SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                   FORM 10-K/A

AMENDMENT NO. 2 TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED                 DECEMBER 31, 1996

Commission File Number:                   0-18267

Noise Cancellation Technologies, Inc.
(Exact name of registrant as specified 
in its charter)

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

1025 West Nursery Road, Linthicum, MD     21090
(Address of principal executive office)   (Zip Code)

(410) 636-8700
(Registrant's telephone number, including area code)




<PAGE>


ITEM 11.    EXECUTIVE COMPENSATION

   Set forth  below is certain  information  for the three  fiscal  years  ended
December  31,  1996,  1995 and 1994  relating  to  compensation  received by the
Company's  Chief  Executive  Officer and all  executive  officers of the Company
other  than the Chief  Executive  Officer  (collectively  the  "Named  Executive
Officers")  whose  total  annual  salary  and bonus for the  fiscal  year  ended
December 31, 1996, exceeded $100,000 for services rendered in all capacities.
<TABLE>
<CAPTION>

                           SUMMARY COMPENSATION TABLE

                                                    
                                                             Other             Restricted     Options    
                                                             Annual            Stock          Warrants        All Other 
Name and Position       Year   Salary($)      Bonus($)       Compensation      Awards         SARS(#)         Compensation
-----------------       ----   --------       --------       ------------      ----------     --------        ------------
<S>                     <C>    <C>            <C>            <C>               <C>            <C>             <C>

Jay M. Haft             1996   $ 64,000 (1)   $     -        $        -        $        -      200,000        $          -  
Chairman (1)            1995    110,000             -                 -                 -      937,000 (2)(8)            -
                        1994     30,000             -                 -             8,750 (3)  165,000                   -
 
Michael J. Parrella     1996    120,000       106,885            15,348                 -      475,000               5,218 (5)
President (1)           1995     90,833        47,168             6,395                 -    1,622,000 (4)(8)            -
                        1994    195,000             -             9,458                 -       75,000               3,858 (5)

Stephen J. Fogarty      1996    105,833             -                 -                 -            -                   -
Senior Vice President;  1995    104,434        10,083                 -                 -      391,400 (6)(8)            -
Chief Financial Officer 1994    110,000             -                 -                 -            -                   -

Irene Lebovics          1996    105,000             -                 -                 -            -                   -
Senior Vice President;  1995     88,000             -                 -                 -      533,850 (7)(8)            -
President, NCT Hearing  1994    107,250             -                 -                 -            -                   -
Products

Jeffrey Zeitlin         1996    110,000             -                 -                 -      275,000                   -
Senior Vice President   1995          -             -                 -                 -            -                   -
Operations              1994          -             -                 -                 -            -                   -
----------------
</TABLE>

(1)Mr. Haft was  elected  Chairman  of the Board and  relinquished  the title of
   Chief Executive Officer on July 17, 1996. Prior thereto,  and from November
   15, 1994, Mr. Haft served as  Co-Chairman of the Board and Chief  Executive
   Officer.  Mr. Haft also served as President from November 15, 1994, to July
   6, 1995, when Mr. Parrella, who had served as Executive Vice President from
   November 15, 1994, to July 6, 1995, was elected  President.  Mr.  Parrella  
   also had served as President until November 15, 1994.

(2)Excludes  options and warrants to purchase  585,000  shares of the  Company's
   common stock forfeited under the "Exchange Program" described in footnote (8)
   below, and other activity for a net new grant of 402,000 options and warrants
   all of which were exercisable at December 31, 1996.

(3)Consists of 5,000 restricted  shares of the Company's common stock granted to
   Mr. Haft on May 11, 1994 pursuant to the Company's  Stock Incentive Plan (the
   "Incentive  Plan") valued at $1.75 per share,  the market price of the common
   stock on that date. As of December 31, 1996, Mr. Haft held 10,000  restricted
   shares of common  stock which were worth  $4,060 based on the market price of
   the common stock on that date.

(4)Excludes  options and warrants to purchase  1,385,000 shares of the Company's
   common stock forfeited under the "Exchange Program" described in footnote (8)
   below, and other activity for a net new grant of 237,000 options and warrants
   all of which were exercisable at December 31, 1996.

(5)Consists of the annual  premiums  for a $2 million  personal  life  insurance
   policy paid by the Company on behalf of Mr. Parrella.

(6)Excludes  options to purchase  316,400  shares of the Company's  common stock
   forfeited under the "Exchange  Program"  described in footnote (8) below, and
   other activity for a net new grant of 75,000 all of which are  exercisable at
   December 31, 1996.

 (7) Excludes  options and warrants to purchase  507,600 shares of the Company's
   common stock forfeited under the "Exchange Program" described in footnote (8)
   below,  and other  activity  for a net new  grant of 26,250  all of which are
   exercisable at December 31, 1996.

(8)On  November  8,  1995,  the  Company  received  an  offer  from  a  Canadian
   institutional  investor to purchase  4,800,000 shares of the Company's common
   stock at a price of $0.75 per share,  the fair market value of such shares on
   that date. At that time virtually all of the Company's  authorized capital of
   100,000,000 shares of common stock was issued and outstanding or reserved for
   issuance  upon the exercise of  outstanding  warrants and options to purchase
   common stock of the Company.  Therefore,  in order to make sufficient  shares
   available  to effect  the sale of  4,800,000  shares of common  stock to such
   investor,  the Company  adopted a program  (the  "Exchange  Program"),  to be
   partially  implemented  through the Incentive  Plan and the Company's  Option
   Plan for Certain  Directors (the "Directors Plan") and partially outside such
   plans, under which all directors,  officers,  certain active consultants (all
   of whom were former  directors  or officers of the  Company)  and all current
   employees  were given the right to  exchange  presently  owned  warrants  and
   options  that had shares of common stock  reserved  for  issuance  upon their
   exercise  (respectively,  "Old  Warrants" and "Old Options") for new warrants
   and options which  initially,  and until the requisite  corporate  action was
   taken to  increase  the  authorized  capital of the  Company  and reserve the
   required  number of shares of common stock for issuance upon their  exercise,
   would not have any shares of common stock  reserved  for issuance  upon their
   exercise (respectively, "New Warrants" and "New Options"). The exercise price
   of the New Warrants and New Options was  established at $0.75 per share,  the
   fair market value of the Company's common stock on November 8, 1995, the date
   the Exchange Program was adopted,  and exchanges were to be effected starting
   with the Old Warrants and Old Options having the highest  exercise prices and
   proceeding in descending order of exercise prices until sufficient  shares of
   common stock became available for the Company to implement the sale of common
   stock to the Canadian  investor.  If possible,  no exchanges  were to be made
   which would  involve Old  Warrants  or Old Options  having an exercise  price
   below $0.75 per share,  and, in fact, no such exchanges  were  required.  The
   exercise  prices  of the Old  Warrants  and  Old  Options  exchanged  for New
   Warrants  and New Options  ranged from a high of $5.09 per share to $0.75 per
   share.

      The  consideration  to  the  participants  in  the  Exchange  Program  for
   exchanging  Old  Warrants  and Old Options that had shares of common stock of
   the Company  reserved for  issuance  upon their  exercise at exercise  prices
   above $0.75 per share for New  Warrants and New Options  initially  having no
   shares  reserved for issuance  upon their  exercise was the  reduction in the
   exercise  price.  With  respect to Old  Warrants  and Old  Options  having an
   exercise  price of $0.75 per share that were  exchanged  for New Warrants and
   New  Options  that did not have  shares  reserved  for  issuance  upon  their
   exercise,  such  consideration  was  provided by a provision  in the Exchange
   Program  that  granted the holders of such Old  Warrants  and Old Options New
   Warrants  and New  Options  having the right to  purchase  115% of the shares
   available  for purchase upon the exercise of the Old Warrants and Old Options
   exchanged.

      The New  Warrants and New Options  became fully vested upon the  surrender
   and  forfeiture  of Old Warrants and Old Options to purchase a  corresponding
   number of shares (as adjusted in accordance with the foregoing formula in the
   case of those  having a $0.75 per share  exercise  price).  However,  the New
   Warrants and New Options would not become  exercisable until: (i) approval by
   the  Company's   stockholders   of  an  amendment  to  the   Certificate   of
   Incorporation  increasing the  authorized  capital by an amount of additional
   shares of common  stock at least  sufficient  to provide the number of shares
   needed to be reserved  to permit the  exercise  of all New  Warrants  and New
   Options,  and (ii) the completion of such further  corporate action including
   amendments to the Incentive Plan and the Directors Plan that may be necessary
   or appropriate in connection with the implementation of the Exchange Program.
   Such  stockholder  approval and further  corporate  action were  obtained and
   completed on July 17, 1996, and August 14, 1996, respectively. The expiration
   dates of the New  Warrants  and New  Options  are the same as the  expiration
   dates of the Old  Warrants  and Old  Options  exchanged  except  that if such
   expiration  date occurred  prior to the date on which the New Warrants or New
   Options become exercisable,  the expiration date for such New Warrants or New
   Options  would be  ninety  (90)  days  following  the date on which  such New
   Warrants and New Options become exercisable. In all other respects, the terms
   and  conditions of the New Warrants and New Options are the same as the terms
   and conditions of the Old Warrants and Old Options exchanged.

      Under the Exchange Program, 4,800,249 shares of the Company's common stock
   were made available for issuance to the Canadian  institutional  investor and
   it was  necessary  in order to make the New  Warrants  and New Options  fully
   exercisable  for the  Company  to take the  appropriate  corporate  action to
   reserve  5,055,499  shares of the  Company's  common stock for issuance  upon
   their  exercise  which action was  completed  following  the above  described
   increase in the Company's authorized capital.

<PAGE>
Stock Options and Warrants

   The following tables summarize the Named Executive Officers' stock option and
warrant activity during 1996.

<TABLE>
<CAPTION>

                     Options and Warrants Granted in 1996

                                                    
                                       Percent                        
                                       of Total                                  
                                       Options                                   
                                       and                                        Potential Realized Value at 
                          Shares       Warrants                                   Assumed Annual Rates of
                          Underlying   Warrants     Exercise                      Stock Price Appreciation for
                          Options      Granted to   Price                         Option and Warrant Term  (4)
                                       Employees    Per           Expiration      ----------------------------
    Name                  Granted      in 1996      Share         Date                  5%            10%
    ----                  -------      ----------   --------      ----------      -------------   ------------
<S>                       <C>          <C>          <C>           <C>             <C>             <C>
Jay M. Haft  (1)          200,000        11.7%     $0.6563        1/22/03         $   53,436      $  124,529
Michael J. Parrella  (2)  475,000        27.8%      0.6563        1/22/03            126,911         295,755
Jeffrey Zeitlin  (3)      275,000        16.1%      0.6563        1/23/03             73,475         171,227
--------------
</TABLE>

(1)Options to purchase  200,000 shares granted to Mr. Haft were granted pursuant
   to the Incentive Plan and are fully vested.

(2)Options to purchase  475,000  shares  granted to Mr.  Parrella  were  granted
   pursuant to the Incentive Plan and are fully vested.

(3)Options to  purchase  275,000  shares  granted to Mr.  Zeitlin  were  granted
   pursuant to the Incentive Plan and are fully vested.

(4)The dollar amounts under these columns are the result of  calculations at the
   5% and 10% rates  required  by the SEC and,  therefore,  are not  intended to
   forecast possible future appreciation if any, of the stock price.



<PAGE>


<TABLE>
<CAPTION>

                1996 Aggregated Options and Warrant Exercises and
                   December 31, 1996 Option and Warrant Values

                                                           Number of Shares
                                                           Underlying                         Value of Unexercised
                                                           Unexercised Options                In-the-Money Options
                      Number of                            and Warrants at                    and Warrants at
                      Shares                               December 31,1996                   December 31, 1996
                      Acquired        Value            -----------------------------      -----------------------------
    Name              on Exercise     Realized         Exercisable     Unexercisable      Exercisable     Unexercisable
-------------------   -----------     --------         -----------     -------------      -----------     -------------
<S>                   <C>             <C>              <C>             <C>                <C>             <C>
Jay M. Haft                -          $     -           1,207,000              -            $    -           $    -
Michael J. Parrella        -                -           2,736,456              -             2,697                -
Stephen J. Fogarty         -                -             233,200              -                 -                -
Irene Lebovics             -                -             492,550              -                 -                -
Jeffrey Zeitlin            -                -             275,000              -                 -                -

</TABLE>


Compensation Arrangements with Certain Officers and Directors

   On February  1, 1996,  the  Compensation  Committee  awarded Mr.  Parrella an
incentive  bonus  equal  to 1% of the  cash  received  by the  Company  upon the
execution of the agreement or other documentation  evidencing  transactions with
unaffiliated  parties (other than certain parties involved in transactions  then
in negotiation) or otherwise  received at the closing of said transactions which
occur subsequent to January 1, 1996.

   On July  11,  1995,  in order to  enable  the  Company  to  obtain  1,100,000
authorized  but  unissued  shares of common  stock to sell to an  investor  in a
private placement to raise additional  working capital,  Mr. Parrella  forfeited
options to purchase  500,000 shares of the Company's  common stock.  Three other
directors,  Messrs.  Haft,  McCloy and Oolie, also forfeited options to purchase
respectively 50,000; 500,000 and 50,000 shares of the Company's common stock for
the same  reason.  In  recognition  of the on-going  efforts of Mr.  Parrella on
behalf  of the  Company  and the  fact  that  his  cash  compensation  had  been
significantly  reduced  the prior year,  the Company  agreed that if the private
placement was  successfully  concluded and Mr.  Parrella  agreed to work for the
Company  through  1996  (without  any  obligation  on the part of the Company to
employ him for any given  period),  Mr.  Parrella  would be  granted  options to
purchase  500,000  shares of common  stock  under the  Incentive  Plan.  Of this
amount,  250,000  options would become vested and exercisable  immediately.  The
other 250,000 options would become vested and exercisable either on December 31,
1996  provided Mr.  Parrella was employed by the Company on that date or on such
earlier date if the price of the Company's  common stock as traded on the NASDAQ
Stock Market had maintained a price of $1.25 per share or above for the previous
45 days. On December 12, 1995 the Option Committee  granted Mr. Parrella options
to purchase  500,000  shares of common stock subject to the foregoing  terms and
conditions.  The exercise  price of such options is $0.6563 per share,  the fair
market value of the Company's common stock on the date of grant.


                COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

   In October 1990, the Company's Board of Directors  authorized the issuance of
warrants to acquire  420,000  shares of common stock to each of Messrs.  McCloy,
Parrella and Oolie and Ms. Lebovics,  exercisable through September 30, 1994, at
$.375 per share,  being the market  price of the  Company's  common stock on the
date of such  authorization,  based upon each such person's commitment to extend
his or her personal  guarantee  on a joint and several  basis with the others in
support  of  the  Company's  attempt  to  secure  bank  or  other  institutional
financing,  the amount of which to be covered by the guarantee  would not exceed
$350,000.  No firm  commitment  for any such  financing  has been secured by the
Company and at present no such financing is being sought.  However, each of such
persons'  commitment  to  furnish  said  guarantee  continues  in full force and
effect.

   In 1989, the Company established a joint venture with Environmental  Research
Information, Inc., ("ERI") to jointly develop, manufacture and sell (i) products
intended  for  use  solely  in  the  process  of  electric   power   generation,
transmission and distribution and which reduce noise and/or vibration  resulting
from such process, (ii) personal quieting products sold directly to the electric
utility industry and (iii) products that reduce noise and/or vibration emanating
from fans and fan systems (collectively,  "Power and Fan Products"). In 1991, in
connection with the termination of this joint venture, the Company agreed, among
other things,  during the period ending  February  1996, to make payments to ERI
equal to (i) 4.5% of the  Company's  sales of Power  and Fan  Products  and (ii)
23.75% of fees derived by the Company from its license of Power and Fan Products
technology,  subject to an overall  maximum of $4,500,000.  Michael J. Parrella,
President  of  the  Company,  was  Chairman  of  ERI at the  time  of  both  the
establishment and termination of the joint venture and owns approximately 12% of
the outstanding capital of ERI. In addition, Jay M. Haft, Co-Chairman, and Chief
Executive Officer of the Company,  shares investment  control over an additional
24% of the outstanding  capital of ERI. The Company believes that the respective
terms  of  both  the  establishment  of the  joint  venture  with  ERI  and  its
termination  were comparable to those that could have been negotiated with other
persons or entities. During the fiscal year ended December 31, 1996, the Company
was not required to make any such payments to ERI under these agreements.

   In 1993, the Company entered into three Marketing  Agreements with QuietPower
Systems,  Inc.  ("QSI")  (until  March 2, 1994,  "Active  Acoustical  Solutions,
Inc."),  a company which is 33% owned by ERI and 2% owned by Mr. Haft. Under the
terms of one of these Marketing  Agreements,  QSI has undertaken to use its best
efforts to seek research and  development  funding for the Company from electric
and natural gas utilities for applications of the Company's  technology to their
industries.  In exchange for this undertaking,  the Company has issued a warrant
to QSI to purchase  750,000 shares of Common Stock at $3.00 per share.  The last
sale price for the Common Stock reported on the NASDAQ National Market System on
May 15, 1993,  the date of the  Marketing  Agreement,  was $2.9375.  The warrant
becomes  exercisable  as to  specific  portions of the total  750,000  shares of
Common Stock upon the occurrence of defined events  relating to QSI's efforts to
obtain such funding for the Company. When such defined events occur, the Company
will  record a charge  for the  amount by which the  market  price of the Common
Stock on such  date  exceeds  $3.00  per  share,  if any.  The  warrant  remains
exercisable  as to each such portion from the  occurrence  of the defined  event
through  October 13,  1998.  As of December  31,  1994,  contingencies  had been
removed  against  525,000  warrants  resulting  in a  1993  non-cash  charge  of
$120,250.  This Marketing  Agreement also grants to QSI a non-exclusive right to
market the  Company's  products that are or will be designed and sold for use in
or with equipment used by electric and/or natural gas utilities for non-retrofit
applications in North America.  QSI is entitled to receive a sales commission on
any sales to a customer of such  products for which QSI is a procuring  cause in
obtaining  the first order from such  customer.  In the case of sales to utility
company customers, the commission is 6% of the revenues received by the Company.
On sales to original equipment manufacturers for utilities, the commission is 6%
on the gross  revenue NCT  receives on such sales from the customer in the first
year, 4% in the second year, 2% in the third year and 1% in the fourth year, and
 .5% in any future years after the fourth year. QSI is also entitled to receive a
5% commission on any research and development funding it obtains for NCT, and on
any license  fees it obtains for the Company  from the license of the  Company's
technology.  The  initial  term of  this  Agreement  is  three  years  renewable
automatically  thereafter on a  year-to-year  basis unless a party elects not to
renew.

   Under the  terms of the  second of the  three  Marketing  Agreements,  QSI is
granted a non-exclusive  right to market the Company's products that are or will
be  designed  and sold for use in or with  feeder  bowls  throughout  the world,
excluding Scandinavia and Italy. Under this Marketing Agreement, QSI is entitled
to  receive  commissions  similar  to those  payable  to end  user and  original
equipment  manufacturer  customers  described  above.  QSI is also  entitled  to
receive  the same 5%  commission  described  above on research  and  development
funding and  technology  licenses which it obtains for the Company in the feeder
bowl area.  The initial  term of this  Marketing  Agreement  is three years with
subsequent automatic one-year renewals unless a party elects not to renew.

   Under the terms of the third Marketing Agreement, QSI is granted an exclusive
right to market the Company's products that are or will be designed and sold for
use in or with  equipment  used by electric  and/or  natural gas  utilities  for
retrofit  applications  in North  America.  QSI is  entitled  to receive a sales
commission  on any sales to a customer of such  products  equal to 129% of QSI's
marketing  expenses  attributable  to the marketing of the products in question,
which expenses are to be deemed to be the lesser of QSI's actual expenses or 35%
of the revenues  received by the Company from the sale of such products.  QSI is
also  entitled to receive a 5% commission  on research and  development  funding
similar  to  that  described  above.  QSI's  exclusive  rights  continue  for an
indefinite  term  provided it meets  certain  performance  criteria  relating to
marketing efforts during the first two years following  product  availability in
commercial  quantity and minimum levels of product sales in subsequent years. In
the event QSI's rights  become  non-exclusive,  depending  on the  circumstances
causing  such change,  the initial term then becomes  either three or five years
from the date of this Marketing  Agreement,  with subsequent  one-year automatic
renewals in each instance  unless  either party elects not to renew.  During the
fiscal year ended  December  31,  1996,  the Company was not required to pay any
commissions to QSI under any of these Marketing Agreements.

   The Company has also  entered into a Teaming  Agreement  with QSI under which
each  party  agrees  to  be  responsible  for  certain  activities  relating  to
transformer  quieting system development  projects to be undertaken with utility
companies.  Under this Teaming Agreement,  QSI is entitled to receive 19% of the
amounts to be received from participating  utilities and the Company is entitled
to receive 81%. During the fiscal year ended December 31, 1996, the Company made
no payments to QSI for project management services.

   In March 1995,  the Company  entered into a Master  Agreement  with QSI under
which QSI was granted an exclusive  worldwide  license under certain NCT patents
and technical  information to market, sell and distribute  transformer  quieting
products,  turbine  quieting  products and certain other products in the utility
industry. Under the Master Agreement, QSI is to fund development of the products
by the Company and the Company is to manufacture the products.  However, QSI may
obtain the right to manufacture the products under certain circumstances include
NCT's  failure to develop the products or the failure of the parties to agree on
certain  development  matters.  In consideration of the rights granted under the
Master  Agreement,  QSI is to pay  the  Company  a  royalty  of 6% of the  gross
revenues  received  from the sale of the products and 50% of the gross  revenues
received from  sublicensing the rights granted to QSI under the Master Agreement
after QSI has recouped 150% of the costs  incurred by QSI in the  development of
the products in question.  The Company is obligated to pay similar  royalties to
QSI on its sale of the products and the  licensing of rights  covered  under the
Master  Agreement  outside the  utility  industry  and from sales and  licensing
within the  utility  industry  in the Far East.  In  addition  to the  foregoing
royalties, QSI is to pay an exclusivity fee to the Company of $750,000; $250,000
of which QSI paid to the  Company in June 1994.  The balance is payable in equal
monthly  installments of $16,667 beginning in April 1995. QSI's exclusive rights
become  non-exclusive  with  respect  to all  products  if it  fails  to pay any
installment  of the  exclusivity  fee when due and QSI loses  such  rights  with
respect  to any  given  product  in the  event it fails to make any  development
funding payment applicable to that product.  The Master Agreement supersedes all
other agreements  relating to the products  covered under the Master  Agreement,
including those agreements between the Company and QSI described above.

   Immediately following the execution to the Master Agreement,  the Company and
QSI entered into a letter agreement  providing for the termination of the Master
Agreement at the Company's election if QSI did not pay approximately $500,000 in
payables then owed to the Company by May 15, 1995.

   In April 1995,  the Company and QSI entered  into  another  letter  agreement
under  which QSI  agreed to  forfeit  and  surrender  the five year  warrant  to
purchase  750,000  shares of the Company's  common stock issued to QSI under the
first Marketing Agreement described above. In addition,  the $500,000 balance of
the  exclusivity  fee  provided  for under the Master  Agreement  was reduced to
$250,000 to be paid in 30 monthly installments of $8,333 each and the payment of
the  indebtedness  to be  paid  under  the  letter  agreement  described  in the
preceding  paragraph  was revised to be the earlier of May 15, 1996, or the date
of closing of a financing of QSI in an amount exceeding $1.5 million,  whichever
first occurs.  Such  indebtedness  is to be evidenced by a promissory  note, non
payment  of which is to  constitute  an event of  termination  under the  Master
Agreement.

   On May 21, 1996,  the Company and QSI entered into another  letter  agreement
extending the time by which the payments from QSI to the Company under the April
1995  letter  agreement  described  above were to be made.  Under the letter the
payment of certain  arrearages in the payment of the  exclusivity  fee was to be
made not later than June 15, 1996, with the balance  continuing to be payable by
monthly payments of $8,333 and as provided in the May 1995 letter agreement.  In
addition the payment of the other indebtedness owed by QSI to the Company was to
be paid by a payment  of $25,000 at the time QSI  obtained  certain  anticipated
financing with the balance paid by monthly payments of $15,000 each.  Default in
QSI's timely payment of any of the amounts  specified in the May 21, 1996 letter
agreement was to cause the immediate termination of the Master Agreement and all
rights granted to QSI thereunder.

   On April 9, 1997, the Company and QSI entered into another  letter  agreement
revising  the payment  schedule  set forth in the May 21, 1996 letter  agreement
applicable to the payment of the  indebtedness  owed to the Company by QSI other
than the unpaid portion of the exclusivity fee. Under the revised schedule,  the
full amount of such indebtedness is to be paid by an initial payment of $125,000
on or before April 21, 1997,  and a second  payment of $200,000 upon the closing
of a proposed  financing  in June 1997 or on January  1, 1998,  whichever  first
occurs.  The  Company is also  entitled  to receive  15% of any other  financing
obtained  by QSI in the interim as well as interest at the rate of 10% per annum
on the  unpaid  amount  of such  indebtedness  from  July 1,  1997.  The  letter
agreement also provides for the continuation of QSI's payment of the exclusivity
fee in accordance  with the earlier letter  agreements as well as the payment of
$11,108 by April 21, 1997,  for headset  products  sold by the Company to QSI in
1996.  In the event of a default in QSI's  timely  payment of any of the amounts
specified  in the April 9, 1997 letter  agreement,  the Company has the right to
cause the  termination  of the Master  Agreement  and all rights  granted by QSI
thereunder upon 10 days notice of termination to QSI.

   As of April 30, 1997, QSI has paid all  installments  due and payable for the
exclusivity fee and, other than as described above, owes no other amounts to the
Company.

   The Company believes that the terms of its agreements with QSI are comparable
to those that it could have negotiated with other persons or entities.
<PAGE>

                      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                                 AND MANAGEMENT

   The following table sets forth, as of March 31, 1997,  information concerning
the  shares  of common  stock  beneficially  owned by each  person  who,  to the
knowledge of the Company, is the holder of 5% or more of the common stock of the
Company,  each Director,  and each Named  Executive  Officer,  and all executive
officers  and  Directors of the Company as a group.  Except as otherwise  noted,
each  beneficial  owner has sole investment and voting power with respect to the
listed shares.


                            Amount and Nature     Approximate
                              of Beneficial      Percentage of
Name of Beneficial Owner      Ownership (1)        Class (1)
------------------------    -----------------    -------------
John J. Mccloy                   3,651,591 ( 2)     3.18%
Michael J. Parrella              2,749,789 ( 3)     2.38%
Jay M. Haft                      1,251,891 ( 4)     1.10%
Sam Oolie                          925,194 ( 5)     0.82%
Irene Lebovics                   1,288,067 ( 6)     1.14%
Stephen J. Fogarty                 233,200 ( 7)     0.21%
Jeffrey C. Zeitlin                 275,000 ( 8)     0.24%
All Executive Officers
and Directors as a              11,213,867 ( 9)     9.28%
Group (10 persons)
Carole Salkind                   5,285,000 (10)     4.63%
Her Majesty The Queen,
Province of Alberta,            11,250,000 (11)     9.43%
Canada
Kingdon Capital                 13,660,930 (12)    12.11%
Management Corporation
----------

(1)  Assumes  the  exercise  of  currently  exercisable  outstanding  options or
     warrants to purchase shares of common stock. The percent 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 shown for
     that person,  but that no other holder of options or warrants has exercised
     such options or warrants.

(2)  Includes   1,085,325   shares  issuable  upon  the  exercise  of  currently
     exercisable  warrants  and 850,000  shares  issuable  upon the  exercise of
     currently exercisable options.

(3)  Includes   1,311,956   shares  issuable  upon  the  exercise  of  currently
     exercisable  warrants and  1,424,500  shares  issuable upon the exercise of
     currently exercisable options.

(4)  Includes 218,500 shares issuable upon the exercise of currently exercisable
     warrants,  10,000  restricted  shares and 988,500 shares  issuable upon the
     exercise of currently exercisable options.

(5)  Includes  25,000  restricted  shares and 48,913  shares  issuable  upon the
     exercise of currently exercisable warrants and 250,000 shares issuable upon
     the exercise of currently exercisable options.

(6)  Includes 291,300 shares issuable upon the exercise of currently exercisable
     options  and  201,250  shares  issuable  upon  the  exercise  of  currently
     exercisable warrants.

(7)  Consists of 233,200 shares issuable upon the exercise of currently 
     exercisable options.

(8)  Consists of 275,000 shares issuable upon the exercise of currently 
     exercisable options.

(9)  Includes 2,910,944 shares issuable to 3 executive officers and Directors of
     the Company upon the exercise of currently exercisable warrants,  5,096,635
     shares  issuable to 6 executive  officers and Directors of the Company upon
     the exercise of currently  exercisable options and 35,000 restricted shares
     issued to 2 Directors of the Company.

(10) Carole Salkind's address is 801 Harmon Cove Towers, Secaucus, 
     New Jersey 07094.

(11) Her Majesty The Queen,  Province of Alberta,  Canada's address is Room 530,
     Terrace Building, 9515 107th Street, Edmondton, Alberta T5K 2C3, Canada.

(12) Kingdon Capital Management Corporation's address is 152 West 57th Street,
     New York, New York  10019.

<PAGE>



                                   SIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to report to
be signed on its behalf by the undersigned, thereunto duly authorized.

                        NOISE CANCELLATION TECHNOLOGIES, INC.


                        /s/ JEFFREY C. ZEITLIN
                        -------------------------------------------
                        Jeffrey C. Zeitlin
                        Senior Vice President, Operations, and
                        Chief Financial Officer

April 30, 1997