
<PAGE>


14.  Shares of Subsidiary Subject to Exchange into a Variable Number of Shares:

     Upon  adoption of SFAS No. 150 on July 1, 2003,  an aggregate of 550 shares
of Pro Tech  series  A and B  convertible  preferred  stock  (see  Note 16) were
outstanding  with exchange  rights into NCT common stock valued at $0.6 million,
which was reclassified  from minority  interest in consolidated  subsidiaries to
current  liabilities  on our  consolidated  balance sheet at a monetary value of
$0.7  million.   An  adjustment  of  monetary  value  on  subsidiary  shares  of
approximately  $0.1 million was charged to additional paid-in capital to reflect
the fair value of the shares required to be issued upon exchange.

     For the year ended December 31, 2003, we calculated the 4% dividends earned
by  holders  of the Pro Tech  series A and B  preferred  stock at  approximately
$11,000.  Following  adoption  of SFAS No. 150 on July 1, 2003,  this  amount is
included in interest expense.

     The  monetary  value of Pro Tech  series A and B  preferred  stock was $0.7
million  in our  consolidated  balance  sheet at  December  31,  2003,  which is
comprised of approximately  $0.7 million of shares plus the accrued dividends of
approximately $55,000. NCT would have to issue approximately 17.2 million shares
of our  common  stock if  settlement  of the  stated  value had  occurred  as of
December 31, 2003. NCT has the option to settle the accrued dividends in cash or
common  stock.  As of December  31,  2003,  settlement  in common  stock for the
accrued  dividends would require issuance of approximately 1.5 million shares of
our common  stock.  There is no limit on the number of shares  that NCT could be
required to issue upon exchange of the Pro Tech series A and B preferred stock.

15.  Other Liabilities:

     (In thousands of dollars)

                                                                December 31,
                                                         -----------------------
                                                             2002         2003
                                                         -----------   ---------
License reacquisition payable                             $  4,000      $  4,000
Development fee payable                                        650           650
Royalty payable                                              1,695         1,679
Due to selling shareholders of Theater Radio Network           557           557
Due to L&H                                                     100           100
Loan advance by investor                                        65           230
Other                                                           34            11
                                                         -----------   ---------
    Other current liabilities                             $  7,101      $  7,227
                                                         ===========   =========

Due to ITC (Notes 4 and 9)                                $  1,422      $  1,422
Other                                                          135           114
                                                         -----------   ---------
     Other liabilities (classified as long term)          $  1,557      $  1,536
                                                         ===========   =========

     License  reacquisition  payable at each of  December  31,  2002 and 2003 is
comprised of $4.0  million for the cost of  reacquiring  DMC  licenses  from two
licensees.

     On  September  28,  2000,  NCT  Video  Displays,   Inc.,  our  wholly-owned
subsidiary,  entered  into a product  development  and  license  agreement  with
Advanced Display Technologies,  LLC ("ADT"). Under the agreement,  NCT Video was
granted by ADT exclusive right and license to make, have made, use, sell, lease,
license,  or  otherwise  commercially  dispose  of  all  licensed  products  and
components,  as defined in the agreement. Such licensed products include certain
electronic  outdoor  billboard  displays  that  utilize  a laser or  light  beam
scanning  methodology.  On May 4,  2001,  NCT  Video  and ADT (by then  known as
ViewBeam  Technology,  L.L.C.) entered into a product and development  agreement
that modified the September 28, 2000  agreement.  Some of the  provisions of the
original agreement remain in effect. The agreement does not materially modify or
change  the  development  fee to be  paid  by NCT  Video  but  does  modify  the
specifications of the product design and the field of use to which the September
28, 2000 exclusive  license was granted.  Such license had a carrying  amount of
$0.8 million and $0.7 million at December 31, 2002 and 2003,  respectively.  The
amount represents our cost for ADT's completion of this product  development and
resultant license rights and subsequent modification and is being amortized over
the estimated useful life of nine years. In addition, as part of this agreement,
NCT Video and ADT entered into a product development arrangement whereby work is
to be performed by ADT in developing the prototype and production design for the
licensed products.  In return, NCT Video agreed to pay a development fee of $1.0
million for performing such  development  work. At each of December 31, 2002 and
2003, $0.7 million was included in other current liabilities.

                                      F-25
<PAGE>


     On August 29, 2000, NCT acquired 100% of the  outstanding  capital stock of
Midcore  Software,  Inc.,  a provider of Internet  infrastructure  software  for
business networks, through a merger with Midcore Software, Inc., a newly formed,
wholly-owned  subsidiary of NCT. In connection therewith, we initially issued to
Midcore's selling shareholders  13,913,355 restricted shares of our common stock
based upon a 10-day  volume-weighted  average  closing bid price of $0.34626 per
share,  for an  aggregate  value of $4.8  million.  In  addition,  the  purchase
consideration  included $1.8 million to be paid by NCT in cash,  over 36 months,
the  timing of which  was based  upon  earned  royalties.  If after 36 months or
August 29, 2003,  the total  royalty had not been  earned,  or if earned but not
fully  paid,  then the  recipients  could  elect at their  discretion  either to
continue  to receive  payment of the  royalties  in  accordance  with the merger
agreement,  or receive the unpaid balance in the form of NCT's common stock.  On
August 29, 2000, we recorded the entire $1.8 million  obligation as a liability.
On September 23, 2003, the founding  stockholders of Midcore made an election to
accept payment of the $1.7 million  royalty due them in NCT common stock.  Prior
to the election,  approximately  $45,000 of this  liability  had been paid.  The
election and calculation of the number of shares were provided for in the August
29, 2000 agreement under which NCT acquired  Midcore.  This calculation is based
upon the volume-weighted  average closing bid price for the ten days immediately
preceding August 29, 2003, or $0.04914 per share. NCT is obligated to issue 34.2
million  shares  of its  common  stock  to  fulfill  its  $1.7  million  royalty
obligation  included in other  current  liabilities  at December 31, 2003 on our
consolidated balance sheet.

     The merger  agreement  provided that NCT had an obligation to register with
the Securities and Exchange  Commission ("SEC") a specified amount of $2,467,639
in shares of NCT common  stock  issued to the Midcore  selling  shareholders  at
closing.  In the event  that NCT's  volume-weighted,  average  trailing  ten-day
closing  bid  price  declined   before  NCT  requested   effectiveness   of  its
registration  statement,  NCT was  required  to issue  additional  shares to the
selling  shareholders  to provide them the  specified  amount.  We refer to this
price  guaranty  provision  as the fill-up  provision.  Of the shares  initially
issued,  7,126,548 shares of NCT common stock were to be registered based upon a
volume-weighted,  average trailing ten-day closing bid price of $0.34626. Due to
the  fill-up  provision,  on February 9, 2001,  we issued  2,863,894  additional
shares of NCT common  stock to the selling  shareholders  based upon the closing
bid price of $0.2470 to make-up for the  diminished  value of their shares.  The
issuance  of the  additional  shares  did not  affect  the cost of the  acquired
company.  In addition,  we are obligated to issue 26.2 million  shares (the look
back shares) of NCT common stock to the founding stockholders of Midcore because
the value of shares issued upon the  acquisition of Midcore,  related to a price
guarantee,  was  less  than  $1.5  million  on  the  third  anniversary  of  the
acquisition.  This issuance of  additional  common stock based on a reduction in
security  prices will not affect the cost of the acquired  company in accordance
with SFAS No.  141.  We will  record the  current  fair value of the  additional
consideration  issued and simultaneously  reduce the amount previously  recorded
for securities issued at the date of acquisition.

     Midcore's  founding  stockholders  are  currently in  discussions  with the
company  relating to the royalty and look back  obligations as discussed  above,
and the company's  inability to issue shares since the company has  insufficient
authorized  shares.  The  company  remains  unable to issue the shares  until an
increase in authorized shares is approved by the shareholders.  The company,  in
these  circumstances,  is unable to assess whether these discussions will result
in a resolution of these matters.

     On August 18, 2000, we acquired from the five sole  stockholders of Theater
Radio  Network,  Inc.  100% of the  outstanding  capital  stock of Theater Radio
Network,  a provider of  in-theater  audio  advertising  in  multiplex  cinemas,
through DMC Cinema, then a newly formed subsidiary of NCT's subsidiary, DMC. The
acquisition included our issuance of restricted shares of NCT common stock and a
7.5% equity  interest in DMC Cinema.  The  purchase  agreement  provided  that a
specified  amount of $2,395,000 in shares of NCT common stock would be issued to
the  selling  shareholders.  NCT  had  an  obligation  to  register  the  shares
represented  by  this  specified  amount.  In  the  event  that  NCT's  trailing
twenty-day closing bid price declined before NCT requested  effectiveness of its
registration statement from the SEC, NCT was required to issue additional shares
to the selling  shareholders to provide them the specified  amount.  We refer to
this provision as the fill-up provision. We initially issued 7,405,214 shares of
NCT common stock based upon a trailing  twenty-day closing bid price of $0.3376.
Of such  shares,  311,019  shares  were  issued to the  placement  agent for the
transaction for services rendered,  aggregating $105,000.  The placement agent's
shares were not subject to the fill-up provision.  Due to the fill-up provision,
in February 2001, we issued 2,455,248  additional  shares of NCT common stock to
the five selling shareholders based upon a trailing twenty-day closing bid price
of $0.2508 to make-up for the diminished  value.  The issuance of the additional
shares did not affect the cost of the acquired company.

     Additional NCT shares may be required to be issued as an earnout based upon
cumulative   revenue  of  Theater  Radio  Network  (DMC  Cinema).   The  selling
shareholders  have demand  registration  rights for these  earnout  shares.  The
earnout provided that if DMC Cinema had accrued revenue of at least $3.3 million
between  August 1, 2000 and  December 31, 2001, a number of shares of NCT common
stock  having a value of  $1.25  million,  based

                                      F-26
<PAGE>


upon the trailing  twenty-day  closing bid price on December 31, 2001,  would be
issued to the  selling  shareholders  and the  placement  agent.  If the accrued
revenue for this period was less than $3.3 million, then the number of shares of
NCT common  stock to be issued  would be prorated to the number  (based upon the
trailing twenty-day closing bid price on December 31, 2001) equal to the product
of $1.25 million  multiplied by a fraction which is the actual  accrued  revenue
for such  period  divided by $3.3  million.  Further,  if DMC Cinema had accrued
revenue of at least $4.7 million  between  August 1, 2000 and June 30, 2002,  an
additional number of shares of NCT common stock having a value of $1.25 million,
based upon the trailing  twenty-day closing bid price on June 30, 2002, would be
issued.  If DMC  Cinema's  accrued  revenue  for such  period was less than $4.7
million, then the number of shares to be issued would be prorated to that number
of shares of NCT common stock having a value (based upon the trailing twenty-day
closing  bid  price on June 30,  2002)  equal to the  product  of $1.25  million
multiplied  by a fraction  which is the actual  accrued  revenue for such period
divided by $4.7 million.  The issuance of additional  NCT shares of common stock
pursuant to the earnout provision would increase our cost of the acquisition. As
of December 31, 2002 and 2003,  approximately  $0.6 million is included in other
current liabilities for this earnout obligation. This accrual increased our cost
of the acquisition and resulting goodwill (see Note 3).

16.  Capital Stock:

Authorized Capital Stock

     NCT has 655 million  shares  authorized,  645  million  shares of which are
$0.01  par  value  common  stock  and 10  million  of which  are $0.10 par value
preferred  stock.  At the NCT annual  meeting of  shareholders  held on July 10,
2001, the stockholders approved an amendment to increase the number of shares of
common stock the company is authorized to issue from 450 million to 645 million.
Such  amendment  became  effective  on July 12,  2001 when the  company  filed a
Certificate of Amendment to its Restated  Certificate of Incorporation  with the
Secretary of State of Delaware.

Common shares available for future issuance

     At the  December 31, 2003 common  stock price of $0.04,  our common  shares
issued and required to be reserved  for  issuance  exceeded the number of shares
authorized at that date. As such, NCT intends to seek shareholder approval of an
amendment to NCT's Restated  Certificate of Incorporation to increase the number
of shares of common stock  authorized  for NCT. At December 31, 2003, the shares
of common stock required to be reserved were as follows, calculated at the $0.04
common stock price on that date (or the discount  therefrom as allowed under the
applicable  exchange or conversion  agreements) along with premiums in excess of
the calculated  number of shares as required  under the  applicable  exchange or
conversion agreements:

  NCT Preferred Stock (a)                                           914,958,904
  Stock options and warrants                                        823,244,619
  NCT Convertible Notes issued to Carole Salkind                    878,891,374
  8% Convertible Notes                                               59,650,989
  ConnectClearly Common Stock exchange                                2,264,063
  Pro Tech Preferred Stock exchange                                  22,597,252
  6% Convertible Notes exchange                                      94,597,108
  Artera Preferred Stock exchange                                   154,763,084
  Earnout for Theater Radio Network acquisition; look back
    and royalty payable for Midcore Software acquisition             67,450,777
  Private Equity Credit Agreement                                   173,611,111
                                                                ----------------
                                                                  3,192,029,281
                                                                ================

     Footnote:
     ---------
     (a) We are required to reserve  100,000,000  shares of our common stock for
     the  conversion  of series H preferred  stock until  additional  authorized
     shares of common  stock are approved by  stockholders.  Although our annual
     shareholder  meeting had not taken place as of December 31,  2003,  we have
     presented  the entire  calculated  reserve  requirement  for our  preferred
     stock.

                                      F-27
<PAGE>


Transactions with Crammer Road LLC

2002 Exchange Agreement

     On June 21, 2002, NCT entered into an exchange  agreement with Crammer Road
to acquire the remaining 12,000 shares of DMC NY in exchange for 1,800 shares of
our series H convertible preferred stock and $120,000 in cash (see discussion of
DMC NY below,  NCT Group,  Inc.  Preferred  Stock below and Crammer Road in Note
21).

Private Equity Credit Agreements

     On July 25, 2002,  we entered into a new private  equity  credit  agreement
with Crammer Road. The July 2002 credit agreement  provides that shares of up to
$50 million (the maximum  commitment  amount) of our common stock may be sold to
Crammer Road  pursuant to put notices  delivered by the company to Crammer Road.
The terms of the  agreement  require us to put at least $5 million  (the minimum
commitment  amount) of our common stock,  in exchange for cash, at a discount to
market of 10%. In connection  with the  execution of this private  equity credit
agreement, we issued a five-year warrant to Crammer Road for 1,000,000 shares of
our common stock with an exercise  price of $0.07375 per share (see Note 17). We
are  obligated to register for resale shares of our common stock for the warrant
and the  credit  agreement  in an  amount  no  less  than  112%  of the  maximum
commitment  amount. If we fail to issue shares for the minimum commitment amount
during the commitment period (which terminates 24 months after  effectiveness of
a resale  registration  statement relating to the shares or earlier as described
in the agreement),  we must pay Crammer Road, in immediately available funds, an
amount  equal to the  product of (i) the  minimum  commitment  amount,  less the
aggregate  shares of our common stock  actually  delivered to Crammer Road under
the equity credit line and (ii) the 10% discount.

     On April 12,  2001,  we executed a private  equity  credit  agreement  that
provided  that  shares of up to $50  million of our common  stock may be sold to
Crammer Road  pursuant to put notices  delivered by the company to Crammer Road.
The April 2001 private  equity  credit  agreement  replaced the  September  2000
private equity credit  agreement.  In  conjunction  with this  transaction,  the
company issued Crammer Road a warrant for 250,000 shares of the company's common
stock.  The terms of that  credit  agreement  obligated  the  company to put $17
million of our common stock (the minimum commitment amount) to Crammer Road. The
agreement  provided  for a  penalty  for late  effectiveness  of a  registration
statement covering the shares in the minimum commitment amount. In addition,  if
we failed to issue and deliver shares for the minimum  commitment  amount of $17
million during the commitment period,  which would terminate 18 months after the
commitment  period began,  NCT was obligated to pay Crammer Road in  immediately
available  funds an amount  equal to the product of (i) the  minimum  commitment
amount,  less the  aggregate  value  of  shares  of our  common  stock  actually
delivered  to Crammer  Road under the credit  line and (ii) the then  applicable
discount.  NCT and  Crammer  Road had a dispute  about the  amount due under the
penalty  provision  of the April  2001  private  equity  credit  agreement  (see
Settlement with Crammer Road below).

     We delivered a put notice to Crammer  Road in November  2000 under the then
existing  private equity credit  agreement for $0.5 million and issued 2,810,304
shares of our common stock to Crammer Road, of which 343,604  shares were issued
in 2001.

2001 Exchange Agreement and Reset Shares

     On April 12,  2001,  NCT entered  into an exchange  agreement  with Crammer
Road.  Pursuant to the  exchange  agreement,  NCT issued to Crammer  Road a $1.0
million convertible note in exchange for 1,000 shares of common stock of DMC New
York, Inc. Further,  pursuant to the exchange  agreement,  the company issued to
Crammer Road 13,333,333  shares of NCT common stock in exchange for 2,000 shares
of common stock of DMC NY with an aggregate value of $2.0 million. In accordance
with the  exchange  agreement,  NCT was also  obligated  to issue  Crammer  Road
additional  NCT common shares (reset shares) if the closing bid price of the NCT
common  stock for the five  business  days prior to the day before we  requested
acceleration of the effectiveness of the registration  statement  covering those
shares was less than $0.16 per share,  up to a maximum of  3,333,334  additional
shares.  We were  obligated to register  these issued shares of common stock and
the reset  shares.  For the years ended  December 31, 2001 and 2002, we incurred
charges of $0.5 million and $3.4 million,  respectively, due to non-registration
of these shares  included in other  (income)  expense,  net in our  consolidated
statement of  operations  (see Note 18). In 2002,  we settled our  obligation to
Crammer Road for the reset shares (see Settlement with Crammer Road below).

                                      F-28
<PAGE>


DMC New York, Inc.

     NCT acquired 75% of DMC NY in 2002 and 25% in 2001.  Our aggregate  cost of
the DMC NY shares was approximately $27.2 million (see Note 2).

     If a registration statement covering amounts pursuant to the April 12, 2001
exchange  agreement  with  Crammer  Road were not in effect by July 1, 2001,  we
agreed to acquire  1,000  shares of DMC NY common stock for $1.0 million in cash
or other marketable securities on July 1, 2001. We paid $100,000 to Crammer Road
in September 2001 toward this commitment.  In 2002, we settled our obligation to
Crammer Road under this agreement (see Settlement with Crammer Road below).

Convertible Note issued by NCT Video Displays, Inc.

     On April 12, 2001, NCT Video, our wholly owned  subsidiary,  entered into a
subscription agreement with Crammer Road whereby NCT Video issued a $0.5 million
convertible note to Crammer Road for $0.5 million in cash. NCT Video received an
advance of this amount in December  2000. The NCT Video note matured on December
31,  2001  and  bore  interest  at 8%  per  annum,  payable  at  maturity.  Such
convertible note was convertible into shares of NCT Video common stock.  Because
NCT Video's common stock is not publicly tradable on any market or exchange, NCT
and Crammer Road entered into an exchange rights agreement whereby the NCT Video
note would be  exchangeable  for shares of NCT common stock at an exchange price
per share of 93.75% of the average closing bid price of NCT common stock for the
five trading  days prior to the  exchange.  In  accordance  with EITF 98-05,  as
codified in EITF 00-27, in 2001, we recorded a beneficial  conversion feature of
approximately  $33,000 in connection with this convertible  note. The beneficial
conversion feature was accounted for as a discount to the note and was allocated
to a component of additional  paid-in  capital.  For the year ended December 31,
2001,  the  discount  was  recognized  as interest  expense in our  consolidated
statement of operation.  In October 2001,  Crammer Road  exchanged the NCT Video
note for 6,014,029 shares of our common stock.

Settlement with Crammer Road

     In September 2002, Crammer Road brought a legal action against NCT alleging
that NCT breached a series of agreements entered into by Crammer Road and NCT on
April 12, 2001, namely, a Private Equity Credit Agreement, a Registration Rights
Agreement  relating  thereto,  an  Exchange  Agreement,  a  Registration  Rights
Agreement  relating thereto,  two promissory notes and an additional side letter
agreement.  On October 30,  2002,  a  settlement  agreement  was executed by the
parties and  approved by the court on December 11,  2002.  Under the  settlement
agreement, all claims in the suit by Crammer Road are dismissed in consideration
of the issuance by NCT to Crammer Road of 68 million  shares of NCT common stock
($5.44  million  priced at $.08 per share).  On  December  17,  2002,  we issued
Crammer  Road 40 million  of the 68 million  shares.  The  remaining  28 million
shares were  issuable 65 days after  demand  therefore  by Crammer  Road.  As of
December  31,  2002,   $2.2  million  is  included  in  shares  payable  on  our
consolidated  balance  sheet.  On or about May 8, 2003,  the company  issued the
remaining  28,000,000  shares to  Crammer  Road which  were  included  in shares
payable at December 31, 2002.

Shares Issued for Acquisitions

     As noted  above,  on April 12, 2001,  we issued  Crammer Road shares of our
common stock in exchange for shares of DMC NY.

     NCT issued approximately 21.3 million shares of its common stock in 2000 to
consummate the  acquisitions of Theater Radio Network and Midcore  Software.  In
February  2001, due to fill-up  provisions,  we issued an aggregate of 5,319,142
additional  shares  for  these  acquisitions.  We have an  obligation  to  issue
additional  shares of our common stock to satisfy an earnout  provision  for the
Theater Radio Network acquisition. Further, we are obligated to issue additional
NCT shares to satisfy a look back provision for the Midcore Software acquisition
and royalty payable (see Note 15).

                                      F-29
<PAGE>


Shares Issued upon Conversion or Exchange of Indebtedness

     During the years ended December 31, 2001, 2002 and 2003, $2.5 million, $0.2
million  and  $1.8  million,  respectively,  of the 6%  convertible  notes  plus
interest were exchanged for 26,910,453  shares,  2,598,956 shares and 42,092,786
shares of NCT's  common  stock.  At December  31,  2003,  $2.5 million of the 6%
convertible  note  principal  remained  that could be  exchanged  for NCT common
stock.

     During the year ended December 31, 2002, $0.4 million of our 8% convertible
notes plus interest were converted into 5,611,682 shares of NCT's common stock.

     As noted  above,  in October  2001,  we issued  Crammer  Road shares of our
common stock upon Crammer Road's exchange of the NCT Video note.

     On May 18,  2001,  Carole  Salkind  converted a 60-day  $500,000  note into
4,303,425  shares of our common stock at an agreed upon price of $0.13,  a price
which  approximated the market price of our common stock on the conversion date.
NCT had  defaulted  on the  repayment of this note.  NCT reduced the  conversion
price  from  $0.21 to $0.13 to induce  conversion  of the note  resulting  in an
inducement  charge of  approximately  $0.2  million  included in other  (income)
expense, net (see Note 18).

Shares Issued for Settlement of Legal Claims

     We issued  Crammer Road shares of NCT common stock in December 2002 and May
2003  pursuant to a  settlement  agreement  (see  Settlement  with  Crammer Road
above).

     On or about January 31, 2002, West Nursery Land Holding Limited Partnership
brought an action against NCT in the District Court of Maryland for Anne Arundel
County.  On  December  31,  2002,  NCT and West  Nursery  executed a  settlement
agreement  under which all claims of West Nursery against NCT were discharged in
consideration  of the issuance by NCT of 1,248,170  shares of its common  stock.
Pursuant  to the  settlement  agreement  between  NCT and West  Nursery  Holding
Limited  Partnership,  on or about April 1, 2003, the company  issued  1,248,170
shares of its common stock (i.e.,  $56,000 in stock priced at $0.0448 per share)
to West Nursery which were included in shares payable at December 31, 2002.

     On February 21, 2002, an action was brought by Mesa Partners,  Inc. against
NCT and DMC.  On  December  3, 2002,  NCT,  DMC and Mesa  executed a  settlement
agreement  that  was  approved  by the  court  in April  2003.  Pursuant  to the
settlement agreement, on or about April 11, 2003, NCT issued 2,321,263 shares of
its common stock (i.e., $125,000 in stock priced at $0.05385 per share) to Mesa.

   On or about  December  17,  2002,  an action was  brought by Alpha  Capital
Aktiengesellschaft,  Austost Anstalt Schaan, Balmore S.A. and Libra Finance S.A.
against NCT Group,  Inc. and Artera Group,  Inc. On or about April 7, 2003, NCT,
Artera and the plaintiffs  executed a settlement  agreement.  In September 2003,
upon court approval of the settlement agreement, NCT issued 61,776,067 shares of
its common stock  (i.e.,  $4.0 million in stock priced at $0.06475 per share) to
the plaintiffs,  reduced  previously  accrued  interest  payable of $0.9 million
(consists of $0.1 million and $0.8 million  related to the 8% and 6% convertible
notes,  respectively)  and  liquidated  damages for  non-registration  of common
shares underlying convertible and exchangeable notes and preferred stock of $8.0
million  (consists  of $0.1  million and $4.6  million  related to the 8% and 6%
convertible  notes,  respectively  and $3.3 million  related to Artera  series A
preferred  stock).  We recorded a $4.9  million gain on  litigation  settlements
included  in  non-operating  other  (income)  expense,  net for the  year  ended
December 31, 2003.

     During the year ended December 31, 2002, we recorded  charges totaling $0.5
million  for the  issuance of  6,138,081  shares of our common  stock.  Of these
shares,  5,938,081 were valued at approximately  $0.5 million and were issued to
settle a legal matter with Linford Group  Limited  related to a leasehold of our
indirect subsidiary Artera Group International Limited. In addition,  200,000 of
the total  number of shares were issued to settle a legal matter and were valued
at less than $0.1  million  (based upon the closing bid price on the date of the
settlement).

                                      F-30
<PAGE>


Shares Issued to Vendors and Others

     During the year ended  December 31, 2002, we recorded a charge of less than
$0.1  million  for the  issuance  of 300,000  shares of our  common  stock for a
partial payment of consulting  services (based upon the closing bid price on the
date of the agreement).

     During  the year ended  December  31,  2001,  NCT  issued an  aggregate  of
3,165,495 shares of its common stock to suppliers,  consultants and an employee.
Of these  shares,  2,994,066  were for  current  obligations  totaling  $804,683
(328,717 of such shares were issued to an employee)  and 171,429 were for future
obligations totaling $60,000.

ConnectClearly.com, Inc. Initial Financing

     On August 10, 2000,  NCT entered into an  agreement  with three  accredited
investors    for   the   financing   of   NCT's    majority-owned    subsidiary,
ConnectClearly.com,   Inc.   In   connection   with  the   initial   funding  of
ConnectClearly,  NCT issued 1,000 shares of ConnectClearly common stock to these
investors in consideration for $0.5 million in cash and conversion of promissory
notes  payable,  due to  two of the  investors,  totaling  $0.5  million.  These
ConnectClearly common shares are exchangeable for shares of NCT common stock any
time on or after the 180th day following issuance of the  ConnectClearly  common
stock at 80% of the five-day closing bid average of the NCT common stock for the
five-day  period  immediately  preceding  the  exchange.  During  the year ended
December 31, 2001, 937 shares of ConnectClearly  common stock were exchanged for
7,831,908  shares of NCT's common  stock.  We incurred a $0.3 million  charge to
additional  paid-in  capital.  This amount is included in beneficial  conversion
features and in the calculation of loss attributable to common  stockholders for
the year ended December 31, 2001. Because NCT obtained the ConnectClearly common
shares upon exchange, NCT accounted for this as a step acquisition for which NCT
recorded an increase to its  goodwill in  ConnectClearly  and an increase to its
additional paid-in capital of $0.9 million. At December 31, 2001, as a result of
ConnectClearly's  failure to achieve operating objectives,  goodwill was reduced
to zero resulting in a goodwill  impairment  charge of $0.9 million.  During the
years  ended  December  31,  2002 and 2003,  no shares  of  ConnectClearly  were
exchanged   for  shares  of  NCT  common   stock.   At  December  31,  2003,  63
ConnectClearly common shares subject to exchange are outstanding.

Distributed Media Corporation

     During 2001, employees of DMC exercised options and were issued 7.06 shares
of DMC common  stock.  On February 28, 2002, we issued  2,142,073  shares of our
common stock in exchange  for 6.435  shares of DMC common  stock  pursuant to an
employment termination  agreement.  We recorded a charge based on the fair value
of our common  stock at that date of $0.2 million  included in our  consolidated
statement of  operations  for the year ended  December 31, 2002,  classified  as
selling, general and administrative expense.

NCT Audio Products, Inc.

Initial Financing

     NCT Audio sold 2,145 common shares in 1997 for  approximately  $4.0 million
in a private  placement  under  Regulation D of the  Securities Act of 1933 (the
"Securities  Act"). The terms of the sale allow purchasers of NCT Audio's common
stock to  exchange  their  shares  for NCT common  stock at 80% of the  five-day
average  closing  bid price of NCT  common  stock for the five days  immediately
preceding  the  exchange.  The NCT share  exchanges  are  accounted  for as step
acquisitions of NCT Audio. Through the fourth quarter of 1999, we had pursued an
acquisition  strategy for NCT Audio.  In connection  with financing  efforts for
that  acquisition  strategy,  we had access to an  independent  appraisal of NCT
Audio  performed  for a  prospective  lender.  In 1999,  we changed the business
strategy to suspend NCT Audio's  acquisition  effort.  Based upon that change in
strategy and the then current  valuation,  we began impairing goodwill resulting
from step acquisitions. In 2001, due to the continuing inability of NCT Audio to
generate positive cash flows from operations,  we reduced the NCT Audio goodwill
balance to zero  (representing $1.5 million of the 2001 impairment to goodwill).
In 2002, $0.3 million of goodwill resulting from a step acquisition was impaired
because of NCT Audio's continuing inability to generate positive cash flows from
operations. Included in our consolidated statements of operations are impairment
charges  aggregating  $2.1 million and $0.3 million for the years ended December
31, 2001 and 2002, respectively.

     Through December 31, 2003, we have issued an aggregate of 31,239,483 shares
of our common  stock in exchange  for 2,145  shares of NCT Audio  common  stock.
During the years ended  December  31,  2001 and 2002,  597 and 160 shares of NCT
Audio common stock,  respectively,  were exchanged for 4,824,068,  and 3,930,818
shares of

                                      F-31
<PAGE>


NCT common  stock.  At December 31, 2002 and 2003, no shares of NCT Audio common
stock subject to exchange are outstanding.

Shares Issued to NXT plc

     On March 30, 2001, NCT issued  3,850,000  shares of its common stock to NXT
attributable  to  new  agreements  that   reorganized   existing   cross-license
agreements  between the companies  (see Note 4). Under the new  agreements,  NXT
transferred  its 533 shares of NCT Audio  common  stock to NCT in payment of the
exercise price for an option held by NXT to purchase  3,850,000  shares of NCT's
common stock (see Note 17). NXT had  purchased  those shares of NCT Audio common
stock in 1997 for $1.0 million.

Exchange Shares

     The  company  had  contingent   obligations  under  a  securities  exchange
agreement,  dated  October  9, 1999  among the  company,  Austost  and  Balmore.
Pursuant to the  exchange  agreement,  on October 26, 1999 the company  issued a
total of  17,333,334  shares to Austost and Balmore (the  "Exchange  Shares") in
exchange  for 532  shares  of  common  stock of NCT Audio  held by  Austost  and
Balmore.  Under the exchange  agreement,  Austost and Balmore were  obligated to
return to NCT 13,671,362 shares of NCT common stock ("Excess Exchange  Shares").
On March 7, 2000,  some terms and  conditions  of the  exchange  agreement  were
amended.  This amendment was agreed to in order to (i) allow Austost and Balmore
to retain  3,611,111  Excess  Exchange  Shares in exchange for an additional 533
shares of NCT Audio common stock from a third party investor,  which Austost and
Balmore would deliver to NCT, and (ii)  substitute  cash payments by Austost and
Balmore to the company in lieu of Austost's and  Balmore's  obligation to return
the remaining  Excess  Exchange  Shares to the company  pursuant to the exchange
agreement. Austost and Balmore would agree to pay the company up to $1.0 million
in cash subject to monthly  limitations  from proceeds Austost and Balmore would
realize from their disposition of such remaining Excess Exchange Shares. Austost
and Balmore would realize a 10%  commission on the proceeds from the sale of NCT
shares. During the year ended December 31, 2000, approximately 10 million Excess
Exchange  Shares  were  sold by  Austost  and  Balmore.  In 2001,  NCT  received
proceeds,  net of  commissions,  of $0.2 million upon the sale of the  remaining
Excess Exchange Shares.

Other Private Placements and Stock Issuances

     On or about August 22, 2001,  2.0 million shares of NCT common stock issued
with a restrictive  legend were sold in a private  placement,  at current market
value. The proceeds consisted of approximately  $0.2 million in cash,  including
approximately  $0.1 million from certain NCT  directors  and officers  (see Note
21).

     On each of October 25, 2001 and December 6, 2001, 5.0 million shares of NCT
common  stock were issued with a  restrictive  legend upon  exercise of warrants
held by a placement agent for an aggregate of $0.8 million in cash.

Transactions Affecting Common Stock of Pro Tech Communications, Inc.

     In 2001, NCT received  1,190,476 shares of Pro Tech common stock as partial
consideration for the January 9, 2001 6% convertible notes then issued (see Note
12). We received  an  aggregate  of  2,563,636  shares of Pro Tech common  stock
valued at $1.4 million in partial payment of technology  license fees receivable
from two DMC customers.

     At December 31, 2003, NCT Hearing  Products,  Inc. had  approximately  27.1
million  shares of Pro Tech common stock,  comprising  approximately  82% of the
issued and outstanding shares of Pro Tech common stock.

NCT Group, Inc. Preferred Stock

     Our  Board  of  Directors  is  authorized  to issue 10  million  shares  of
preferred stock,  par value $0.10 per share.  Through 2003, NCT designated eight
series of preferred stock,  including series A, B, C, D, E, F, G and H preferred
stock.  Series A and B were  eliminated in 1992 without ever having been issued.
We  have  issued  preferred  stock  under  our  series  C,  D,  E,  F,  G  and H
designations.  In November  2001,  series C, D, E and F were  eliminated.  As of
December 31, 2003, there are 1,725 shares of series H preferred stock issued and
outstanding.

Series G Convertible Preferred Stock

     On January 25, 2000,  the Board of  Directors of NCT  designated a series G
convertible  preferred  stock.  The series G preferred  stock  consists of 5,000
designated shares, par value of $0.10 per share and a stated value of

                                      F-32
<PAGE>


$1,000 per share with a cumulative  dividend of 4% per annum on the stated value
payable upon  conversion in either cash or common stock.  On September 26, 2000,
the  company's  Board  of  Directors  approved  an  amendment  to the  Series  G
Certificate  of  Designations,  Rights and  Preferences  to increase the maximum
share issuance amount thereunder from 10 million shares to 24 million shares. On
March 6, 2000, as amended March 10, 2000, NCT and an accredited investor entered
into an agreement under which NCT sold an aggregate stated value of $2.0 million
(2,004 shares) of series G preferred stock, in a private  placement  pursuant to
Regulation  D under the  Securities  Act,  for  proceeds,  net of  expenses,  of
approximately  $1.7  million  cash.  Each share of series G  preferred  stock is
convertible  into shares of NCT common  stock at the lesser of (i) 20% below the
five-day  average  closing  bid  price  of  common  stock  immediately  prior to
conversion  or (ii)  $0.71925.  During the year ended  December  31,  2001,  the
company  issued  7,218,150  shares of our common  stock upon  conversion  of the
remaining 767 shares of series G preferred stock. As of December 31, 2001, 2,004
shares of NCT's  series G preferred  stock had been  converted  into  12,124,745
shares of NCT's  common  stock.  At  December  31,  2002 and  2003,  no series G
preferred stock was outstanding.

Series H Convertible Preferred Stock

     In June 2002, NCT designated  series H preferred stock  consisting of 1,800
designated  shares with a par value $0.10 per share,  a stated  value of $10,000
per share and a cumulative  dividend of 4% per annum on the stated value payable
upon conversion in either cash or common stock, at NCT's election.  On March 10,
2003,  NCT  amended  the  number of  designated  shares of series H  convertible
preferred stock from 1,800 shares to 2,100 shares.  The series H preferred stock
is senior in rank to our common stock and has a  liquidation  value equal to the
dividends  plus the  stated  value in the case of  liquidation,  dissolution  or
winding up of NCT.  The holders of our series H  preferred  stock have no voting
rights  (except as may be  required  by law).  Each share of series H  preferred
stock is  convertible  into shares of the  company's  common stock at 75% of the
average  closing  bid price of  common  stock for the  five-day  trading  period
immediately preceding conversion.  The holder of the series H preferred stock is
subject to a limitation on the percentage ownership of outstanding common shares
of the company, as defined.  The series H preferred stock is redeemable by us in
cash at any time at a  redemption  price that is a function of the time  between
the date  the  series H was  originally  issued  and the  redemption  date.  The
redemption  price  ranges  from 85% of  stated  value  (within  three  months of
issuance) to 120% of stated value (after nine months from issuance). On June 24,
2002,  we issued  1,800  shares  ($18  million  stated  value)  of our  series H
preferred  stock to Crammer Road LLC for $120,000  cash and 12,000 shares of DMC
New York,  Inc. (see Note 2). For the years ended December 31, 2002 and 2003, we
have  included  $0.4  million  and  $0.7  million,  respectively,   representing
preferred stock dividends on the consolidated  statement of operations.  For the
year ended  December 31, 2003, 75 shares of series H preferred  stock along with
accrued  dividends  totaling  approximately  $0.8  million were  converted  into
23,057,761  shares of NCT's common stock. As of December 31, 2003,  1,725 shares
of series H preferred stock are outstanding.

Artera Group, Inc. Preferred Stock

     On  February  21,  2001,  the  Board of  Directors  of Artera  Group,  Inc.
designated  a series A  convertible  preferred  stock  which  consists of 30,000
designated  shares,  par value of $0.10 per share and  stated  value  $1,000 per
share with a  cumulative  dividend of 4% per annum on the stated  value  payable
upon conversion in either cash or common stock of Artera. Each share of series A
convertible preferred stock is convertible into shares of Artera common stock on
and after the  earlier of two years  after  issuance  or ten days  after  Artera
becomes  publicly  traded,  at a conversion  price equal to the average  closing
price for the five trading days prior to the  conversion  date.  At December 31,
2002 and 2003, we have  included  $8.0 million and $8.3  million,  respectively,
representing  the carrying  value of the  preferred  stock  included in minority
interest on the consolidated  balance sheets. We amended these rights as to $4.3
million  stated value of Artera  preferred  stock that was issued in conjunction
with our  acquisition  of  Artera  (see  Note 2).  For each of the  years  ended
December 31, 2001, 2002 and 2003, the dividends are approximately  $0.3 million.
These  amounts are included in  preferred  stock  dividends on the  consolidated
statement of operations for the years then ended.

     On June 29, 2001,  NCT entered into an exchange  rights  agreement with ten
accredited  investors who hold $4.3 million in aggregate  stated value of Artera
Group, Inc. series A preferred stock. Each of the ten holders of Artera series A
preferred  stock is entitled to exchange the Artera series A preferred stock for
shares of NCT common stock from and after November 30, 2001 at an exchange price
per share of 100% of the average closing bid price of NCT's common stock for the
five  trading  days prior to the  exchange  date and may not convert into Artera
common  stock.  NCT is obligated to register  shares of its common stock for the
exchange of Artera series A preferred  stock.  For the years ended  December 31,
2001, 2002 and 2003, we incurred charges of $0.7 million,  $2.1 million and $1.9
million,  respectively,  for  non-registration  of the underlying  shares of NCT
common  stock.  These amounts are included in preferred  stock  dividends on the
consolidated  statement of operations for the years then ended.  Pursuant to the
exchange  rights  agreement,  NCT has the  option  at any  time  to  redeem  any
outstanding  Artera series A preferred  stock by paying the holder cash equal to
the aggregate stated value of the Artera series A

                                      F-33
<PAGE>


preferred  stock being  redeemed  (together  with  accrued and unpaid  dividends
thereon).  As a result of a  settlement  of a legal  action (see  above),  which
included $3.3 million of accrued  non-registration  fees payable relating to our
inability to register the shares, we recorded a related gain of $2.0 million for
the year ended  December  31, 2003  included  in  non-operating  other  (income)
expense and we are no longer  accruing for these  expenses for three  holders of
Artera  series A preferred  stock.  Pursuant  to an exchange  rights and release
agreement dated April 10, 2003, three holders of an aggregate of 3,154 shares of
Artera series A preferred  stock  received an additional  right to exchange into
NCT preferred  stock (a series to be designated)  upon thirty days prior written
notice. As of December 31, 2003, 8,299 shares of Artera series A preferred stock
are issued and outstanding and no shares have been converted.

Pro Tech Communications, Inc. Preferred Stock
---------------------------------------------
(see Note 14)

     On  September  29, 2000,  Pro Tech  entered into a securities  purchase and
supplemental  exchange  rights  agreement  with the company and three holders to
consummate  the $1.5 million  financing  arranged by the company for Pro Tech in
connection  with its  sale of 1,500  shares  of Pro  Tech  series A  convertible
preferred stock to the investors. The Pro Tech series A preferred stock consists
of 1,500  designated  shares,  par value  $0.01 per share and a stated  value of
$1,000 per share with a cumulative  dividend  rate of 4% per annum on the stated
value. Each share of such stock is exchangeable for shares of NCT's common stock
based upon the lowest  average of the  average  closing bid price for a share of
our common  stock for any  consecutive  five-day  period out of 15 trading  days
preceding the date of exchange,  less a discount of 20%. In addition, each share
of this preferred stock is convertible into shares of Pro Tech's common stock at
a discount from the quoted market value.

     On July 30, 2001, Pro Tech entered into an agreement with a holder to issue
500 shares of Pro Tech series B redeemable convertible preferred stock having an
aggregate  stated  value of $0.5  million.  Upon  issuance,  Pro  Tech  received
approximately $0.4 million in cash, net of expenses and fees, which was used for
working capital  purposes.  The Pro Tech preferred stock is convertible into Pro
Tech common,  and is exchangeable for shares of NCT common stock (as to 50% from
and after  six  months,  and as to 100% from and after one year,  from the issue
date) at an exchange rate which is the lowest average of the average closing bid
price for a share of NCT common stock for any consecutive  five trading days out
of the 15 trading days  preceding the date of exchange,  less a discount of 20%.
Pro Tech recorded a beneficial conversion feature of $125,000 in connection with
the issuance of its series B preferred stock that resulted in a reduction to the
outstanding balance of the preferred stock and an increase to additional paid-in
capital. The beneficial  conversion feature was recognized as an increase to Pro
Tech's  preferred  stock and a decrease to additional  paid-in  capital over the
period  from the  date of  issuance  (July  30,  2001)  to the date of  earliest
conversion  (50% on January  30, 2002 and 50% on July 30,  2002).  For the years
ended December 31, 2001, 2002 and 2003, $79,000, $46,000 and zero, respectively,
of the beneficial  conversion  feature was  recognized.  In connection with this
2001 transaction,  Pro Tech issued a three-year  warrant to purchase 1.0 million
shares of its common stock,  exercisable at $0.13 per share.  Pro Tech estimated
the  fair  value  of  this  warrant  to  be  approximately   $63,000  using  the
Black-Scholes option pricing model. The aggregate of $142,000,  $46,000 and zero
is included in beneficial  conversion features on the consolidated  statement of
operations for the years ended December 31, 2001, 2002 and 2003, respectively.

     As of  December  31,  2002,  under  the  terms  of the Pro  Tech  series  B
convertible  preferred  stock agreement dated July 30, 2001, the holder of those
shares  may have had a right to  require  Pro Tech to redeem  the shares and any
such  redemption  would not have been within the sole  control of Pro Tech.  The
redemption  value was 125% of the  stated  value of $0.5  million  or  $125,000.
Accordingly,  approximately  $0.1  million  redemption  adjustment  was recorded
during 2001 increasing the minority  interest in consolidated  subsidiaries.  On
April 10, 2003,  NCT and Pro Tech  entered into an agreement  with the holder of
the  series B  preferred  stock  whereby  the  holder  agreed  to waive  certain
requirements  of the  registration  rights  agreement  relating  to the series B
preferred stock.  This waiver released Pro Tech from the requirement to register
shares of Pro Tech's  common stock for the  conversion of the series B preferred
stock. This cancelled the triggering event, which may have placed the redemption
of the series B preferred stock at the holder's option. With the signing of this
agreement, such redemption became under the control of Pro Tech. Pro Tech was no
longer  required  to carry the  series B  preferred  stock at 125% of the stated
value.  Accordingly,   approximately  $0.1  million  redemption  adjustment  was
reversed during the year ended December 31, 2003.

     Prior to the  adoption of SFAS No. 150,  for the years ended  December  31,
2001, 2002 and 2003, we calculated the 4% dividends earned by holders of the Pro
Tech series A convertible  preferred  stock and the Pro Tech series B redeemable
convertible  preferred  stock at  approximately  $24,000,  $22,000 and  $11,000,
respectively. These amounts are included in preferred stock dividends and in the
calculation of loss  attributable  to common  stockholders  on the  consolidated
statement of operations for the years then ended.  At December 31, 2002, we have
included $0.7 million  representing  the carrying  value of the preferred  stock
included in minority interest on the consolidated balance sheet.

                                      F-34
<PAGE>


     During the year ended December 31, 2001,  1,162 shares of Pro Tech series A
preferred  stock were converted  into 4,951,873  shares of Pro Tech common stock
and 288 shares of Pro Tech series A preferred stock were exchanged for 2,975,978
shares of NCT common stock. In connection  with the issuance of NCT shares,  NCT
recorded a decrease in the minority  interest in  subsidiary  and an increase to
additional paid-in capital of approximately $0.2 million. During the years ended
December 31, 2002 and 2003, there were no conversions or exchanges.  At December
31,  2003,  there  were  50  shares  of Pro  Tech's  series  A  preferred  stock
outstanding and 500 shares of Pro Tech series B preferred stock outstanding.

Treasury Stock

     On March 1,  2002,  NCT  retired  and  cancelled  all  6,078,065  shares of
treasury stock.

17.  Common Stock Options and Warrants:

     The company  values  options and warrants  using the  Black-Scholes  option
pricing model and accounts for options and warrants issued to those that are not
employees  of the  company  or  members of the Board of  Directors  as  outlined
herein. The fair value of options and warrants issued to general consultants are
recorded as consulting expense over the vesting period of the related options or
warrants and classified as selling,  general and  administrative  expenses.  The
relative  fair  value  of  options  and  warrants   issued  in  connection  with
indebtedness  are  amortized  as interest  expense  over the term of the related
indebtedness.  The  allocated  fair  value of  options  and  warrants  issued in
conjunction   with  preferred   stock  are  accreted  as  an  increase  in  loss
attributable to common  stockholders in the net loss per share  computation over
the vesting period of the related options or warrants. The fair value of options
and warrants issued in connection with  acquisitions  are recorded as additional
purchase price.

Stock Options:

     The  company  has stock  option  plans  under  which  directors,  officers,
employees and  consultants  may be granted  options to purchase  common stock or
other  equity-based  awards.  The  company's  stock  option plans that have been
approved  by  shareholders  are as  follows:  1987 Stock  Option Plan (the "1987
Plan");  the NCT Group,  Inc. 1992 Stock  Incentive Plan (as amended,  the "1992
Plan");  the NCT Group, Inc. Option Plan for Certain Directors (as amended,  the
"Directors  Plan");  and the NCT Group,  Inc. 2001 Stock and Incentive Plan (the
"2001 Plan").  In addition,  options outside the option plans have been granted.
Due to plan expirations,  no future grants or options for the purchase of shares
of NCT common  stock are  available  under the 1987  Plan,  the 1992 Plan or the
Direction Plan.

     As of  December  31,  2003,  there  were no options  outstanding  under the
Directors Plan. The following  summarizes  information about the company's stock
options outstanding and exercisable at December 31, 2003:

<TABLE>
<CAPTION>

                                                     Options Outstanding                      Options Exercisable
                                           -------------------------------------------    ----------------------------
                                                               Weighted
                                                                Average
                                                               Remaining     Weighted                        Weighted
                                                              Contractual     Average                         Average
                          Range of              Number           Life        Exercise          Number        Exercise
     Plan             Exercise Prices         Outstanding     (In Years)      Price         Exercisable (a)    Price
----------------     ------------------    -----------------    -------    -----------     --------------    ----------
<S>                  <C>        <C>            <C>                <C>       <C>              <C>              <C>
 1987 Plan           $ 0.50  to $0.625         1,350,000          0.09      $   0.5093       1,350,000        $ 0.5093
                                           =================                               ==============

 1992 Plan           $ 0.103 to $1.00         42,459,337          3.86      $   0.4037      42,459,337        $ 0.4037
                                           =================                               ==============

 2001 Plan           $ 0.054 to $0.13         67,054,945 (b)      5.94      $   0.0780      52,476,945 (b)    $ 0.0847
                                           =================                               ==============

 Non-plan            $ 0.029 to $0.2656      368,375,000          4.44      $   0.0455     368,375,000        $ 0.0455
                                           =================                               ==============
</TABLE>

Footnotes:
----------
(a) Exercisable on a plan by plan basis subject to the approval by the company's
stockholders  of a  sufficient  increase in the number of shares of common stock
authorized.  (b) Approximately  49.1 million of the number  outstanding and 34.5
million  of the  number  exercisable  under  the 2001  Plan are  subject  to the
approval by the company's stockholders of a sufficient increase in the number of
shares of common stock (1)  authorized  and (2) covered by the 2001 Plan. At the
time of such shareholder  approval,  if the market value of the company's common
stock exceeds the exercise price of the subject options,  the company will incur
a non-cash  charge to earnings equal to the spread between the exercise price of
the option  and the market  price,  times the  number of  options  involved.  If
shareholder  approval of the  increase is not  obtained at an annual  meeting of
shareholders  ,  options  granted  will be  reduced  pro  rata  for  the  excess
unauthorized shares.

                                      F-35
<PAGE>


1987 Plan

     The  company's  1987 Plan  provided  for the  granting of up to 4.0 million
shares of common stock as either  incentive stock options or nonstatutory  stock
options.  Options to  purchase  shares  could be granted  under the 1987 Plan to
persons who, in the case of incentive  stock options,  were full-time  employees
(including  officers  and  directors)  of  the  company;  or,  in  the  case  of
nonstatutory  stock  options,  were employees or  non-employee  directors of the
company. The exercise price of all incentive stock options was required to be at
least  equal to the fair  market  value of such  shares on the date of grant and
could be  exercisable  over a  ten-year  period  as  determined  by the Board of
Directors.  The exercise  price and duration of the  nonstatutory  stock options
were  determined  by the Board of  Directors.  In 2000,  the Board of  Directors
determined  that no future grants of options for the purchase of shares would be
made  under the 1987  Plan.  Thus,  no options  for the  purchase  of shares are
available for future grant under the 1987 Plan.  At December 31, 2001,  2002 and
2003, there were outstanding, exercisable options under the 1987 Plan to acquire
1,350,000 shares of common stock at a weighted average exercise price of $0.5093
per share.

1992 Plan

     On October 6, 1992,  the company  adopted the 1992 Plan for the granting of
shares and options to purchase up to 10.0 million  shares of common stock to its
officers,  employees,  consultants and directors.  The exercise price of options
granted under the 1992 Plan was required to be at least equal to the fair market
value of such shares on the date of the grant,  and such options were  generally
exercisable over a five to ten-year period with vesting  schedules as determined
by the Board of Directors.  On October 20, 1998,  the  stockholders  approved an
amendment to the 1992 Plan to increase the aggregate  number of shares of common
stock available there under to 30.0 million.  On July 13, 2000, the stockholders
approved an  amendment  to the 1992 Plan to  increase  the  aggregate  number of
shares of NCT's  common  stock  under the 1992  Plan from 30.0  million  to 50.0
million shares.

     In December 2000, the Board of Directors  granted  options to directors and
employees to acquire  11,325,000  shares of common stock  subject to  sufficient
remaining shares under the 1992 Plan. These grants exceeded the number of shares
available under the 1992 Plan by 2,824,505.  As such, the grant to the company's
Chairman of the Board of Directors  and Chief  Executive  Officer was reduced by
this amount, but this award remained an obligation  pending future  availability
under  the 1992  Plan or  adoption  of a new  stock  option  plan.  The Board of
Directors  fulfilled  this  obligation  in 2001 by  granting  options to acquire
824,505 shares under the 1992 Plan and options to acquire 2,000,000 shares under
the 2001 Plan.  The exercise  price of the options was equal to the market price
at the date the shares  were made  available  under the plans;  accordingly,  no
compensation expense was recognized.

     On April 25, 2001,  the Board of  Directors  approved  the  re-granting  to
employees of options to replace options that would otherwise expire in 2001. The
replacement grants under the 1992 Plan totaled approximately 67,000 options. The
exercise  price of those new  grants was the same as the  exercise  price of the
replaced  grants,  and all exercise prices exceeded the fair value of our common
stock on the date of grant;  therefore,  there was no financial statement impact
with respect to these options. In addition, in 2001, the company granted 357,927
shares of common  stock  under the 1992 Plan to a former  officer in  connection
with his  employment  termination  agreement.  The company  recorded a charge of
approximately  $33,000 in connection  with that grant,  representing  the market
price at the date of termination.

     From time to time, the Board of Directors accelerates the vesting schedules
of previously  granted stock options so that the right to acquire the underlying
shares becomes 100% vested.  On September 20, 2001, the vesting  schedule on the
December 6, 2000 grant to acquire 6,000,000 shares made to NCT's Chairman of the
Board of Directors and Chief  Executive  Officer was  accelerated in 2001 due to
his formation of Artera Group, Inc. and  conceptualization  of its strategy.  On
October  25,  2002,  the  Board of  Directors  deemed  all  options  granted  to
directors,   officers  and  employees  before  that  date  as  fully  vested  to
acknowledge  its  gratitude  for  ongoing  employee  dedication  during the 2002
restructuring and cost-saving measures,  including suspension of employee salary
increases. On September 10, 2003, the Board of Directors accelerated the vesting
schedules of options granted to directors,  officers and employees dated October
25, 2002 to 100% vested to  acknowledge  its  continued  gratitude  for employee
dedication. Although the acceleration of vesting schedules was a modification of
the original  grants,  there was no  accounting  consequence  because the market
price on the date of such  modification  was lower  than the  original  exercise
prices of the grants which exercise prices were not revised.

                                      F-36
<PAGE>


     1992 Plan activity is summarized as follows:

<TABLE>
<CAPTION>

                                                                         Years Ended December 31,
                                           ------------------------------------------------------------------------------------
                                                      2001                        2002                          2003
                                           --------------------------- -------------------------    ---------------------------
                                                           Weighted                    Weighted                      Weighted
                                                            Average                     Average                      Average
                                                           Exercise                    Exercise                      Exercise
                                              Shares         Price       Shares         Price          Shares         Price
                                           ------------  ------------  ------------   ----------    ------------  -------------
<S>                                          <C>           <C>          <C>            <C>           <C>            <C>
Outstanding at beginning of year             47,057,690    $   0.43     46,408,663     $   0.42      44,022,537     $  0.420
Options granted                               1,641,992    $   0.19              -     $      -               -     $      -
Options exercised                                     -    $      -              -     $      -               -     $      -
Options canceled, expired or forfeited       (2,291,019)   $   0.55     (2,386,126)    $   0.44      (1,563,200)    $  0.672
                                           ------------                ------------                 ------------
Outstanding at end of year                   46,408,663    $   0.42     44,022,537     $   0.42      42,459,337     $  0.404
                                           ============                ============                 ============

Options exercisable at year-end              42,180,040    $   0.42     44,022,537     $   0.42      42,459,337     $  0.404
                                           ============                ============                 ============
Options available for grant at year-end               -                          -                            -
                                           ============                ============                 ============
</TABLE>

Directors Plan

     On November 15, 1994,  the Board of Directors  adopted the  Directors  Plan
which was approved by  shareholders  at the annual meeting held in July 1996. As
of December 31, 2003,  the  Directors  Plan has no shares  available  due to the
expiration of the plan.

     Directors Plan activity is summarized as follows:

<TABLE>
<CAPTION>
                                                                         Years Ended December 31,
                                           ------------------------------------------------------------------------------------
                                                      2001                        2002                          2003
                                           --------------------------  -------------------------    ---------------------------
                                                          Weighted                    Weighted                     Weighted
                                                          Average                      Average                      Average
                                                          Exercise                     Exercise                    Exercise
                                              Shares        Price        Shares         Price         Shares         Price
                                           ------------  ------------  ------------   ----------    ------------  -------------
<S>                                             <C>        <C>             <C>         <C>                           <C>
Outstanding at beginning of year                538,500    $   0.73        538,500     $   0.73              -       $      -
Options granted                                       -    $      -              -     $      -              -       $      -
Options exercised                                     -    $      -              -     $      -              -       $      -
Options canceled, expired or forfeited                -    $      -       (538,500)    $   0.73              -       $      -
                                           ------------                ------------                 ------------
Outstanding at end of year                      538,500    $   0.73              -     $      -              -       $      -
                                           ============                ============                 ============

Options exercisable at year-end                 538,500    $   0.73              -     $      -              -       $      -
                                           ============                ============                 ============
Options available for grant at year-end         282,500                          -                           -
                                           ============                ============                 ============
</TABLE>

2001 Plan

     On April 25,  2001,  the Board of  Directors  adopted the 2001 Plan for the
granting of shares and options to  purchase  up to  18,000,000  shares of common
stock to  directors,  officers,  employees  and  consultants.  The 2001 Plan was
approved by the  stockholders at the company's  annual meeting on July 10, 2001.
The  exercise  price of all 2001 Plan options must be at least equal to the fair
market value of our common stock on the date of grant,  and the term and vesting
schedules of 2001 Plan options are determined by the Board of Directors. On June
3, 2002,  June 13, 2002 and October 25,  2002,  the Board of  Directors  granted
seven-year options to purchase shares of NCT common stock to directors, officers
and  employees in the aggregate  amount of 430,000,  10,575,000  and  20,675,000
shares,  respectively,   at  exercise  prices  of  $0.081,  $0.081  and  $0.083,
respectively,  the  fair  market  value of  shares  of NCT  common  stock on the
respective dates of grant. On September 10, 2003, the Board of Directors granted
seven-year options to purchase shares of NCT common stock to directors, officers
and employees in the aggregate amount of 26,290,000 shares, at an exercise price
of $0.054 per share,  the fair market value of shares of NCT common stock on the
date of grant.  The June 13, and  October 25,  2002 and the  September  10, 2003
grants were made  subject to the  approval by the  company's  stockholders  of a
sufficient  increase in the number of shares of common stock (1)  authorized and
(2) covered by the 2001 Plan. At the time of such shareholder  approval,  if the
market value of the  company's  common stock  exceeds the exercise  price of the
subject  options,  the company will incur a non-cash charge to earnings equal to
the spread between the exercise price of the option and the market price,  times
the number of shares  involved.  If shareholder  approval of the increase is not
obtained at an annual meeting of  shareholders,  options granted will be reduced
pro rata for the excess  unauthorized  shares. On October 25, 2002, the Board of
Directors  deemed all options  granted to directors,  officers,  consultants and
employees before that date as fully vested (pending the approval as noted above)
to acknowledge  its gratitude for ongoing  employee  dedication  during the 2002
restructuring and cost-saving measures,  including suspension of employee salary
increases. On September 10, 2003, the Board of Directors accelerated the vesting
schedules of options granted to directors,  officers and employees dated October
25, 2002 to 100% vested to  acknowledge  its  continued  gratitude  for employee
dedication. Although the acceleration of vesting schedules was a modification of
the original  grants,  there was no

                                      F-37
<PAGE>


accounting  consequence because the market price on the date of the modification
was lower than the original  exercise price of the grants which exercise  prices
were not revised.

     2001 Plan activity is summarized as follows:

<TABLE>
<CAPTION>

                                                                          Years Ended December 31,
                                          ------------------------------------------------------------------------------------------
                                                     2001                           2002                           2003
                                          ---------------------------  -------------------------------  ----------------------------
                                                          Weighted                        Weighted                        Weighted
                                                           Average                        Average                         Average
                                                          Exercise                        Exercise                        Exercise
                                             Shares         Price         Shares           Price          Shares           Price
                                          -------------  ------------  -------------   ---------------  ------------     -----------
<S>                                                                      <C>                 <C>         <C>               <C>
Outstanding at beginning of year                     -      $      -     10,387,503          $   0.13    41,485,358        $  0.100
Options granted                             10,387,503      $   0.13     31,680,000          $   0.08    26,290,000        $  0.054
Options exercised                                    -      $      -              -          $      -             -        $      -
Options canceled, expired or forfeited               -      $      -      (582,145)          $   0.13     (720,413)        $  0.096
                                          -------------                -------------                    ------------
Outstanding at end of year                  10,387,503      $   0.13     41,485,358          $   0.10    67,054,945 (a)    $  0.078
                                          =============                =============                    ============

Options exercisable at year-end              5,355,001      $   0.13     30,080,358          $   0.11    52,476,945         $ 0.085
                                          =============                =============                    ============
Options available for grant at year-end      7,612,497                            -                               -
                                          =============                =============                    ============
</TABLE>

Footnote:
---------
(a) As of December 31, 2003,  49,054,945  of the  outstanding  options under the
2001  Plan are  subject  to the  approval  by the  company's  stockholders  of a
sufficient increase in the number of shares of common stock (1) authorized and
(2) covered by the 2001 Plan.

Non-plan

     From time to time at the  discretion  of the Board of  Directors,  non-plan
options are granted. The exercise price of non-plan options generally must be at
least  equal  to the fair  market  value of such  shares  on the date of  grant.
Non-plan options generally are exercisable over a five to ten-year period as and
vesting  schedules  vary  from  (i)  fully  vested  at the date of grant to (ii)
multiple year apportionment of vesting, as determined by the Board of Directors.
In 2001, the company issued  3,850,000 shares of NCT common stock to NXT plc for
an  option  which  NCT had  granted  to NXT plc in 1997.  This  issuance  was in
connection with reorganizing existing  cross-license  agreements between NCT and
NXT plc (see Note 4). In 2002 and 2003, the Board of Directors  granted non-plan
options to acquire  NCT common  stock to  consulting  entities  in which  Carole
Salkind or her son were the sole  shareholder  (see Note 21).  The fair value of
these consulting  options  (determined  using the  Black-Scholes  option pricing
model) resulted in aggregate  charges of $4.1 million and $8.3 million  included
in our selling,  general and administrative expenses for the year ended December
31, 2002 and 2003, respectively.

     Non-plan stock option activity is summarized as follows:

<TABLE>
<CAPTION>

                                                                            Years Ended December 31,
                                                ---------------------------------------------------------------------------------
                                                         2001                       2002                         2003
                                                -----------------------   --------------------------  ---------------------------
                                                              Weighted                     Weighted                    Weighted
                                                              Average                       Average                     Average
                                                              Exercise                     Exercise                    Exercise
                                                  Shares       Price         Shares         Price        Shares         Price
                                                -----------  ----------   -------------   ----------  ------------  -------------
<S>                                              <C>          <C>              <C>         <C>         <C>             <C>
Outstanding at beginning of year                 4,025,000    $   0.30         100,000     $   0.27    84,825,000      $    0.07
Options granted                                          -    $      -     100,225,000     $   0.07   283,550,000      $  0.0393
Options exercised                               (3,850,000)   $   0.30               -     $      -             -      $       -
Options canceled, expired or forfeited             (75,000)   $   0.50     (15,500,000)    $   0.08             -      $       -
                                                -----------               -------------               ------------
Outstanding at end of year                         100,000    $   0.27      84,825,000     $   0.07   368,375,000      $  0.0455
                                                ===========               =============               ============

Options exercisable at year-end                    100,000    $   0.27      84,825,000     $   0.07   368,375,000      $  0.0455
                                                ===========               =============               ============
</TABLE>

Warrants:

     The  company's  warrants are issued from time to time at the  discretion of
the Board of  Directors.  The exercise  price of warrants  generally  must be at
least equal to the fair  market  value of the  underlying  shares on the date of
grant. Generally,  warrants are exercisable over a three to seven-year period as
determined by the Board of Directors and vest on the date of issuance.

     During 2001, in  conjunction  with the issuance of convertible  notes,  NCT
issued Carole Salkind  warrants to acquire an aggregate of 10,417,254  shares of
its common stock at exercise prices ranging from $0.071 to $0.21 per share.  The
fair  value  of  these   warrants  was  $0.7  million   (determined   using  the
Black-Scholes  option pricing model).  We reduced the exercise price on warrants
granted to her before December 20, 2001 to $0.071 per share.  The fair value due
to the repricing of these warrants as determined using the Black-Scholes  option
pricing  model was $0.3

                                      F-38
<PAGE>


million.  Thus,  the company  valued the warrants and repricings at $1.0 million
using the  Black-Scholes  option  pricing  model.  Based upon  allocation of the
relative fair values of the instruments,  we recorded a discount of $0.7 million
to the  convertible  notes issued to Carole  Salkind.  On October 25, 2001,  NCT
granted a placement agent a warrant to acquire  20,000,000  shares of NCT common
stock at an  exercise  price of $0.09 per share as  consideration  for  advisory
services  with  respect to equity  placements  during 2001  (including  Pro Tech
series B preferred  stock).  We reduced the  exercise  price of this  warrant in
January  2002 from $0.09 per share to an exercise  price,  as amended as of June
28, 2002, to the lesser of $0.07 or the lowest closing bid price between January
10,  2002 and June  28,  2003.  During  2001,  we  issued  warrants  to  outside
consultants  for the right to acquire an aggregate  of  3,125,000  shares of our
common stock at exercise prices ranging from $0.093 to $0.59 per share.  For the
year ended  December 31, 2001, we recorded a charge for  consulting  services of
$0.4 million (determined using the Black-Scholes option pricing model).

     During 2002, in  conjunction  with the issuance of convertible  notes,  NCT
granted Carole Salkind five-year  warrants to acquire an aggregate of 96,372,920
shares of its common stock  (including  30,000,000  warrants for her irrevocable
wavier to  rights to  exchange  her notes and a warrant  for  shares of Pro Tech
common  stock) at exercise  prices  ranging  from $0.041 to $0.097 per share,  a
weighted average exercise price of $0.069.  The fair value of these warrants was
$5.0 million  (determined using the Black-Scholes  option pricing model).  Based
upon  allocation of the relative fair values of the  instruments,  we recorded a
discount of $4.4  million to the  convertible  notes  issued to Carole  Salkind.
During 2002, we issued warrants to outside  consultants for the right to acquire
an aggregate of 10,854,167 shares of our common stock at exercise prices ranging
from $0.054 to $0.75 per share, a weighted  average exercise price of $0.099 and
recorded a charge for consulting  services of $0.6 million (determined using the
Black-Scholes option pricing model).  Included in these shares, as consideration
for advisory  services by a placement agent, was a five-year  warrant to acquire
5,000,000 shares of our common stock at an exercise price, as amended as of June
28, 2002, of the lesser of $0.07 or the lowest closing bid price between January
10,  2002 and June 28,  2003,  or $0.027  per  share.  In  conjunction  with the
execution of a license agreement with FairPoint  Broadband,  Inc. (see Note 13),
NCT issued a  five-year  warrant  for  2,000,000  shares of its common  stock to
FairPoint Communications, Inc. exercisable at $0.15 per share. The fair value of
this warrant was approximately $0.1 million  (determined using the Black-Scholes
option  pricing  model) which was recorded as a reduction of license fee revenue
(see Note 13). In connection  with the issuance of a promissory note on December
6, 2002, we issued two five-year  warrants to the note holder, one for 1,400,000
shares of NCT common stock at an exercise price per share of the lesser of $0.07
or the  lowest  closing  bid price of NCT common  stock for the period  from the
grant date through the first anniversary, or $0.027 per share. The fair value of
the  warrant  was less than $0.1  million  (determined  using the  Black-Scholes
option pricing model) and was recorded as a discount to the related note payable
based upon allocation of the relative fair values of the instruments.  The other
warrant  was for  15,000,000  shares at an  exercise  price of $0.01 per  share,
subject to certain  conditions and vested and became exercisable in its entirety
as of the date,  if any,  that both of the following  events  occurred:  (a) NCT
failed to pay when due and payable  (April 7, 2003) any amount owed by it to the
note holder under the promissory  note, dated December 6, 2002, in the principal
amount of $385,000,  and (b) NCT failed, as of the date that the note became due
and  payable  (April 7,  2003),  to pay any  amount  owed by NCT  under  certain
registration  penalty  provisions  and  such  payment  obligation  had not  been
otherwise  discharged.  If the event  described  in clause (b)  occurred but the
event described in clause (a) did not occur, then this warrant vested and became
exercisable  as to  2,000,000  shares only.  During  2003,  both of these events
occurred and we recorded the fair value of this  warrant  (calculated  as of May
30,  2003)  as  interest   expense  of  $0.6  million   (determined   using  the
Black-Scholes  option  pricing  model) for the year ended December 31, 2003 as a
result of this vesting.  On September 4, 2003,  2,500,000  shares of the warrant
issued to Alpha  Capital on  December  6, 2002 were  cancelled  resulting  in no
accounting effect. Based upon additional negotiation in 2003, the warrant vested
as to 12.5 million shares and 2.5 million warrant shares were cancelled.

     During 2003, in  conjunction  with the issuance of convertible  notes,  NCT
issued Carole Salkind five-year  warrants to acquire an aggregate of 175,175,579
shares of its common stock at exercise  prices ranging from $0.029 to $0.055 per
share, a weighted  average  exercise price of $0.04078.  The fair value of these
warrants was $5.6 million  (determined  using the  Black-Scholes  option pricing
model). Based upon allocation of the relative fair values of the instruments, we
recorded a discount of $4.8  million to the  convertible  notes issued to Carole
Salkind. During 2003, we issued warrants to outside consultants for the right to
acquire an aggregate of 3,000,000  shares of our common stock at exercise prices
ranging from $0.0312 to $0.048 per share,  a weighed  average  exercise price of
$0.0438  and  recorded  a  charge  for  consulting   services  of  $0.1  million
(determined using the Black-Scholes option pricing model).

                                      F-39
<PAGE>


     Warrant activity is summarized as follows:

<TABLE>
<CAPTION>

                                                                      Years Ended December 31,
                                          ------------------------------------------------------------------------------------
                                                   2001                        2002                        2003
                                          -------------------------   --------------------------  ----------------------------
                                                         Weighted                     Weighted                      Weighted
                                                         Average                      Average                        Average
                                                         Exercise                     Exercise                      Exercise
                                            Shares        Price          Shares        Price        Shares            Price
                                          ------------  -----------   -------------  -----------  ------------    ------------
<S>                                        <C>           <C>           <C>            <C>          <C>            <C>
Outstanding at beginning of year           21,048,331    $   0.36      43,725,585     $  0.207     169,667,922      $  0.0910
Warrants granted                           33,542,254    $   0.13     126,627,087     $  0.066     178,175,579      $  0.0408
Warrants exercised                        (10,000,000)   $   0.08               -     $      -               -      $       -
Warrants canceled, expired or forfeited      (865,000)   $   0.40        (684,750)    $  0.621      (3,838,164)     $  0.2512
                                          ------------                -------------               ------------
Outstanding at end of year                 43,725,585    $   0.21     169,667,922     $  0.091     344,005,337      $  0.0601
                                          ============                =============               ============
Warrants exercisable at year-end           42,396,318    $   0.20     168,788,705     $  0.090     343,639,714 (a)  $  0.0597
                                          ============                =============               ============
</TABLE>

Footnote:
---------
(a)  Exercisable  subject to the  approval by the  company's  stockholders  of a
sufficient increase in the number of shares of common stock authorized.

     The following table summarizes  information  about warrants  outstanding at
December 31, 2003:

<TABLE>
<CAPTION>

                                            Warrants Outstanding                         Warrants Exercisable
                               -------------------------------------------------   --------------------------------
                                                                     Weighted
                                                                      Average
                                                                     Remaining
                                                  Weighted          Contractual                        Weighted
              Range of            Number           Average             Life            Number           Average
           Exercise Prices      Outstanding     Exercise Price      (In Years)       Exercisable     Exercise Price
         ------------------    --------------   --------------      ------------   --------------    --------------
<S>      <C>        <C>          <C>              <C>                   <C>          <C>               <C>
         $0.0100 to $0.0290      40,900,000       $0.02190              2.31         40,900,000        $0.02190
         $0.0310 to $0.0400      94,775,579       $0.03780              4.68         94,775,579        $0.03780
         $0.0410 to $0.0500      89,606,373       $0.04356              4.51         89,606,373        $0.04356
         $0.0535 to $0.0700      44,729,491       $0.06387              3.91         44,729,491        $0.06387
         $0.0710 to $0.0990      58,104,310       $1.07866              3.22         58,104,310        $0.07866
         $0.1000 to $0.7500      15,889,584       $0.30547              1.64         15,523,961        $0.30296
                               --------------                                      --------------
                                344,005,337                                         343,639,714
                               ==============                                      ==============

</TABLE>

Stock Options and Warrants of Pro Tech Communications, Inc.:

     On March 5, 1998,  the Pro Tech Board of  Directors  adopted the 1998 Stock
Option  Plan  for  the  benefit  of  its  directors,   officers,  employees  and
consultants.  This plan  originally  authorized  the  issuance  of up to 500,000
shares of common stock and was increased to 2 million  shares of common stock on
August  11,  2000.  The  authorized  shares for this plan were  increased  to 30
million on April 12, 2002 at Pro Tech's annual  meeting of  stockholders.  As of
December 31, 2003,  Pro Tech's  outstanding  stock options have exercise  prices
ranging from $0.06 to $0.4375 and a weighted average remaining  contractual life
of  approximately  3.8 years.  The following  table  summarizes Pro Tech's stock
option activity:

<TABLE>
<CAPTION>

                                                                 Years Ended December 31,
                                 ------------------------------------------------------------------------------------
                                             2001                       2002                         2003
                                 --------------------------- ---------------------------  ---------------------------
                                                 Weighted                    Weighted                     Weighted
                                                  Average                     Average                      Average
                                                 Exercise                    Exercise                     Exercise
                                    Shares         Price        Shares         Price         Shares         Price
                                 -------------- ------------ -------------- ------------  -------------  ------------
<S>                                  <C>            <C>          <C>            <C>          <C>             <C>
Outstanding at beginning of year     1,528,000      $ 0.440      1,740,000      $ 0.283      1,372,500       $ 0.253
Options granted                        940,000      $ 0.170        250,000      $ 0.060              -       $     -
Options exercised                            -      $     -              -      $     -              -       $     -
Options expired                       (728,000)     $ 0.468       (617,500)     $ 0.259        (87,500)      $ 0.402
                                 --------------              --------------               -------------
Outstanding at end of year           1,740,000      $ 0.283      1,372,500      $ 0.253      1,285,000       $ 0.242
                                 ==============              ==============               =============

Options exercisable at year-end      1,187,500      $ 0.265      1,235,000      $ 0.232      1,285,000       $ 0.242
                                 ==============              ==============               =============

</TABLE>

     In connection  with issuance of Pro Tech's  series A preferred  stock,  Pro
Tech provided warrants to purchase  4,500,000 shares of Pro Tech's common stock.
The  warrants  were  exercisable  at $0.50 per share and  expired on October 28,
2003. In connection with Pro Tech's series B preferred  stock, Pro Tech issued a
warrant  to  purchase  1,000,000  shares of its  common  stock.  The  warrant is
exercisable  at $0.13 per share and expires on July 30,  2004.  Pro Tech has the
right to require  the warrant  holder to exercise  upon a call by Pro Tech under
the  following

                                      F-40
<PAGE>


conditions: (1) one-third of the warrant is callable if the closing bid price of
the common stock for each of the previous  fifteen days equals or exceeds $0.177
per share and the average  daily  trading  volume during such period is at least
150,000  shares;  (2)  two-thirds  of the warrant is callable if the closing bid
price of the  common  stock  for each of the  previous  fifteen  days  equals or
exceeds $0.244 per share and the average daily trading volume during such period
is at least  150,000  shares;  and (3) the  entire  warrant is  callable  if the
closing  bid price of the common  stock for each of the  previous  fifteen  days
equals or exceeds  $0.295 per share and the average daily trading  volume during
such  period is at least  150,000  shares.  We  estimated  the fair value of the
warrants  issued in  connection  with our issuance of Pro Tech  preferred  stock
using the  Black-Scholes  option  pricing  model (see Pro Tech  preferred  stock
discussion in Note 16).

     As of December 31, 2003, the outstanding Pro Tech warrants have an exercise
price of $0.13 and a weighted  average  remaining  contractual life of less than
one year. The following table summarizes Pro Tech's warrant activity:

<TABLE>
<CAPTION>

                                                                     Years Ended December 31,
                                          -----------------------------------------------------------------------------
                                                    2001                     2002                      2003
                                          ------------------------  ------------------------ --------------------------
                                                        Weighted                 Weighted                   Weighted
                                                         Average                  Average                    Average
                                                        Exercise                 Exercise                   Exercise
                                            Shares        Price       Shares       Price        Shares        Price
                                          ------------ -----------  ----------- ------------ ------------- ------------
<S>                                         <C>           <C>        <C>            <C>         <C>            <C>
Outstanding at beginning of year            4,500,000     $ 0.500    5,500,000      $ 0.433     5,500,000      $ 0.433
Warrants granted                            1,000,000     $ 0.130            -      $     -             -      $     -
Warrants canceled or expired                        -     $     -            -      $     -    (4,500,000)     $ 0.500
                                          ------------              -----------              -------------
Outstanding at end of year                  5,500,000     $ 0.433    5,500,000      $ 0.433     1,000,000      $ 0.130
                                          ============              ===========              =============
</TABLE>


18.  Other (Income) Expense:

     (In thousands of dollars)

<TABLE>
<CAPTION>

                                                                                         For the Years Ended December 31,
                                                                                     ------------------------------------------
                                                                                         2001          2002          2003
                                                                                     ------------- ------------- --------------
<S>                                                                                   <C>            <C>          <C>
  Settlement of accounts payable                                                      $      (67)    $       -    $       (54)
  Write-down of prepaid royalty                                                                -           563              -
  Minority share of loss in subsidiary - Pro Tech                                           (473)         (458)             -
  Other                                                                                     (397)         (426)          (190)
                                                                                     ------------- ------------- --------------
     Other (income) expense (classified as operating)                                 $     (937)    $    (321)   $      (244)
                                                                                     ============= ============= ==============


  Finance costs associated with non-registration
     of common shares                                                                 $    2,318     $   6,070    $     2,207
  Litigation settlements (Notes 11 and 16)                                                     -             -         (5,317)
  Default penalties on debt (Note 12)                                                      1,208           441          2,103
  Other-than-temporary decline in value of available-for-sale
     securities                                                                            7,036           765              -
  Depreciation in fair value of warrant                                                    1,355           151              1
  Realized loss on sale of trading securities                                              2,301             -              -
  Inducement charge                                                                          190             -              -
  Reserve for notes receivable                                                             1,000             -              -
  Other                                                                                      691           (16)            63
                                                                                     ------------- ------------- --------------
     Other (income) expense (classified as non-operating)                             $   16,099     $   7,411    $      (943)
                                                                                     ============= ============= ==============
</TABLE>

     In  consideration  of  the  license  agreement  with  Infinite   Technology
Corporation  (see Note 4), the  company  received  1.2  million  shares of ITC's
common  stock valued at $6.0  million  determined  using the quoted price of the
stock on the date the shares  were  received  ($5.00 per  share).  For the years
ended    December    31,   2001   and   2002,    respectively,    NCT   recorded
other-than-temporary  realized losses of $3.9 million and $0.7 million  included
in other (income) expense, net in the consolidated  statement of operations.  At
December  31,  2003,  an  unrealized  loss  of  $0.1  million  included  on  the
consolidated  balance sheet as part of accumulated  other  comprehensive  income
(loss).

                                      F-41
<PAGE>


     The company  accounts for its investment in  InsiderStreet.com,  Inc., (now
known as Neometrix Corp.) stock as available-for-sale  securities valued at fair
value, with unrealized gains and losses excluded from earnings but reported in a
separate  component of  stockholders'  equity  (capital  deficit) until they are
sold. For the year ended December 31, 2001 (second quarter of 2001), the holding
loss of $2.5 million was considered other-than-temporary due to the longevity of
the economic downturn in the industry sector and company specific  prospects and
is included in other  (income)  expense,  net in the  consolidated  statement of
operations.

     In 2001, we decided to reacquire  the DMC licenses  held by two  licensees,
Eagle Assets Limited and Brookepark  Limited and we accrued an aggregate of $4.0
million for this  reacquisition  cost.  As a result,  we  incurred an  aggregate
charge of $1.3  million,  net of $2.7  million  reduction  of  deferred  revenue
previously  recorded  from the sale of  licenses,  classified  as write downs of
investment and repurchased licenses in our consolidated statement of operations.
Concurrently, we ceased recognition of revenue on these DMC licenses.

19.  Costs of Exiting Activities:

     On December 18, 2001, the Board of Directors of Artera Group  International
Limited decided to suspend  underperforming  operations and reduce employees. In
connection therewith,  the company recorded a write-down of $1.1 million for the
year ended December 31, 2001  principally  relating to equipment and other costs
yet to be incurred at December  31, 2001.  For the year ended  December 31, 2002
the company  recorded a write-down of $0.4 million  relating to the remainder of
the net assets.

     On March 21, 2002,  the Board of  Directors  of Artera Group  International
Limited, a U.K.-based subsidiary,  decided that the corporation should cease all
operations and be liquidated. Cessation of operations was formalized on April 5,
2002 and liquidation proceedings are pending at December 31, 2003.

     In  December  2001,  management  decided  to close the  company's  Maryland
research facilities.  In connection therewith, the company recorded a charge for
the year ended December 31, 2001 of $0.8 million  principally  relating to lease
termination  and other  costs yet to be  incurred  at  December  31,  2001.  The
abandonment of this facility was completed in the first quarter of 2002. For the
year ended  December 31, 2002, we recorded  employee  termination  costs of $0.3
million along with an adjustment  relating to the lease  termination and lawsuit
settlement of $(0.6) million.

     These costs have been included in the consolidated  statement of operations
as "costs of exiting activities."

     On February 28, 2002, DMC Cinema,  Inc. ceased business  operations and had
no material operations at date of discontinuance.

                                      F-42
<PAGE>


20.  Supplemental Cash Flow Disclosures:

     (In thousands of dollars)

<TABLE>
<CAPTION>

                                                                                           For the Years Ended December 31,
                                                                                     ---------------------------------------------
                                                                                          2001            2002           2003
                                                                                     ---------------  -------------  -------------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
<S>                                                                                   <C>              <C>            <C>
    Interest                                                                          $         11     $       17     $        35
                                                                                     ===============  =============  =============
Supplemental disclosures of non-cash investing and financing activities:
    Investment in DMC New York and repurchase of licenses                             $     21,000     $        -     $         -
                                                                                     ===============  =============  =============
    Receipt of NXT shares for license fee                                             $      9,160     $        -     $         -
                                                                                     ===============  =============  =============
    Settlement of liability as offset against patent                                  $        405     $        -     $         -
                                                                                     ===============  =============  =============
    Unrealized holding loss on available-for-sale securities                          $          -     $        -     $       (53)
                                                                                     ===============  =============  =============
    Issuance of series H preferred stock in exchange for previously accrued
    acquisition of subsidiary                                                        $           -     $   14,000     $         -
                                                                                     ===============  =============  =============
    Issuance of common stock upon conversion of principal portion of
    convertible notes                                                                 $        500     $      375     $         -
                                                                                     ===============  =============  =============
    Issuance of common stock in exchange for common stock of subsidiary               $        984     $        -     $         -
                                                                                     ===============  =============  =============
    Receipt of Pro Tech common shares in lieu of cash to settle accounts
    receivable                                                                        $      1,350     $        -     $         -
                                                                                     ===============  =============  =============
    Issuance of preferred stock of subsidiary, Artera Group, Inc.                     $      7,799     $        -     $         -
                                                                                     ===============  =============  =============
    Issuance of common stock for services                                             $        435     $       19     $         -
                                                                                     ===============  =============  =============
    Issuance of notes for placement services rendered                                 $        527     $        -     $         -
                                                                                     ===============  =============  =============
    Issuance of options and warrants for services                                     $        438     $        -     $         -
                                                                                     ===============  =============  =============
    Issuance of common stock upon exchange of principal portion of convertible
    notes of subsidiary                                                               $      2,477     $      200     $     1,754
                                                                                     ===============  =============  =============
    Issuance of common stock in exchange for preferred stock of subsidiary            $        261     $        -     $         -
                                                                                     ===============  =============  =============
    Property and equipment financed through capitalized leases and notes payable      $      1,404     $       15     $         -
                                                                                     ===============  =============  =============
    Receipt of non-recourse notes as partial consideration for convertible note
    of subsidiary                                                                     $      1,000     $        -     $         -
                                                                                     ===============  =============  =============
    Receipt of Pro Tech common shares as partial consideration of convertible
    note of subsidiary                                                                $        500     $        -     $         -
                                                                                     ===============  =============  =============
    Issuance of common stock to fulfill common stock payable obligation               $          -     $        -     $     2,296
                                                                                     ===============  =============  =============
    Issuance of common stock upon conversion of preferred stock and dividends         $          -     $        -     $       785
                                                                                     ===============  =============  =============
    Issuance of common stock to settle litigation                                     $          -     $        -     $     4,125
                                                                                     ===============  =============  =============
    Finance costs associated with non-registration of common shares
      on preferred stock of subsidiary                                                $          -     $        -     $     1,896
                                                                                     ===============  =============  =============

</TABLE>

21.  Related Parties:

Carole Salkind

     Beginning in 1999, NCT has issued  convertible  notes to Carole Salkind,  a
stockholder,  an accredited  investor and spouse of a former director of NCT. As
of  December  31,  2003,  the  principal  balance  outstanding  of  these  notes
aggregated   approximately   $33.8   million   (see  Note  12).  The  notes  are
collateralized  by substantially  all the assets of NCT Group,  Inc. and certain
assets of NCT Video  Displays,  Inc. At Ms.  Salkind's  election,  the notes are
convertible  into shares of our common stock and may be exchanged  for shares of
common stock of our  subsidiaries,  except Pro Tech.  The notes contain  various
events of default, the occurrence of any one of which provides, at Ms. Salkind's
election,  that the outstanding principal,  unpaid interest and a penalty become
immediately due and payable.

Consulting Agreements

     On January 25,  2002,  NCT and Leben Care,  Inc.  entered into a consulting
agreement.  This  agreement  replaced an agreement  dated January 19, 1999.  The
consulting  agreement  calls for a monthly fee of $2,500,  payable at the end of
the one-year term, and equity compensation in the form of options. The agreement
was  renewed  for one year at the end of its term and will expire on January 25,
2004. On January 8, 2002 and January 25, 2002,  NCT granted to Leben Care,  Inc.
options to purchase  8,350,000  shares of NCT common  stock at  exercise  prices
ranging from $0.079 to $0.130 (an aggregate  exercise  price of  $809,000).  The
options  vested on the date of grant.  The

                                      F-43
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options  expire on dates  ranging  from May 22,  2006 to January 24,  2007.  The
options were granted in consideration of consulting  services  provided by Leben
Care to NCT.  Carole  Salkind's son Steven  Salkind is the sole  shareholder  of
Leben Care.  We  recorded a charge of $545,000  and zero for the fair value (see
Note 17) of the options and a $120,000 and $30,000  consulting fee as called for
under the agreement for  consulting  expenses  included in selling,  general and
administrative  expenses in our  consolidated  statement of  operations  for the
years ended  December 31, 2002 and 2003,  respectively.  The accrued  consulting
expenses of $150,000  are  included in accrued  expenses at December 31, 2003 in
our consolidated balance sheet.

     On July 1, 2001, NCT and Stop Noise, Inc. (formerly known as Stopnoise.com,
Inc.) entered into a consulting  agreement.  The consulting  agreement is for an
initial one-year term and calls for equity  compensation in the form of options.
On February  27,  2002,  NCT granted to Stop Noise,  Inc.  five-year  options to
purchase  3,375,000  shares of NCT common stock at exercise  prices ranging from
$0.079 to $0.120 (an aggregate  exercise price of $312,500).  The options vested
on June 30,  2002.  The options  expire on dates  ranging  from June 30, 2006 to
February 26,  2007.  The options were  granted in  consideration  of  consulting
services  provided by Stop Noise to NCT. Carole  Salkind's son Steven Salkind is
the sole shareholder of Stop Noise. We recorded an aggregate charge for the fair
value  (see Note 17) of the  options  as  called  for  under  the  agreement  of
approximately $187,000 for consulting expenses included in selling,  general and
administrative expenses in our consolidated statement of operations for the year
ended  December 31, 2002.  The  agreement was renewed for one-year at the end of
its initial  term and expired on June 30, 2003.  On July 14, 2003,  NCT issued a
warrant to John Harris,  as designee for Stop Noise, Inc. to satisfy health care
coverage  obligations  under the  consulting  agreement  dated July 1, 2001.  We
recorded a charge for the fair value of the  warrant of $17,500  for  consulting
expenses  included  in  selling,  general  and  administrative  expenses  in our
consolidated statement of operations for the year ended December 31, 2003.

     On  September  30,  2002,  NCT and Acme  Associates,  Inc.  entered  into a
consulting  agreement.  The  consulting  agreement  calls for a  monthly  fee of
$2,500,  payable at the end of the one-year term, and equity compensation in the
form of  options.  The  agreement  was  renewed  for  one-year at the end of its
initial term and will expire on September 30, 2004.  On September 30, 2002,  NCT
granted to Acme  Associates,  Inc. a  five-year  option to  purchase  50,000,000
shares of NCT common stock at an exercise price of $0.07 per share (an aggregate
exercise  price of $3.5 million).  The options vested on the date of grant.  The
September 30, 2002 consulting  agreement was amended on July 14, 2003, September
11, 2003, October 3, 2003, October 14, 2003, November 3, 2003, November 21, 2003
and  December  17,  2003 to provide  for  additional  consulting  services  with
additional  options as  consideration.  Pursuant to the amendments,  on July 14,
2003,  September 11, 2003, October 3, 2003, October 14, 2003,  November 3, 2003,
November 21, 2003 and December 17, 2003,  NCT granted to Acme  Associates,  Inc.
non-plan  options to purchase an aggregate of  190,500,000  shares of NCT common
stock at exercise  prices ranging from $0.0312 to $0.052 per share (an aggregate
exercise  price  of  $7.4  million).  The  five-year  options  vested  on  their
respective  dates of grant. We recorded an aggregate  charge of $0.8 million for
the fair  value of the  options  as  called  for  under  the  amendments  to the
agreement for consulting  expenses included in selling,  general  administrative
expenses in our consolidated statement of operations for the year ended December
31, 2003.  The options  were granted in  consideration  of  consulting  services
provided by Acme  Associates to NCT.  Carole Salkind is the sole  shareholder of
Acme  Associates.  We recorded a charge of $2,625,000  and  $5,561,000 (of which
approximately  $4.7 million was during the fourth  quarter of 2003) for the fair
value (see Note 17) of the options and a $25,000 and $12,500  consulting  fee as
called for under the  agreement  for  consulting  expenses  included in selling,
general and administrative  expenses in our consolidated statement of operations
for the years  ended  December  31,  2002 and 2003,  respectively.  The  accrued
consulting  expenses of $37,500 are included in accrued expenses at December 31,
2003 in our consolidated balance sheet.

     On December  26,  2002,  NCT and  Motorworld,  Incorporated  entered into a
consulting agreement.  The agreement calls for a monthly fee of $2,500,  payable
at the end of the one-year term, and equity compensation in the form of options.
On December 26, 2002, NCT granted to Motorworld, Incorporated a five-year option
to purchase 23,000,000 shares of NCT common stock at an exercise price of $0.042
per share (an aggregate  exercise price of $966,000).  The options vested on the
date of grant. The options were granted in consideration of consulting  services
provided  by  Motorworld  to NCT.  Carole  Salkind  is the sole  shareholder  of
Motorworld Incorporated.  We have recorded a charge of $724,000 and zero for the
fair value (see Note 17) of the options and a zero and $30,000 consulting fee as
called for under the  agreement  for  consulting  expenses  included in selling,
general and administrative  expenses in our consolidated statement of operations
for the years  ended  December  31,  2002 and 2003,  respectively.  The  accrued
consulting  expenses of $30,000 are included in accrued expenses at December 31,
2003 in our consolidated balance sheet.

     On January 23,  2003,  NCT and  Inframe,  Inc.  entered  into a  consulting
agreement.  The agreement calls for a monthly fee of $2,500,  payable at the end
of the  one-year  term,  and  equity  compensation  in the form of  options,  in
consideration of consulting services provided by Inframe to NCT. Such consulting
services are performed by Morton Salkind,  husband of Carole Salkind,  acting on
behalf of Inframe,  Inc. Carole Salkind is the sole shareholder

                                      F-44
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of Inframe,  Inc. The agreement  expires on January 23, 2004 and is subject to a
one-year  renewal unless  cancelled  after the initial  period.  Pursuant to the
agreement, on January 23, 2003, NCT granted to Inframe, Inc. non-plan options to
purchase  23,000,000  shares of NCT common stock at an exercise  price of $0.042
per share (an aggregate  exercise price of $1.0 million).  The five-year options
vest on the date of grant.  We have  recorded a charge of $0.7  million  for the
fair value of the options (see Note 17) and a $27,500  consulting  fee as called
for under the agreement for consulting expenses included in selling, general and
administrative expenses in our consolidated statement of operations for the year
ended December 31, 2003. The accrued consulting expenses of $27,500 are included
in accrued expenses at December 31, 2003 in our consolidated balance sheet.

     On February  11,  2003,  NCT and Avant  Interactive,  Inc.  entered  into a
consulting agreement.  The agreement calls for a monthly fee of $2,500,  payable
at the end of the one-year term, and equity compensation in the form of options,
in  consideration  of  consulting  services  provided  by  Avant  to  NCT.  Such
consulting services are performed by Morton Salkind,  husband of Carole Salkind,
acting  on  behalf  of  Avant  Interactive,  Inc.  Carole  Salkind  is the  sole
shareholder  of Avant  Interactive,  Inc. The agreement  expires on February 11,
2004 and is subject to a one-year  renewal  unless  cancelled  after the initial
period.  The February  11, 2003  consulting  agreement  was amended on March 12,
2003,  April 3, 2003 and April 11,  2003 to provide  for  additional  consulting
services, with additional options as compensation. Pursuant to the agreement and
its subsequent  amendments,  on February 11, 2003, March 12, 2003, April 3, 2003
and April 11, 2003, NCT granted to Avant  Interactive,  Inc. non-plan options to
purchase  7,000,000 shares,  13,500,000  shares,  2,000,000 shares and 2,000,000
shares, respectively, of NCT common stock at exercise prices of $0.04 per share,
$0.031 per share,  $0.029  per share and  $0.031  per  share,  respectively  (an
aggregate  exercise price of $0.8 million).  The five-year options vest on their
respective  dates of grant. We have recorded an aggregate charge of $0.6 million
for the fair value of the options (see Note 17) and a $27,500  consulting fee as
called for under the  agreement  for  consulting  expenses  included in selling,
general and administrative  expenses in our consolidated statement of operations
for the year ended December 31, 2003. The accrued consulting expenses of $27,500
are  included  in accrued  expenses at  December  31,  2003 in our  consolidated
balance sheet.

     On April 17, 2003, NCT and Turbo Networks,  Inc.  entered into a consulting
agreement.  The agreement calls for a monthly fee of $2,500,  payable at the end
of the  one-year  term,  and  equity  compensation  in the form of  options,  in
consideration of consulting  services  provided by Turbo to NCT. Such consulting
services are performed by Morton Salkind,  husband of Carole Salkind,  acting on
behalf of Turbo Networks,  Inc. Carole Salkind is the sole  shareholder of Turbo
Networks,  Inc.  The  agreement  expires  on April 17,  2004 and is subject to a
one-year renewal unless  cancelled after the initial period.  The April 17, 2003
consulting  agreement  was  amended on May 22, 2003 and June 28, 2003 to provide
for additional  consulting  services,  with additional  options as compensation.
Pursuant to the agreement and its subsequent amendments,  on April 17, 2003, May
22, 2003 and June 28, 2003, NCT granted to Turbo Networks, Inc. non-plan options
to  purchase   2,000,000   shares,   18,550,000  shares  and  2,000,000  shares,
respectively,  of NCT common  stock at  exercise  prices of  $0.037,  $0.042 and
$0.04, respectively (an aggregate exercise price of $0.9 million). The five-year
options vest on their  respective  dates of grant. We have recorded an aggregate
charge of $0.7  million  for the fair value of the  options  (see Note 17) and a
$20,000 consulting fee as called for under the agreement for consulting expenses
included in selling,  general and  administrative  expenses in our  consolidated
statement  of  operations  for the year ended  December  31,  2003.  The accrued
consulting  expenses of $20,000 are included in accrued expenses at December 31,
2003 in our consolidated balance sheet.

     On June 12, 2003, NCT and Maple Industries,  Inc. entered into a consulting
agreement.  The agreement calls for a monthly fee of $2,500,  payable at the end
of the  one-year  term,  and  equity  compensation  in the form of  options,  in
consideration of consulting  services  provided by Maple to NCT. Such consulting
services are performed by Morton Salkind,  husband of Carole Salkind,  acting on
behalf of Maple Industries, Inc. Carole Salkind is the sole shareholder of Maple
Industries,  Inc.  The  agreement  expires on June 12,  2004 and is subject to a
one-year  renewal unless  cancelled  after the initial  period.  Pursuant to the
agreement,  on June 12, 2003,  NCT granted to Maple  Industries,  Inc.  non-plan
options to purchase  23,000,000  shares of NCT common stock at an exercise price
of $0.044 (an aggregate  exercise price of $1.0 million).  The five-year  option
vests on its date of grant. We have recorded an aggregate charge of $0.8 million
for the fair value of the options (see Note 17) and a $17,500  consulting fee as
called for under the  agreement  for  consulting  expenses  included in selling,
general and administrative  expenses in our consolidated statement of operations
for the year ended December 31, 2003. The accrued consulting expenses of $17,500
are  included  in accrued  expenses at  December  31,  2003 in our  consolidated
balance sheet.

SpringerRun, Inc.

     On July 2, 2003, NCT entered into a consulting  agreement with SpringerRun,
Inc.,  under  which  SpringerRun  provides  consulting  services  to NCT and its
subsidiaries,  consisting  primarily  of  raising  capital  and debt  financing,
identifying  potential  joint  ventures  and other  strategic  transactions  and
finding distributors, licensees and end users for products and technologies. The
term of the SpringerRun agreement is one year, with possible

                                      F-45
<PAGE>


renewals.  Under the agreement,  NCT will pay  SpringerRun  the  following:  for
capital  raised,  6% of the  amount  thereof  plus 5% of the  amount  thereof in
warrants to purchase  NCT stock;  for debt  financing  raised,  1% of the amount
thereof;  for joint  ventures  or  distribution  license or end user  agreements
entered into, 7% of NCT's net revenues therefrom for three years, 5% thereafter.
In lieu of cash, some of the compensation  described above may, at SpringerRun's
request and if agreed to by NCT, be given as stock of NCT or of a joint  venture
entered  into by NCT.  The  compensation  formula and other  material  terms and
conditions in this  agreement are comparable to those used by NCT with similarly
situated,  unrelated  consultants.  To date,  NCT has not paid  SpringerRun  any
compensation  under the  agreement,  and none is owed to it.  John  McCloy II, a
Director of NCT, is  Chairman,  Chief  Executive  Officer,  a Director and a 40%
shareholder of  SpringerRun.  John McCloy II's son John McCloy III is President,
Treasurer,  Secretary,  a Director and a 25%  shareholder of  SpringerRun.  John
McCloy II's son Rush McCloy is a 25% shareholder of SpringerRun.

Spyder Technologies Group, LLC

     On October 24, 2002, Artera Group,  Inc. entered into a master  distributor
agreement with Spyder Technologies Group, LLC under which Spyder distributed the
Artera Turbo  service in Puerto Rico,  the U.S.  Virgin  Islands and a number of
countries  in the  Caribbean  region.  The  term of the  agreement  was  through
February 2008.  Compensation consisted of a commission to Spyder of 50% of gross
revenues on sales originated by local  distributors  that were brought to Artera
by Spyder,  out of which those  distributors were to be paid 30% to 40% of gross
revenues as a commission  from Spyder.  With some  exceptions in Puerto Rico and
the U.S. Virgin Islands,  Spyder's distribution rights were exclusive,  although
Artera had the right to  terminate  the  exclusivity  in  February  of each year
beginning 2004 if specified  revenue  thresholds were not met. The  compensation
structure,  commission  rate and  other  material  terms of the  agreement  were
comparable to those used by Artera with  similarly  situated,  unrelated  master
distributors  at the time. On October 1, 2003,  Artera and Spyder entered into a
new,  superseding master distributor  agreement for Puerto Rico, the U.S. Virgin
Islands and these same countries in the Caribbean. The new agreement changed the
compensation  structure  from one of  commissions  from  Artera  to  Spyder  for
distributors  brought by Spyder to Artera,  to one of  royalties  from Spyder to
Artera on sales to distributors by Spyder. The royalties are calculated on a per
unit  basis and vary  based  upon the size and  category  of the end user of the
product  and the  support  services  provided  by  Artera.  The  term of the new
agreement is through  February 2008. The compensation  structure,  royalty rates
and other material terms of the agreement are comparable to those used by Artera
with similarly situated, unrelated master distributors.

     On October 24, 2002,  Artera  entered into a master  distributor  agreement
with Spyder  under which  Spyder  distributed  the Artera  Turbo  service in the
United States.  The term of the agreement was through  October 2003, with either
party  having  the  right  to  terminate   upon  30  days'  notice   thereafter.
Compensation  consisted  of a commission  to Spyder of 50% of gross  revenues on
sales originated by U.S. distributors that were brought to Artera by Spyder, out
of which those  distributors  were to be paid 30% to 40% of gross  revenues as a
commission  from  Spyder.   Spyder's   distribution  rights  in  the  U.S.  were
non-exclusive.  The compensation  structure,  commission rate and other material
terms of the agreement  were  comparable to those used by Artera with  similarly
situated,  unrelated  master  distributors  at the time.  On  September 1, 2003,
Artera and Spyder entered into a new,  superseding master distributor  agreement
for the U.S., with expansion to cover Canada, South America and Central America.
The new agreement  changed the  compensation  structure  from one of commissions
from Artera to Spyder for  distributors  brought by Spyder to Artera,  to one of
royalties  from  Spyder  to  Artera  on sales to  distributors  by  Spyder.  The
royalties  are  calculated  on a per unit basis and vary based upon the size and
category of the end user of the product  and the  support  services  provided by
Artera. The term of the new agreement is five years. The compensation structure,
royalty rates and other  material terms of the agreement are comparable to those
used by Artera with similarly situated, unrelated master distributors.

     On September 1, 2003, Artera entered into a reseller  agreement with Spyder
under  which  Spyder  resells  the Artera  Turbo  service in the United  States,
Canada,  South  America  and Central  America.  Spyder is to pay Artera per unit
royalties  that vary  based  upon the size and  category  of the end user of the
product.  The term of the  agreement is one year,  with possible  renewals.  The
compensation structure,  royalty rates and other material terms of the agreement
are  comparable  to those  used by Artera  with  similarly  situated,  unrelated
resellers.

     In addition,  from time to time on an "as needed"  basis,  Spyder  provides
technical  consulting  services to Artera  pertaining  to Artera  Turbo.  Spyder
earned  $12,330  and  $86,840  for  technical  consulting  expenses  included in
research and development  expenses in our  consolidated  statement of operations
for the years ended  December 31, 2002 and 2003,  respectively.  At December 31,
2003,  $18,580  was  included in accounts  payable on the  consolidated  balance
sheet.

     Jonathan  Parrella,  the son of NCT's Chairman and Chief Executive Officer,
is  President  of  and  holds  a  45%  ownership  interest  in  Spyder.  Bulldog

                                      F-46
<PAGE>


Communications,   Inc.  holds  a  25%  ownership  interest  in  Spyder.  Bulldog
Communications,  Inc. is owned 20% by each of Michael Parrella,  Karen Parrella,
Michael  Parrella,  Jr., Jonathan Parrella and Daniel Parrella (the Chairman and
Chief  Executive  Officer of NCT, and,  respectively,  his wife and three sons).
Michael  Parrella is also the Chairman of the Board,  and Karen  Parrella is the
President,  of Bulldog  Communications.  Spyder earned aggregate  commissions of
$143 and $3,017 for the years ended December 31, 2002 and 2003, respectively. At
December 31, 2003,  $102 was  included in accounts  payable on our  consolidated
balance sheet.

Private Placement and Issuance of NCT Common Stock

     On August 22, 2001, three individuals,  NCT directors and officers,  agreed
to  purchase  in a  private  placement  an  aggregate  of  1,000,000  shares  of
restricted  common  stock.  The  aggregate  value of the shares was $93,000,  or
$0.093 per share, the then fair market value based upon the closing bid price on
August 21, 2001.  Shares were issued to NCT's Chairman of the Board of Directors
and  Chief  Executive  Officer  (612,893),  to NCT's  President  and a  director
(171,342) and to NCT's Senior Vice President, Chief Financial Officer (215,765).

     On August 22, 2001,  Carole Salkind agreed to purchase  1,000,000 shares of
NCT common  stock for $93,000  cash,  or $0.093 per share,  the then fair market
value.  On September 10, 2001, we received the funds from Ms. Salkind and issued
the 1,000,000 shares of common stock to her.

     We issued  328,717  shares of NCT common  stock to the former  president of
Theater Radio Network (who had become an employee of DMC Cinema).  This issuance
was in settlement of amounts owed him aggregating  approximately $25,000 that he
had advanced to the company.

Compensation of Director

     The company's former Chairman of the Board of Directors, who continued as a
director until his resignation on May 29, 2002,  received  compensation from the
company in 2001 and 2002 of $63,000 and $15,750, respectively.

Incentive Compensation of Management

     NCT's Chairman of the Board of Directors and Chief Executive Officer,  who,
at December  31,  2003,  holds  options and warrants for the right to acquire an
aggregate  of  51,686,634  shares of the  company's  common  stock,  received an
incentive  bonus  consisting  of a 1% cash  override on the value derived by the
company,  in  cash  or  otherwise,  upon  the  execution  of  transactions  with
unaffiliated parties.  Under this arrangement,  the company included in selling,
general and administrative costs approximately  $299,000,  $136,000 and $433,000
for the years ended December 31, 2001, 2002 and 2003, respectively.

     The  company's  President  and a director of NCT,  who at December 31, 2003
holds  options and warrants for the right to acquire an aggregate of  10,643,323
shares  of the  company's  common  stock,  had an  incentive  bonus  arrangement
consisting of a 1/3% cash override on the value  derived from  transactions,  in
cash or otherwise,  entered into by the company with unaffiliated  parties.  Her
participation  in this incentive bonus commenced  effective  January 2001. Under
this arrangement,  the company included in selling,  general and  administrative
costs approximately  $99,000,  $45,000 and $144,000 for the years ended December
31, 2001, 2002 and 2003, respectively.

     The  company's  Senior Vice  President,  Chief  Financial  Officer,  who at
December  31,  2003  holds  options  and  warrants  for the right to  acquire an
aggregate of 7,599,024  shares of the company's  common stock,  had an incentive
bonus  arrangement  consisting of a 1/2% cash override on the value derived from
transactions,   in  cash  or  otherwise,   entered  into  by  the  company  with
unaffiliated parties.  Under this arrangement,  the company included in selling,
general and administrative  costs approximately  $150,000,  $68,000 and $217,000
for the years ended December 31, 2001, 2002 and 2003, respectively.

     The company's Senior Vice President, Corporate Development, who at December
31, 2003 holds options for the right to acquire an aggregate of 3,753,049 shares
of the company's common stock, has an incentive bonus arrangement under which he
receives cash  compensation  for  completion of specified  events and receives a
cash  override  consisting of 1% of the value of specific  subsidiary  financing
transactions  in  which  he was  directly  involved  and  1/2% of the  value  of
licensing  agreements  and  joint  venture  alliances  in which he was  directly
involved.  Under this arrangement,  the company included in selling, general and
administrative expenses approximately $56,000, zero and zero for the years ended
December 31, 2001, 2002 and 2003, respectively.

                                      F-47
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Guarantee of Indebtedness by Management

     NCT's  Chairman  of the  Board of  Directors  and Chief  Executive  Officer
personally  guaranteed  the repayment of a $0.4 million  bridge  financing  note
issued  by  NCT  on  December  27,  2001.  The  guarantee  was  extinguished  in
conjunction with new financing completed on January 10, 2002.

Indebtedness of Management

     On various  dates in 2000 and 2001,  the company's  Senior Vice  President,
Corporate Development entered into several short-term promissory notes to borrow
funds from the company in anticipation of cash overrides due under the incentive
compensation  arrangement  described above.  Effective May 1, 2002, the borrowed
funds  had  not  been  repaid  but  were  consolidated  with  interest  into  an
outstanding  promissory  note due January 15,  2003 for an  aggregate  principal
amount owed to NCT of $107,960. The note bore interest at an annual rate of 6.0%
through its due date of January 15,  2003,  and bears  interest at prime plus 5%
thereafter.  The note was not paid when due on January  15, 2003 and became past
due.  NCT is seeking to collect on the May 1, 2002 note.  However,  NCT believes
that  incentive  compensation  (see above) that is or will be due him may offset
the amount owed NCT. At December 31, 2003, $24,000 was due him.

     On January 30, 2002,  NCT's  Chairman of the Board of  Directors  and Chief
Executive  Officer,  entered into a promissory  note in the principal  amount of
$29,510 to borrow funds from the company in  anticipation  of cash overrides due
under the incentive  compensation  arrangement described above. The note matures
on January  31,  2004.  The note bears  interest  at 5.75% per annum  payable at
maturity and default interest at the stated rate plus 5%. Subsequent to December
31, 2003, the note plus accrued interest was paid.

Indemnification of Management

     On or about  December 5, 2002, NCT agreed to indemnify  three  individuals,
NCT  directors  and  officers,  who had each also served as a Director of Artera
Group International Limited, a U.K.-based subsidiary, prior to its entering into
liquidation proceedings (see Note 19) for any liabilities that may arise against
them from claims  under  Section 214 of the U.K.  Insolvency  Act and to provide
them with legal representation with respect to the claims. On November 26, 2003,
the Liquidator issued letters to these three  individuals  stating that he would
not be asserting any Section 214 claims against them. As a result, no amount has
been accrued at December 31, 2003.

Crammer Road LLC

     The company has  executed a number of  transactions  with Crammer Road (see
Note 16) and settled a legal  action  brought in 2002 by Crammer  Road.  Crammer
Road was the sole  stockholder  of DMC NY, the owner of 16  licenses  previously
purchased from Distributed Media Corporation.  We acquired 25% of DMC NY in 2001
and 75% in 2002 (see Note 2). We intended  to put shares of our common  stock to
Crammer Road in exchange for a combination  of cash and the remaining  shares of
DMC NY common stock under the April 12, 2001  private  equity  credit  agreement
with Crammer Road, but reacquired those 12,000 DMC NY shares in exchange for our
series  H  preferred  stock.  The  purchase  price  paid  for DMC NY  aggregated
approximately $27.2 million and was arrived at in various  negotiations  between
NCT and  Crammer  Road.  We did not obtain a  valuation  from an  outside  firm.
Crammer  Road  obtained  the 16 DMC  licenses  from other  investors  in private
transactions.  In 2000,  five  investors  in our series E and F preferred  stock
contributed  their 16 New York area DMC  licenses  to Crammer  Road in a private
transaction, in exchange for membership interests in Crammer Road. The investors
holding the licenses  advised NCT and DMC of plans to contribute the licenses to
Crammer Road. NCT and DMC did not object to those  contributions.  The investors
who  initially  owned  the 16 DMC  licenses  had paid  for them in 1999  with $4
million in cash and by  surrendering  to NCT $9.6  million of NCT series E and F
preferred  stock  (9,600  shares at the stated  value of $1,000 per share).  The
holders of our series E and F preferred  stock were the original  purchasers  of
the DMC licenses.  The purchasers of our series E and F preferred  stock (except
one investor) were the same investors who contributed the 16 licenses to Crammer
Road. The capital  contribution  of licenses to Crammer Road was for purposes of
administrative  convenience to provide for such  contributors'  undertakings  in
respect of their investment in Crammer Road. In turn, Crammer Road's purpose for
contributing  the 16 licenses  to DMC NY was to provide it a  perceived  form of
liquidity,   possibly   through  an  initial  public  offering  or  through  the
acquisition  of DMC NY by  DMC  or  NCT.  Subsequently,  it  appeared  that  the
licensees lacked the ability to initiate services under the license  agreements.
Concurrently,  due to a lack of capital (such capital would have been  provided,
in part,  by the  licensees  for services  rendered on their behalf and at their
request by DMC), DMC was unable to execute its business plan to provide, install
and operate our digital  broadcast system at locations in the New York area. DMC
was undercapitalized  despite the license fees received because it was unable to
attract  adequate  private  financing or complete an initial public  offering to
establish a sufficient  installed base of Sight & Sound  locations that would be
attractive to prospective  advertisers.  As such,  Crammer Road did not perceive
that it had an opportunity to exploit

                                      F-48
<PAGE>


the licenses in a viable business venture. DMC did not receive any requests from
Crammer Road to install the locations it had secured. In addition,  Crammer Road
did not seek to obtain advertising contracts as all of its efforts would require
additional  investment  in the  venture.  On September  27, 2000,  DMC NY issued
16,000  shares of its common stock in exchange  for 16 licenses  held by Crammer
Road pursuant to a license exchange agreement. Certain officers and directors of
NCT comprise 100% of the Board of Directors of DMC NY.

Vidikron of America

     On  September  29,  2000,  NCT and  Distributed  Media  Corporation  signed
separate  agreements  to  license  various  microbroadcasting   technologies  to
Vidikron  of  America,  Inc.  for an  aggregate  of $2  million.  Vidikron  is a
manufacturer  of high-end home theater  equipment.  Vidikron's  intention was to
develop  commercial video applications using the technology it licensed from NCT
and DMC. We used $1 million of the proceeds  from  Vidikron for working  capital
and general corporate  purposes and the other $1 million to acquire 1,000 shares
of common stock of DMC New York,  Inc. in 2001. Such shares of DMC NY were owned
by Crammer  Road LLC.  Crammer  Road's  sole  corporate  director  is  Navigator
Management  Ltd.  The sole  director  of  Navigator  Management  is David  Sims.
Vidikron's  majority  shareholder  is Markland LLC.  Markland's  sole  corporate
director  is also  Navigator  Management  Ltd.

22.  Income Taxes:

     The company  provides  for income  taxes in  accordance  with SFAS No. 109,
"Accounting for Income Taxes." Accordingly,  deferred tax assets and liabilities
are established for temporary  differences  between tax and financial  reporting
bases of assets and liabilities.  A valuation  allowance is established when the
company  determines  that it is more likely  than not that a deferred  tax asset
will not be realized.  The company's temporary differences primarily result from
the losses on  available-for-sale  securities  and stock  compensation  expenses
related to warrants and options.

     The company files consolidated  federal and state tax returns.  At December
31, 2003, the company had available  estimated net operating loss  carryforwards
of approximately  $157.5 million,  estimated capital loss  carryforwards of $3.6
million  and  estimated  research  and  development   credit   carryforwards  of
approximately   $2.4   million  for  federal   income  tax   purposes  of  which
approximately  $27.6 million will expire  within the five years ending  December
31, 2008 ($1.6 million expire in 2004) and  approximately  $129.9 million expire
at various dates from December 31, 2009 through December 31, 2023. The company's
ability to utilize its net  operating  loss  carryforwards  may be subject to an
annual limitation.  In addition,  the net operating losses of acquired companies
prior to their related  acquisitions by NCT have not been included above.  These
net operating  losses may be severely  limited under Section 382 of the Internal
Revenue Code.

     The  difference  between the  statutory  tax rate of 34% and the  company's
effective  tax rate of 0% is  primarily  due to the  increase  in the  valuation
allowance of $2.8 million and $17.7 million in 2002 and 2003, respectively.  The
difference is as follows:

<TABLE>
<CAPTION>

                                                           Years Ended December 31,
                                                ----------------------------------------------
                                                     2001             2002            2003
                                                --------------  --------------   -------------
<S>                                                 <C>              <C>             <C>
Statutory rate                                      (34.0)%          (34.0)%         (34.0)%
State tax net of federal effect                      (5.6)            (5.6)           (5.6)
Permanent differences                                11.5             13.8             0.2
Effect of adjustments to prior year
     net operating loss carryforwards                 2.7                -           (19.0)
Increase in valuation allowances                     25.4             25.8            58.4
                                                --------------  --------------   -------------
     Effective tax rate                                 - %              - %             - %
                                                ==============  ==============   =============

</TABLE>


     In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some  portion or all of the deferred tax
assets will not be realized.  The ultimate realization of deferred tax assets is
dependent  upon the  generation  of future  taxable  income during the period in
which those temporary  differences become deductible.  Management  considers the
scheduled reversal of deferred tax liabilities,  projected future taxable income
and tax planning  strategies in making this  assessment.

                                      F-49
<PAGE>


     Deferred income taxes reflect the net tax effects of temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the company's deferred tax assets and liabilities are as follows:

     (In thousands of dollars)

<TABLE>
<CAPTION>

                                                                    December 31,
                                                            ---------------------------------
                                                                 2002             2003
                                                            ---------------  ----------------
<S>                                                            <C>              <C>
Accounts receivable                                            $        36      $         44
Inventory                                                              159               112
Investments                                                          6,107             6,108
Property, equipment and intangibles                                    173              (193)
Accrued expenses                                                     1,456             1,347
Stock compensation                                                   5,997             9,337
                                                            ---------------  ----------------
     Total temporary differences                               $    13,928      $     16,755
Federal net operating and capital loss carryforwards                48,818            63,784
Federal research and development credits                             2,492             2,408
                                                            ---------------  ----------------
                                                               $    65,238      $     82,947
Less:  Valuation allowance                                         (65,238)          (82,947)
                                                            ---------------  ----------------
     Deferred taxes                                            $         -      $          -
                                                            ===============  ================

</TABLE>


23.  Litigation:

     Theater Radio Network - InsiderStreet (Neometrix) Litigation

     On December 6, 2000, our subsidiary DMC Cinema  (formerly  known as Theater
Radio Network) filed suit against  InsiderStreet.com,  Inc. in the Circuit Court
of the  Thirteenth  Judicial  Circuit  for  Hillsborough  County,  Florida.  The
complaint  alleges  that  InsiderStreet  breached  a  May  5,  2000  advertising
agreement  with  Theater  Radio  Network and seeks a  declaratory  judgment  and
specific performance of the agreement.  The agreement provided that, in exchange
for advertising services performed by Theater Radio Network, InsiderStreet would
deliver to Theater  Radio  Network $3 million in common stock of  InsiderStreet,
with an  adjustment  in the  number of shares  to  ensure  that the total  stock
delivered was worth at least $2,000,000 on May 10, 2001 and with registration of
all stock delivered.  InsiderStreet  has to date made only a partial delivery of
shares and has not  registered  any of the shares  delivered.  Discovery in this
litigation has begun. On October 23, 2001,  Theater Radio Network terminated its
representation  by outside counsel in this action due to a possible  conflict of
interest.  On February  28, 2002,  Theater  Radio  Network  (DMC Cinema)  ceased
operations,  although  that does not preclude it (or an  assignee)  from further
prosecuting the Theater Radio Network claims.  On March 26, 2002,  Theater Radio
Network  retained  new  counsel  in this  action.  On or about  October 9, 2002,
InsiderStreet.com,  Inc.  changed its name to Neometrix  Corp. On or about April
14, 2003,  Neometrix Corp. changed its name to Neometrix  Technology Group, Inc.
Management  believes  that at this stage it cannot  assess the  likelihood  of a
favorable outcome.  Further,  since the amount of damages, if any, Theater Radio
Network may recover cannot be quantified until the legal process is complete; no
amount has been recorded in the financial statements.

     Production Resource Group Litigation

     On June 6, 2001,  Production Resource Group ("PRG") began legal proceedings
against NCT and our subsidiary,  Distributed Media Corporation,  in the Superior
Court  for  the  Judicial  District  of  Fairfield  County,  Connecticut.  PRG's
complaint  alleged that NCT and DMC breached the terms of a July 19, 1999 lease,
promissory  note and warrant  entered into in connection  with the lease of some
DMC Sight & Sound(R)  equipment.  The  complaint  also  alleged that NCT and DMC
breached a January 11, 2001  resolution  agreement  designed to settle  disputes
between the parties concerning the July 19, 1999 transactions,  that we breached
a May 11,  2001  agreement  designed  to settle  disputes  between  the  parties
concerning the July 19, 1999  transactions  and the January 11, 2001  resolution
agreement,  and that we engaged in  misrepresentations  and fraud in  connection
with these matters.  On July 26, 2001,  the court granted a pre-judgment  remedy
giving PRG the right to attach or garnish up to $2.1 million of specified assets
of NCT and DMC.  On  October  4,  2001,  we filed an answer  to the  plaintiff's
complaint,  denying  PRG's  material  allegations,   seeking  dismissal  of  the
complaint  and  counterclaiming  for  breach  of  PRG's  obligation  to  deliver
equipment.

                                      F-50
<PAGE>


     On December 20, 2001,  NCT and DMC accepted an Offer of Judgment  requiring
NCT and DMC to pay PRG $2.0  million.  That  judgment was entered on January 17,
2002 along  with costs of $0.2  million.  In  December  2001,  we  recorded  all
anticipated  liability  related to payment of this  judgment.  PRG is conducting
post-judgment  discovery regarding enforcement of the judgment. In June 2003, in
furtherance of its efforts to collect on the judgment, PRG filed the judgment in
the Circuit Court for Anne Arundel County,  Maryland;  the Superior Court of New
Jersey,  Hudson  County;  and the Circuit  Court of St. Lucie  County,  Florida.
Beginning February 2003, PRG has served papers on NCT and DMC seeking to enforce
the  judgment  against  their  assets.   PRG  has  also  served  papers  on  the
subsidiaries of NCT and DMC, and on various third parties with which NCT and DMC
do business,  seeking to enforce the judgment  against any assets of NCT and DMC
in the  possession of those served.  On or about  December 10, 2003, PRG filed a
motion for an Order in Aid of Execution  requiring NCT and DMC to turn over to a
state  marshal,  for  possible  sale for the  benefit  of PRG,  equity  and debt
securities NCT and DMC hold (including equity in their subsidiaries)  sufficient
to satisfy the  approximately  $2.1 million  remaining on the  judgment.  To the
extent  that  further  payment  of the  judgment  is in  cash  or in  securities
surrendered  and sold for the benefit of PRG,  such payment could be material to
our financial position. As of December 31, 2003, PRG had collected approximately
$129,000 in NCT's and DMC's cash or cash  equivalent  assets as a result of this
judgment  and the  pre-judgment  remedy  referred  to  above.  PRG is  currently
conducting  post-judgment  discovery  regarding  additional  enforcement  of the
judgment.

     On January 2, 2002, outside the scope of the judgment entered into with NCT
and DMC, PRG amended its Connecticut complaint to allege that NCT's Chairman and
Chief Executive Officer Michael Parrella,  in dealing with PRG on behalf of NCT,
committed  breaches of good faith and fair dealing,  unfair trade  practices and
fraud.  NCT has agreed to indemnify Mr. Parrella for any liabilities  (including
legal  fees) he may  incur as a result  of the PRG  claims  against  him in this
action.  On July 15, 2002,  Mr.  Parrella  moved to strike the portions of PRG's
amended  complaint  that pertain to him  personally.  On February 25, 2003,  the
court granted Mr.  Parrella's  motion in part,  striking  those  portions of the
amended  complaint  against  him that allege a breach of an  obligation  of good
faith and fair dealing,  but  declining to strike those  portions of the amended
complaint against him that allege unfair trade practices and fraud. On August 8,
2003,  Mr.  Parrella  filed a  motion  for  summary  judgment  on all  remaining
allegations.  To the extent that NCT may ultimately  indemnify Mr.  Parrella for
liabilities  arising out of these  allegations  and for related  legal fees,  we
believe that our directors and officers  indemnification  insurance  (subject to
certain  exceptions  under the insurance  policy and after payment of a $100,000
deductible) will cover such payments. Discovery as to Mr. Parrella has begun.

     On or about  December  15,  2003,  PRG filed a  complaint  in the  Delaware
Chancery  Court in and for New  Castle  County  against  NCT,  DMC,  Michael  J.
Parrella   (Chairman  and  Chief  Executive  Officer  of  NCT),  Irene  Lebovics
(President and a Director of NCT), John J. McCloy II (a Director of NCT) and Sam
Oolie  (a  Director  of  NCT).  PRG's  complaint  alleges  that  NCT and DMC are
insolvent,  that during the  insolvency the  individual  named  defendants owe a
fiduciary  duty to PRG as a  judgment  creditor  in the  Connecticut  litigation
described  above,  and that the  individual  defendants  breached that duty. The
complaint  seeks the  appointment  of a receiver over the business and assets of
NCT and DMC and money damages against the individual  defendants in an amount at
least equal to the amount of the Connecticut judgment remaining unsatisfied. NCT
has agreed to indemnify the individual defendants for any liabilities (including
legal  fees) they may incur as a result of the PRG claims  against  them in this
Delaware  action.  NCT has  submitted  those  claims for  director  and  officer
indemnification insurance coverage by two insurers.

     Artera Trademark Oppositions

     On December 17, 2002 and December 23, 2002, in connection with all of NCT's
pending U.S.  trademark  registration  applications  for "Artera Turbo" and with
some of NCT's pending U.S.  trademark  registration  applications  for "Artera,"
Altera Corporation filed oppositions to the granting of such registrations.  The
alleged  basis for the  oppositions  is, in essence,  that the Artera  marks are
confusingly  similar  to  Altera   Corporation's  mark  of  "Altera"  which  was
registered  in a number of product and service  categories  prior to the initial
filing of the  "Artera  Turbo" and  "Artera"  applications  being  opposed.  NCT
intends to defend against these oppositions vigorously.

     NCT has issued  shares of its common  stock  during 2003 in  settlement  of
legal claims (see Note 16). See Note 28 for litigation  activity occurring after
December 31, 2003.

     NCT believes  there are no other patent  infringement  claims,  litigation,
matters or unasserted  claims other than the matters  discussed above that could
have a  material  adverse  effect  on  our  financial  position  or  results  of
operations.   In  the  circumstances,   based  upon  the  information  presently
available,  management believes that adequate provisions have been estimated and
included in the consolidated financial statements for these matters.

                                      F-51
<PAGE>


24.  Commitments and Contingencies:

Leases:

     The company is obligated for minimum annual rentals under operating  leases
for offices,  warehouse space and laboratory space,  expiring through March 2010
with various renewal options, as follows:

     (In thousands of dollars)

  Year ending December 31,                 Amount
  -----------------------------        ----------------
       2004                              $        590
       2005                                       561
       2006                                       466
       2007                                       440
       2008                                       369
       Thereafter                                 462
                                       ----------------
  Total minimum lease payments           $      2,888
                                       ================

     Rent expense was $1.0 million,  $0.7 million and $0.7 million for the years
ended December 31, 2001, 2002 and 2003, respectively.

Benefit Plan Liability:

     In April 1996, the company  established  the NCT Group,  Inc.  Benefit Plan
(the "Benefit Plan") which provides,  among other coverage,  various health care
benefits to employees and directors of the company's  United States  operations.
The company  administers  this  modified  self-insured  Benefit  Plan  through a
commercial  third-party  administrative  health  care  provider.  The  company's
maximum  aggregate  benefit exposure in each Benefit Plan fiscal year is limited
to $0.7 million,  while individual  benefit exposure in each Benefit Plan fiscal
year is limited to  $45,000.  Benefit  claims in excess of these  individual  or
maximum  aggregate  stop loss  limits  are  covered  by a  commercial  insurance
provider  to which  the  company  pays a  nominal  premium  for such  stop  loss
coverage.  The company  records benefit claim expense in the period in which the
benefit claim is incurred.  The company  believes it has sufficient  accruals to
meet its obligation at December 31, 2003.

Advertising Commitments:

     As of December  31, 2003,  the company is obligated  under Sight & Sound(R)
technology and services  agreements to pay up to 25% of  advertising  revenue to
the  locations  airing and  displaying  advertisements.  The amounts under these
agreements were negligible at December 31, 2003.

Contingencies:

     Under the July 25, 2002 private equity credit  agreement with Crammer Road,
we are required to put at least $5 million (the  minimum  commitment  amount) of
our common stock, in exchange for cash, at a discount to market of 10% (see Note
16).  This credit  agreement  provides  that  shares of up to $50  million  (the
maximum  commitment  amount)  of our common  stock may be sold to  Crammer  Road
pursuant to put notices delivered by the company to Crammer Road. The company is
obligated  to register  for resale no less than 112% of the  maximum  commitment
amount. If we fail to issue shares for the minimum  commitment amount during the
commitment  period (which  terminates 24 months after  effectiveness of a resale
registration  statement  relating to the shares or earlier as  described  in the
agreement),  we must pay Crammer Road, in immediately available funds, an amount
equal to the product of (i) the minimum  commitment  amount,  less the aggregate
shares of our common stock  actually  delivered to Crammer Road under the equity
credit line and (ii) the 10% discount (the maximum would be $0.5 million).

     The  company  may have a  contingent  liability  arising  out of a possible
violation of Section 5 of the Securities Act of 1933, as amended,  in connection
with the issuance of shares of its common stock to satisfy  payment  obligations
to some of its service  providers,  vendors and other third  parties.  We ceased
this  practice   during  2001  and  the  passage  of  time  will  mitigate  this
contingency.  Should  a  court  determine  that a  violation  of  Section  5 has
occurred, each such recipient of our shares may have a right for a period of one
year from the date of the purchase to obtain recovery of the consideration given
in connection  with their  purchase of common shares offered in violation of the
Securities  Act or, if they have already sold the stock,  to sue the company for
damages  resulting  from their  purchase of common  shares to the extent the net
proceeds they received were  insufficient to cover the

                                      F-52
<PAGE>


company's  obligations  to them.  We believe that at December 31, 2002 and 2003,
the company has no further contingent liability relating to this matter.

25.  Segment Information:

     Management  views the  company as being  organized  into  three  reportable
operating  segments:  communications,  media and technology.  Reportable segment
data as of  December  31,  2001,  2002 and 2003 and for the years then ended are
provided in the table below.  Information about our operating  segments is found
following the table.  Information  about the goodwill and related  impairment of
our operating segments is found in Note 3.

     The Other data columns are used to reconcile the reportable segment data to
the  consolidated  financial  statements and is segregated  into two categories,
other-corporate  and  other-consolidating.  Other-corporate  consists  of  items
maintained  at the  company's  corporate  headquarters  and not allocated to the
segments.  This  includes  most of the  company's  debt and related  cash,  cash
equivalents and net interest expense,  litigation  liabilities and non-operating
fixed  assets.  Also  included  in  the  components  of  revenue  attributed  to
other-corporate  are license fees and royalty revenue from subsidiaries that are
offset  (eliminated)  in  the  other-consolidating  column.  Other-consolidating
consists of items eliminated in consolidation such as intersegment revenue.

<TABLE>
<CAPTION>

     (In thousands of dollars)

                                                                                  Total
                                                                                Reportable  ---------- Other -------------   Grand
                                          Communications   Media    Technology   Segments   Corporate        Consolidating   Total
                                          ------------------------------------------------------------------------------------------
<S>                                       <C>            <C>         <C>        <C>         <C>              <C>           <C>
    2003:
   License Fees and Royalties - External  $    843       $  2,140    $     14   $  2,997    $      16        $      -      $  3,013
   Other Revenue - External                  1,722            123           -      1,845            -               -         1,845
   Revenue - Other Operating Segments        1,116              9           -      1,125          173          (1,298)            -
   Interest (Income) Expense, net            2,593          2,796        (353)     5,036        9,252               -        14,288
   Depreciation/Amortization                 1,003          1,826         115      2,944          166          (2,386)          724
   Net Loss                                (14,398)        (4,038)        (37)   (18,473)    (130,523)        118,696       (30,300)
   Segment Assets                           21,279         24,548       2,017     47,844        2,486         (37,555)       12,775
   Capital Expenditures                        150              -           -        150            -               -           150


    2002:
   License Fees and Royalties - External  $  2,334       $  2,140    $      -   $  4,474    $      19        $      -      $  4,493
   Other Revenue - External                  2,655            171           -      2,826            -               -         2,826
   Revenue - Other Operating Segments          974            (41)          -        933      (10,141)          9,208             -
   Interest (Income) Expense, net            1,922          1,575        (186)     3,311        4,400               -         7,711
   Depreciation/Amortization                 1,107          2,026         115      3,248          198          (2,141)        1,305
   Net Loss                                (10,836)        (8,520)       (797)   (20,153)     (16,334)         (3,618)      (40,105)
   Segment Assets                           21,865         25,579       2,383     49,827       14,730         (50,988)       13,569
   Capital Expenditures                         18              -           -         18            -               -            18


    2001:
   License Fees and Royalties - External  $  2,639       $  1,834    $  1,028   $  5,501    $     132        $      -      $  5,633
   Other Revenue - External                  4,642            337           -      4,979            -               -         4,979
   Revenue - Other Operating Segments          738            441           -      1,179       10,033         (11,212)            -
   Interest (Income) Expense, net            4,005            528          76      4,609        1,518              26         6,153
   Depreciation/Amortization                 1,612          1,689         120      3,421          904          (1,348)        2,977
   Loss before cumulative effect of
     accounting change                     (27,430)       (14,282)     (4,361)   (46,073)     (25,349)         (4,656)      (76,078)
   Cumulative effect of accounting change   (1,582)             -           -     (1,582)           -               -        (1,582)
   Net Loss                                (29,012)       (14,282)     (4,361)   (47,655)     (25,349)         (4,656)      (77,660)
   Segment Assets                           16,701         30,708       2,991     50,400       13,676         (44,067)       20,009
   Capital Expenditures                      1,780            991           -      2,771           10               -         2,781

</TABLE>


COMMUNICATIONS:

     NCT Hearing Products, Inc.:

     NCT Hearing  designs,  develops and markets active noise reduction  headset
products to the audio headphone and communications  headset markets. The product
lines include the NoiseBuster(R) and the ProActive(R)  lines. The NoiseBuster(R)
products  consist of the NoiseBuster ANR headsets,  consumer  headsets,  and the
NB-PCU,  a headset  used for  in-flight  passenger  entertainment  systems.  The
ProActive(R)  products  consist of noise reduction  headsets and  communications
headsets for noisy industrial environments.  The majority of NCT Hearing's sales
are in North America.  Principal customers consist of end-users,  retail stores,
original equipment manufacturers and the airline industry.

                                      F-53
<PAGE>


     Pro Tech Communications, Inc.:

     Pro Tech designs, develops and manufactures light-weight telecommunications
headsets and new audio  technologies  for use in fast-food,  telephone and other
commercial  applications.  It  currently  has  marketing  agreements  with major
companies in the fast-food  industry and catalog and Internet site  distributors
of telephone equipment, primarily in North America.

     Noise Cancellation Technologies (Europe) Ltd.:

     NCT Europe  provides  research  and  engineering  services  in the field of
active  sound  control  technology  to NCT  Audio,  NCT  Hearing,  DMC and other
business  units as needed.  NCT Europe also  provides  technical  sales  support
services to the company for European sales.

     ConnectClearly.com, Inc.:

     ConnectClearly   was   established   to   focus  on  the   development   of
Internet-telephony-based voice applications targeted to the e-commerce and e-CRM
(electronic  customer  relationship   management)  markets.   NCT's  proprietary
Internet  telephony  software would be the basis for developing a  user-friendly
"click to talk"  application  for  improving  the  completion  rate of  Internet
transactions  by  allowing  for  real-time  customer  service  access by a user.
Principal markets for ConnectClearly are the  telecommunications  industries and
principal customers are original equipment manufacturers, system integrators and
end-users.

     Artera Group, Inc.:

     Artera is the  developer  of  high-speed  data  communications  and network
optimization technology. The information and traffic management benefits of this
advanced  technology  are  applicable  to  enterprise  as well  as  small/medium
business markets. The company's Artera Turbo(TM) Internet service optimizes last
mile performance and provides  high-speed  Internet usage to residential  users.
The bandwidth and speed performance of traditional  dial-up  connections as well
as  broadband  connections  such as  cable,  DSL,  ISDN and Tl are  dramatically
increased.  In addition to the speed optimizations,  the technology includes all
the  features  necessary  for optimal  network  usage -  ultra-secure  firewall,
content control, email and usage accounting.

MEDIA:

     NCT Audio Products, Inc.:

     NCT Audio is engaged in the design,  development and marketing of products,
which utilize flat panel transducer technology.  The products available from NCT
Audio include the Gekko(TM)  flat speaker and the  ArtGekko(TM)  printed  grille
collection.  The Gekko(TM) flat speaker's  primary  external  market is the home
audio market. The principal customers are DMC and end-users.

     Distributed Media Corporation:

     DMC  provides  location  based  broadcast  and  billboard-type  advertising
through  a  microbroadcasting   network  of  Sight  &  Sound(R)  systems  within
commercial and  professional  settings.  The Sight & Sound(R) systems consist of
flat  panel  transducer-based  speakers  (provided  by NCT  Audio),  a  personal
computer  containing  DMC's Sight & Sound(R)  software,  telephone access to the
Internet, amplifiers and related components. The software schedules advertisers'
customized broadcast messages,  which are downloaded via the Internet,  with the
respective  music genre  choice to the  commercial/professional  establishments.

TECHNOLOGY:

     Advancel Logic Corporation:

     Advancel is a participant in the native  Java(TM)  (Java(TM) is a trademark
of Sun Microsystems,  Inc.) embedded  microprocessor  market. The purpose of the
Java(TM) platform is to simplify application development by providing a platform
for the same  software to run on many  different  kinds of  computers  and other
smart devices.  Advancel has developed a family of processor  cores,  which will
execute  instructions  written in both Java(TM) bytecode and C/C++ significantly
enhancing  the  rate  of  instruction   execution,   which  opens  up  many  new
applications.  The potential for  applications  consists of the next  generation
home  appliances  and  automotive  applications,  smartcards  for a  variety  of
applications, hearing aids and mobile communications devices.

                                      F-54
<PAGE>


26.  Geographical Information (by country of origin) - Total Segments:

     (In thousands of dollars)

                                          As of December 31, and
                                         For the Years then Ended
                           -----------------------------------------------------
                                 2001                2002               2003
                           -----------------   -----------------  --------------
Revenue
   United States              $    6,916          $    4,460         $    2,290
   Europe                          3,402               2,453              2,179
   Far East                          294                 406                389
                           -----------------   -----------------  --------------
     Total                    $   10,612          $    7,319         $    4,858
                           =================   =================  ==============

Identifiable Assets
   United States              $   19,272          $   13,464         $   12,689
   Europe                            737                 105                 86
   Far East                            -                   -                  -
                           -----------------   -----------------  --------------
     Total                    $   20,009          $   13,569         $   12,775
                           =================   =================  ==============


27.  Selected Quarterly Financial Data (Unaudited):

     The following  tables contain  selected  quarterly  financial data for each
quarter of 2003 and 2002.  The company  believes that the following  information
reflects all normal recurring  adjustments  necessary for a fair presentation of
the information for the periods presented. The operating results for any quarter
are not necessarily indicative of results for any future periods.

     (Unaudited; in thousands of dollars, except per share data)

<TABLE>
<CAPTION>

                                                                 Year Ended December 31, 2003
                                               ----------------------------------------------------------------
                                               1st Quarter  2nd Quarter  3rd Quarter   4th Quarter  Full Year
                                               -----------  -----------  -----------  -----------   -----------

<S>                                             <C>          <C>          <C>          <C>           <C>
Net revenue                                     $   1,182    $   1,050    $   1,190    $   1,436     $   4,858
Gross profit                                          971          869          945        1,219         4,004
Loss attributable to common stockholders           (7,750)      (8,730)      (3,068)     (13,700)      (33,248)
Loss per share - basic and diluted              $   (0.02)   $   (0.02)   $   (0.01)   $   (0.02)    $   (0.06)*


                                                                 Year Ended December 31, 2002
                                               ----------------------------------------------------------------
                                               1st Quarter  2nd Quarter  3rd Quarter   4th Quarter  Full Year
                                               -----------  -----------  -----------  -----------   -----------

Net revenue                                     $   2,014    $   2,055    $   1,713    $   1,537     $   7,319
Gross profit                                        1,507        1,646        1,419        1,445         6,017
Loss attributable to common stockholders           (6,879)     (14,365)     (11,961)      (9,763)      (42,968)
Loss per share - basic and diluted              $   (0.02)   $   (0.03)   $   (0.03)   $   (0.02)    $   (0.10)

</TABLE>


Footnotes:
----------
* Loss per share for each quarter is computed using the weighted-average  number
of shares  outstanding  during that quarter and loss per share for the full year
is computed using the  weighted-average  number of shares outstanding during the
year. Therefore, the sum of the four quarters' loss per share does not equal the
full-year loss per share.


2nd Quarter 2003:
-----------------
Includes $1.5 million charge for consulting expenses relating to the issuance of
options.
3rd Quarter 2003:
-----------------
Includes  $(4.9) million gain for  settlement of litigation  relating to some of
our convertible instruments.
4th Quarter 2003:
-----------------
Includes $4.7 million charge for consulting expenses relating to the issuance of
options.  Also includes $5.0 million  interest expense relating to the increased
issuance of our convertible debt.

                                      F-55
<PAGE>


1st Quarter 2002:
-----------------
Includes $0.3 million writedown due to impairment of goodwill  attributed to our
step  acquisition  of NCT Audio.  Also includes $0.3 million charge for costs of
exiting activities attributable to closing facilities.
2nd Quarter 2002:
-----------------
Includes $9.2 million charge for our acquisition of the remaining  12,000 shares
of DMC New York ($14.0 million previously accrued 2nd quarter 2001).
4th Quarter 2002:
-----------------
Includes  $1.2  million  charge  for  impairment  of  other  intangible   assets
attributed to our minority  shareholders'  portion of the license granted to Pro
Tech.  Also  includes  $(0.1)  million  gain  for  costs of  exiting  activities
attributable to closing facilities and certain operations.


28.  Subsequent Events:

Transactions with Carole Salkind

     On February 13, 2004, NCT issued a convertible  note payable to Ms. Salkind
for approximately  $0.4 million as consideration for approximately  $0.4 million
in cash. The note is due on demand and bears interest at 8% per annum payable at
maturity.  The note is convertible  into shares of our common stock at $0.05 per
share  and may be  exchanged  for  shares  of  common  stock  of any  other  NCT
subsidiary  except Pro Tech that has an initial public  offering (at the initial
public  offering  price  thereof).  In  conjunction  with the note,  a five-year
warrant was issued to Ms. Salkind to purchase  approximately  6.8 million shares
of our common stock at an exercise price of $0.05 per share.

     On March 5, 2004 and March 15, 2004, NCT issued  convertible  notes payable
to Ms. Salkind for approximately $1.0 million as consideration for approximately
$1.0  million in cash.  The notes are due on demand and bear  interest at 8% per
annum.  The notes are  convertible  into  shares of our common  stock and may be
exchanged for shares of common stock of any other NCT subsidiary except Pro Tech
that has an initial  public  offering  (at the  initial  public  offering  price
thereof).  In conjunction with the notes,  five-year warrants were issued to Ms.
Salkind to purchase approximately 18.5 million shares of our common stock.

     NCT defaulted on convertible  notes payable to Ms. Salkind for an aggregate
principal of $11.2 million as they matured through March 2004. Of such defaults,
an  aggregate of $5.2 million in  principal,  along with accrued  interest and a
default penalty,  representing notes that matured during January 2004 was rolled
into a new note for  approximately  $6.2  million  dated  March 15,  2004 and an
aggregate  of $3.1  million in  principal,  along with  accrued  interest  and a
default  penalty,  representing  those maturing  during February 2004 was rolled
into a new note dated March 15, 2004 for approximately  $3.6 million.  The notes
are due on demand and bear interest at 8% per annum.  The notes are  convertible
into shares of our common stock and may be exchanged  for shares of common stock
of any other NCT subsidiary  except Pro Tech that has an initial public offering
(at the initial public offering price thereof). In conjunction with these notes,
five-year  warrants were issued to Ms. Salkind to purchase  approximately  159.8
million  shares of our common stock.  We are currently in  negotiation  with Ms.
Salkind to cure approximately $2.9 million in principal  representing notes that
matured during March 2004.

Infinite Technology Corporation

     On March 31,  2004,  ITC,  Advancel  and NCT entered  into a  cross-release
agreement that released the parties from any and all claims, through the date of
the  cross-release,  under prior  agreements  and affirms the  ownership  of ITC
common stock (see Notes 5 and 9). The agreement  will result in the  elimination
of $1.4 million as an  obligation  of Advancel and the reduction in the carrying
amount of the ITC common stock to its fair value.  The pro forma effects of such
release,  if it had been  effected on December 31, 2003,  would be a decrease in
liabilities and other assets of $1.4 million and $1.3 million, respectively, and
an increase in paid-in capital of $0.1 million.

Indemnification of Management

     On or about January 14, 2004, NCT agreed to indemnify five individuals, NCT
directors and  officers,  for any  liabilities  that may arise against them in a
lawsuit brought in Delaware against them, NCT and NCT's  subsidiary  Distributed
Media  Corporation by PRG and to provide them with legal  representation  in the
suit.  This Delaware suit is separate from but related to the  Connecticut  suit
brought by PRG (see Note 23).

                                      F-56
<PAGE>


Litigation

     Production Resource Group Litigation

     In the portion of the Connecticut case against NCT and DMC, on February 25,
2004, NCT surrendered  NCT's 5,876 shares of common stock of NCT Audio Products,
Inc.  representing  100% of the issued and outstanding  shares of NCT Audio, for
possible sale for the benefit of PRG. Such surrender may adversely  affect NCT's
right to any further proceeds from the TSA/TST  bankruptcy estate (see Note 11).
At the same time,  DMC  surrendered  DMC's 20,000  shares of common stock of DMC
Cinema,  Inc.  representing  84% of the  issued  and  outstanding  shares of DMC
Cinema, its 100 shares of common stock of DMC HealthMedia Inc. representing 100%
of the issued and outstanding  shares of DMC HealthMedia,  a $153,956  principal
amount promissory note from (and related security agreement with) DMC Cinema and
a  $1,388,666  principal  amount  promissory  note  from (and  related  security
agreement with) DMC  HealthMedia,  for possible sale for the benefit of PRG. NCT
reported to the court that all of the other equity and debt  securities NCT owns
could not be so  surrendered  because they are covered by security  interests in
favor of Carole Salkind and are in her possession. At December 31, 2003, the net
liabilities included in our consolidated balance sheet related to NCT Audio, DMC
Cinema and DMC  HealthMedia  were $16.1 million,  $4.9 million and $1.7 million,
respectively.  For the year ended  December  31, 2003,  the net earnings  (loss)
before income taxes included in our consolidated  statement of operation related
to NCT Audio, DMC Cinema and DMC HealthMedia were $2.0 million, less than $(0.1)
million and $(0.6) million, respectively.

     In the  portion of the  Connecticut  case  against NCT  Chairman  and Chief
Executive  Officer Michael Parrella (as to which NCT has agreed to indemnify Mr.
Parrella),  on March 11, 2004, the court denied Mr. Parrella's motion to dismiss
all pending claims against him in the case. Trial has been tentatively scheduled
for September 2004. Mr. Parrella has told NCT that he intends to deny and defend
against all pending allegations.

     In the  Delaware  case,  on or about  January  6,  2004,  PRG  amended  its
complaint dated December 15, 2003 to add Cy E. Hammond (Chief Financial  Officer
of NCT) as a defendant.  PRG's  amended  complaint  alleges that the  individual
named defendants owe a fiduciary duty to PRG and breached that duty. The amended
complaint seeks money damages against the individual  defendants in an amount at
least equal to the amount of the Connecticut judgment remaining unsatisfied. NCT
has agreed to indemnify Mr. Hammond for any liabilities  (including  legal fees)
he may incur as a result of the PRG claims against him in this Delaware  action.
NCT has added Mr.  Hammond to the  submission of claims for director and officer
indemnification  insurance  coverage  by  two  insurers  along  with  the  other
previously  named  individual  defendants.  On February 25,  2004,  one of those
insurers initially denied coverage. NCT is considering whether to challenge that
initial  denial.  The other insurer has not yet stated its position with respect
to coverage.  On February 13, 2004, the defendants filed a motion to dismiss all
claims in the amended  complaint.  On or about March 30, 2004, PRG again amended
its complaint, this time to refine and expand some of its claims relating to the
alleged  mismanagement  of the  affairs of NCT and its  subsidiaries  (including
DMC).  Discovery in the action has begun. NCT and DMC intend, and the individual
defendants  have told NCT that  they  intend,  to deny and  defend  against  all
allegations.

                                      F-57
<PAGE>


INDEPENDENT AUDITORS' REPORT ON SCHEDULE II


Board of Directors and Stockholders of
NCT Group, Inc.

Our audits  were  conducted  for the  purpose of forming an opinion on the basic
consolidated  financial  statements of NCT Group,  Inc. and  subsidiaries  as of
December  31, 2002 and 2003 and for each of the years ended  December  31, 2001,
2002 and 2003 taken as a whole. The 2001, 2002 and 2003 information  included on
Schedule II is  presented  for  purposes  of  additional  analysis  and is not a
required part of the basic consolidated  financial statements.  Such information
has been subjected to the auditing procedures applied in the audits of the basic
consolidated  financial  statements and, in our opinion, is fairly stated in all
material  respects in relation to the basic  consolidated  financial  statements
taken as a whole.


/s/ Eisner LLP
----------------------
    Eisner LLP


New York, New York
March 12, 2004

                                      F-58
<PAGE>


                                                                  SCHEDULE II

NCT GROUP, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(In thousands of dollars)

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
               Column A                                     Column B               Column C              Column D         Column E
------------------------------------------------------------------------------------------------------------------------------------
                                                                            Charged      Charged to
                                                            Balance at      to costs       other                        Balance at
                                                            beginning         and        accounts -    Deductions -       end of
              Description                                   of period       expenses      Describe      Describe          period
------------------------------------------------------      ----------      --------    -----------   --------------   ------------
<S>                       <C> <C>                               <C>            <C>          <C>                <C>             <C>

Allowance for doubtful accounts:
      Year ended December 31, 2001                          $   103         $  249      $   (46)   (a)   $     (8)  (b)    $   298
      Year ended December 31, 2002                              298             77          (29)   (a)         (6)  (b)        340
      Year ended December 31, 2003                              340              8           (7)   (a)          -              341

Reserve for uncollectible amounts:
      Year ended December 31, 2001                                -          1,000            -                 -            1,000
      Year ended December 31, 2002                            1,000              -            -                 -            1,000
      Year ended December 31, 2003                            1,000              -            -                 -            1,000

Allowance for inventory obsolescence:
      Year ended December 31, 2001                              100            691            -                 -              791
      Year ended December 31, 2002                              791            239            -              (626)  (b)        404
      Year ended December 31, 2003                              404              -            -              (122)  (b)        282

Accumulated depreciation:
      Year ended December 31, 2001                            4,352            936        1,115    (c)     (1,809)  (b)      4,594
      Year ended December 31, 2002                            4,594            852          186    (d)     (1,836)  (b)      3,796
      Year ended December 31, 2003                            3,796            429           25    (d)     (1,606)  (b)      2,644

Accumulated goodwill amortization:
      Year ended December 31, 2001                            5,182          1,691       16,239    (e)    (21,988)  (f)      1,124
      Year ended December 31, 2002                            1,124              -            -                 -            1,124
      Year ended December 31, 2003                            1,124              -            -                 -            1,124

Accumulated patent and other intangibles amortization:
      Year ended December 31, 2001                            3,536            350            -                 -            3,886
      Year ended December 31, 2002                            3,886            453        2,116    (e)     (2,495)  (f)      3,960
      Year ended December 31, 2003                            3,960            296            -                 -            4,256

</TABLE>

Attention is directed to the foregoing  auditors' report and to the accompanying
notes to our consolidated financial statements.


Footnotes:
----------
(a) Accounts written-off directly to expense.
(b) Accounts previously reserved for, written off in current year.
(c) Write off fixed asset dispositions against reserve.
(d) Currency translation adjustments.
(e) Write down intangibles to estimated fair value.
(f) Write off fully amortized intangibles.

                                      F-59
<PAGE>


                                 NCT Group, Inc.
                                Index to Exhibits

                                  Item 15(a)(3)


Exhibit
Number              Description of Exhibit
-------             ----------------------

3(a)      Second Restated  Certificate of Incorporation of NCT Group, Inc. filed
          in the Office of the  Secretary  of State of the State of  Delaware on
          August 15, 2001.

3(b)      By-laws of NCT Group, Inc., as amended to date.

3(c)      Certificate  of  Designations,  Preferences  and  Rights  of  Series A
          Convertible Preferred Stock of NCT Networks, Inc. (now known as Artera
          Group,  Inc.) as filed in the office of the  Secretary of State of the
          State of Delaware of February 23, 2001.

3(d)(1)   Certificate  of  Designation,  Preferences  and  Rights  of  Series  H
          Convertible  Preferred Stock of NCT Group, Inc. as filed in the office
          of the  Secretary  of State of the State of Delaware of June 21, 2002,
          incorporated   herein  by   reference   to   Exhibit   3(c)  of  NCT's
          Pre-effective  Amendment No. 5 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on August 9, 2002.

3(d)(2)   Certificate of Amendment of Certificate  of  Designation,  Preferences
          and Rights of Series H Convertible  Preferred Stock of NCT Group, Inc.
          as filed  in the  office  of the  Secretary  of State of the  State of
          Delaware of March 7, 2003, incorporated herein by reference to Exhibit
          3(a) NCT's  Quarterly  Report on Form 10-Q for the quarter ended March
          31, 2003 filed on May 15, 2003.

4(a)      Warrant  #BW-1-R to  purchase  862,500  shares of common  stock of the
          Company at a purchase price of $.75 per share issued to John J. McCloy
          II,  incorporated herein by reference to Exhibit 4(b) to the Company's
          Annual  Report on Form 10-K for the  fiscal  year ended  December  31,
          1996.

4(b)      Warrant  #BW-2-R to  purchase  862,500  shares of common  stock of the
          Company  at a  purchase  price of $.75 per share  issued to Michael J.
          Parrella,  incorporated  herein by  reference  to Exhibit  4(c) to the
          Company's  Annual  Report  on Form  10-K  for the  fiscal  year  ended
          December 31, 1996.

4(c)      Warrant  #BW-4-R to  purchase  201,250  shares of common  stock of the
          Company  at a  purchase  price  of $.75  per  share  issued  to  Irene
          Lebovics,  incorporated  herein by  reference  to Exhibit  4(d) to the
          Company's  Annual  Report  on Form  10-K  for the  fiscal  year  ended
          December 31, 1996.

4(d)      Secretary's  Certificate  dated  February  1, 1999,  as to a five-year
          extension of the expiration  dates of the Warrants  described in 4(a),
          (b) and (c) above, incorporated herein by reference to Exhibit 4(e) of
          the Company's  Pre-effective Amendment No. 1 to Registration Statement
          on Form S-1 (Registration No. 333-60574) filed on September 5, 2001.

4(e)(1)   Warrant  issued to Carole Salkind for the purchase of shares of common
          stock dated  February  13,  2001,  filed as an exhibit to Schedule 13D
          filed by NCT on behalf of Ms. Salkind on February 13, 2001.

4(e)(2)   Letter  dated  December 20, 2001  amending  terms of February 13, 2001
          warrant to Carole Salkind, incorporated herein by reference to Exhibit
          10(az) of the Company's  Pre-effective Amendment No. 3 to Registration
          Statement on Form S-1  (Registration  No. 333-60574) filed on December
          21, 2001.

                                      II-1
<PAGE>


4(f)(1)   Warrant issued to Carole Salkind for the purchase of 500,000 shares of
          common stock dated May 14,  2001,  filed as an exhibit to Schedule 13D
          filed by NCT on behalf of Ms. Salkind on May 18, 2001.

4(f)(2)   Letter dated  December 20, 2001 amending terms of May 14, 2001 warrant
          to Carole Salkind,  incorporated herein by reference to Exhibit 10(ba)
          of  the  Company's  Pre-effective  Amendment  No.  3  to  Registration
          Statement on Form S-1  (Registration  No. 333-60574) filed on December
          21, 2001.

4(g)(1)   Warrant issued to Carole Salkind for the purchase of 625,000 shares of
          common  stock  dated  August 22,  2001,  filed by NCT as an exhibit to
          Schedule 13D filed on behalf of Carole Salkind on September 14, 2001.

4(g)(2)   Letter  dated  December  20,  2001  amending  terms of August 22, 2001
          warrant to Carole Salkind, incorporated herein by reference to Exhibit
          10(bb) of the Company's  Pre-effective Amendment No. 3 to Registration
          Statement on Form S-1  (Registration  No. 333-60574) filed on December
          21, 2001.

4(h)(1)   Warrant issued to Carole Salkind for the purchase of 1,000,000  shares
          of common  stock dated  September  28,  2001,  incorporated  herein by
          reference to Exhibit 10(an)(1) of NCT's Pre-effective  Amendment No. 2
          to Registration  Statement on Form S-1  (Registration  No.  333-60574)
          filed on November 7, 2001.

4(h)(2)   Letter dated  December 20, 2001  amending  terms of September 28, 2001
          warrant to Carole Salkind, incorporated herein by reference to Exhibit
          10(bc) of the Company's  Pre-effective Amendment No. 3 to Registration
          Statement on Form S-1  (Registration  No. 333-60574) filed on December
          21, 2001.

4(i)(1)   Warrant  dated  October 25, 2001 issued to Libra  Finance S.A. for the
          purchase of 20,000,000 shares of common stock,  incorporated herein by
          reference to Exhibit 10(ap) of NCT's Pre-effective  Amendment No. 2 to
          Registration  Statement on Form S-1 (Registration No. 333-60574) filed
          on November 7, 2001.

4(i)(2)   Letter  agreement  dated January 10, 2002 amending  exercise  price of
          Warrant  dated  October 25, 2001 issued to Libra  Finance S.A. for the
          purchase  of  20,000,000  shares of NCT  common  stock from a purchase
          price of $0.09  per  share to the  lower  of:  $0.07  per share or the
          lowest  closing bid price from January 10, 2002 through June 28, 2002,
          incorporated  by  reference to Exhibit  4(c) to the  Quarterly  Report
          filed on Form 10-Q for the quarter ended March 31, 2002,  filed on May
          15, 2002.

4(i)(3)   Letter Agreement dated as of June 28, 2002 amending  exercise price of
          warrant dated  October 25, 2001 for the purchase of 20,000,000  shares
          of NCT common  stock to the lesser of $0.07 or the lowest  closing bid
          price  between   January  10,  2002  and  June  28,  2003   inclusive,
          incorporated  by reference to Exhibit  4(i)(3) of NCT's  Pre-effective
          Amendment 8 to Registration  Statement on Form S-1  (Registration  No.
          333-60574), filed on September 16, 2003.

4(j)      Warrant issued to Carole Salkind for the purchase of 1,250,000  shares
          of common  stock  dated  December  20,  2001,  incorporated  herein by
          reference to Exhibit 10(ay) of the Company's  Pre-effective  Amendment
          No.  3  to  Registration  Statement  on  Form  S-1  (Registration  No.
          333-60574) filed on December 21, 2001.

4(k)      Warrant dated January 1, 2002 issued to Piedmont Consulting,  Inc. for
          the purchase of 500,000 shares of NCT common stock at a purchase price
          of $0.20 per share,  incorporated  by reference to Exhibit 4(a) to the
          Quarterly  Report  filed on Form 10-Q for the quarter  ended March 31,
          2002, filed on May 15, 2002.

                                      II-2
<PAGE>


4(l)(1)   Warrant  dated  January 10, 2002 issued to Libra  Finance S.A. for the
          purchase of 5,000,000  shares of NCT common stock at a purchase  price
          of the lower of: $0.07 per share or the lowest  closing bid price from
          January 10, 2002 through June 28, 2002,  incorporated  by reference to
          Exhibit  4(b) to the  Quarterly  Report  filed  on Form  10-Q  for the
          quarter ended March 31, 2002, filed on May 15, 2002.

4(l)(2)   Letter Agreement dated as of June 28, 2002 amending  exercise price of
          warrant dated January 10, 2002 for the purchase of 5,000,000 shares of
          NCT  common  stock to the lesser of $0.07 or the  lowest  closing  bid
          price  between   January  10,  2002  and  June  28,  2003   inclusive,
          incorporated   herein  by  reference  to  Exhibit   4(l)(2)  of  NCT's
          Pre-effective  Amendment  No.8 to  Registration  Statement of Form S-1
          (Registration No. 333-60574), filed on September 16, 2003.

4(m)      Warrant issued to Carole Salkind for the purchase of 2,789,082  shares
          of common stock at an exercise price of $0.079 per share dated January
          11,  2002,  incorporated  herein by  reference  to Exhibit 4(m) to the
          Annual Report on Form 10-K for the year ended December 31, 2001, filed
          on April 30, 2002.

4(n)      Option dated  January 11, 2002 granted to Carole  Salkind to acquire a
          10% equity  interest  in Artera  Group,  Inc,  incorporated  herein by
          reference  to Exhibit  4(n) to the Annual  Report on Form 10-K for the
          year ended December 31, 2001, filed on April 30, 2002.

4(o)      Warrant  dated  January  25,  2002  issued to Carole  Salkind  for the
          purchase of 812,500 shares of NCT common stock at an exercise price of
          $0.09 per share,  incorporated  herein by reference to Exhibit 4(o) to
          the Annual  Report on Form 10-K for the year ended  December 31, 2001,
          filed on April 30, 2002.

4(p)      Warrant  dated  January  25,  2002  issued to Carole  Salkind  for the
          purchase of 312,500 shares of NCT common stock at an exercise price of
          $0.09 per share,  incorporated  herein by reference to Exhibit 4(p) to
          the Annual  Report on Form 10-K for the year ended  December 31, 2001,
          filed on April 30, 2002.

4(q)      Option  granted to Leben  Care,  Inc.  dated  January  25, 2002 for an
          aggregate of 8,350,000  shares of NCT common stock at exercise  prices
          ranging  from  $0.079  to $0.13  per  share,  incorporated  herein  by
          reference to Exhibit 4(ah) of NCT's  Pre-effective  Amendment No. 5 to
          Registration  Statement on Form S-1 (Registration No. 333-60574) filed
          on August 9, 2002.

4(r)      Warrant  dated  January  31,  2002  issued  to  Robert  C. Lau for the
          purchase of 104,167  shares of NCT common stock at a purchase price of
          $0.13 per share,  incorporated  by  reference  to Exhibit  4(d) to the
          Quarterly  Report  filed on Form 10-Q for the quarter  ended March 31,
          2002, filed on May 15, 2002.

4(s)      Warrant  dated  February  27,  2002  issued to Carole  Salkind for the
          purchase of 1,034,226  shares of NCT common stock at an exercise price
          of $0.079 per share,  incorporated herein by reference to Exhibit 4(q)
          to the  Annual  Report on Form 10-K for the year  ended  December  31,
          2001, filed on April 30, 2002.

4(t)      Option  granted to Stop Noise,  Inc.  dated  February  27, 2002 for an
          aggregate of 3,375,000  shares of NCT common stock at exercise  prices
          ranging  from  $0.079  to $0.12  per  share,  incorporated  herein  by
          reference to Exhibit 4(ai) of NCT's  Pre-effective  Amendment No. 5 to
          Registration  Statement on Form S-1 (Registration No. 333-60574) filed
          on August 9, 2002.

4(u)      Warrant dated March 1, 2002 issued to Carole  Salkind for the purchase
          of 437,500  shares of NCT common  stock at a purchase  price of $0.079
          per share,  incorporated by reference to Exhibit 4(e) to the Quarterly
          Report filed on Form 10-Q for the quarter ended March 31, 2002,  filed
          on May 15, 2002.

                                      II-3
<PAGE>


4(v)      Warrant dated May 2, 2002 issued to Carole Salkind for the purchase of
          3,188,708 shares of NCT common stock at a purchase price of $0.094 per
          share,  incorporated  by reference  to Exhibit  4(f) to the  Quarterly
          Report filed on Form 10-Q for the quarter ended March 31, 2002,  filed
          on May 15, 2002.

4(w)      Warrant dated May 2, 2002 issued to Carole Salkind for the purchase of
          3,562,500 shares of NCT common stock at a purchase price of $0.094 per
          share,  incorporated  by reference  to Exhibit  4(g) to the  Quarterly
          Report filed on Form 10-Q for the quarter ended March 31, 2002,  filed
          on May 15, 2002.

4(x)      Warrant  dated May 29, 2002 issued to Carole  Salkind for the purchase
          of 1,500,000  shares of NCT common stock at a purchase price of $0.095
          per share,  incorporated  herein by reference to Exhibit 4(y) of NCT's
          Pre-effective  Amendment No. 5 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on August 9, 2002.

4(y)      Warrant  dated June 2, 2002 issued to Carole  Salkind for the purchase
          of 1,500,000  shares of NCT common stock at a purchase price of $0.097
          per share,  incorporated  herein by reference to Exhibit 4(z) of NCT's
          Pre-effective  Amendment No. 5 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on August 9, 2002.

4(z)      Warrant  dated  June 13,  2002  issued to Blue  Future,  Inc.  for the
          purchase of 250,000  shares of NCT common stock at a purchase price of
          $0.16 per share,  incorporated herein by reference to Exhibit 4(ad) of
          NCT's Pre-effective  Amendment No. 5 to Registration Statement on Form
          S-1 (Registration No. 333-60574) filed on August 9, 2002.

4(aa)     Warrant  dated June 17, 2002 issued to Thomas  Cotton for the purchase
          of 350,000  shares of NCT common  stock at a purchase  price of $0.081
          per share,  incorporated herein by reference to Exhibit 4(ae) of NCT's
          Pre-effective  Amendment No. 5 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on August 9, 2002.

4(ab)     Warrant  dated  June 17,  2002  issued  to Barry  H.  Chappel  for the
          purchase of 400,000  shares of NCT common stock at a purchase price of
          $0.081 per share, incorporated herein by reference to Exhibit 4(af) of
          NCT's Pre-effective  Amendment No. 5 to Registration Statement on Form
          S-1 (Registration No. 333-60574) filed on August 9, 2002.

4(ac)     Warrant dated June 17, 2002 issued to John Capozzi for the purchase of
          400,000  shares of NCT common stock at a purchase  price of $0.081 per
          share,  incorporated  herein by  reference  to Exhibit  (4ag) of NCT's
          Pre-effective  Amendment No. 5 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on August 9, 2002.

4(ad)     Warrant  dated July 3, 2002 issued to Carole  Salkind for the purchase
          of 1,500,000  shares of NCT common stock at a purchase price of $0.078
          per share,  incorporated herein by reference to Exhibit 4(aa) of NCT's
          Pre-effective  Amendment No. 5 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on August 9, 2002.

4(ae)     Warrant dated July 12, 2002 issued to Carole  Salkind for the purchase
          of 20,000,000 shares of NCT common stock at a purchase price of $0.075
          per share,  incorporated herein by reference to Exhibit 4(ab) of NCT's
          Pre-effective  Amendment No. 5 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on August 9, 2002.

4(af)     Warrant dated July 15, 2002 issued to Carole  Salkind for the purchase
          of 1,500,000  shares of NCT common stock at a purchase price of $0.075
          per share,  incorporated herein by reference to Exhibit 4(ac) of NCT's
          Pre-effective  Amendment No. 5 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on August 9, 2002.

                                      II-4
<PAGE>


4(ag)     Warrant dated July 23, 2002 issued to Carole  Salkind for the purchase
          of 2,250,000 shares of common stock,  incorporated herein by reference
          to  Exhibit   4(aj)  of  NCT's   Pre-effective   Amendment  No.  6  to
          Registration  Statement on Form S-1 (Registration No. 333-60574) filed
          on November 4, 2002.

4(ah)     Warrant  dated  August  14,  2002  issued  to Carole  Salkind  for the
          purchase of 1,500,000 shares of common stock,  incorporated  herein by
          reference to Exhibit 4(ak) of NCT's  Pre-effective  Amendment No. 6 to
          Registration  Statement on Form S-1 (Registration No. 333-60574) filed
          on November 4, 2002.

4(ai)     Warrant  dated  August  29,  2002  issued  to Carole  Salkind  for the
          purchase of 2,100,000 shares of common stock,  incorporated  herein by
          reference to Exhibit 4(al) of NCT's  Pre-effective  Amendment No. 6 to
          Registration  Statement on Form S-1 (Registration No. 333-60574) filed
          on November 4, 2002.

4(aj)     Warrant  dated  September  9, 2002  issued to Carole  Salkind  for the
          purchase of 1,500,000 shares of common stock,  incorporated  herein by
          reference to Exhibit 4(am) of NCT's  Pre-effective  Amendment No. 6 to
          Registration  Statement on Form S-1 (Registration No. 333-60574) filed
          on November 4, 2002.

4(ak)     Warrant  dated  September  30, 2002  issued to Carole  Salkind for the
          purchase of 10,000,000 shares of Common Stock,  incorporated herein by
          reference to Exhibit 4(an) of NCT's  Pre-effective  Amendment No. 6 to
          Registration  Statement on Form S-1 (Registration No. 333-60574) filed
          on November 4, 2002.

4(al)     Warrant  dated  September  30, 2002  issued to Carole  Salkind for the
          purchase of 16,157,565 shares of common stock,  incorporated herein by
          reference to Exhibit 4(ao) of NCT's  Pre-effective  Amendment No. 6 to
          Registration  Statement on Form S-1 (Registration No. 333-60574) filed
          on November 4, 2002.

4(am)     Option dated as of September 30, 2002 granted to Acme Associates, Inc.
          for the  purchase  of  50,000,000  shares  of NCT  common  stock at an
          exercise price of $0.070 per share (prior options to Acme  Associates,
          Inc,  were  cancelled  by this  new  grant),  incorporated  herein  by
          reference to Exhibit 4(ap) of NCT's  Pre-effective  Amendment No. 6 to
          Registration  Statement on Form S-1 (Registration No. 333-60574) filed
          on November 4, 2002.

4(an)     Warrant  dated  October 11, 2002 issued to  FairPoint  Communications,
          Inc.  for the  purchase of  2,000,000  shares of NCT common stock at a
          purchase  price of $0.15  per  share,  incorporated  by  reference  to
          Exhibit 4(aj) of the company's Annual Report on Form 10-K for the year
          ended December 31, 2002, filed on April 4, 2003.

4(ao)     Warrant  dated  November  7, 2002  issued to  Carole  Salkind  for the
          purchase of 1,750,000  shares of NCT common stock at a purchase  price
          of $0.072 per share, incorporated by reference to Exhibit 4(af) of the
          company's  Quarterly  Report  on  Form  10-Q  for  the  quarter  ended
          September 30, 2002, filed November 14, 2002.

4(ap)     Warrant  dated  November  20,  2002  issued to Carole  Salkind for the
          purchase of 1,750,000  shares of NCT common stock at a purchase  price
          of $0.054 per share, incorporated by reference to Exhibit 4(al) of the
          company's  Annual Report on Form 10-K for the year ended  December 31,
          2002, filed on April 4, 2003.

4(aq)     Warrant  dated  November  21,  2002  issued to Carole  Salkind for the
          purchase of 6,271,926  shares of NCT common stock at a purchase  price
          of $0.0535 per share,  incorporated  by reference to Exhibit  4(am) of
          the company's  Annual Report on Form 10-K for the year ended  December
          31, 2002, filed on April 4, 2003.

                                      II-5
<PAGE>


4(ar)     Warrant dated November 22, 2002 issued to Gavin  Brackenridge  for the
          purchase of 300,000  shares of NCT common stock at a purchase price of
          $0.054 per share,  incorporated  by reference to Exhibit  4(an) of the
          company's  Annual Report on Form 10-K for the year ended  December 31,
          2002, filed on April 4, 2003.

4(as)     Warrant  dated  December  2, 2002  issued to  Carole  Salkind  for the
          purchase of 1,500,000  shares of NCT common stock at a purchase  price
          of $0.048 per share, incorporated by reference to Exhibit 4(ao) of the
          company's  Annual Report on Form 10-K for the year ended  December 31,
          2002, filed April 4, 2003.

4(at)     Warrant   dated   December   6,   2002   issued   to   Alpha   Capital
          Aktiengesellschaft  for the purchase of 1,400,000 shares of NCT common
          stock at a  purchase  price of the  lower  of $0.07  per  share or the
          lowest  closing  bid price per share  from  December  6, 2002  through
          December 6, 2003,  incorporated  by reference to Exhibit  4(bl) of the
          company's  Annual Report on Form 10-K for the year ended  December 31,
          2002, filed April 4, 2003.

4(au)     Warrant   dated   December   6,   2002   issued   to   Alpha   Capital
          Aktiengesellschaft for the purchase of 15,000,000 shares of NCT common
          stock  at a  purchase  price  of  $0.01  per  share,  incorporated  by
          reference to Exhibit 4(bm) of the company's Annual Report on Form 10-K
          for the year ended December 31, 2002, filed April 4, 2003.

4(av)     Letter  Agreement  dated April 7, 2003 amending the vesting terms of a
          December 6, 2002 warrant for 15,000,000 shares issued to Alpha Capital
          Aktiengesellschaft,  incorporated  herein by reference to Exhibit 4(l)
          of NCT's Quarterly Report on Form 10-Q for the quarter ended March 31,
          2003 filed on May 15, 2003.

4(aw)     Warrant  dated  December  11,  2002  issued  to KEQ  Partners  III (as
          designee of Kalkines, Arky Zall & Bernstein LLP, HealthNet Connections
          LLC  and  HNC New  York  Representatives  LLC)  for  the  purchase  of
          1,250,000 shares of NCT Common Stock at a purchase price of $0.063 per
          share,  incorporated  by reference  to Exhibit  4(a) of the  company's
          Quarterly  Report on Form 10-Q for the  quarter  ended  June 30,  2003
          filed on August 14, 2003.

4(ax)     Warrant  dated  December  16,  2002  issued to Carole  Salkind for the
          purchase of 1,750,000  shares of NCT common stock at a purchase  price
          of $0.042 per share, incorporated by reference to Exhibit 4(ap) of the
          company's  Annual Report on Form 10-K for the year ended  December 31,
          2002, filed April 4, 2003.

4(ay)     Warrant dated  December 16, 2002 issued to Robert L. Bernstein for the
          purchase of 200,000  shares of NCT common stock at a purchase price of
          $0.515 per share,  incorporated  by reference to Exhibit  4(aq) of the
          company's  Annual Report on Form 10-K for the year ended  December 31,
          2002, filed April 4, 2003.

4(az)(1)  Warrant dated December 16, 2002 issued to Gavin  Brackenridge  for the
          purchase of 200,000  shares of NCT common stock at a purchase price of
          $0.125 per share,  incorporated  by reference to Exhibit  4(ar) of the
          company's  Annual Report on Form 10-K for the year ended  December 31,
          2002, filed April 4, 2003.

4(az)(2)  Warrant dated December 16, 2002 issued to Gavin  Brackenridge  for the
          purchase of 250,000  shares of NCT common stock at a purchase price of
          $0.08 per share,  incorporated  by reference  to Exhibit  4(as) of the
          company's  Annual Report on Form 10-K for the year ended  December 31,
          2002, filed April 4, 2003.

4(az)(3)  Warrant dated December 16, 2002 issued to Gavin  Brackenridge  for the
          purchase of 250,000  shares of NCT common stock at a purchase price of
          $0.150 per share,  incorporated  by reference to Exhibit  4(at) of the
          company's  Annual Report on Form 10-K for the year ended  December 31,
          2002, filed April 4, 2003.

                                      II-6
<PAGE>


4(ba)(1)  Warrant  dated  December  16,  2002  issued to Dr.  Henry  Murray  (as
          designee of The Murray Group) for the purchase of 67,000 shares of NCT
          common stock at a purchase price of $0.100 per share,  incorporated by
          reference to Exhibit 4(au) of the company's Annual Report on Form 10-K
          for the year ended December 31, 2002, filed April 4, 2003.

4(ba)(2)  Warrant dated December 16, 2002 issued to Diana T. Murray (as designee
          of The Murray  Group) for the purchase of 33,000  shares of NCT common
          stock at a  purchase  price  of  $0.100  per  share,  incorporated  by
          reference to Exhibit 4(av) of the company's Annual Report on Form 10-K
          for the year ended December 31, 2002, filed April 4, 2003.

4(ba)(3)  Warrant dated December 16, 2002 issued to Dr. Henry Masur (as designee
          of The Murray Group) for the purchase of 100,000  shares of NCT common
          stock at a  purchase  price  of  $0.100  per  share,  incorporated  by
          reference to Exhibit 4(aw) of the company's Annual Report on Form 10-K
          for the year ended December 31, 2002, filed April 4, 2003.

4(bb)     Warrant  dated  December  16,  2002  issued to Steven  Keenan  for the
          purchase of 300,000  shares of NCT common stock at a purchase price of
          $0.099 per share,  incorporated  by reference to Exhibit  4(ax) of the
          company's  Annual Report on Form 10-K for the year ended  December 31,
          2002, filed April 4, 2003.

4(bc)     Warrant dated  December 16, 2002 issued to B. Michael Pisani / Granite
          Securities  Cooperation  for the  purchase  of  200,000  shares of NCT
          common stock at a purchase price of $0.100 per share,  incorporated by
          reference to Exhibit 4(ay) of the company's Annual Report on Form 10-K
          for the year ended December 31, 2002, filed April 4, 2003.

4(bd)     Warrant dated  December 16, 2002 issued to Charles T. Lanktree for the
          purchase of 200,000  shares of NCT common stock at a purchase price of
          $0.100 per share,  incorporated  by reference to Exhibit  4(az) of the
          company's  Annual Report on Form 10-K for the year ended  December 31,
          2002, filed April 4, 2003.

4(be)(1)  Warrant dated  December 16, 2002 issued to Sandy  Eisemann / NRI, Inc.
          (as designee of C&C Partners,  Inc.) for the purchase of 50,000 shares
          of  NCT  common  stock  at a  purchase  price  of  $0.100  per  share,
          incorporated  by reference to Exhibit  4(ba) of the  company's  Annual
          Report on Form 10-K for the year ended December 31, 2002,  filed April
          4, 2003.

4(be)(2)  Warrant dated  December 16, 2002 issued to Sandy  Eisemann / NRI, Inc.
          (as designee of C&C Partners,  Inc.) for the purchase of 25,000 shares
          of  NCT  common  stock  at a  purchase  price  of  $0.250  per  share,
          incorporated  by reference to Exhibit  4(bb) of the  company's  Annual
          Report on Form 10-K for the year ended December 31, 2002,  filed April
          4, 2003.

4(be)(3)  Warrant dated  December 16, 2002 issued to Sandy  Eisemann / NRI, Inc.
          (as designee of C&C Partners,  Inc.) for the purchase of 25,000 shares
          of  NCT  common  stock  at a  purchase  price  of  $0.500  per  share,
          incorporated  by reference to Exhibit  4(bc) of the  company's  Annual
          Report on Form 10-K for the year ended December 31, 2002,  filed April
          4, 2003.

4(be)(4)  Warrant dated  December 16, 2002 issued to Sandy  Eisemann / NRI, Inc.
          (as designee of C&C Partners,  Inc.) for the purchase of 25,000 shares
          of  NCT  common  stock  at a  purchase  price  of  $0.750  per  share,
          incorporated  by reference to Exhibit  4(bd) of the  company's  Annual
          Report on Form 10-K for the year ended December 31, 2002,  filed April
          4, 2003.

4(bf)(1)  Warrant  dated  December  16,  2002 issued to Robert F.  Callahan  (as
          designee of C&C  Partners,  Inc.) for the purchase of 50,000 shares of
          NCT common stock at a purchase price of $0.100 per share, incorporated
          by reference to Exhibit 4(be) of the  company's  Annual Report on Form
          10-K for the year ended December 31, 2002, filed April 4, 2003.

                                      II-7
<PAGE>


4(bf)(2)  Warrant  dated  December  16,  2002 issued to Robert F.  Callahan  (as
          designee of C&C  Partners,  Inc.) for the purchase of 25,000 shares of
          NCT common stock at a purchase price of $0.250 per share, incorporated
          by reference to Exhibit 4(bf) of the  company's  Annual Report on Form
          10-K for the year ended December 31, 2002, filed April 4, 2003.

4(bf)(3)  Warrant  dated  December  16,  2002 issued to Robert F.  Callahan  (as
          designee of C&C  Partners,  Inc.) for the purchase of 25,000 shares of
          NCT common stock at a purchase price of $0.500 per share, incorporated
          by reference to Exhibit 4(bg) of the  company's  Annual Report on Form
          10-K for the year ended December 31, 2002, filed April 4, 2003.

4(bf)(4)  Warrant  dated  December  16,  2002 issued to Robert F.  Callahan  (as
          designee of C&C  Partners,  Inc.) for the purchase of 25,000 shares of
          NCT common stock at a purchase price of $0.750 per share, incorporated
          by reference to Exhibit 4(bh) of the  company's  Annual Report on Form
          10-K for the year ended December 31, 2002, filed April 4, 2003.

4(bg)     Warrant  dated  December  26,  2002  issued to Carole  Salkind for the
          purchase of 10,206,373  shares of NCT common stock at a purchase price
          of $0.042 per share, incorporated by reference to Exhibit 4(bi) of the
          company's  Annual Report on Form 10-K for the year ended  December 31,
          2002, filed April 4, 2003.

4(bh)     Option dated December 26, 2002 granted to Motorworld, Incorporated for
          an aggregate of  23,000,000  shares of NCT common stock at an exercise
          price of $0.042 per share,  incorporated by reference to Exhibit 4(bn)
          of the  company's  Annual  Report  on Form  10-K  for the  year  ended
          December 31, 2002, filed April 4, 2003.

4(bi)     Warrant  dated  December  30,  2002  issued to Carole  Salkind for the
          purchase of 1,500,000  shares of NCT common stock at a purchase  price
          of $0.0412 per share,  incorporated  by reference to Exhibit  4(bj) of
          the company's  Annual Report on Form 10-K for the year ended  December
          31, 2002, filed April 4, 2003.

4(bj)     Warrant  dated  December 31, 2002 issued to Michael  Dickerson for the
          purchase of 250,000  shares of NCT common stock at a purchase price of
          $0.10 per share,  incorporated  by reference  to Exhibit  4(bk) of the
          company's  Annual Report on Form 10-K for the year ended  December 31,
          2002, filed April 4, 2003.

4(bk)     Warrant  dated  January  15,  2003  issued to Carole  Salkind  for the
          purchase of 2,000,000  shares of NCT common stock at a purchase  price
          of $0.041 per share, incorporated herein by reference to Exhibit 4(by)
          of NCT's  Pre-effective  Amendment No. 7 to Registration  Statement on
          Form S-1 (Registration No. 333-60574) filed on April 18, 2003.

4(bl)     Option  granted  to  Inframe,  Inc.  dated  January  23,  2003  for an
          aggregate  of  23,000,000  shares of NCT common  stock at an  exercise
          price of $0.042 per share,  incorporated by reference to Exhibit 4(bo)
          of the  company's  Annual  Report  on Form  10-K  for the  year  ended
          December 31, 2002, filed April 4, 2003.

4(bm)     Warrant  dated  January  23,  2003  issued to Carole  Salkind  for the
          purchase of 11,775,579  shares of NCT common stock at a purchase price
          of $0.04 per share,  incorporated herein by reference to Exhibit 4(bz)
          of NCT's  Pre-effective  Amendment No. 7 to Registration  Statement on
          Form S-1 (Registration No. 333-60574) filed on April 18, 2003.

4(bn)     Warrant  dated  January  30,  2003  issued to Carole  Salkind  for the
          purchase of 1,500,000  shares of NCT common stock at a purchase  price
          of $0.041 per share, incorporated herein by reference to Exhibit 4(ca)
          of NCT's  Pre-effective  Amendment No. 7 to Registration  Statement on
          Form S-1 (Registration No. 333-60574) filed on April 18, 2003.

                                      II-8
<PAGE>


4(bo)     Option granted to Avant Interactive,  Inc. dated February 11, 2003 for
          an aggregate  of  7,000,000  shares of NCT common stock at an exercise
          price of $0.04 per share,  incorporated  by reference to Exhibit 4(bp)
          of the  company's  Annual  Report  on Form  10-K  for the  year  ended
          December 31, 2002, filed April 4, 2003.

4(bp)     Warrant  dated  February  11,  2003  issued to Carole  Salkind for the
          purchase of 5,500,000  shares of NCT common stock at a purchase  price
          of $0.04 per share,  incorporated herein by reference to Exhibit 4(cb)
          of NCT's  Pre-effective  Amendment No. 7 to Registration  Statement on
          Form S-1 (Registration No. 333-60574) filed on April 18, 2003.

4(bq)     Warrant dated March 4, 2003 issued to Carole  Salkind for the purchase
          of 2,000,000  shares of NCT common stock at a purchase price of $0.035
          per share,  incorporated herein by reference to Exhibit 4(cc) of NCT's
          Pre-effective  Amendment No. 7 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on April 18, 2003.

4(br)     Option granted to Avant Interactive,  Inc. dated March 12, 2003 for an
          aggregate  of  13,500,000  shares of NCT common  stock at an  exercise
          price of $0.031 per share,  incorporated by reference to Exhibit 4(bq)
          of the  company's  Annual  Report  on Form  10-K  for the  year  ended
          December 31, 2002, filed April 4, 2003.

4(bs)     Warrant dated March 13, 2003 issued to Carole Salkind for the purchase
          of 4,250,000  shares of NCT common stock at a purchase price of $0.031
          per share,  incorporated herein by reference to Exhibit 4(cd) of NCT's
          Pre-effective  Amendment No. 7 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on April 18, 2003.

4(bt)     Warrant dated March 13, 2003 issued to Carole Salkind for the purchase
          of 3,750,000  shares of NCT common stock at a purchase price of $0.031
          per share,  incorporated herein by reference to Exhibit 4(ce) of NCT's
          Pre-effective  Amendment No. 7 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on April 18, 2003.

4(bu)     Warrant dated April 2, 2003 issued to Carole  Salkind for the purchase
          of 2,000,000  shares of NCT common stock at a purchase price of $0.029
          per share,  incorporated herein by reference to Exhibit 4(cf) of NCT's
          Pre-effective  Amendment No. 7 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on April 18, 2003.

4(bv)     Option granted to Avant Interactive,  Inc. dated April 3, 2003 for the
          purchase of 2,000,000  shares of NCT common stock at an exercise price
          of $0.029 per share,  incorporated by reference to Exhibit 4(m) of the
          company's Quarterly Report on Form 10-Q for the quarter ended June 30,
          2003 filed on August 14, 2003.

4(bw)     Warrant dated April 11, 2003 issued to Carole Salkind for the purchase
          of 2,000,000  shares of NCT Common Stock at a purchase price of $0.031
          per share,  incorporated  herein by reference to 4(m) NCT's  Quarterly
          Report on Form 10-Q for the quarter  ended March 31, 2003 filed on May
          15, 2003.

4(bx)     Option granted to Avant Interactive, Inc. dated April 11, 2003 for the
          purchase of 2,000,000  shares of NCT common stock at an exercise price
          of $0.031 per share,  incorporated by reference to Exhibit 4(o) of the
          company's Quarterly Report on Form 10-Q for the quarter ended June 30,
          2003 filed on August 14, 2003.

4(by)     Option  granted to Turbo  Networks  Inc.  dated  April 17, 2003 for an
          aggregate of 2,000,000 shares of NCT common stock at an exercise price
          of $0.037 per share,  incorporated by reference to Exhibit 4(q) of the
          company's Quarterly Report on Form 10-Q for the quarter ended June 30,
          2003 filed on August 14, 2003.

                                      II-9
<PAGE>


4(bz)     Warrant dated April 21, 2003 issued to Carole Salkind for the purchase
          of 2,000,000  shares of NCT Common Stock at a purchase price of $0.037
          per share,  incorporated  herein by reference to Exhibit 4(n) of NCT's
          Quarterly  Report on Form 10-Q for the  quarter  ended  March 31, 2003
          filed on May 15, 2003.

4(ca)     Warrant  dated May 15, 2003 issued to Carole  Salkind for the purchase
          of 2,000,000  shares of NCT common stock at a purchase price of $0.046
          per share,  incorporated by reference to Exhibit 4(s) of the company's
          Quarterly  Report on Form 10-Q for the  quarter  ended  June 30,  2003
          filed on August 14, 2003.

4(cb)     Option  granted  to Turbo  Networks  Inc.  dated  May 22,  2003 for an
          aggregate  of  18,550,000  shares of NCT common  stock at an  exercise
          price of $0.042 per share,  incorporated  by reference to Exhibit 4(t)
          of the company's  Quarterly  Report on Form 10-Q for the quarter ended
          June 30, 2003 filed on August 14, 2003.

4(cc)     Warrant  dated May 22, 2003 issued to Carole  Salkind for the purchase
          of 7,500,000  shares of NCT common stock at a purchase price of $0.042
          per share,  incorporated by reference to Exhibit 4(u) of the company's
          Quarterly  Report on Form 10-Q for the  quarter  ended  June 30,  2003
          filed on August 14, 2003.

4(cd)     Warrant  dated May 28, 2003 issued to Carole  Salkind for the purchase
          of 1,900,000  shares of NCT common stock at a purchase price of $0.044
          per share,  incorporated by reference to Exhibit 4(v) of the company's
          Quarterly  Report on Form 10-Q for the  quarter  ended  June 30,  2003
          filed on August 14, 2003.

4(ce)     Warrant  dated June 5, 2003 issued to NATCO,  LLC for the  purchase of
          2,250,000  shares of NCT common stock at the purchase  price of $0.048
          per share,  incorporated by reference to Exhibit 4(w) of the company's
          Quarterly  Report on Form 10-Q for the  quarter  ended  June 30,  2003
          filed on August 14, 2003.

4(cf)     Warrant dated June 12, 2003 issued to Carole  Salkind for the purchase
          of  10,500,000  shares of NCT common  stock at the  purchase  price of
          $0.044 per share,  incorporated  by  reference  to Exhibit 4(y) of the
          company's Quarterly Report on Form 10-Q for the quarter ended June 30,
          2003 filed on August 14, 2003.

4(cg)     Warrant dated June 12, 2003 issued to Carole  Salkind for the purchase
          of 2,000,0000 shares of NCT common stock at a purchase price of $0.044
          per share,  incorporated by reference to Exhibit 4(z) of the company's
          Quarterly  Report on Form 10-Q for the  quarter  ended  June 30,  2003
          filed on August 14, 2003.

4(ch)     Option granted to Maple  Industries,  Inc. dated June 12, 2003 for the
          purchase of 23,000,000 shares of NCT common stock at an exercise price
          of $0.044 per share,  incorporated by reference to Exhibit 4(x) of the
          company's Quarterly Report on Form 10-Q for the quarter ended June 30,
          2003 filed on August 14, 2003.

4(ci)     Warrant dated June 28, 2003 issued to Carole  Salkind for the purchase
          of 2,000,000  shares of NCT common stock at a purchase price of $0.038
          per share, incorporated by reference to Exhibit 4(ab) of the company's
          Quarterly  Report on Form 10-Q for the  quarter  ended  June 30,  2003
          filed on August 14, 2003.

4(cj)     Option  granted to Turbo  Networks,  Inc.  dated June 28, 2003 for the
          purchase of 2,000,000  shares of NCT common stock at an exercise price
          of $0.04 per share,  incorporated by reference to Exhibit 4(aa) of the
          company's Quarterly Report on Form 10-Q for the quarter ended June 30,
          2003 filed on August 14, 2003.

                                     II-10
<PAGE>


4(ck)(1)  Warrant dated July 14, 2003 issued to Carole  Salkind for the purchase
          of 2,000,000 shares of NCT common stock at a purchase price of $0.0312
          per share, incorporated by reference to Exhibit 4(ad) of the company's
          Quarterly Report on Form 10-Q for the quarter ended September 30, 2003
          filed on August 14, 2003.

4(ck)(2)  Warrant dated July 14, 2003 issued to Carole  Salkind for the purchase
          of 2,000,000 shares of NCT common stock at a purchase price of $0.0312
          per share, incorporated by reference to Exhibit 4(ae) of the company's
          Quarterly  Report on Form 10-Q for the  quarter  ended  June 30,  2003
          filed on November 19, 2003.

4(cl)     Warrant dated July 14, 2003 issued to John Harris (as designee of Stop
          Noise, Inc.) for the purchase of 750,000 shares of NCT common stock at
          a purchase  price of $0.0312 per share,  incorporated  by reference to
          Exhibit 4(ac) of the company's  Quarterly  Report on Form 10-Q for the
          quarter ended June 30, 2003 filed on August 14, 2003.

4(cm)     Option  granted to Acme  Associates,  Inc. dated July 14, 2003 for the
          purchase of 25,000,000 shares of NCT common stock at an exercise price
          of $0.0312  per share,  incorporated  herein by  reference  to Exhibit
          4(cm) of NCT's Pre-effective Amendment No. 8 to Registration Statement
          on Form S-1 (Registration No. 333-60574) filed on September 16, 2003.

4(cn)(1)  Warrant dated July 28, 2003 issued to Carole  Salkind for the purchase
          of 2,000,000  shares of NCT common stock at a purchase price of $0.042
          per share, incorporated by reference to Exhibit 4(af) of the company's
          Quarterly  Report on Form 10-Q for the  quarter  ended  June 30,  2003
          filed on August 14, 2003.

4(cn)(2)  Warrant dated July 28, 2003 issued to Carole  Salkind for the purchase
          of 2,000,000  shares of NCT common stock at a purchase price of $0.042
          per share, incorporated by reference to Exhibit 4(ag) of the company's
          Quarterly  Report on Form 10-Q for the  quarter  ended  June 30,  2003
          filed on August 14, 2003.

4(co)     Warrant dated August 7, 2003 issued to Carole Salkind for the purchase
          of 2,750,000 shares of NCT common stock at a purchase price of $0.0539
          per share,  incorporated herein by reference to Exhibit 4(co) to NCT's
          Pre-Effective  Amendment No. 8 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on September 16, 2003.

4(cp)     Warrant  dated  August  18,  2003  issued  to Carole  Salkind  for the
          purchase of 2,000,000  shares of NCT common stock at a purchase  price
          of $0.045 per share, incorporated herein by reference to Exhibit 4(cp)
          to NCT's  Pre-Effective  Amendment No. 8 to Registration  Statement on
          Form S-1 (Registration No. 333-60574) filed on September 16, 2003.

4(cq)(1)  Warrant  dated  August  28,  2003  issued  to Carole  Salkind  for the
          purchase of 2,000,000  shares of NCT common stock at a purchase  price
          of $0.055  per  share,  incorporated  herein by  reference  to Exhibit
          4(cq)(1)  to  NCT's  Pre-Effective  Amendment  No.  8 to  Registration
          Statement on Form S-1  (Registration No. 333-60574) filed on September
          16, 2003.

4(cq)(2)  Warrant  dated  August  28,  2003  issued  to Carole  Salkind  for the
          purchase of 2,000,000  shares of NCT common stock at a purchase  price
          of $0.055  per  share,  incorporated  herein by  reference  to Exhibit
          4(cq)(2)  to  NCT's  Pre-Effective  Amendment  No.  8 to  Registration
          Statement on Form S-1  (Registration No. 333-60574) filed on September
          16, 2003.

4(cr)     Option granted to Acme  Associates,  Inc. dated September 11, 2003 for
          the  purchase of  7,500,000  shares of NCT common stock at an exercise
          price of $0.052 per share,  incorporated  herein by reference  Exhibit
          4(ao) of the company's  Quarterly  Report on Form 10-Q for the quarter
          ended September 30, 2003 filed on November 19, 2003.

                                     II-11
<PAGE>


4(cs)     Warrant  dated  September  11, 2003  issued to Carole  Salkind for the
          purchase of 2,500,000  shares of NCT common stock at a purchase  price
          of $0.05 per share,  incorporated herein by reference Exhibit 4(ap) of
          the  company's  Quarterly  Report on Form 10-Q for the  quarter  ended
          September 30, 2003 filed on November 19, 2003.

4(ct)     Warrant  dated  September  12, 2003  issued to Carole  Salkind for the
          purchase of 2,000,000  shares of NCT common stock at a purchase  price
          of $0.05 per share,  incorporated herein by reference Exhibit 4(aq) of
          the  company's  Quarterly  Report on Form 10-Q for the  quarter  ended
          September 30, 2003 filed on November 19, 2003.

4(cu)     Warrant  dated  October  2,  2003  issued to  Carole  Salkind  for the
          purchase of 4,000,000  shares of NCT common stock at a purchase  price
          of $0.043 per share, incorporated herein by reference Exhibit 4(ar) of
          the  company's  Quarterly  Report on Form 10-Q for the  quarter  ended
          September 30, 2003 filed on November 19, 2003.

4(cv)     Option granted to Acme Associates,  Inc. dated October 3, 2003 for the
          purchase of 5,750,000  shares of NCT common stock at an exercise price
          of $0.043 per share, incorporated herein by reference Exhibit 4(as) of
          the  company's  Quarterly  Report on Form 10-Q for the  quarter  ended
          September 30, 2003 filed on November 19, 2003.

4(cw)     Option granted to Acme Associates, Inc. dated October 14, 2003 for the
          purchase of 44,000,000 shares of NCT common stock at an exercise price
          of $0.044 per share, incorporated herein by reference Exhibit 4(at) of
          the  company's  Quarterly  Report on Form 10-Q for the  quarter  ended
          September 30, 2003 filed on November 19, 2003.

4(cx)     Warrant  dated  October  14,  2003  issued to Carole  Salkind  for the
          purchase of 19,250,000  shares of NCT common stock at a purchase price
          of $0.044 per share, incorporated herein by reference Exhibit 4(au) of
          the  company's  Quarterly  Report on Form 10-Q for the  quarter  ended
          September 30, 2003 filed on November 19, 2003.

4(cy)     Warrant  dated  October  14,  2003  issued to Carole  Salkind  for the
          purchase of 2,000,000  shares of NCT common stock at a purchase  price
          of $0.044 per share, incorporated herein by reference Exhibit 4(av) of
          the  company's  Quarterly  Report on Form 10-Q for the  quarter  ended
          September 30, 2003 filed on November 19, 2003.

4(cz)     Warrant  dated  November  3, 2003  issued to  Carole  Salkind  for the
          purchase of 2,000,000  shares of NCT common stock at a purchase  price
          of $0.044 per share, incorporated herein by reference Exhibit 4(aw) of
          the  company's  Quarterly  Report on Form 10-Q for the  quarter  ended
          September 30, 2003 filed on November 19, 2003.

4(da)     Option granted to Acme Associates,  Inc dated November 3, 2003 for the
          purchase of 2,000,000  shares of NCT common stock at an exercise price
          of $0.045 per share, incorporated herein by reference Exhibit 4(ax) of
          the  company's  Quarterly  Report on Form 10-Q for the  quarter  ended
          September 30, 2003 filed on November 19, 2003.

4(db)     Warrant  dated  November  21,  2003  issued to Carole  Salkind for the
          purchase of 2,250,000  shares of NCT common stock at a purchase  price
          of $0.041 per share.

4(dc)     Warrant  dated  November  21,  2003  issued to Carole  Salkind for the
          purchase of 2,500,000  shares of NCT common stock at a purchase  price
          of $0.041 per share.

4(dd)     Option  granted to Acme  Associates,  Inc. dated November 21, 2003 for
          the  purchase of  6,500,000  shares of NCT Common stock at an exercise
          price of $0.041 per share.

4(de)     Warrant  dated  November  22,  2003  issued to Carole  Salkind for the
          purchase of 2,500,000  shares of NCT common stock at a purchase  price
          of $0.041 per share.

                                     II-12
<PAGE>


4(df)     Warrant  dated  December  15,  2003  issued to Carole  Salkind for the
          purchase of 16,500,000  shares of NCT common stock at a purchase price
          of $0.037 per share.

4(dg)     Warrant  dated  December  15,  2003  issued to Carole  Salkind for the
          purchase of 2,500,000  shares of NCT common stock at a purchase  price
          of $0.037 per share.

4(dh)     Option  granted to Acme  Associates,  Inc. dated December 17, 2003 for
          the purchase of  99,750,000  shares of NCT Common stock at an exercise
          price of $0.037 per share.

4(di)     Warrant  dated  December  31,  2003  issued to Carole  Salkind for the
          purchase of 32,250,000  shares of NCT common stock at a purchase price
          of $0.04 per share.

4(dj)     Warrant  dated  December  31,  2003  issued to Carole  Salkind for the
          purchase of 5,500,000  shares of NCT common stock at a purchase  price
          of $0.04 per share.

4(dk)     Warrant  dated  February  13,  2004  issued to Carole  Salkind for the
          purchase of 6,750,000  shares of NCT common stock at a purchase  price
          of $0.05 per share.

10(a)     Patent Assignment  Agreement,  dated as of June 21, 1989, among George
          B.B. Chaplin, Sound Alternators Limited, the Company, Active Noise and
          Vibration  Technologies,  Inc. and Chaplin  Patents Holding Co., Inc.,
          incorporated  herein by reference to Exhibit 10(aa) to Amendment No. 2
          on Form  S-1 to the  Company's  Registration  Statement  on Form  S-18
          (Registration No. 33-19926).

*10(b)    Noise Cancellation Technologies, Inc. Stock Incentive Plan (as adopted
          April 14, 1993,  and amended  through  August 16, 1996),  incorporated
          herein  by  reference  to  Exhibit  4 to  the  Company's  Registration
          Statement on Form S-8 filed with the Securities & Exchange  Commission
          on August 30, 1996 (Reg. No. 333-11213).

10(c)     Asset Purchase  Agreement,  dated  September 16, 1994,  between Active
          Noise and Vibration Technologies,  Inc. and the Company,  incorporated
          herein by reference to Exhibit 2 to the  Company's  Current  Report on
          Form 8-K filed September 19, 1994.

*10(d)    Noise  Cancellation   Technologies,   Inc.  Option  Plan  for  Certain
          Directors (as adopted November 15, 1994 and amended through August 16,
          1996),  incorporated herein by reference to Exhibit 4 to the Company's
          Registration  Statement  on Form S-8  filed  with the  Securities  and
          Exchange Commission on August 30, 1996 (Reg. No. 333-11209).

10(e)(1)  Variation   of   Teaming   Agreement   between   Noise    Cancellation
          Technologies,  Inc. and Ultra Electronics Limited dated April 6, 1995,
          incorporated  herein by  reference to Exhibit  10(c) of the  Company's
          Current Report on Form 8-K filed August 4, 1995.

10(e)(2)  Agreement  for Sale and  Purchase of Part of the  Business and Certain
          Assets among Noise Cancellation Technologies, Inc., Noise Cancellation
          Technologies (UK) Limited and Ultra Electronics Limited dated April 6,
          1995,  incorporated  herein  by  reference  to  Exhibit  10(d)  of the
          Company's Current Report on Form 8-K filed August 4, 1995.

10(e)(3)  Patent License Agreement among Noise Cancellation Technologies,  Inc.,
          Noise  Cancellation  Technologies  (UK) Limited and Ultra  Electronics
          Limited  dated  April 6, 1995,  incorporated  herein by  reference  to
          Exhibit 10(e) of the Company's Current Report on Form 8-K filed August
          4, 1995.

10(e)(4)  License  Agreement between Chaplin Patents Holding Co., Inc. and Ultra
          Electronics  Limited  dated  April 6,  1995,  incorporated  herein  by
          reference to Exhibit 10(f) of the Company's Current Report on Form 8-K
          filed August 4, 1995.

                                     II-13
<PAGE>


10(e)(5)  Patent Sub-License  Agreement among Noise  Cancellation  Technologies,
          Inc.,  Noise   Cancellation   Technologies   (UK)  Limited  and  Ultra
          Electronics  Limited  dated  May  15,  1995,  incorporated  herein  by
          reference to Exhibit 10(g) of the Company's Current Report on Form 8-K
          filed August 4, 1995.

10(f)     License Agreement dated September 4, 1997,  between Noise Cancellation
          Technologies,  Inc.  and NCT Audio  Products,  Inc.,  incorporated  by
          reference to Exhibit 10(d) to the Company's  Quarterly  Report on Form
          10-Q for the quarter ended  September 30, 1997,  filed on November 17,
          1997.

10(g)     License  Agreement  dated July 15,  1998,  between the Company and NCT
          Hearing Products, Inc., incorporated by reference to Exhibit 10 of the
          Company's Quarterly Report on Form 10-Q for the period ended September
          30, 1998, filed on November 5, 1998.

10(h)     Consulting  Agreement  dated  January 20,  1999  between NCT and Leben
          Care, Inc. along with correspondence  dated January 8, 2002, amendment
          and extension  thereof and three amendments  thereto,  incorporated by
          reference to Exhibit  10(am) of the  company's  Annual  Report on Form
          10-K for the year ended December 31, 2002, filed April 4, 2003.

10(i)     License Agreement dated January 25, 1999,  between NCT Group, Inc. and
          DistributedMedia.com, Inc., incorporated by reference to Exhibit 10 to
          the  Company's  Quarterly  Report on Form 10-Q for the  quarter  ended
          September 30, 1999, filed on November 15, 1999.

10(j)     Agreement dated May 20, 1999 between Barnes & Noble College Bookstores
          and Distributed Media Corporation, incorporated herein by reference to
          Exhibit  10(au)  of the  Company's  Pre-effective  Amendment  No. 3 to
          Registration  Statement on Form S-1 (Registration No. 333-60574) filed
          on December 21, 2001.

10(k)     Agreement  dated  August  4,  1999  between  TransWorld  Entertainment
          Corporation and Distributed Media Corporation,  incorporated herein by
          reference to Exhibit 10(av) of the Company's  Pre-effective  Amendment
          No.  3  to  Registration  Statement  on  Form  S-1  (Registration  No.
          333-60574) filed on December 21, 2001.

10(l)     Agreement  dated  October 28, 1999 between  Wherehouse  Entertainment,
          Inc.  and  Distributed  Media  Corporation,   incorporated  herein  by
          reference to Exhibit 10(aw) of the Company's  Pre-effective  Amendment
          No.  3  to  Registration  Statement  on  Form  S-1  (Registration  No.
          333-60574) filed on December 21, 2001.

10(m)(1)  Securities Exchange Agreement,  dated as of October 9, 1999, among the
          Company,  Austost Anstalt Schaan and Balmore Funds, S.A.  incorporated
          by reference to Exhibit 10(a) of the Company's  Current Report on Form
          8-K filed on January 12, 2000.

10(m)(2)  Amendment  No. 1 to the  Securities  Exchange  Agreement,  dated as of
          March 7, 2000,  among the Company,  Austost Anstalt Schaan and Balmore
          Funds,  S.A.,  incorporated  by  reference  to  Exhibit  10(ae) of the
          Company's  Annual Report on Form 10-K for the year ended  December 31,
          1999, filed on April 14, 2000.

10(n)     Registration Rights Agreement,  dated as of October 9, 1999, among the
          Company,  Austost Anstalt Schaan and Balmore Funds, S.A.  incorporated
          by reference to Exhibit 10(b) of the Company's  Current Report on Form
          8-K filed on January 12, 2000.

10(o)(1)  Securities  Purchase  Agreement,  dated as of December 27, 1999, among
          the Company,  Austost Anstalt Schaan,  Balmore Funds, S.A. and Nesher,
          Inc.  incorporated  by  reference  to Exhibit  10(c) of the  Company's
          Current Report on Form 8-K filed on January 12, 2000.

                                     II-14
<PAGE>


10(o)(2)  Registration  Rights  Agreement,  dated as of December 27, 1999, among
          the Company, Austost Anstalt Schaan, Balmore Funds, S.A.. Nesher, Inc.
          and Libra Finance S.A.  incorporated  by reference to Exhibit 10(d) of
          the Company's Current Report on Form 8-K filed on January 12, 2000.

10(p)(1)  Strategic Alliance and Technology License Agreement entered into as of
          May 8, 2000 among NCT Group,  Inc.,  Advancel  Logic  Corporation  and
          Infinite Technology Corporation,  incorporated by reference to Exhibit
          10(ag)  of  the  Company's   Pre-effective  Amendment  No.  1  to  the
          Registration Statement on Form S-1 filed on June 13, 2000.

10(p)(2)  Strategic   Alliance  and  Technology   Development   Amendment  dated
          effective  June 20,  2000,  between NCT Group,  Inc.,  Advancel  Logic
          Corporation and Infinite Technology  Corporation,  incorporated herein
          by  reference  to  Exhibit  10(al)  of  the  Company's   Pre-effective
          Amendment No. 1 to  Registration  Statement on Form S-1  (Registration
          No. 333-47084) filed on October 25, 2000.

10(q)     License Agreement Amendment dated effective June 30, 2000, between NCT
          Group,  Inc.,  Advancel  Logic  Corporation  and  Infinite  Technology
          Corporation,  incorporated  herein by  reference  to Exhibit 10 of the
          Company's  Quarterly  Report  on  Form  10-Q  for  the  quarter  ended
          September 30, 2000, filed on November 27, 2000.

10(r)     Securities  Purchase and Supplemental  Exchange Rights Agreement dated
          August 10, 2000 by and among ConnectClearly.com, Inc. NCT Group, Inc.,
          and  Austost  Anstalt   Schaan,   Balmore  S.A.  and  Zakeni  Limited,
          incorporated  herein by reference to Exhibit  10(ak) of the  Company's
          Pre-effective  Amendment No. 1 to  Registration  Statement on Form S-1
          (Registration No. 333-47084) filed on October 25, 2000.

10(s)     Stock  Purchase  Agreement  dated  August 18,  2000 by and between NCT
          Group,  Inc.,  DistributedMedia.com,  Inc., DMC Cinema,  Inc. and Jeff
          Arthur, LaJuanda Barrera, Robert Crisp, Steven Esrick and Alan Martin,
          incorporated  herein by reference to Exhibit  10(aj) of the  Company's
          Pre-effective  Amendment No. 1 to  Registration  Statement on Form S-1
          (Registration No. 333-47084) filed on October 25, 2000.

10(t)     Agreement  and Plan of Merger dated August 29, 2000,  among NCT Group,
          Inc, NCT Midcore, Inc. and Midcore Software, Inc., incorporated herein
          by reference to Exhibit 2 of the Company's  Current Report on Form 8-K
          filed on September 13, 2000.

10(u)     Securities  Purchase and Supplemental  Exchange Rights Agreement dated
          September  29, 2000 by and among Pro Tech  Communications,  Inc.,  NCT
          Group, Inc., Austost Anstalt Schaan,  Balmore S.A. and Zakeni Limited,
          incorporated  herein by reference to Exhibit  10(am) of the  Company's
          Pre-effective  Amendment No. 1 to  Registration  Statement on Form S-1
          (Registration No. 333-47084) filed on October 25, 2000.

10(v)(1)  Stock Purchase  Agreement between NCT Hearing  Products,  Inc. and Pro
          Tech Communications, Inc. dated as of September 13, 2000, incorporated
          by  reference  to  Exhibit  10(an)  of  the  Company's   Pre-effective
          Amendment No. 2 to  Registration  Statement on Form S-1  (Registration
          No. 333-47084) filed on December 12, 2000.

10(v)(2)  License  Agreement  between NCT Hearing  Products,  Inc.  and Pro Tech
          Communications,   Inc.  dated  September  12,  2000,  incorporated  by
          reference to Exhibit 10(ao) of the Company's  Pre-effective  Amendment
          No.  2  to  Registration  Statement  on  Form  S-1  (Registration  No.
          333-47084) filed on December 12, 2000.

                                     II-15
<PAGE>


10(w)(1)  Stock and Asset Purchase Agreement by and among Teltran  International
          Group,  Ltd.,  Internet  Protocols  Ltd. and NCT  Networks,  Inc. (now
          Artera  Group,  Inc.) dated as of January 23,  2001,  incorporated  by
          reference to the  Quarterly  Report on Form 10-Q for the quarter ended
          June 30, 2001, filed on August 15, 2001.

10(w)(2)  Side letter dated  February  27,  2001,  amending the January 23, 2001
          Stock and Asset Agreement,  incorporated by reference to the Quarterly
          Report on Form 10-Q for the  quarter  ended  June 30,  2001,  filed on
          August 15, 2001.

10(x)     Stockholders'  Agreement  dated  February  27,  2001 by and  among NCT
          Group, Inc., NCT Networks,  Inc. and the holders of Series A Preferred
          Stock of NCT Networks, Inc, incorporated by reference to the Quarterly
          Report on Form 10-Q for the  quarter  ended  June 30,  2001,  filed on
          August 15, 2001.

10(y)(1)  Subscription  Agreement  between NCT Networks,  Inc. and  Subscribers:
          Austost Anstalt Schaan; Balmore S.A.; Amro International, S.A.; Nesher
          Ltd.;  Talbiya B.  Investments  Ltd.; and The Gross  Foundation,  Inc.
          (collectively,  Holders of  Convertible  Notes of NCT Networks,  Inc.)
          dated  January 9, 2001,  incorporated  herein by  reference to Exhibit
          10(ap) of the Company's  Pre-effective Amendment No. 3 to Registration
          Statement on Form S-1  (Registration  No.  333-47084) filed on January
          26, 2001.

10(y)(2)  Form of Convertible Note of NCT Networks,  Inc. dated January 9, 2001,
          incorporated  herein by reference to Exhibit  10(aq) of the  Company's
          Pre-effective  Amendment No. 3 to  Registration  Statement on Form S-1
          (Registration No. 333-47084) filed on January 26, 2001.

10(y)(3)  Exchange  Rights  Agreement  among NCT  Group,  Inc.  and  Holders  of
          Convertible  Notes  of NCT  Networks,  Inc.  dated  January  9,  2001,
          incorporated  herein by reference to Exhibit  10(ar) of the  Company's
          Pre-effective  Amendment No. 3 to  Registration  Statement on Form S-1
          (Registration No. 333-47084) filed on January 26, 2001.

10(y)(4)  Registration  Rights  Agreement  among NCT Group,  Inc. and Holders of
          Convertible  Notes  of NCT  Networks,  Inc.  dated  January  9,  2001,
          incorporated  herein by reference to Exhibit  10(as) of the  Company's
          Pre-effective  Amendment No. 3 to  Registration  Statement on Form S-1
          (Registration No. 333-47084) filed on January 26, 2001.

10(z)(1)  Exchange  Agreement  dated April 12, 2001 by and between  Crammer Road
          LLC and NCT Group, Inc.,  incorporated  herein by reference to Exhibit
          10(at) of NCT's  Registration  Statement on Form S-1 (Registration No.
          333-60574) filed on May 9, 2001.

10(z)(2)  NCT Group,  Inc.  note CR-1 in principal  amount of  $1,000,000  dated
          April 12, 2001,  incorporated herein by reference to Exhibit 10(au) of
          NCT's Registration  Statement on Form S-1 (Registration No. 333-60574)
          filed on May 9, 2001.

10(z)(3)  Registration Rights Agreement (Exhibit A to Exchange Agreement) by and
          between NCT Group,  Inc.  and  Crammer  Road LLC dated as of April 12,
          2001,  incorporated  herein by  reference  to Exhibit  10(av) of NCT's
          Registration  Statement on Form S-1 (Registration No. 333-60574) filed
          on May 9, 2001.

10(aa)(1) Subscription  Agreement  by and between NCT Video  Displays,  Inc. and
          Crammer  Road LLC dated as of April 12, 2001,  incorporated  herein by
          reference to Exhibit  10(ax) of NCT's  Registration  Statement on Form
          S-1 (Registration No. 333-60574) filed on May 9, 2001.

10(aa)(2) Exchange  Rights  Agreement  dated  April 12,  2001 by and between NCT
          Group, Inc. and Crammer Road LLC,  incorporated herein by reference to
          Exhibit   10(aw)  of  NCT's   Registration   Statement   on  Form  S-1
          (Registration No. 333-60574) filed on May 9, 2001.

                                     II-16
<PAGE>


10(aa)(3) Convertible  Note of NCT Video Displays,  Inc. in principal  amount of
          $500,000 dated as of April 12, 2001,  incorporated herein by reference
          to  Exhibit  10(ay)  of  NCT's  Registration  Statement  on  Form  S-1
          (Registration No. 333-60574) filed on May 9, 2001.

10(ab)(1) Private  Equity  Credit  Agreement  dated as of April 12,  2001 by and
          between NCT Group, Inc. and Crammer Road LLC,  incorporated  herein by
          reference to Exhibit  10(az) of NCT's  Registration  Statement on Form
          S-1 (Registration No. 333-60574) filed on May 9, 2001.

10(ab)(2) Registration  Rights  Agreement  (Exhibit A to Private  Equity  Credit
          Agreement)  dated as of April 12, 2001 by and between NCT Group,  Inc.
          and Crammer  Road LLC,  incorporated  herein by  reference  to Exhibit
          10(ba) of NCT's  Registration  Statement on Form S-1 (Registration No.
          333-60574) filed on May 9, 2001.

10(ac)(1) Framework  Agreement  between NXT plc, New  Transducers  Limited,  NCT
          Group,   Inc.   and  NCT  Audio   Products,   Inc.   relating  to  the
          reorganization of certain existing  arrangements dated as of March 30,
          2001,  incorporated  herein by  reference  to  Exhibit  10(z) of NCT's
          Pre-effective  Amendment No. 1 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on September 5, 2001.

10(ac)(2) Registration  Rights Agreement dated as of March 30, 2001 by and among
          NCT Group,  Inc.  and NXT plc,  incorporated  herein by  reference  to
          Exhibit   10(z)(1)  of  NCT's   Pre-effective   Amendment   No.  1  to
          Registration  Statement on Form S-1 (Registration No. 333-60574) filed
          on September 5, 2001.

10(ac)(3) IP Sale  Agreement  dated April 11, 2001 between NCT Group,  Inc., NXT
          plc and New Transducers  Limited,  incorporated herein by reference to
          Exhibit   10(z)(2)  of  NCT's   Pre-effective   Amendment   No.  1  to
          Registration  Statement on Form S-1 (Registration No. 333-60574) filed
          on September 5, 2001.

10(ac)(4) NXT General License  between the company and New  Transducers  Limited
          dated as of April  11,  2001,  incorporated  herein  by  reference  to
          Exhibit   10(z)(3)  of  NCT's   Pre-effective   Amendment   No.  1  to
          Registration  Statement on Form S-1 (Registration No. 333-60574) filed
          on September 5, 2001.

10(ac)(5) Letter  dated April 11, 2001  amending the NXT General  License  dated
          April 11, 2001,  incorporated  herein by reference to Exhibit 10(z)(4)
          of NCT's  Pre-effective  Amendment No. 1 to Registration  Statement on
          Form S-1 (Registration No. 333-60574) filed on September 5, 2001.

10(ac)(6) Cancellation letter between the company, NCT Audio Products, Inc., New
          Transducers  Limited and NXT plc dated April 11,  2001  canceling  the
          Master License  Agreement  dated  September 27, 1997 and the New Cross
          License  Agreement  dated September 27, 1997,  incorporated  herein by
          reference to Exhibit 10(z)(5) of NCT's  Pre-effective  Amendment No. 1
          to Registration  Statement on Form S-1  (Registration  No.  333-60574)
          filed on September 5, 2001.

10(ac)(7) Letter  dated  April 11,  2001  outlining  additional  services  to be
          rendered  by NXT  plc/New  Transducers  Limited to  Distributed  Media
          Corporation,  incorporated  herein by reference to Exhibit 10(z)(6) of
          NCT's Pre-effective  Amendment No. 4 to Registration Statement on Form
          S-1 (Registration No. 333-60574) filed on January 30, 2002.

10(ad)(1) Subscription  Agreement  dated March 14, 2001  between the company and
          Alpha Capital Aktiengesellschaft,  incorporated herein by reference to
          Exhibit   10(bh)  of  NCT's   Registration   Statement   on  Form  S-1
          (Registration No. 333-60574) filed on May 9, 2001.

10(ad)(2) Form of Convertible  Note in principal  amount of $250,000 dated March
          14, 2001,  incorporated herein by reference to Exhibit 10(bi) of NCT's
          Registration  Statement on Form S-1 (Registration No. 333-60574) filed
          on May 9, 2001.

                                     II-17
<PAGE>


10(ae)(1) Subscription  Agreement dated April 4, 2001 among Artera Group,  Inc.,
          Alpha  Capital   Aktiengesellschaft  and  Amro  International,   S.A.,
          incorporated   herein  by  reference   to  Exhibit   10(bj)  of  NCT's
          Registration  Statement on Form S-1 (Registration No. 333-60574) filed
          on May 9, 2001.

10(ae)(2) Form of Note dated April 4, 2001,  incorporated herein by reference to
          Exhibit   10(bk)  of  NCT's   Registration   Statement   on  Form  S-1
          (Registration No. 333-60574) filed on May 9, 2001.

10(ae)(3) Exchange Rights Agreement by and among NCT Group, Inc. and the Holders
          identified   on  Schedule  A  thereto  dated  as  of  April  4,  2001,
          incorporated  herein  by  reference  to  Exhibit  10(ab)(2)  of  NCT's
          Pre-effective  Amendment No. 1 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on September 5, 2001.

10(ae)(4) Registration  Rights  Agreement  among NCT  Group,  Inc.  and  Holders
          identified   on  Schedule  A  thereto  dated  as  of  April  4,  2001,
          incorporated  herein  by  reference  to  Exhibit  10(ab)(3)  of  NCT's
          Pre-effective  Amendment No. 1 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on September 5, 2001.

10(af)(1) Subscription  Agreement  dated April 12, 2001  between the company and
          Alpha Capital Aktiengesellschaft,  incorporated herein by reference to
          Exhibit   10(bl)  of  NCT's   Registration   Statement   on  Form  S-1
          (Registration No. 333-60574) filed on May 9, 2001.

10(af)(2) Form of Convertible  Note in principal  amount of $125,000 dated April
          12, 2001,  incorporated herein by reference to Exhibit 10(bm) of NCT's
          Registration  Statement on Form S-1 (Registration No. 333-60574) filed
          on May 9, 2001.

10(ag)    Product  Development and Licensing Agreement dated May 4, 2001 between
          NCT Video Displays, Inc. and ViewBeam Technology, L.L.C., incorporated
          herein by reference  to Exhibit  10(bl) of NCT's  Quarterly  Report on
          Form 10-Q for the  quarter  ended June 30,  2001,  filed on August 15,
          2001.

10(ah)    Agreement  dated  May  11,  2001,  by  and  among  NCT  Group,   Inc.,
          Distributed   Media   Corporation   and  Production   Resource  Group,
          incorporated   herein  by  reference   to  Exhibit   10(af)  of  NCT's
          Pre-effective  Amendment No. 1 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on September 5, 2001.

10(ai)(1)

          Subscription Agreement among Artera Group, Inc. and Subscribers: Alpha
          Capital  Aktiengesellschaft  and Amro International,  S.A. dated as of
          May 25, 2001,  incorporated  by reference to the  Quarterly  Report on
          Form 10-Q for the  quarter  ended June 30,  2001,  filed on August 15,
          2001.

10(ai)(2) Form of Convertible Note dated May 25, 2001, incorporated by reference
          to the  Quarterly  Report on Form 10-Q for the quarter  ended June 30,
          2001, filed on August 15, 2001.

10(ai)(3) Exchange Rights Agreement by and among NCT Group, Inc. and the Holders
          identified   on  Schedule  A  thereto   dated  as  of  May  25,  2001,
          incorporated by reference to the Quarterly Report on Form 10-Q for the
          quarter ended June 30, 2001, filed on August 15, 2001.

10(ai)(4) Registration  Rights  Agreement  among NCT  Group,  Inc.  and  Holders
          identified   on  Schedule  A  thereto   dated  as  of  May  25,  2001,
          incorporated by reference to the Quarterly Report on Form 10-Q for the
          quarter ended June 30, 2001, filed on August 15, 2001.

                                     II-18
<PAGE>


10(aj)(1) Subscription Agreement among Artera Group, Inc. and Subscribers: Alpha
          Capital  Aktiengesellschaft;   Amro  International,  S.A.;  The  Gross
          Foundation,  Inc.;  Leval Trading,  Inc.;  Nesher Ltd.; and Talbiya B.
          Investments Ltd. dated as of June 29, 2001,  incorporated by reference
          to the  Quarterly  Report on Form 10-Q for the quarter  ended June 30,
          2001, filed on August 15, 2001.

10(aj)(2) Form  of  Convertible  Note  dated  June  29,  2001,  incorporated  by
          reference to the  Quarterly  Report on Form 10-Q for the quarter ended
          June 30, 2001, filed on August 15, 2001.

10(aj)(3) Exchange  Rights  Agreement  (Notes) by and among NCT Group,  Inc. and
          Holders  identified  on Schedule A thereto  dated as of June 29, 2001,
          incorporated by reference to the Quarterly Report on Form 10-Q for the
          quarter ended June 30, 2001, filed on August 15, 2001.

10(aj)(4) Registration  Rights  Agreement  (Notes)  among NCT  Group,  Inc.  and
          Holders  identified  on Schedule A thereto  dated as of June 29, 2001,
          incorporated by reference to the Quarterly Report on Form 10-Q for the
          quarter ended June 30, 2001, filed on August 15, 2001.

10(ak)(1) Exchange Rights Agreement (Preferred) by and among NCT Group, Inc. and
          Austost Anstalt Schaan; Amro  International,  S.A.; Nesher Ltd.; Leval
          Trading,  Inc.; ICT N.V.;  Balmore S.A.; The Gross  Foundation,  Inc.;
          Talbiya B. Investments  Ltd.; United  Securities  Services,  Inc.; and
          Libra  Finance,  S.A.  dated  as of June  29,  2001,  incorporated  by
          reference to the  Quarterly  Report on Form 10-Q for the quarter ended
          June 30, 2001, filed on August 15, 2001.

10(ak)(2) Registration  Rights Agreement  (Preferred)  among NCT Group, Inc. and
          Austost Anstalt Schaan; Amro  International,  S.A.; Nesher Ltd.; Leval
          Trading,  Inc.; ICT N.V.;  Balmore S.A.; The Gross  Foundation,  Inc.;
          Talbiya B. Investments  Ltd.; United  Securities  Services,  Inc.; and
          Libra  Finance,  S.A.  dated  as of June  29,  2001,  incorporated  by
          reference to the  Quarterly  Report on Form 10-Q for the quarter ended
          June 30, 2001, filed on August 15, 2001.

10(al)    Consulting  Agreement  dated July 1, 2001  between NCT and Stop Noise,
          Inc.  along with an  addendum  thereto  dated  October 9, 2001 and two
          amendments thereto, incorporated by reference to Exhibit 10(an) of the
          company's  Annual Report on Form 10-K for the year ended  December 31,
          2002, filed April 4, 2003.

10(am)    License  Agreement  dated August 10, 2001 between  Sharp  Corporation,
          acting through its  Communication  Systems Group and NCT Group, Inc. ,
          incorporated by reference to Exhibit 10(a) of the company's  Quarterly
          Report on Form 10-Q for the  quarter  ended  June 30,  2003,  filed on
          August 14, 2003.

10(an)(1) Securities  Purchase and Supplemental  Exchange Rights Agreement dated
          July 30, 2001 by and among Pro Tech  Communications,  Inc., NCT Group,
          Inc., and Alpha Capital Aktiengesellschaft,  incorporated by reference
          to the  Quarterly  Report on Form 10-Q for the quarter  ended June 30,
          2001, filed on August 15, 2001.

10(an)(2) Registration Rights Agreement by and between NCT Group, Inc. and Alpha
          Capital  Aktiengesellschaft  dated  July  30,  2001,  incorporated  by
          reference to the  Quarterly  Report on Form 10-Q for the quarter ended
          June 30, 2001, filed on August 15, 2001.

10(ao)    Letter dated November 9, 2001 to each of the Subscribers identified on
          Schedule A thereto (being the subscribers in Artera  convertible notes
          dated January 9, 2001, April 4, 2001, May 25, 2001, and June 29, 2001)
          amending  terms  of  conversion  of  the  Artera   convertible  notes,
          incorporated  herein by reference to Exhibit  10(ar) of the  Company's
          Pre-effective  Amendment No. 3 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on December 21, 2001.

                                     II-19
<PAGE>


10(ap)    Letter dated  November 9, 2001 to each of the investors  identified on
          Schedule  A  thereto  amending  the  terms of  exchange  of  shares of
          Artera's Series A Convertible Preferred Stock,  incorporated herein by
          reference to Exhibit 10(as) of the Company's  Pre-effective  Amendment
          No.  3  to  Registration  Statement  on  Form  S-1  (Registration  No.
          333-60574) filed on December 21, 2001.

10(aq)    Distributed  Media  Corporation  standard  form of  license  agreement
          conveying rights to the use of Sight & Sound(R) systems,  incorporated
          herein by reference to Exhibit  10(at) of the Company's  Pre-effective
          Amendment No. 3 to  Registration  Statement on Form S-1  (Registration
          No. 333-60574) filed on December 21, 2001.

10(ar)(1) Subscription  Agreement dated January 10, 2002,  between Artera Group,
          Inc. and Alpha Capital  Aktiengesellschaft,  incorporated by reference
          to Exhibit  10(a) to the  Quarterly  Report filed on Form 10-Q for the
          quarter ended March 31, 2002, filed on May 15, 2002.

10(ar)(2) Security  Agreement dated January 10, 2002, between Artera Group, Inc.
          and Alpha  Capital  Aktiengesellschaft,  incorporated  by reference to
          Exhibit  10(b) to the  Quarterly  Report  filed  on Form  10-Q for the
          quarter ended March 31, 2002, filed on May 15, 2002.

10(ar)(3) Convertible Note in the principal amount of $550,000 dated January 10,
          2002,    issued   by   Artera    Group,    Inc.   to   Alpha   Capital
          Aktiengesellschaft,  incorporated by reference to Exhibit 10(c) to the
          Quarterly  Report  filed on Form 10-Q for the quarter  ended March 31,
          2002, filed on May 15, 2002.

10(ar)(4) Funds Escrow  Agreement dated January 10, 2002,  between Artera Group,
          Inc. and Alpha Capital  Aktiengesellschaft,  incorporated by reference
          to Exhibit  10(d) to the  Quarterly  Report filed on Form 10-Q for the
          quarter ended March 31, 2002, filed on May 15, 2002.

10(as)(1) Subscription  Agreement dated March 11, 2002,  between the Company and
          Alpha Capital Aktiengesellschaft, incorporated by reference to Exhibit
          10(f) to the Quarterly Report filed on Form 10-Q for the quarter ended
          March 31, 2002, filed on May 15, 2002.

10(as)(2) Funds Escrow  Agreement dated March 11, 2002,  between the Company and
          Alpha Capital Aktiengesellschaft, incorporated by reference to Exhibit
          10(g) to the Quarterly Report filed on Form 10-Q for the quarter ended
          March 31, 2002, filed on May 15, 2002.

10(as)(3) Convertible  Note in the principal  amount of $400,000 dated March 11,
          2002,  issued  by the  Company  to Alpha  Capital  Aktiengesellschaft,
          incorporated  by reference to Exhibit  10(h) to the  Quarterly  Report
          filed on Form 10-Q for the quarter ended March 31, 2002,  filed on May
          15, 2002.

10(at)(1) Exchange  Agreement  between the company and Crammer Road LLC dated as
          of June 21, 2002,  incorporated  herein by reference to Exhibit 10(bm)
          of NCT's  Pre-effective  Amendment No. 5 to Registration  Statement on
          Form S-1 (Registration No. 333-60574) filed on August 9, 2002.

10(at)(2) Registration  Rights  Agreement  (Exhibit B to the Exchange  Agreement
          dated as of June 21,  2002)  dated as of June  21,  2002  between  the
          company and Crammer  Road LLC,  incorporated  herein by  reference  to
          Exhibit   10(bm)(1)  of  NCT's   Pre-effective   Amendment  No.  5  to
          Registration  Statement on Form S-1 (Registration No. 333-60574) filed
          on August 9, 2002.

10(au)    Agreement  dated July 12, 2002  relating to Pro Tech  Exchange  Rights
          among the Company, Pro Tech Communications,  Inc., and Carole Salkind,
          incorporated   herein  by  reference   to  Exhibit   10(bp)  of  NCT's
          Pre-effective  Amendment No. 5 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on August 9, 2002.

                                     II-20
<PAGE>


10(av)(1) Private Equity Credit  Agreement dated as of July 25, 2002 between NCT
          Group, Inc. and Crammer Road LLC,  incorporated herein by reference to
          Exhibit 10(bq) of NCT's Pre-effective  Amendment No. 5 to Registration
          Statement on Form S-1  (Registration No. 333-60574) filed on August 9,
          2002.

10(av)(2) Registration  Rights  Agreement  (Exhibit A to Private  Equity  Credit
          Agreement)  dated as of July 25,  2002  between  NCT Group,  Inc.  and
          Crammer  Road  LLC,   incorporated  herein  by  reference  to  Exhibit
          10(bq)(1)  of NCT's  Pre-effective  Amendment  No.  5 to  Registration
          Statement on Form S-1  (Registration No. 333-60574) filed on August 9,
          2002.

10(ax)    Secured  Convertible  Note in principal  amount of $525,000 dated July
          23, 2002 issued by the Company to Carole Salkind,  incorporated herein
          by reference to Exhibit 10(br) of NCT's Pre-effective  Amendment No. 6
          to Registration  Statement on Form S-1  (Registration  No.  333-60574)
          filed on November 4, 2002.

10(ay)    Secured  Convertible Note in principal amount of $350,000 dated August
          14, 2002 issued by the Company to Carole Salkind,  incorporated herein
          by reference to Exhibit 10(bs) of NCT's Pre-effective  Amendment No. 6
          to Registration  Statement on Form S-1  (Registration  No.  333-60574)
          filed on November 4, 2002.

10(az)(1) License   Agreement   dated   August  15,   2002   between   Fairpoint
          Communications, Inc. and Artera Group, Inc., incorporated by reference
          to Exhibit  10(b) of the company's  Quarterly  Report on Form 10-Q for
          the quarter ended June 30, 2003, filed on August 14, 2003.

10(az)(2) Memorandum  of  Understanding  dated May 23,  2003  between  Fairpoint
          Broadband,  Inc. and Artera Group, Inc.,  incorporated by reference to
          Exhibit 10(x) of the company's  Quarterly  Report on Form 10-Q for the
          quarter ended June 30, 2003, filed on August 14, 2003.

10(ba)    Secured  Convertible Note in principal amount of $490,000 dated August
          29, 2002 issued by the Company to Carole Salkind,  incorporated herein
          by reference to Exhibit 10(bt) of NCT's Pre-effective  Amendment No. 6
          to Registration  Statement on Form S-1  (Registration  No.  333-60574)
          filed on November 4, 2002.

10(bb)    Secured  Convertible  Note  in  principal  amount  of  $350,000  dated
          September   9,  2002  issued  by  the   Company  to  Carole   Salkind,
          incorporated   herein  by  reference   to  Exhibit   10(bu)  of  NCT's
          Pre-effective  Amendment No. 6 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on November 4, 2002.

10(bc)    Consulting  Agreement  dated  September  30, 2002 between NCT and Acme
          Associates,  Inc.,  incorporated by reference to Exhibit 10(ao) of the
          company's  Annual Report on Form 10-K for the year ended  December 31,
          2002, filed April 4, 2003.

10(bd)    Secured  Convertible Note in principal  amount of $3,770,098.38  dated
          September   30,  2002  issued  by  the  Company  to  Carole   Salkind,
          incorporated   herein  by  reference   to  Exhibit   10(bv)  of  NCT's
          Pre-effective  Amendment No. 6 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on November 4, 2002.

10(be)    Agreement  dated  September  30, 2002  relating  to Pro Tech  Exchange
          Rights among the Company,  Pro Tech  Communications,  Inc., and Carole
          Salkind,  incorporated  herein by reference to Exhibit 10(bw) of NCT's
          Pre-effective  Amendment No. 6 to  Registration  Statement on Form S-1
          (Registration No. 333-60574) filed on November 4, 2002.

10(bf)    Exclusive  Marketing  License Agreement dated October 11, 2002 between
          FairPoint Broadband,  Inc. and Artera Group Inc.,  incorporated herein
          by reference to Exhibit 10(b) to NCT's  Quarterly  Report on Form 10-Q
          for the quarter ended September 30, 2003, filed on November 19, 2003.

                                     II-21
<PAGE>


10(bg)    Master  Distributor  Agreement dated October 24, 2002,  between Artera
          Group, Inc. and Spyder Technologies Group, LLC, incorporated herein by
          reference to Exhibit 10(by) of NCT's Pre-effective  Amendment No. 6 to
          Registration  Statement on Form S-1 (Registration No. 333-60574) filed
          on November 4, 2002.

10(bh)    Settlement  Agreement  and Release  dated October 30, 2002 made by and
          between Crammer Road LLC and NCT,  incorporated herein by reference to
          Exhibit 10(bx) of NCT's Pre-effective  Amendment No. 6 to Registration
          Statement on Form S-1  (Registration  No. 333-60574) filed on November
          4, 2002.

10(bi)    Secured  Convertible  Note  in  principal  amount  of  $400,000  dated
          November 7, 2002 issued by the Company to Carole Salkind, incorporated
          by reference to Exhibit  10(af) of the company's  Quarterly  Report on
          Form 10-Q for the quarter ended September 30, 2002, filed November 14,
          2002.

10(bj)    Secured  Convertible  Note  in  principal  amount  of  $400,000  dated
          November   20,  2002   issued  by  the  company  to  Carole   Salkind,
          incorporated  by reference to Exhibit  10(ak) of the company's  Annual
          Report on Form 10-K for the year ended December 31, 2002,  filed April
          4, 2003.

10(bk)    Secured  Convertible Note in principal  amount of $1,463,449.36  dated
          November   21,  2002   issued  by  the  company  to  Carole   Salkind,
          incorporated  by reference to Exhibit  10(al) of the company's  Annual
          Report on Form 10-K for the year ended December 31, 2002,  filed April
          4, 2003.

10(bl) \  Secured  Convertible  Note  in  principal  amount  of  $350,000  dated
          December 2, 2002 issued by the company to Carole Salkind, incorporated
          by reference to Exhibit 10(ap) of the company's  Annual Report on Form
          10-K for the year ended December 31, 2002, filed April 4, 2003.

10(bm)    Settlement Agreement dated December 3, 2002 among Mesa Partners, Inc.,
          the company,  and Distributed Media Corporation  approved by the court
          on April 8, 2003, incorporated herein by reference to Exhibit 10(k) of
          NCT's  Quarterly  Report on Form 10-Q for the quarter  ended March 31,
          2003 filed on May 15, 2003.

10(bn)    Settlement Agreement dated December 11, 2002 among Kalkines, Arky Zall
          &   Bernstein   LLP,   HealthNet   Connections   LLC,   HNC  New  York
          Representatives  LLC, the company,  Distributed  Media Corporation and
          DMC  HealthMedia  Inc,  incorporated  herein by  reference  to Exhibit
          10(bm)  of  NCT's  Pre-effective   Amendment  No.  8  to  Registration
          Statement on Form S-1 (Registration No. 333-60574), filed on September
          16, 2003.

10(bo)    Secured  Convertible  Note  in  principal  amount  of  $400,000  dated
          December   16,  2002   issued  by  the  company  to  Carole   Salkind,
          incorporated  by reference to Exhibit  10(aq) of the company's  Annual
          Report on Form 10-K for the year ended December 31, 2002,  filed April
          4, 2003.

10(bp)    Secured  Convertible Note in principal  amount of $2,381,486.89  dated
          December   26,  2002   issued  by  the  company  to  Carole   Salkind,
          incorporated  by reference to Exhibit  10(ar) of the company's  Annual
          Report on Form 10-K for the year ended December 31, 2002,  filed April
          4, 2003.

10(bq)    Consulting   Agreement   dated  December  26,  2002  between  NCT  and
          Motorworld, Incorporated,  incorporated by reference to Exhibit 10(ba)
          of the  company's  Annual  Report  on Form  10-K  for the  year  ended
          December 31, 2002, filed April 4, 2003.

10(br)    Secured  Convertible  Note  in  principal  amount  of  $350,000  dated
          December   30,  2002   issued  by  the  company  to  Carole   Salkind,
          incorporated  by reference to Exhibit  10(as) of the company's  Annual
          Report on Form 10-K for the year ended December 31, 2002,  filed April
          4, 2003.

                                     II-22
<PAGE>


10(bs)    Settlement Agreement dated December 31, 2002 between West Nursery Land
          Holding Limited  Partnership and the company  approved by the court on
          March 3, 2003,  incorporated  herein by reference to Exhibit  10(f) of
          NCT's  Quarterly  Report on Form 10-Q for the quarter  ended March 31,
          2003 filed on May 15, 2003.

10(bt)    License  Agreement dated January 6, 2003 (October 1, 2002 was the date
          inadvertently  indicated on our Form 10-K) between NCT Group, Inc. and
          Stop Noise,  Inc.,  incorporated by reference to Exhibit 10(aj) of the
          company's  Annual Report on Form 10-K for the year ended  December 31,
          2002, filed April 4, 2003.

10(bu)    Secured Convertible Note in principal amount of $450,000 dated January
          15,  2003  issued by the company to Carole  Salkind,  incorporated  by
          reference to Exhibit  10(at) of the  company's  Annual  Report on Form
          10-K for the year ended December 31, 2002, filed April 4, 2003.

10(bv)    Secured  Convertible Note in principal  amount of $2,747,634.92  dated
          January 23, 2003 issued by the company to Carole Salkind, incorporated
          by reference to Exhibit 10(au) of the company's  Annual Report on Form
          10-K for the year ended December 31, 2002, filed April 4, 2003.

10(bw)    Consulting  Agreement  dated January 23, 2003 between NCT and Inframe,
          Inc.,  incorporated  by  reference to Exhibit  10(f) of the  company's
          Quarterly  Report on Form 10-Q for the  quarter  ended June 30,  2003,
          filed on August 14, 2003.

10(bx)    Secured Convertible Note in principal amount of $350,000 dated January
          30,  2003  issued by the company to Carole  Salkind,  incorporated  by
          reference to Exhibit  10(av) of the  company's  Annual  Report on Form
          10-K for the year ended December 31, 2002, filed April 4, 2003.

10(by)    Secured  Convertible Note in principal  amount of $1,252,592.41  dated
          February   11,  2003   issued  by  the  company  to  Carole   Salkind,
          incorporated  by reference to Exhibit  10(aw) of the company's  Annual
          Report on Form 10-K for the year ended December 31, 2002,  filed April
          4, 2003.

10(bz)    Consulting  Agreement  dated  February  11, 2003 between NCT and Avant
          Interactive,  Inc. and amendments  thereto dated March 12, 2003, April
          3, 2003 and April 11, 2003, incorporated by reference to Exhibit 10(i)
          of the company's  Quarterly  Report on Form 10-Q for the quarter ended
          June 30, 2003, filed on August 14, 2003.

10(ca)    Secured  Convertible  Note in principal amount of $450,000 dated March
          4, 2003  issued by the  company  to Carole  Salkind,  incorporated  by
          reference to Exhibit  10(ax) of the  company's  Annual  Report on Form
          10-K for the year ended December 31, 2002, filed April 4, 2003.

10(cb)    Secured  Convertible  Note in principal  amount of  $980,802.25  dated
          March 13, 2003 issued by the company to Carole  Salkind,  incorporated
          by reference to Exhibit 10(ay) of the company's  Annual Report on Form
          10-K for the year ended December 31, 2002, filed April 4, 2003.

10(cc)    Secured  Convertible  Note in principal  amount of  $864,615.56  dated
          March 13, 2003 issued by the company to Carole  Salkind,  incorporated
          by reference to Exhibit 10(az) of the company's  Annual Report on Form
          10-K for the year ended December 31, 2002, filed April 4, 2003.

10(cd)    Secured  Convertible  Note in principal amount of $450,000 dated April
          2, 2003 issued by the company to Carole Salkind,  incorporated  herein
          by reference to Exhibit 10(cr) of NCT's Pre-effective  Amendment No. 7
          to Registration  Statement on Form S-1  (Registration  No.  333-60574)
          filed on April 18, 2003.

                                     II-23
<PAGE>


10(ce)    Settlement   Agreement   dated  April  7,  2003  among  Alpha  Capital
          Aktiengesellschaft,  Austost  Anstalt  Schaan,  Balmore,  S.A.,  Libra
          Finance,  S.A.,  the company and Artera Group,  Inc.,  approved by the
          court on  September  16,  2003,  incorporated  herein by  reference to
          Exhibit 10(ay) to NCT's Quarterly  Report on Form 10-Q for the quarter
          ended September 30, 2003, filed on November 19, 2003.

10(cf)    Exchange  Rights and Release  Agreement dated April 10, 2003 among the
          company,    Pro   Tech    Communications,    Inc.,    Alpha    Capital
          Aktiengesellschaft,  Austost Anstalt Schaan,  Balmore, S.A., and Libra
          Finance,  S.A.,  incorporated  herein by reference to Exhibit 10(l) of
          NCT's  Quarterly  Report on Form 10-Q for the quarter  ended March 31,
          2003, filed on May 15, 2003.

10(cg)    Secured  Convertible  Note in principal amount of $450,000 dated April
          11, 2003 issued by the company to Carole Salkind,  incorporated herein
          by reference to Exhibit 10(m) of NCT's  Quarterly  Report on Form 10-Q
          for the quarter ended March 31, 2003, filed on May 15, 2003.

10(ch)    Consulting  Agreement  dated  April 17,  2003  between the company and
          Turbo Networks, Inc. and amendment thereto dated May 22, 2003 and June
          28, 2003,  incorporated by reference to Exhibit 10(r) of the company's
          Quarterly  Report on Form 10-Q for the  quarter  ended June 30,  2003,
          filed on August 14, 2003.

10(ci)    Secured  Convertible  Note in principal amount of $450,000 dated April
          21, 2003 issued by the company to Carole Salkind,  incorporated herein
          by reference to Exhibit 10(n) of NCT's  Quarterly  Report on Form 10-Q
          for the quarter ended March 31, 2003, filed on May 15, 2003.

10(cj)(1) Subscription  Agreement  dated April 22, 2003  between the company and
          Alpha Capital Aktiengesellschaft, incorporated by reference to Exhibit
          10(u) of the company's  Quarterly  Report on Form 10-Q for the quarter
          ended June 30, 2003, filed on August 14, 2003.

10(cj)(2) Convertible  Note in the principal  amount of $235,000 dated April 22,
          2003 issued by NCT Group,  Inc. to Alpha  Capital  Aktiengesellschaft,
          incorporated by reference to Exhibit 10(t) of the company's  Quarterly
          Report on Form 10-Q for the  quarter  ended  June 30,  2003,  filed on
          August 14, 2003.

10(ck)    Secured Convertible Note in principal amount of $450,000 dated May 15,
          2003  issued  by  the  company  to  Carole  Salkind,  incorporated  by
          reference to Exhibit 10(v) of the company's  Quarterly  Report on Form
          10-Q for the quarter ended June 30, 2003, filed on August 14, 2003.

10(cl)    Secured  Convertible Note in principal  amount of $1,692,462.74  dated
          May 22, 2003 issued by the company to Carole Salkind,  incorporated by
          reference to Exhibit 10(w) of the company's  Quarterly  Report on Form
          10-Q for the quarter ended June 30, 2003, filed on August 14, 2003.

10(cm)    Secured Convertible Note in principal amount of $415,000 dated May 28,
          2003  issued  by  the  company  to  Carole  Salkind,  incorporated  by
          reference to Exhibit 10(y) of the company's  Quarterly  Report on Form
          10-Q for the quarter ended June 30, 2003, filed on August 14, 2003.

10(cn)    Secured  Convertible Note in principal  amount of $2,449,811.87  dated
          June 12, 2003 issued by the company to Carole Salkind, incorporated by
          reference to Exhibit 10(z) of the company's  Quarterly  Report on Form
          10-Q for the quarter ended June 30, 2003, filed on August 14, 2003.

10(co)    Consulting  Agreement  dated  June  12,  2003  between  NCT and  Maple
          Industries,  Inc.,  incorporated by reference to Exhibit 10(ab) of the
          company's Quarterly Report on Form 10-Q for the quarter ended June 30,
          2003, filed on August 14, 2003.

10(cp)    Secured  Convertible  Note in principal  amount of $435,000 dated June
          12,  2003  issued by the company to Carole  Salkind,  incorporated  by
          reference to Exhibit 10(aa) of the company's  Quarterly Report on Form
          10-Q for the quarter ended June 30, 2003, filed on August 14, 2003.

                                     II-24
<PAGE>


10(cq)    Secured  Convertible  Note in principal  amount of $410,000 dated June
          28,  2003  issued by the company to Carole  Salkind,  incorporated  by
          reference to Exhibit 10(ac) of the company's  Quarterly Report on Form
          10-Q for the quarter ended June 30, 2003, filed on August 14, 2003.

10(cr)    Consulting  Agreement  dated  July 2, 2003  between  the  company  and
          SpringerRun,  Inc., incorporated herein by reference to Exhibit 10(az)
          to NCT's Quarterly Report on Form 10-Q for the quarter ended September
          30, 2003, filed on November 19, 2003.

10(cs)    Secured  Convertible  Note in principal  amount of $410,000 dated July
          14,  2003  issued by the company to Carole  Salkind,  incorporated  by
          reference to Exhibit 10(ad) of the company's  Quarterly Report on Form
          10-Q for the quarter ended June 30, 2003, filed on August 14, 2003.

10(ct)    Secured Convertible Note in principal amount of $414,480.93 dated July
          14,  2003  issued by the company to Carole  Salkind,  incorporated  by
          reference to Exhibit 10(ae) of the company's  Quarterly Report on Form
          10-Q for the quarter ended June 30, 2003, filed on August 14, 2003.

10(cu)    Amendment  dated July 14,  2003 to Acme  Associates,  Inc.  Consulting
          Agreement, incorporated herein by reference to Exhibit 10(cr) to NCT's
          Pre-Effective  Amendment No. 8 to  Registration  Statement on Form S-1
          (Registration No. 333-60574), filed on September 16, 2003.

10(cv)    Secured Convertible Note in principal amount of $414,750.19 dated July
          28,  2003  issued by the company to Carole  Salkind,  incorporated  by
          reference to Exhibit 10(ag) of the company's  Quarterly Report on Form
          10-Q for the quarter ended June 30, 2003, filed on August 14, 2003.

10(cw)    Secured  Convertible  Note in principal  amount of $410,000 dated July
          28,  2003  issued by the company to Carole  Salkind,  incorporated  by
          reference to Exhibit 10(af) of the company's  Quarterly Report on Form
          10-Q for the quarter ended June 30, 2003, filed on August 14, 2003.

10(cx)    Secured  Convertible  Note in principal  amount of  $622,529.18  dated
          August 7, 2003 issued by the company to Carole  Salkind,  incorporated
          herein by reference to Exhibit 10(cu) to NCT's Pre-Effective Amendment
          No.  8  to  Registration  Statement  on  Form  S-1  (Registration  No.
          333-60574), filed on September 16, 2003.

10(cy)    Secured  Convertible Note in principal amount of $425,000 dated August
          18, 2003 issued by the company to Carole Salkind,  incorporated herein
          by reference to Exhibit 10(cv) to NCT's Pre-Effective  Amendment No. 8
          to Registration  Statement on Form S-1 (Registration  No.  333-60574),
          filed on September 16, 2003.

10(cz)    Secured  Convertible  Note in principal  amount of  $414,884.82  dated
          August 28, 2003 issued by the company to Carole Salkind,  incorporated
          herein by reference to Exhibit 10(cw) to NCT's Pre-Effective Amendment
          No.  8  to  Registration  Statement  on  Form  S-1  (Registration  No.
          333-60574), filed on September 16, 2003.

10(da)    Secured  Convertible Note in principal amount of $375,000 dated August
          28, 2003 issued by the company to Carole Salkind,  incorporated herein
          by reference to Exhibit 10(cx) to NCT's Pre-Effective  Amendment No. 8
          to Registration  Statement on Form S-1 (Registration  No.  333-60574),
          filed on September 16, 2003.

10(db)    Reseller  Agreement dated September 1, 2003 between Artera Group, Inc.
          and Spyder Technologies  Group, LLC,  incorporated herein by reference
          to Exhibit 10(ao) of the company's  Quarterly  Report on Form 10-Q for
          the quarter ended September 30, 2003, filed on November 19, 2003.

                                     II-25
<PAGE>


10(dc)    Master  Distributor  Agreement  dated September 1, 2003 between Artera
          Group, Inc. and Spyder Technologies Group, LLC, incorporated herein by
          reference to Exhibit 10(ap) of the company's  Quarterly Report on Form
          10-Q for the quarter ended  September 30, 2003,  filed on November 19,
          2003.

10(dd)    Amendments  dated September 11, 2003,  October 3, 2003 and October 14,
          2003 to  Consulting  Agreement  dated  September  30, 2002 between the
          company and Acme Associates, Inc., incorporated herein by reference to
          Exhibit 10(aq) of the company's  Quarterly Report on Form 10-Q for the
          quarter ended September 30, 2003, filed on November 19, 2003.

10(de)    Secured  Convertible  Note in principal  amount of  $580,650.27  dated
          September   11,  2003  issued  by  the  company  to  Carole   Salkind,
          incorporated  herein by reference to Exhibit  10(ar) of the  company's
          Quarterly  Report on Form 10-Q for the  quarter  ended  September  30,
          2003, filed on November 19, 2003.

10(df)    Secured  Convertible  Note in principal  amount of  $400,000.00  dated
          September   12,  2003  issued  by  the  company  to  Carole   Salkind,
          incorporated  herein by reference to Exhibit  10(as) of the  company's
          Quarterly  Report on Form 10-Q for the  quarter  ended  September  30,
          2003, filed on November 19, 2003.

10(dg)    Secured  Convertible  Note in principal  amount of  $816,096.49  dated
          October 2, 2003 issued by the company to Carole Salkind,  incorporated
          herein by  reference  to  Exhibit  10(at) of the  company's  Quarterly
          Report on Form 10-Q for the quarter ended September 30, 2003, filed on
          November 19, 2003.

10(dh)    Secured  Convertible Note in principal  amount of $4,469,018.84  dated
          October 14, 2003 issued by the company to Carole Salkind, incorporated
          herein by  reference  to  Exhibit  10(au) of the  company's  Quarterly
          Report on Form 10-Q for the quarter ended September 30, 2003, filed on
          November 19, 2003.

10(di)    Secured  Convertible  Note in principal  amount of  $400,000.00  dated
          October 14, 2003 issued by the company to Carole Salkind, incorporated
          herein by  reference  to  Exhibit  10(av) of the  company's  Quarterly
          Report on Form 10-Q for the quarter ended September 30, 2003, filed on
          November 19, 2003.

10(dj)    Secured  Convertible  Note in principal  amount of  $400,000.00  dated
          November 3, 2003 issued by the company to Carole Salkind, incorporated
          herein by  reference  to  Exhibit  10(aw) of the  company's  Quarterly
          Report on Form 10-Q for the quarter ended September 30, 2003, filed on
          November 19, 2003.

10(dk)    Amendment  dated  November  3,  2003  to  Consulting  Agreement  dated
          September  30, 2002  between the  company and Acme  Associates,  Inc.,
          incorporated  herein by reference to Exhibit  10(ax) of the  company's
          Quarterly  Report on Form 10-Q for the  quarter  ended  September  30,
          2003, filed on November 19, 2003.

10(dl)    Master  Distributor  Agreement  dated  October 1, 2003 between  Artera
          Group, Inc. and Spyder Technologies Group, LLC, incorporated herein by
          reference to Exhibit 10(dl) to NCT's Pre-Effective  Amendment No. 9 to
          Registration Statement on Form S-1 (Registration No. 333-60574), filed
          on February 4, 2004.

10(dm)    Master  Distributor  Agreement  dated  November 1, 2003 between Artera
          Group,  Inc. and FairPoint  Broadband,  Inc.,  incorporated  herein by
          reference to Exhibit 10(dm) to NCT's Pre-Effective  Amendment No. 9 to
          Registration Statement on Form S-1 (Registration No. 333-60574), filed
          on February 4, 2004.

                                     II-26
<PAGE>


10(dn)    Secured  Convertible  Note in principal  amount of  $474,154.08  dated
          November 21, 2003 issued by the company to Carole Salkind.

10(do)    Secured  Convertible  Note in principal  amount of  $425,000.00  dated
          November 21, 2003 issued by the company to Carole Salkind.

10(dp)    Amendment  dated  November  21,  2003 to  Consulting  Agreement  dated
          September 30, 2002 between the company and Acme Associates, Inc.

10(dq)    Secured  Convertible  Note in principal  amount of  $400,000.00  dated
          November 22, 2003 issued by the company to Carole Salkind.

10(dr)    Secured  Convertible Note in principal  amount of $3,828,984.72  dated
          December 15, 2003 issued by the company to Carole Salkind.

10(ds)    Secured  Convertible  Note in principal  amount of  $400,000.00  dated
          December 15, 2003 issued by the company to Carole Salkind.

10(dt)    Amendment  dated  December  17,  2003 to  Consulting  Agreement  dated
          September 30, 2002 between the company and Acme Associates, Inc.

10(du)    Secured  Convertible Note in principal  amount of $7,479,384.54  dated
          December 31, 2003 issued by the company to Carole Salkind.

10(dv)    Secured  Convertible  Note in principal  amount of  $785,000.00  dated
          December 31, 2003 issued by the company to Carole Salkind.

10(dw)    Note  Consolidation  Agreement  dated  December 31, 2003,  between the
          company and Carole Salkind.

10(dx)    Secured  Convertible  Demand Note in principal amount of $3,050,000.00
          dated December 31, 2003 issued by the company to Carole Salkind.

10(dy)    Secured  Convertible  Demand Note in principal  amount of  $425,000.00
          dated February 13, 2004 issued by the company to Carole Salkind.

14        Code of Ethics

16        Change  in   certifying   accountants,   dated   February   12,  2002,
          incorporated  herein by reference to the company's  Current  Report on
          Form 8-K filed on February 14, 2002.

21        Subsidiaries, as of December 31, 2003.

23(a)     Consent of Eisner LLP.

31(a)     Certification  of Chief Executive  Officer  pursuant to Section 302 of
          the Sarbanes-Oxley Act of 2002 for the quarterly period ended June 30,
          2003,  incorporated  herein  by  reference  to  Exhibit  31(a)  of the
          company's Quarterly Report on Form 10-Q for the quarter ended June 30,
          2003 filed on August 14, 2003.

31(b)     Certification  of Chief Financial  Officer  pursuant to Section 302 of
          the Sarbanes-Oxley Act of 2002 for the quarterly period ended June 30,
          2003,  incorporated  herein  by  reference  to  Exhibit  31(b)  of the
          company's Quarterly Report on Form 10-Q for the quarter ended June 30,
          2003 filed on August 14, 2003.

                                     II-27
<PAGE>


31(c)     Certification  of Chief Executive  Officer  pursuant to Section 302 of
          the  Sarbanes-Oxley  Act  of  2002  for  the  quarterly  period  ended
          September 30, 2003,  incorporated herein by reference to Exhibit 32(c)
          of the company's  Quarterly  Report on Form 10-Q for the quarter ended
          September 30, 2003, filed on November 19, 2003.

31(d)     Certification  of Chief Financial  Officer  pursuant to Section 302 of
          the  Sarbanes-Oxley  Act  of  2002  for  the  quarterly  period  ended
          September 30, 2003,  incorporated herein by reference to Exhibit 32(c)
          of the company's  Quarterly  Report on Form 10-Q for the quarter ended
          September 30, 2003, filed on November 19, 2003.

31(e)     Certification  of Chief Executive  Officer  pursuant to Section 302 of
          the  Sarbanes-Oxley  Act of 2002 for the annual period ended  December
          31, 2003.

31(f)     Certification  of Chief Financial  Officer  pursuant to Section 302 of
          the  Sarbanes-Oxley  Act of 2002 for the annual period ended  December
          31, 2003.

32(a)     Certification  of Form 10-Q for the  quarterly  period ended March 31,
          2003  pursuant  to 18 U.S.C.  Section  1350,  as adopted  pursuant  to
          Section 906 of the Sarbanes-Oxley Act of 2002,  incorporated herein by
          reference to Exhibit 99(a) of the company's  Quarterly  Report on Form
          10-Q for the quarter ended March 31, 2003 filed on May 15, 2003.

32(b)     Certification  of Form 10-Q for the  quarterly  period  ended June 30,
          2003  pursuant  to 18 U.S.C.  Section  1350,  as adopted  pursuant  to
          Section 906 of the Sarbanes-Oxley Act of 2002,  incorporated herein by
          reference to Exhibit 32(b) of the company's  Quarterly  Report on Form
          10-Q for the quarter ended June 30, 2003 filed on August 14, 2003.

32(c)     Certification  of Form 10-Q for the quarterly  period ended  September
          30, 2003 pursuant to 18 U.S.C.  Section  1350, as adopted  pursuant to
          Section 906 of the Sarbanes-Oxley Act of 2002,  incorporated herein by
          reference to Exhibit 32(c) of the company's  Quarterly  Report on Form
          10-Q for the quarter ended  September 30, 2003,  filed on November 19,
          2003.

32(d)     Certification  of Form 10-K for the annual  period ended  December 31,
          2003  pursuant  to 18 U.S.C.  Section  1350,  as adopted  pursuant  to
          Section 906 of the Sarbanes-Oxley Act of 2002.

99(a)     Employment  Agreement  by and between NCT Midcore,  Inc.  (now Midcore
          Software,  Inc.) and  Jerrold  Metcoff,  dated as of August 29,  2000,
          incorporated  by reference to the Quarterly  Report filed on Form 10-Q
          for the quarter ended June 30, 2001, filed on August 15, 2001.

99(b)     Employment  Agreement  by and between NCT Midcore,  Inc.  (now Midcore
          Software,  Inc.)  and  David  Wilson,  dated as of  August  29,  2000,
          incorporated  by reference to the Quarterly  Report filed on Form 10-Q
          for the quarter ended June 30, 2001, filed on August 15, 2001.

99(c)     Employment Agreement by and between Midcore Software Limited and Barry
          Marshall-Johnson,  dated  as  of  August  29,  2000,  incorporated  by
          reference to the  Quarterly  Report filed on Form 10-Q for the quarter
          ended June 30, 2001, filed on August 15, 2001.

99(d)     Employment  termination agreement between NCT Group, Inc. and James A.
          McManus dated November 27, 2001,  incorporated  herein by reference to
          Exhibit 99(d) of NCT's  Pre-effective  Amendment No. 6 to Registration
          Statement on Form S-1 (Registration No. 333-60574),  filed on November
          4, 2002.


-----------------------
*         Pertains to a management contract or compensation plan or arrangement.


                                     II-28