SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-QSB

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended December 31, 2000

[ ] 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 0-28745

NATIONAL SCIENTIFIC CORPORATION

                             Texas                           86-0837077


4455 East Camelback Road, E-160, Phoenix, AZ 85018

602-954-1492

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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.

Yes [X] No [ ]

There were 48,607,498 shares of Common Stock, par value $.01 per share, were outstanding at February 13, 2001.

Transitional Small Business Disclosure Format (Check One): Yes____ No__X__


NATIONAL SCIENTIFIC CORPORATION

FORM 10-QSB

                                      INDEX

Part I - Financial Information

         Item 1 - Financial Statements (unaudited)

           Balance Sheet - December 31, 2000

           Statements of Operations - Three Months ended December 31, 2000, 1999
           and 1998 and Cumulative from October 1, 1997 (Inception) through
           December 31, 2000

           Statements of Cash Flows - Three Months ended December 31, 2000, 1999
           and 1998 and Cumulative from October 1, 1997 (Inception) through
           December 31, 2000

Statements of Changes in Shareholders' Equity - Fiscal Years ended September 30, 2000, 1999 and 1998 and three months ended December 31, 2000

Notes to Financial Statements

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations

Part II - Other Information

Item 2 - Changes in Securities and Use of Proceeds

Item 5 - Other Information

Item 6 - Exhibits and reports on Form 8-K

Signatures


PART I - FINANCIAL INFORMATION

NATIONAL SCIENTIFIC CORPORATION
(A Development Stage Company)

Unaudited Condensed Balance Sheet
December 31, 2000

                                     ASSETS
                                                                           2000
                                                                       ------------
Current assets:
     Cash and cash equivalents                                         $  2,952,867
     Loan to officer                                                        200,000
     Other assets                                                            65,219
                                                                       ------------
        Total current assets                                              3,218,086
                                                                       ------------

Property and equipment, net of accumulated depreciation at $6,878            47,244
                                                                       ------------

                                                                       $  3,265,330
                                                                       ============

                 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
     Accounts payable and accrued expenses                             $     11,720

     Other accrued liabilities                                            1,000,000
                                                                       ------------
        Total current liabilities                                         1,011,720

Commitments, contingencies and subsequent events (see notes)

Shareholders' equity (deficit):
     Common stock, par value $.01; 80,000,000 shares authorized,
        48,607,498 shares issued and outstanding
        at December 31, 2000                                                486,075
     Additional paid-in-capital                                          14,242,601
     Common stock options                                                   263,760
     Deficit accumulated during the development stage                   (10,344,146)
                                                                       ------------
     Accumulated deficit                                                 (2,394,680)
                                                                       ------------
                                                                          2,253,610
                                                                       ------------

                                                                       $  3,265,330
                                                                       ============


NATIONAL SCIENTIFIC CORPORATION
(A Development Stage Company)

Unaudited Condensed Statements of Operations For the Quarters Ended December 31, 2000, 1999 and For the Period from October 1, 1997 (Inception of Development Stage) Through December 31, 2000

                                                                                       Cumulative
                                                                                       Development
                                                      2000              1999              Stage
                                                  -----------       ------------       -----------
Revenues                                          $        --       $         --                --
                                                  -----------       ------------       -----------

Costs and expenses
     Consulting fees, related party                   422,008            405,000         3,856,991
     Compensation and benefits                        129,631                 --           203,337
     Research and development                         186,435             78,027         2,071,716
     Stock compensation                             3,443,160             50,320         3,598,436
     Other                                            214,689             62,324           684,486
                                                  -----------       ------------       -----------
                                                    4,395,923            595,671        10,414,966
                                                  -----------       ------------       -----------

Net loss from operations                           (4,395,923)          (595,671)      (10,414,966)
                                                  -----------       ------------       -----------

Other income (expense)
     Interest and other income                         42,744              4,074           115,691
     Interest expense                                      --             (2,750)          (16,316)
     Loss on disposal of assets                            --                 --           (28,555)
                                                  -----------       ------------       -----------
                                                       42,744              1,324            70,820
                                                  -----------       ------------       -----------

Net loss before income tax benefit                 (4,353,179)          (594,347)      (10,344,146)

Provision for income taxes (benefit)                       --                 --                --
                                                  -----------       ------------       -----------

Net loss                                          $(4,353,179)      $   (594,347)      (10,344,146)
                                                  ===========       ============       ===========

Net loss per common share, basic and diluted     $      (0.09)      $     (0.01)
                                                 ============       ===========


NATIONAL SCIENTIFIC CORPORATION
(A Development Stage Company)

Unaudited Condensed Statements of Cash Flows For the Quarters Ended December 31, 2000 and 1999, and For the Period from October 1, 1997 (Inception of Development Stage) Through December 31, 2000

                                                                                                           Cumulative
                                                                                                           Development
                                                                             2000             1999            Stage
                                                                          -----------       --------       -----------
Cash flows from operating activities:
     Net loss                                                             $(4,353,179)      (594,347)      (10,344,146)
     Adjustments to reconcile net loss to net
        cash used in operating activities:
        Depreciation                                                            1,746            334            11,765
        Loss on disposal of assets                                                 --             --            28,555
        Stock and options issued for services                                 380,660        474,820         6,638,575
        Amortization of deferred stock compensation                         3,062,500             --         1,000,000
        Decrease (increase) in receivables                                         --             --            30,000
        Decrease (increase) in other assets                                    40,337             --           (54,648)
        Increase (decrease) in accounts payable and accrued expenses          (14,234)        (4,371)          (10,859)

        Increase (decrease) in accrued interest                                    --          2,750                --
                                                                          -----------       --------       -----------
            Net cash used in operating activities                            (882,170)      (120,814)       (2,700,758)
                                                                          -----------       --------       -----------
Cash flows from investing activities:
     Acquisition of property and equipment                                    (41,593)                         (47,442)
     Proceeds from the sale of furniture and equipment                             --             --             4,660

     Loan to officer                                                               --             --          (200,000)
                                                                          -----------       --------       -----------
                                                                              (41,593)            --          (242,782)
Cash flows from financing activities:                                     -----------       --------       -----------
     Repayment of debt                                                             --             --          (110,000)
     Repayment of shareholder loans                                                --             --           (10,000)
     Repayment of capital lease obligations                                        --             --            (1,819)
     Proceeds from the issuance of common stock                             1,291,730        761,150         5,532,108
     Proceeds from the issuance of preferred stock                                 --             --           482,500
                                                                          -----------       --------       -----------
           Net cash provided by financing activities                        1,291,730        761,150         5,892,789
                                                                          -----------       --------       -----------

Net increase in cash and cash equivalents                                     367,967        640,336         2,949,249

Cash and cash equivalents, beginning of year                                2,584,900         62,185             3,618
                                                                          -----------       --------       -----------

Cash and cash equivalents, end of the quarter                             $ 2,952,867        702,521         2,952,867
                                                                          ===========       ========       ===========


NATIONAL SCIENTIFIC CORPORATION
(A Development Stage Company)

Unaudited Condensed Statements of Cash Flows For the Quarters Ended December 31, 2000 and 1999, and For the Period from October 1, 1997 (Inception of Development Stage) Through December 31, 2000

Supplementary Disclosure of Cash Flow Information                    Cumulative
                                                                     Development
                                                  2000       1999       Stage
                                                  -----      -----   -----------
Cash paid during the year for interest            $  --         --      2,597
                                                  =====      =====      =====
Cash paid during the year for income taxes        $  --         --         --
                                                  =====      =====      =====

Summary of Non-Cash Investing and Financing Activities

During 1998, the Company sold equipment for $4,660 in cash, with the purchaser assuming $9,252 in lease obligations.

During the year-ended September 30, 1999, the Company issued 451,440 shares of restricted common stock to a Director in exchange for 320,000 shares of unrestricted common stock.

During the quarter-ended December 31, 1999, the Company issued 1,128,600 shares of restricted common stock to a Director's family member in exchange for 580,000 shares of unrestricted common stock.


NATIONAL SCIENTIFIC CORPORATION
(A Development Stage Company)

Unaudited Statements of Changes in Shareholders' Equity (Deficit) For the Years Ended September 30, 2000, 1999 and 1998, and For the Quarter Ended December 31, 2000

                                           Common Stock           Preferred Stock
                                      ----------------------   ---------------------   Additional                 Development
                                      Number of                Number of                Paid-In     Accumulated      Stage
                                       Shares        Amount     Shares      Amount      Capital       Deficit       Deficit
                                      ----------    --------   ---------    ------     ----------   -----------   -----------
Balance September 30, 1997            17,847,292    $178,473         --         --      2,160,780    (2,394,680)          --

Stock issued for services              3,487,557      34,875         --         --        335,473            --           --

Private placement of preferred stock          --          --     49,500      4,950        242,550            --           --

Exercise of warrants and options         547,000       5,470         --         --        100,888            --           --

Conversion of preferred to
    common stock                       3,450,000      34,500    (34,500)    (3,450)       (31,050)           --           --

Contributed capital                           --          --         --         --         14,850            --           --

Net loss                                      --          --         --         --             --            --     (772,545)
                                      ----------    --------    -------     ------     ----------    ----------     --------

Balance, September 30, 1998           25,331,849     253,318     15,000      1,500      2,823,491    (2,394,680)    (772,545)
                                      ----------    --------    -------     ------     ----------    ----------     --------

                                        Total
                                      --------
Balance September 30, 1997             (55,427)

Stock issued for services              370,348

Private placement of preferred stock   247,500

Exercise of warrants and options       106,358

Conversion of preferred to
    common stock                            --

Contributed capital                     14,850

Net loss                              (772,545)
                                      --------

Balance, September 30, 1998            (88,916)
                                      --------


NATIONAL SCIENTIFIC CORPORATION
(A Development Stage Company)

Statements of Changes in Shareholders' Equity (Deficit), continued For the Years Ended September 30, 2000, 1999 and 1998, and For the Quarter Ended December 31, 2000

                                                    Common Stock         Preferred Stock
                                                --------------------   -------------------    Additional                 Development
                                                Number of              Number of               Paid-In     Accumulated      Stage
                                                 Shares      Amount     Shares      Amount     Capital       Deficit       Deficit
                                               ----------    -------   ---------    ------    ----------   -----------   -----------
Balance, September 30, 1998                    25,331,849    253,318     15,000      1,500     2,823,491    (2,394,680)    (772,545)

Stock issued for services                       3,165,000     31,650         --         --       315,979            --           --

Preferred stock offering                               --         --     47,000      4,700       230,300            --           --

Exercise of warrants and options                  496,000      4,960         --         --        27,490            --           --

Private placement of common stock                 400,000      4,000         --         --        96,000            --           --

Conversion of preferred to
    common stock                                6,200,000     62,000    (62,000)    (6,200)      (55,800)           --           --

Common stock issued to collateralize loan         500,000      5,000         --         --            --            --           --

Stock converted by director's family member       451,440      4,515         --         --        (4,515)           --           --

Net loss                                               --         --         --         --            --            --     (699,085)
                                               ----------    -------    -------     ------    ----------    ----------   ----------
Balance, September 30, 1999                    36,544,289    365,443         --         --     3,432,945    (2,394,680)  (1,471,630)
                                               ----------    -------    -------     ------    ----------    ----------   ----------

                                                     Total
                                                   --------
Balance, September 30, 1998                         (88,916)

Stock issued for services                           347,629

Preferred stock offering                            235,000

Exercise of warrants and options                     32,450

Private placement of common stock                   100,000

Conversion of preferred to
    common stock                                         --

Common stock issued to collateralize loan             5,000

Stock converted by director's family member              --

Net loss                                           (699,085)
                                                   --------
Balance, September 30, 1999                         (67,922)
                                                   --------


NATIONAL SCIENTIFIC CORPORATION
(A Development Stage Company)

Statements of Changes in Shareholders' Equity (Deficit), continued For the Years Ended September 30, 2000, 1999 and 1998, and For the Quarter Ended December 31, 2000

                                                  Common Stock            Preferred Stock
                                              ---------------------   -----------------------   Additional               Development
                                              Number of                Number of                 Paid-In    Accumulated     Stage
                                               Shares       Amount      Shares       Amount      Capital      Deficit      Deficit
                                              ----------   --------   ----------   ----------   ----------  -----------  -----------
Balance, September 30, 1999                   36,544,289    365,443          --           --    3,432,945   (2,394,680)  (1,471,630)

Stock issued for services                      2,817,629     28,176          --           --    5,511,762           --           --

Exercise of warrants and options               3,440,250     34,403          --           --    3,202,317           --           --

Private placement of common stock              3,765,000     37,650          --           --      712,350           --           --

Stock converted by director's family member    1,128,600     11,286          --           --      (11,286)          --           --

Common stock to collateralize loan - retired    (500,000)    (5,000)         --           --           --           --           --

Deferred stock compensation                           --         --          --           --   (2,062,500)          --           --

Net loss                                              --         --          --           --           --           --   (4,519,337)
                                              ----------   --------   ---------   ----------  -----------   ----------   ----------

Balance, September 30, 2000                   47,195,768    471,958          --           --   10,785,588   (2,394,680)  (5,990,967)
                                              ==========   ========   =========   ==========  ===========   ==========   ==========

                                                    Total
                                                 -----------
Balance, September 30, 1999                         (67,922)

Stock issued for services                         5,539,938

Exercise of warrants and options                  3,236,720

Private placement of common stock                   750,000

Stock converted by director's family member              --

Common stock to collateralize loan - retired         (5,000)

Deferred stock compensation                      (2,062,500)

Net loss                                         (4,519,337)
                                                 ----------

Balance, September 30, 2000                       2,871,899
                                                 ==========


NATIONAL SCIENTIFIC CORPORATION
(A Development Stage Company)

Statements of Changes in Shareholders' Equity (Deficit), continued For the Years Ended September 30, 2000, 1999 and 1998, and For the Quarter Ended December 31, 2000

                                          Common Stock           Preferred Stock
                                      ---------------------    --------------------    Additional                   Development
                                      Number of                Number of                Paid-In      Accumulated       Stage
                                        Shares      Amount      Shares      Amount      Capital        Deficit        Deficit
                                      ----------    -------    ---------   --------    ----------    -----------    -----------
Balance, September 30, 2000           47,195,768    471,958          --          --    10,785,588    (2,394,680)     (5,990,967)

Stock issued for services                120,000      1,200          --          --       115,700            --              --

Exercise of warrants and options       1,291,730     12,917          --          --     1,278,813            --              --

Amortization of stock compensation            --         --          --          --     2,062,500            --              --

Common stock options exercisable              --         --          --          --       263,760            --              --

Net loss                                      --         --          --          --            --            --      (4,353,179)
                                      ----------    -------     -------    --------    ----------    ----------     -----------

Balance, December 31, 2000            48,607,498    486,075          --          --    14,506,361    (2,394,680)    (10,344,146)
                                      ==========    =======     =======    ========    ==========    ==========     ===========

                                           Total
                                         ----------
Balance, September 30, 2000               2,871,899

Stock issued for services                   116,900

Exercise of warrants and options          1,291,730

Amortization of stock compensation        2,062,500

Common stock options exercisable            263,760

Net loss                                 (4,353,179)
                                         ----------

Balance, December 31, 2000                2,253,610
                                         ==========


NATIONAL SCIENTIFIC CORPORATION
(A Development Stage Company)

Notes to Unaudited Financial Statements
Quarter Ended December 31, 2000 and 1999

1. Basis of Presentation

The accompanying financial statements have been prepared by the Company, without audit, and reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods. The statements have been prepared in accordance with generally accepted accounting principles for interim financial reporting and Securities and Exchange Commission regulations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the financial statements reflect all adjustments (of a normal and recurring nature) which are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The results of operations for the three months ended December 31, 2000 are not necessarily indicative of the results to be expected for the entire fiscal year.

These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's annual report on Form 10-KSB for the fiscal year ended September 30, 2000.

2. Employment Agreement

The employment agreement with the President is still under negotiation. The shares of restricted common stock granted to the President are currently being restructured, to be exchanged for options to purchase common stock. The employment agreement currently being negotiated contemplates granting options to purchase approximately 2,100,000 and 666,700 shares of common stock at exercise prices proposed to be $.46 per share and $.29 per share, or 25% of the market value of common stock on December 1, 2000 and January 1, 2001, respectively. At the date of filing this Form 10-QSB, the contract had not yet been finalized.

The Company is accruing additional compensation of $1,000,000 to reflect the probability that the final option agreement will be greater in value than the restricted common shares to be exchanged.

3. Issuance of Common Stock

During the three months ended December 31, 2000, the Company received $1,291,730 and issued 1,291,730 shares of restricted common stock in connection with the exercise of its $1.00 common stock warrants. The Company also issued 100,000 shares of restricted common stock valued at $92,000 to consultants and principals as compensation for services. The Company issued 20,000 shares of restricted common stock valued at $24,900 to consultants as compensation for services. This restricted stock was valued at 50% of the market price of the stock on the dates granted and earned.


NATIONAL SCIENTIFIC CORPORATION
(A Development Stage Company)

Notes to Unaudited Financial Statements
Quarter Ended December 31, 2000 and 1999

3. Issuance of Common Stock (continued)

During the quarter ended December 31, 1999, the Company received $750,000 from a private placement of common stock. In conjunction with the offering, the Company issued 600,000 shares of restricted stock valued at $72,000 to a principal and a consultant of the Company. The Company also issued 500,000 shares of restricted common stock to consultants as compensation for services.

4. Stock Options

The Company from time to time issues stock options for the purchase of restricted stock to directors, officers, employees and consultants. The Company adopted a qualified stock option plan for its executives and employees in December 2000.

The Company adopted APB Opinion 25 and related interpretations in accounting for the plan. Accordingly, compensation expense is equal to the difference between the exercise price of the options granted and the fair value of the common stock at the date of grant. Compensation of $263,760 has been recognized for the quarter ended December 31, 2000. Under the terms of the Company's stock options granted to certain directors, officers, employees and consultants, the Board of Directors, at its sole discretion, will determine when certain options granted shall be fully vested and exercisable. At December 31, 2000, all outstanding stock options had been deemed vested, and were fully exercisable.

In accordance with APB Opinion 25, the fair value of option grants is estimated on the date of grant using the Black-Scholes option-pricing model for proforma footnote purposes with the following assumptions used for grants in all years; dividend yield of 0%, risk-free interest rate of 6%, and expected option life of 5 years. Expected volatility was assumed to be 100% as of the date of issue.

                                                             Weighted
                                               Number         Average
                                                 Of          Exercise
                                               Shares          Price
                                              ---------      --------
Options Outstanding, September 30, 2000              --
    Granted                                   1,207,667       $  1.63
    Exercised                                        --            --
                                              ---------
Options Outstanding, December 31, 2000        1,207,667       $  1.63
                                              =========

Had the Company fully adopted SFAS 123, the first quarter loss from operations would have been $(6,231,086) and basic loss per share would have been $(0.13).


NATIONAL SCIENTIFIC CORPORATION
(A Development Stage Company)

Notes to Unaudited Financial Statements
Quarter Ended December 31, 2000 and 1999

5. Loan to Officer

During the quarter ended December 31, 2000 the Company renewed a loan with a Director and Officer for $200,000, bearing interest at 10% per annum and due on December 1, 2001.

6. Net Loss Per Share

Net loss per share is computed by dividing the loss attributable to common shareholders by the weighted average number of shares outstanding during the period, which was assumed to be 47,661,601 and 40,532,808 for the three months ended December 31, 2000 and 1999, respectively. Stock options and warrants are considered anti-dilutive and were not considered in the calculation.

7. Subsequent Event

On January 19, 2001, the Company loaned $100,000 to an entity at 12% interest. The Chairman of the Board of the entity is also a director of the Company. The loan is to be repaid in two $50,000 installments, which are due March 1 and April 1, 2001.


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

SAFE HARBOR STATEMENT

Certain statements in this Form 10-QSB, including information stated under Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the Act). We desire to make available to ourselves certain "safe harbor" provisions of the Act and we are including this special note to enable us to do so.

Forward-looking statements in the Form 10-QSB or those included in other publicly available documents filed with the Securities and Exchange Commission, reports to our stockholders and other publicly available statements issued or released by us involve known and unknown risks, uncertainties and other factors which could cause our actual results, performance (financial or operating) or achievements to differ from the future results, performance (financial or operating) or achievements expressed or implied by such forward-looking statements. Such future results are based upon management's best estimates based upon current conditions and the most recent results of operations.

Three Months Ended December 31, 2000 Compared to Three Months Ended December 31, 1999

We are a development stage company and, therefore, have no revenues to report for the periods indicated above.

We believe that our cash position of approximately $3.0 million as of December 31, 2000, to be sufficient to continue operations for the next twelve months. Such future requirements are based upon management's best estimates based upon current conditions and the most recent results of operations.

In the next twelve months, we expect to continue to increase our research and development expenditures with additional staffing. The purpose of these additional expenditures is to bring our existing products closer to the point of market readiness by producing working prototypes along with design and process specifications. Additionally, these expenditures will be used for continued research into RF technologies that are anticipated to provide wireless products into next generation electronic devices. There can be no assurance that we will be successful in completing these tasks in the time period estimated.

Operating expenses for the three months ended December 31, 2000 of approximately $4.4 million are up from the similar period ended December 31, 1999, which were approximately $596,000. This increase, over the similar period last year, was primarily due to the increase in stock compensation of approximately $3.4 million in lieu of cash to the Company's President. The employment agreement with the President is still under negotiation. The shares of restricted common stock granted to the President are currently being restructured, to be exchanged for options to purchase common stock. The employment agreement currently being negotiated contemplates


granting options to purchase approximately 2,100,000 and 666,700 shares of restricted common shares of common stock at exercise prices proposed to be $.46 per share and $.29 per share, or 25% of the market value of common stock on December 1, 2000 and January 1, 2001, respectively.

Compensation and benefits have increased by approximately $130,000 due to the addition of the Chief Operating and Financial Officers, the Global Director of Marketing and the Director of Research in our San Jose research facility. In addition, research and development costs increased approximately $108,000. Research and development costs increased due primarily to our opening our San Jose, California research facility and hiring an additional research scientist.

Liquidity and Capital Resources

For the three months ended December 31, 2000, additional capital of approximately $1.3 million was received as a result of the exercise of approximately 1.3 million of the warrants to acquire a total of 9,650,000 shares of restricted common stock that were issued in conjunction with our private offering of March 15, 1998, at an exercise price of $1.00 per share. The remaining unexercised warrants that were issued in connection with this offering expired on December 31, 2000.

Warrants to acquire 4,250,000 shares of restricted common stock, which expire on December 31, 2001, were issued in conjunction with our private offering of August 1, 1999, at an exercise price of $1.50 per share. Prior to the fiscal quarter ended December 31, 2000, 120,000 of these warrants were exercised, raising $180,000 in equity and cash. We expect that more of these warrants will be exercised prior to their expiration; however, there can be no assurance that any more of these warrants will be exercised.

Cash used in operations was approximately $882,000 for the three months ended December 31, 2000 compared with approximately $121,000 for the three month period ended December 31, 1999. The increase in cash used in operations resulted significantly from the employment several new employees, including the Chief Operating and Financial Officers, both of whom were hired in October 2000, the Global Director of Marketing who was hired on December 1, 2000 and a research scientist in San Jose, California who was hired on November 1, 2000. In addition, the President of NSC, as an independent consultant, was engaged on September 1, 2000. The fiscal quarter ended December 31, 2000 represents the first entire quarter that includes regular contractor payments to the President.

PART II - OTHER INFORMATION

Item 2. Changes in Securities and Use of Proceeds

On December 31, 1999, we completed our private offering of August 1, 1999. A total of $830,000 was raised during the offering. We sold 4,165,000 shares of restricted common stock


at an average price of $.20 per share for the entire offering. Of these totals, $750,000 was raised and 3,765,000 shares were sold during the quarter ended December 31, 1999.

As part of this offering, we also issued 4,250,000 warrants to purchase one restricted share of common stock at a price of $1.50 for each warrant. These warrants are immediately exercisable and they all expire on December 31, 2001. One hundred twenty thousand (120,000) of these warrants have been exercised as of the date of this filing. The shares were sold in reliance on the exemption provided by Sections 4 (2) and 4 (6) of the Securities Act of 1933 and Rule 506 of Regulation D.

During the three months ended December 31, 2000, approximately 1.3 million warrants were exercised at $1.00 each. These represent a portion of the 9,650,000 warrants issued in conjunction with our Private Offering of March 15, 1998. The remaining and unexercised warrants issued during this Private Offering expired on December 31, 2000. The shares were sold in reliance on the exemption provided by Sections 4 (2) and 4 (6) of the Securities Act of 1933 and Rule 506 of Regulation D.

In addition, during the three months ended December 31, 2000, 100,000 restricted shares of common stock were issued to the Chief Operating Officer, in accordance with his employment agreement, and 15,000 shares were granted to a consultant for services rendered.

On December 1, 2000, the Board of Directors instituted a Stock Option Plan (2000 Plan). The Board is of the opinion that it is in the best interest of NSC to reserve not less than 7,000,000 Common Shares to provide adequate Common Shares for the issuance to qualified individuals under the 2000 Plan to encourage them to remain in the service of NSC and to promote its business and growth strategy. The full text of the Amended and Restated 2000 Stock Option Plan is set forth as Exhibit 10.1 to this Form 10-QSB.

Item 5. Other Information

Subsequent to our latest filings with the SEC, we have learned that the U.S. Patent and Trademark Office issued patent number 6,171,920 for our Hetrojunction Bipolar Transistor. In June 1999, we had received a patent on the novel design and architecture for the product. This most recent patent relates to the intellectual property required to manufacture the transistor. Additionally, on January 2, 2001, the U.S. Patent and Trademark Office granted patent number 6,169,467 for our Mode Dielectric Resonator. The Mode Dielectric Resonator is unique in its design allowing for a significant reduction in size and an increase in the Quality factor.

In January 2001, we executed several distribution contracts with Korean technology manufacturers that we believe will allow the Company to expand its business infrastructure and start the transformation from a pure research and development company to a more complete and operational full-line business. We currently anticipate that the contracts will produce in excess of $5.0 million in revenue for the current fiscal year.


During the three months ended December 31, 2000, the Company rounded out is Board of Directors with the addition of Michael A. Grollman, Sam H. Carr, both officers of the Company, as well as Richard C. Kim and Charles E. Martin, who both serve as outside directors. In addition to the Board of Directors, we have begun a technical advisory board, currently consisting of two prominent and respected scientists, which are called upon to advise the Company on its technology strategies and functionality.

Item 6. Exhibits and reports on Form 8-K

(a) Exhibits Exhibit 10.1 Amended and Restated 2000 Stock Option Plan Exhibit 10.2 Master Purchase & License Contract - Sun Il Computec Exhibit 10.3 Master Purchase & License Contract - Maroo Electrotech Co.
Ltd.
Exhibit 10.4 Master Purchase & License Contract - Ozaki Korea Co., Ltd.

(b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter.

SIGNATURES

Pursuant to the requirements 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.

NATIONAL SCIENTIFIC CORPORATION

February 13, 2001                  /s/ L.L. Ross
     DATE                          -------------
                                   L.L Ross
                                   Chairman of the Board, President & C.E.O.

                                   /s/ Sam H. Carr
                                   ---------------
                                   Sam H. Carr
                                   Corporate Secretary


INDEX TO EXHIBITS

Exhibit 10.1 Amended and Restated 2000 Stock Option Plan Exhibit 10.2 Master Purchase & License Contract - Sun Il Computec Exhibit 10.3 Master Purchase & License Contract - Maroo Electrotech Co. Ltd.

Exhibit 10.4 Master Purchase & License Contract - Ozaki Korea Co., Ltd.


Exhibit 10.1

EXHIBIT A
NATIONAL SCIENTIFIC CORPORATION
AMENDED AND RESTATED
2000 STOCK OPTION PLAN

SECTION 1. PURPOSE OF PLAN. The purpose of the National Scientific Corporation 2000 Stock Option Plan (the "Plan") shall be to provide for the grant to employees, officers, directors, and consultants of the Company options to acquire Stock of the Company.

SECTION 2. DEFINITIONS. Unless the context clearly indicates otherwise, the following terms, when used in the Plan, shall have the meanings set forth in this section.

(a) "Board" shall mean the Board of Directors of the Company.

(b) "Cause" shall mean (i) Grantee's willful, material and irreparable breach of any agreement that governs the terms and conditions of his or her employment; (ii) Grantee's gross negligence or gross incompetence in the performance or intentional nonperformance (continuing for ten days after receipt of written notice of such negligence) of any of Grantee's material duties and responsibilities; (iii) Grantee's dishonesty, fraud or misconduct with respect to the business or affairs of the Company or any Subsidiary; (iv) Grantee's conviction of a felony; or (v) chronic alcohol abuse or illegal drug abuse by Grantee.

(c) A "Change in Control" of the Company shall occur when: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30 percent or more of the combined voting power of the Company's then outstanding securities; (ii) as a result of, or in connection with, any tender offer or exchange offer, merger, or other business combination (a "Transaction"), the persons who were Directors of the Company immediately before the Transaction shall cease to constitute a majority of the Board or any successor to the Company; (iii) the Company is merged or consolidated with another corporation and as a result of the merger or consolidation less than 75 percent of the outstanding voting securities of the surviving or resulting corporation shall then be owned in the aggregate by the former shareholders of the Company; (iv) a tender offer or exchange offer is made and consummated for the ownership of securities of the Company representing 50 percent or more of the combined voting power of the Company's then outstanding voting securities; or (v) the Company transfers substantially all of its assets to another corporation which is not controlled by the Company.

(d) "Code" shall mean the Internal Revenue Code of 1986 as it may be amended from time to time.

(e) "Committee" shall mean the Board or, in the discretion of the Board, any Committee of two or more Directors that may be designated by the Board to administer the Plan, all of which Committee's members shall be Nonemployee Directors. Additionally, if any Options are intended to qualify as performance-based compensation under Section 162(m)(4)(C) of the Code, all members of the Committee granting such Options shall be "outside directors" within the meaning of that Code section.

(f) "Company" shall mean National Scientific Corporation, a Texas corporation.

(g) "Consultant" shall mean any person who is engaged to perform services for the Company or its Subsidiaries, other than as an Employee or Director.


(h) "Control Person" shall mean any person who, as of the date of grant of an Option, owns (within the meaning of Section 422(b)(6) of the Code) stock possessing more than ten percent of the total combined voting power or value of all classes of stock of the Company or of any Parent or Subsidiary.

(i) "Director" shall mean any member of the Board.

(j) "Employee" shall mean any full-time employee of the Company or any Subsidiary (including Directors who are otherwise employed on a full-time basis by the Company or any Subsidiary).

(k) "Exchange Act" shall mean the Securities Exchange Act of 1934 as it may be amended from time to time.

(l) "Fair Market Value" of the Stock on a given date shall be based upon: (i) if the Stock is listed on a national securities exchange or quoted in an interdealer quotation system, the last sales price or, if such price is unavailable, the average of the closing bid and asked prices per share of the Stock on such date (or, if there was no trading or quotation in the Stock on such date, on the next preceding date on which there was trading or quotation) as provided by one of such organizations; or (ii) if the Stock is not listed on a national securities exchange or quoted in an interdealer quotation system, the value as determined by the Board in good faith in its sole discretion.

(m) "Grantee" shall mean a person granted an Option under the Plan.

(n) "ISO" shall mean an Option granted pursuant to the Plan to purchase shares of the Stock and intended to qualify as an incentive stock option under
Section 422 of the Code, as now or hereafter constituted.

(o) "1933 Act" shall mean the Securities Act of 1933, as it may be amended from time to time.

(p) "Nonemployee Director" shall mean a Director who is a "nonemployee director" within the meaning of Rule 16b-3 under the Exchange Act and an "outside director" within the meaning of Section 162(m) of the Code:

(q) "NQSO" shall mean an Option granted pursuant to the Plan to purchase shares of the Stock that is not an ISO.

(r) "Option" or "Options" shall refer to one or more NQSOs and ISOs issued under and subject to the Plan.

(s) "Parent" shall mean any parent corporation as defined in Section 424 of the Code.

(t) "Plan" shall mean the National Scientific Corporation 2000 Stock Option Plan as set forth herein and as amended from time to time.

(u) "SEC" means the United States Securities and Exchange Commission.

(v) "Stock" shall mean shares of the common stock, par value $.01 per share, of the Company.

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(w) "Subsidiary" shall mean any corporation with respect to which the Company owns, directly or indirectly, 50 percent or more of the total combined voting power of all classes of stock of such corporation.

SECTION 3. SHARES OF STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 hereof, the total amount of Stock with respect to which Options may be granted under the Plan shall not exceed the greater of (i) 7,000,000 shares (subject to adjustment pursuant to Section 11 hereof) and
(ii)15 percent of the total number of shares of Stock outstanding from time to time at the time of grant of any Option hereunder. Notwithstanding the foregoing, the total amount of Stock with respect to which ISOs may be granted under the Plan shall not exceed 3,500,000 shares. Moreover, the total amount of Stock with respect to which Options may be granted under the Plan to any Grantee during the term of the Plan shall not exceed 3,000,000 shares. Stock issuable under the Plan may be authorized but unissued shares or reacquired shares of Stock. If, prior to exercise, any Options are forfeited, lapse, or terminate for any reason, the Stock covered thereby shall again be available for Option grants under the Plan.

SECTION 4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Committee. Subject to the express provisions of the Plan, the Committee shall have the authority to interpret the Plan, to prescribe, amend, and rescind rules and regulations relating to the Plan, to determine the terms and provisions of stock option agreements thereunder, and to make all other determinations necessary or advisable for the administration of the Plan. Any controversy or claim arising out of or related to the Plan or the Options granted thereunder shall be determined unilaterally by, and at the sole discretion of, the Committee. To the extent necessary to comply with Rule 16b-3 under the Exchange Act, determinations concerning Options granted to any person who is a Director or officer or otherwise subject to Section 16 of the Exchange Act shall be made by the Committee.

SECTION 5. LIMITATION OF LIABILITY. Each member of the Committee shall be entitled to, in good faith, rely or act upon any report or other information furnished to him by any officer or other employee of the Company or any subsidiary, the Company's independent certified public accountants or any executive compensation consultant, legal counsel or other professional retained by the Company to assist in the administration of the Plan. No member of the Committee, nor any officer or employee of the Company acting on behalf of the Committee, shall be personally liable for any action, determination or interpretation taken or made in good faith with respect to the Plan, and all members of the Committee and any officer or employee of the Company acting on its behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination or interpretation.

SECTION 6. TYPES OF OPTIONS. Options granted under the Plan may be of two types: ISOs or NQSOs. The Committee shall have the authority and discretion to grant to an eligible Employee either ISOs, NQSOs, or both but shall clearly designate the nature of each Option at the time of grant. Grantees who are not Employees of the Company or a Subsidiary on the date an Option is granted shall receive only NQSOs.

SECTION 7. GRANTS OF OPTIONS TO NONEMPLOYEE DIRECTORS.

(a) Nonemployee Directors of the Company shall be eligible to receive Options under the Plan only pursuant to the provisions of this Section 7. Each individual who agrees to become a Nonemployee Director shall receive, without the exercise of the discretion of any person, an NQSO under the Plan relating to the purchase of 5,000 shares of Stock on the date that the Nonemployee Director's service as a director commences. In addition, on the date of each annual meeting of the shareholders, each person who is a continuing Nonemployee Director on any such date shall receive, without the exercise of discretion of any person, an NQSO under the Plan relating to the purchase of 5,000 shares of

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Stock. In the event that there are not sufficient shares available under the Plan to allow for the grant to each Nonemployee Director of an NQSO for the number of shares provided herein, each Nonemployee Director shall receive an NQSO for his pro rata share of the total number of shares of Stock available under the Plan.

(b) The exercise price of each share of Stock subject to an Option granted a Nonemployee Director shall equal the Fair Market Value of a share of Stock on the date such Option is granted.

(c) Each Option granted to a Nonemployee Director shall become exercisable six (6) months from, and shall have a term of ten (10) years from, the date of the Option grant. Notwithstanding the exercise period of any Option granted to a Nonemployee Director, all such Options shall immediately become exercisable upon (1) the death of a Nonemployee Director while serving as such or (2) a Change in Control.

SECTION 8. GRANTS OF OPTIONS TO EMPLOYEES AND CONSULTANTS.

(a) Employees and Consultants of the Company and its Subsidiaries shall be eligible to receive Options under the Plan. Consultants of the Company shall receive only NQSOs.

(b) The exercise price per share of Stock subject to an Option granted to an Employee or Consultant shall be determined by the Committee; provided, however, that the exercise price of each share subject to an ISO shall be not less than 100 percent of the Fair Market Value of a share of the Stock on the date such Option is granted, or, in the case of an ISO granted to a Control Person, not less than 110 percent of such Fair Market Value, and the exercise price of each share subject to an NQSO shall be not less than 25 percent of the Fair Market Value of a share of the Stock on the date such Option is granted.

(c) The term of each Option granted to an Employee or Consultant shall be determined by the Committee, provided that no ISO shall be exercisable more than ten years from the date of grant of the Option and further provided that no ISO granted to a Control Person shall be exercisable more than five years from the date of grant of the Option.

(d) The Committee shall determine and designate from time to time Employees or Consultants who are to be granted Options, the nature of each Option granted and the number of shares of Stock subject to each such Option.

(e) Notwithstanding any other provisions hereof, the aggregate Fair Market Value (determined at the time the ISO is granted) of the Stock with respect to which ISOs are exercisable for the first time by any Employee during any calendar year under all plans of the Company and any Parent or Subsidiary corporation shall not exceed $100,000. To the extent the limitation set forth in the preceding sentence is exceeded, the Options with respect to such excess shall be treated as NQSOs.

(f) The Committee, in its sole discretion, shall determine whether any Option granted to an Employee or Consultant shall become exercisable in one or more installments and shall specify the installment dates. The Committee may also make such other provisions, not inconsistent with the terms of the Plan, as it may deem desirable, including such provisions as it may deem necessary to qualify any ISO under the provisions of Section 422 of the Code. Without limitation of the foregoing, the Committee may, in its discretion, provide that Options shall immediately become exercisable upon (i) the death of an Employee or Consultant while in the employ of the Company or any Subsidiary or (ii) a Change in Control.

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(g) The Committee may, at any time, grant new or additional options to any eligible Employee or Consultant who has previously received Options under the Plan or options under other plans, whether such prior Options or other options are still outstanding, have been exercised previously in whole or in part, or have been canceled. The exercise price of such new or additional Options may be established by the Committee, subject to Section 8(b) hereof, without regard to such previously granted Options or other options.

SECTION 9. EXERCISE OF OPTIONS.

(a) A Grantee shall exercise an Option by delivery of written notice to the Company setting forth the number of shares with respect to which the Option is to be exercised, together with cash, certified check, bank draft, or postal or express money order payable to the order of the Company for an amount equal to the Option price of such shares and any income tax required to be withheld. The Committee may, in its sole discretion, permit a Grantee to pay all or a portion of the exercise price by a simultaneous sale of the shares of Stock to be issued pursuant to such exercise pursuant to a brokerage or similar arrangement.

(b) Except as provided pursuant to Section 10(a) hereof, no Option granted to an Employee or Consultant shall be exercised unless at the time of such exercise the Grantee is then an Employee or Consultant of the Company or a Subsidiary.

(c) Except as provided in Section 10(a) hereof, no Option granted to a Nonemployee Director shall be exercised unless at the time of such exercise the Grantee is then a Nonemployee Director.

(d) Before the Company issues Stock to a Grantee pursuant to the exercise of an NQSO, the Company shall have the right to require that the Grantee make such provision, or furnish the Company such authorization, necessary or desirable so that the Company may satisfy its obligation under applicable income tax laws to withhold income or other taxes due upon or incident to such exercise.

SECTION 10. EXERCISE OF OPTIONS UPON TERMINATION.

(a) Subject to Section 10(c) hereof, upon the termination of a Grantee's relationship with the Company and its Subsidiaries, the period during which such Grantee may exercise any outstanding exercisable installments of his Options that were exercisable at the date of termination of his relationship with the Company shall not exceed (i) if such termination is due to death or permanent and total disability (within the meaning of Section 22(e)(3) of the Code), one year from the date of such termination, and (ii) in all other cases, three months (six months for Nonemployee Directors) from the date of such termination, provided, however, that in no event shall the period extend beyond the expiration of the Option term. Notwithstanding the foregoing, all Options shall immediately terminate upon a termination of a Grantee's employment if the Committee determines, in its sole discretion, that such termination is for Cause.

(b) In no event shall any Option be exercisable for more than the maximum number of shares that the Grantee was entitled to purchase at the date of termination of the relationship with the Company and its Subsidiaries.

(c) The Committee may, in its discretion, extend the period of exercisability set forth in clauses (i) and (ii) in paragraph (a) above; provided, however, that such period may not be extended for Options granted to Nonemployee Directors or for ISOs.

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(d) Subject to Section 10(b) hereof, the sale of any Subsidiary shall be treated as a termination of employment with respect to any Grantee employed by such Subsidiary.

(e) Subject to the foregoing, in the event of a Grantee's death, Options may be exercised by the Grantee's legal representative.

SECTION 11. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. If the Company shall effect a subdivision or consolidation of shares or other increase or reduction of shares of Stock outstanding without receiving compensation therefor in money, services or property, or any other change in corporate capital structure shall occur, then (a) the number of shares subject to outstanding Options shall be proportionately adjusted (without a change in the total price applicable to any such Option, but with a corresponding adjustment in the price per share), and (b) the number of shares available for issuance under Section 3 and Section 8(a) shall be proportionately adjusted.

SECTION 12. RESTRICTIONS ON ISSUING SHARES. No Stock shall be issued or transferred under the Plan unless and until all applicable legal requirements have been complied with to the satisfaction of the Committee. The Committee shall have the right to condition any Option on the Grantee's undertaking in writing to comply with such restrictions on any subsequent disposition of the shares of Stock issued or transferred thereunder as the Committee shall deem necessary or advisable as a result of any applicable law, regulation, official interpretation thereof, or underwriting agreement, and certificates representing such shares may be legended to reflect any such restrictions.

SECTION 13. OPTION AGREEMENTS; MISCELLANEOUS TERMS.

(a) Each Option shall be evidenced by a written agreement containing such terms and conditions, not inconsistent with the Plan, as the Committee shall approve. The terms and provisions of such agreements may vary among Grantees and among different Options granted to the same Grantee.

(b) The grant of an Option in any year shall not give the Grantee any right to similar grants in future years, any right to continue such Grantee's employment relationship with the Company or its Subsidiaries, or, until such Option is exercised and share certificates are issued, any rights as a Stockholder of the Company. All Grantees shall remain subject to discharge to the same extent as if the Plan were not in effect.

(c) No Grantee, and no beneficiary or other persons claiming under or through the Grantee, shall have any right, title, or interest by reason of any Option to any particular assets of the Company or its Subsidiaries or any shares of Stock allocated or reserved for the purposes of the Plan or subject to any Option except as set forth herein. The Company shall not be required to establish any fund or make any other segregation of assets to assure the payment of any Option.

(d) No Option may be transferred, assigned, pledged, encumbered, or charged, except by will or the laws of descent and distribution, and an Option shall be exercisable during the Grantee's lifetime only by the Grantee.

(e) The issuance of shares of Stock to Grantees or to their legal representatives shall be subject to any applicable taxes and other laws or regulations of the United States or of any state having jurisdiction thereof.

SECTION 14. AMENDMENT AND TERMINATION. The Board may, at any time, alter, amend, suspend, discontinue, or terminate the Plan; provided, however, that no such action shall adversely affect the rights of Grantees to Options previously granted hereunder and provided further that any stockholder approval

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necessary or desirable in order to comply with Rule 16b-3 under the Exchange Act or with Section 422 of the Code (or other applicable law or regulation) shall be obtained in the manner required therein.

SECTION 15. COMPLIANCE WITH SECTION 16(b). In the case of recipients of Options under the Plan who are or may be subject to Section 16 of the Exchange Act, it is the intent of the Company that the Plan and any Option granted hereunder satisfy and be interpreted in a manner that satisfies the applicable requirements of Rule 16b-3 under the Exchange Act, so that such persons will be entitled to the benefits of Rule 16b-3 under the Exchange Act or other exemptive rules under Section 16 of the Exchange Act and will not be subject to liability thereunder. If any provision of the Plan or any award of Options would otherwise conflict with the intent expressed herein, that provision, to the extent possible, shall be interpreted and deemed amended so as to avoid such conflict. To the extent of any remaining irreconcilable conflict with such intent, such provision shall be deemed void as applicable to recipients who are or may be subject Section 16 of the Exchange Act.

SECTION 16. COMPLIANCE WITH CODE SECTION 162(m). It is the intent of the Company that the Options awarded pursuant to the Plan shall constitute "qualified performance-based compensation" within the meaning of the Code
Section 162(m). Accordingly, if any provision of the Plan or any award agreement relating to such Options does not comply or is inconsistent with the requirements of Code Section 162(m), such provision shall be construed or deemed amended to the extent necessary to conform to such requirements, and no provision shall be deemed to confer upon the Committee or any other person discretion to increase the amount of compensation otherwise payable in connection with any such Award upon attainment of the performance objectives.

SECTION 17. MARKET STANDOFF. In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the 1933 Act, the Grantee may not sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose or transfer for value or otherwise agree to exchange in any of the foregoing transactions with respect to any shares of Stock acquired upon exercise of an Option granted hereunder without the prior written consent of the Company and its underwriters. Such restriction (the "Market Standoff") shall be in effect for such period of time from and after the effective date of the final prospectus for the offering as may be requested by the Company or its underwriters. The Grantee shall be required to execute such agreements as the Company or its underwriters request in connection with the Market Standoff.

SECTION 18. EFFECTIVE DATE OF PLAN. The Plan shall be effective upon its adoption by the Board. The Plan must be approved by the Company's shareholders within twelve (12) months of its establishment. No ISO may be granted more than ten years after the Plan is approved by the Board or the Company's shareholders, whichever is earlier.

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Exhibit 10.2

NATIONAL SCIENTIFIC CORPORATION
MASTER PURCHASE & LICENSING CONTRACT
CONTRACT NUMBER: NSC-KR101

This Contract is dated this 12th day of January, 2001

By and Between

Name:  Sungil Computec                 Name:  National Scientific Corporation
       (Korzan Company)                       (a Texas State U.S. corporation)

Address:  584-1 Kajae-121 Paltan-Myun   d/b/a  NSC
          Hwasung-Goon  Ktungg 1-00
          Korea                        4455 E. Camelback Ste E-160
                                       Phoenix, AZ 85018  USA

Telephone:  +82-31-354-9600            Telephone:  602-954-1492
Fax:  +82-31-354-6327                  Fax:  602-954-1499
      ("Vendor")                       ("NSC")

1. Description and Term. This Contract establishes the basic terms and conditions which shall govern all Orders for Equipment, Software or Services between the parties and shall be incorporated by reference in Orders. These terms and conditions can only be varied in writing signed by both parties. Unless otherwise agreed to in writing by Vendor and NSC, if any printed term or condition contained in any Purchase Order, acknowledgment or other form used by Vendor is inconsistent with any term or condition contained herein, the provisions of this contract shall apply and take precedence. This Contract shall remain in effect for a term of 2 years unless terminated by either party upon ninety (90) days prior written notice or otherwise under of the attached Terms and Conditions.

2. Orders. Orders for Equipment, Software, or Services must be in writing and shall specify a Purchase Order number, the above Contract Number, the requested delivery date, the Equipment, Software or Services to be Purchased or licensed, the quantities, the prices, and the desired delivery location. No Order will be binding until issued in writing by NSC and accepted by Vendor in writing.

3. Prices/Terms and Conditions. All Purchases and sales are subject to the attached Terms and Conditions.

The undersigned Vendor has read and understands this Contract (including the Terms and Conditions) and is not entering into this Contract on the basis of any representations not expressly set forth in this Contract.

                VENDOR                                  NSC

By:    /s/ YOUNG BEE PARK              By:      /s/ MICHAEL A. GROLLMAN
       ----------------------------             ----------------------------

Name:  Young Bee Park                    Name:  Michael A. Grollman
       ----------------------------             ----------------------------

Title: Vice President                    Title: Chief Operating Officer, E.V.B.
       ----------------------------             ----------------------------

Date:  1-12-2001                         Date:  1-12-2001
       ----------------------------             ----------------------------


1. PRICES; TAXES; PAYMENT.

1.1 PRICES. Prices and quantities for Equipment and Software, and Services will be specified in each Purchase Order. Unless otherwise specified in the Purchased Order, all currency amounts and payments will be in U.S. dollars.

1.2 TAXES. Tax terms for Equipment and Software, and any Services will be specified in each Purchase Order. In the event that such terms are not specified, then the Vendor shall report and pay all excise, value added, use and other domestic and foreign taxes (excluding only those taxes based on net income) designated, levied, or based (i) upon the Purchase price or any other amounts payable under this Contract; (ii) on account of this Contract; or (iii) with respect to the Equipment, Software or the Services. Vendor shall indemnify and hold harmless NSC from all claims and liability resulting from Vendor's failure to report or pay such amounts.

1.3 SHIPMENT. Shipment and delivery terms for Equipment and Software will be specified in each Purchase Order. In the event that such terms are not specified, then the Vendor shall be responsible for all shipment costs FOB the NSC warehouse in Los Angeles, California, USA.

1.4 TITLE. Title to the Equipment and Software shall pass to NSC upon NSC's receipt of the Equipment.

1.5 PAYMENT. NSC shall pay all amounts due to Vendor according to the terms specified in each Purchase Order. In the event that the Purchase Order does not specify payment terms, the default terms shall be in U.S. dollars Net 90 days of accepted delivery by NSC.

2. WARRANTIES, REPRESENTATIONS AND COVENANTS OF VENDOR. In addition to any other Contracts of Vendor set forth in this Contract, Vendor makes the following warranties, representations and covenants:

2.1 RISK OF LOSS. Until receipt by NSC in its designated warehouse, Vendor shall bear liability for all risk of loss or damage to any Equipment.

2.2 WARRANTY SUPPORT AND RETURNS. Vendor will provide warranty support to its users, if Vendor offers such support. NSC will have no obligation to pay Vendor for defective units, and will have the right to return such to Vendor or to request a credit from the Vendor for such units. Vendor is responsible for management of defective returns.

2.3 COMPLIANCE WITH LAWS. Vendor will comply with all foreign, federal, state and local laws relating to the Purchase, use and operation of the Equipment and Software, including without limitation all applicable export laws. Vendor agrees that it will not export or re-export the Equipment or Software without the appropriate United States and foreign government licenses and will not export or re-export the Equipment or Software to any countries where export or re-export is prohibited by applicable government law or regulations. Vendor shall have full responsibility for compliance with all laws that require registration or approval of this Contract or any governmental approval for sale or use of the Equipment or Software in any jurisdiction where Vendor Purchases or uses the Equipment or Software, and shall bear all costs associated with such compliance. Vendor shall indemnify and hold harmless NSC for any damages that result from a breach of this Section, and such indemnity shall survive expiration or termination of this Contract.

3. WARRANTIES AND REPRESENTATIONS OF NSC. In addition to any other Contracts of Vendor set forth in this Contract, NSC makes the following warranties, representations and covenants:

3.1 INSURANCE. NSC shall maintain, at its own expense and with established insurance companies, adequate workers' compensation, comprehensive general liability and automobile liability insurance coverage and shall provide written proof of such insurance coverage upon the request of Vendor.

3.2 WARRANTY SUPPORT. NSC will provide no warranty support or support of any kind to any users of this Equipment. NSC is not responsible for management of defective returns or any other type of end user returns.

3.3 LICENSING BY NSC OF ITS TECHNOLOGIES. Vendor may issue its own Purchase Orders in Order to license NSC technologies. Such Purchase Orders shall not be binding until signed by an officer of NSC.

4. CONFIDENTIALITY. Each party agrees not to disclose to any third party the terms of this Contract (other than in general summary press release form announcing this agreement, and as otherwise required under law for disclosure) and any other information of the other party designated as confidential ("Confidential Information") and also agrees not to use any Confidential Information of the other party except as expressly permitted under this Contract or except with the prior written consent of the other party. Each party agrees to exercise the highest degree of care in safeguarding the Confidential Information of the other party against loss or other inadvertent disclosure.

5. LIMITATION OF LIABILITIES. IN NO EVENT WILL NSC BE LIABLE TO VENDOR OR TO ANY THIRD PARTY FOR INCIDENTAL, INDIRECT, EXEMPLARY, SPECIAL OR CONSEQUENTIAL DAMAGES, WHETHER FORESEEABLE OR UNFORESEEABLE, ARISING OUT OF OR OTHERWISE RELATING TO THIS CONTRACT. IN NO EVENT WILL ANY LIABILITY TO NSC EXCEED THE PURCHASE PRICE PAID BY NSC.

NSC MASTER PURCHASE & LICENSING CONTRACT, PAGE: 2 OF 3

6. TERMINATIONS

6.1 Expiration; Termination for Convenience. This Contract shall remain in effect for a term of two years unless earlier terminated by either party for convenience upon 90 days prior written notice.

6.2 Termination by NSC for Breach. NSC, at its sole option, and reserving all other rights and remedies available to it at law or in equity, shall have the right to terminate this Contract or any accepted Order not then completed by giving written notice of termination to Vendor of the occurrence of, but not limited to, any of the following:

(a) Vendor's failure to perform any material obligation set forth in this Contract or any accepted Order not then completed, if such failure has not been corrected within ten days after NSC has given Vendor written notice of such failure; or

(b) Any act or event whereby Vendor (i) is or becomes insolvent, (ii) is or becomes a party to any bankruptcy or receivership proceeding or any similar action affecting the financial condition or property of Vendor.

6.3 Termination by Vendor for Breach. Vendor, at its sole option and reserving all other rights and remedies available to it at law or in equity, shall have the right to terminate this Contract or any accepted Order not then completed by giving written notice of termination to NSC of the occurrence of any of the following:

(a) NSC's failure to pay to Vendor any charge, cost, or other payment accruing under any accepted Order, if such delinquency has not been corrected within thirty days after Vendor has given NSC written notice of such delinquency;

(b) NSC's failure to perform any other material obligation set forth in this Contract or any accepted Order, including any act of repudiation or wrongful rejection of the Equipment, if such failure has not been corrected within thirty days after Vendor has given NSC written notice of such failure; or

(c) Any act or event whereby NSC (i) is or becomes insolvent, (ii) is or becomes a party to any bankruptcy or receivership proceeding or any similar action affecting the financial condition or property of NSC.

7. GENERAL PROVISIONS

7.1 Force Majeure. Neither party shall be liable for any delays in performance (other than obligations for the payment of money) due to acts of God, war, riots, strikes, industrial or labor disputes, delays in transit, or any other cause, whether similar or dissimilar, beyond such party's control and without its fault or negligence. Each party will use its best efforts to notify the other party in writing as soon as it has knowledge that any such delays may occur, but such party shall not be liable for any failure to give such notification. Any agreed-upon schedule shall be extended for a period of time equal to the period of delay.

7.2 Entire Contract. This Contract, the attached Schedules and any accepted Orders contain the entire Contract between NSC and Vendor with respect to the subject matter of this Contract. All prior representations, demonstrations, arrangements or understandings are superseded by this Contract. In particular, there are no representations or warranties not expressly set forth in this Contract.

7.3 Non-Solicitation. Vendor shall not induce or attempt to influence, directly or indirectly, any employee or agent or partner of NSC to terminate his or her relationship or employment with NSC or to work for Vendor or any other person, and will not hire any employee of NSC during the performance of any Services for a period of one year after termination of this Contract.

7.4 Governing Law. This Agreement shall be governed in accordance with the laws of the state of Arizona and those of the United States of America, except that the provisions of the United Nations Convention on International Sale of Goods the and United Nations Convention on Statutory Limitations will not apply. This Agreement may be translated into a language other than English, but this English version of the Agreement shall control the rights and obligations of the parties regardless of any subsequent translation and regardless of any reliance by any party upon such translation. All communications and notices related to this Agreement shall be in English, and all transaction shall be in U.S. dollars unless otherwise specified.

7.5 Counterparts and Modification. Any representations purporting to waive, vary, modify or supplement the terms of this Contract shall be of no force or effect unless in writing and signed by a duly-authorized officer of NSC and Vendor. This Contract may be executed in one or more counterparts, all of which together shall constitute one complete Contract.

7.6 Notification. Unless otherwise provided in this Contract, any notice or communication required or permitted to be given to either party shall be in writing and shall be considered effective when received in the mail (postage prepaid, certified with return receipt requested), by facsimile or by courier at the address shown on page 1 of this Contract for the party to be notified, unless such party has notified the sender in writing of a change of address, in which case notice shall be mailed as described above, to the revised address.


NSC Master Purchase & Licensing Contract, Page: 3 of 3


EXHIBIT 10.3

NATIONAL SCIENTIFIC CORPORATION

MASTER PURCHASE & LICENSING CONTRACT

CONTRACT NUMBER: NSC-KR102

This Contract is dated this 12th day of January, 2001.

By and Between

Name:      Maroo Electrotech Co. Ltd.,           Name:      National Scientific Corporation
           (Korean Company)                                 (a Texas State U.S. corporation)
Address:   #138. Donghyun-RI. Koduck-Hyun        d/b/a      NSC
           PyongTaek-SI        Kyonggi-D0                   4455 E. Camelback Rd. E-160
           Korea                                            Phoenix, AZ 85018 USA
Telephone: (+)82-31-669-2560                     Telephone: 602-954-1492
Fax:       (+)82-31-667-1193                     Fax:       602-954-1499
           ("Vendor")                                       ("NSC")

1. Description and Term. This Contract establishes the basic terms and conditions which shall govern all Orders for Equipment, Software or Services between the parties and shall be incorporated by reference in Orders. These terms and conditions can only be varied in writing signed by both parties. Unless otherwise agreed to in writing by Vendor and NSC, if any printed term or condition contained in any Purchase Order, acknowledgment or other form used by Vendor is inconsistent with any term or condition contained herein, the provisions of this contract shall apply and take precedence. This Contract shall remain in effect for a term of 2 years unless terminated by either party upon ninety (90) days prior written notice or otherwise under of the attached Terms and Conditions.

2. Orders. Orders for Equipment, Software, or Services must be in writing and shall specify a Purchase Order number, the above Contract Number, the requested delivery date, the Equipment, Software or Services to be Purchased or licensed, the quantities, the prices, and the desired delivery location. No Order will be binding until issued in writing by NSC and accepted by Vendor in writing.

3. Prices / Terms and Conditions. All Purchases and sales are subject to the attached Terms and Conditions.

The undersigned Vendor has read and understands this Contract (including the Terms and Conditions) and is not entering into this Contract on the basis of any representations not expressly set forth in this Contract.

VENDOR                                  NSC
  By:    /s/ Han Sang Chung               By:    /s/ Michael A. Grollman
  Name:  Han Sang Chung                   Name:  Michael A. Grollman
  Title: Vice president                   Title: C.O.O., Executive VP
  Date:  1-12-2001                        Date:  1-12-2001


NSC MASTER PURCHASE & LICENSING CONTRACT, Page 1 of 3


TERMS AND CONDITIONS

1. PRICES; TAXES; PAY

1.1 Prices. Prices and quantities for Equipment and Software, and Services will be specified in each Purchase Order. Unless otherwise specified in the Purchase Order, all currency amounts and payments will be in U.S. dollars.

1.2 Taxes. Tax terms for Equipment and Software, and any Services will be specified in each Purchase Order. In the event that such terms are not specified, then the Vendor shall report and pay all excise, value added, use and other domestic and foreign taxes (excluding only those taxes based on net income) designated, levied, or based (i) upon the Purchase price or any other amounts payable under this Contract; (ii) on account or this Contract; or (iii) with respect to the Equipment, Software or the Services. Vendor shall indemnify and hold harmless NSC from all claims and liability resulting from Vendor's failure to report or pay such amounts.

1.3 Shipment. Shipment and delivery terms for Equipment and Software will be specified in each Purchase Order. In the event that such terms are not specified, then the Vendor shall be responsible for all shipment costs FOB the NSC warehouse in Los Angeles, California, USA.

1.4 Title. Title to the Equipment and Software shall pass to NSC upon NSC's receipt of the Equipment.

1.5 Payment. NSC shall pay all amounts due to Vendor according to the terms specified in each Purchase Order. In the event that the Purchase Order does not specify payment terms, the default terms shall be in U.S. dollars Net 90 days of accepted delivery by NSC.

2. WARRANTIES, REPRESENTATIONS AND COVENANTS OF VENDOR. In addition to any other Contracts of Vendor set forth in this Contract, Vendor makes the following warranties, representations and covenants:

2.1 Risk of Loss. Until receipt by NSC in its designated warehouse, Vendor shall bear liability for all risk of loss or damage to any Equipment.

2.2 Warranty Support and Returns. Vendor will provide warranty support to its users, if Vendor offers such support. NSC will have no obligation to pay Vendor to for defective units, and will have the right to return such to Vendor or to request a credit from the Vendor for such units. Vendor is responsible for management of defective returns.

2.3 Compliance with Laws. Vendor will comply with all foreign, federal, state and local laws relating to the Purchase, use and operation of the Equipment and Software, including without limitation all applicable export laws. Vendor agrees that it will not export or re-export the Equipment or Software without the appropriate United States and foreign government licenses and will not export or re-export the Equipment or Software to any countries where export or re-export is prohibited by applicable government law or regulations. Vendor shall have full responsibility for compliance with all laws that require registration or approval of this Contract or any governmental approval for sale or use of the Equipment or Software in any jurisdiction where Vendor Purchases or uses the Equipment or Software, and shall bear all costs associated with such compliance. Vendor shall indemnify and hold harmless NSC for any damages that result from a breach of this Section, and such indemnity shall survive expiration or termination of this Contract.

3. WARRANTIES AND REPRESENTATIONS OF NSC. In addition to any other Contracts of Vendor set forth in this Contract, NSC makes the following warranties, representations and covenants:

3.1 Insurance. NSC shall maintain, at its own expense and with established insurance companies, adequate workers' compensation, comprehensive general liability and automobile liability insurance coverage and shall provide written proof of such insurance coverage upon the request of Vendor.

3.2 Warranty Support. NSC will provide no warranty support or support of any kind to any users of this Equipment. NSC is not responsible for management of defective returns or any other type of end user returns.

3.3 Licensing by NSC of its Technologies. Vendor may issue its own Purchase Orders in Order to license NSC technologies. Such Purchase Orders shall not be binding until signed by an officer of NSC.

4. CONFIDENTIALITY. Each party agrees not to disclose to any third party the terms of this Contract (other than in general summary press release form announcing this agreement, and as otherwise required under law for disclosure) and any other information of the other party designated as confidential ("Confidential Information") and also agrees not to use any Confidential Information of the other party except as expressly permitted under this Contract or except with the prior written consent of the other party. Each party agrees to exercise the highest degree of care in safeguarding the Confidential Information of the other party against loss or other inadvertent disclosure.

5. LIMITATION OF LIABILITIES. IN NO EVENT WILL NSC BE LIABLE TO VENDOR OR TO ANY THIRD PARTY FOR INCIDENTAL, INDIRECT, EXEMPLARY, SPECIAL OR CONSEQUENTIAL DAMAGES, WHETHER FORSEEABLE OR UNFORSEEABLE, ARISING OUT OF OR OTHERWISE RELATING TO THIS CONTRACT. IN NO EVENT WILL ANY LIABILITY TO NSC EXCEED THE PURCHASE PRICE PAID BY NSC.


NSC Master Purchase & Licensing Contract, Page: 2 OF 3

6. [MISSING COPY]

6.1 Expiration; Termination for Convenience. This Contract shall remain in effect for a term of two years unless earlier termination by either party for convenience upon 90 days prior written notice.

6.2 Termination by NSC for Breach. NSC, at its sole option, and reserving all other rights and remedies available to it at law or in equity, shall have the right to terminate this Contract or any accepted Order not then completed by giving written notice of termination to Vendor of the occurrence of, but not limited to, any of the following:

(a) Vendor's failure to perform any material obligation set forth in this Contract or any accepted Order not then completed, if such failure has not been corrected within ten days after NSC has given Vendor written notice of such failure; or

(b) Any act or event whereby Vendor (i) is or becomes insolvent, (ii) is or becomes a party to any bankruptcy or receivership proceeding or any similar action affecting the financial condition or property of Vendor.

6.3 Termination by Vendor for Breach. Vendor, at its sole option and reserving all other rights and remedies available to it at law or in equity, shall have the right to terminate this Contract or any accepted Order not then completed by giving written notice of termination to NSC of the occurrence of any of the following:

(a) NSC's failure to pay to Vendor any charge, cost, or other payment accruing under any accepted Order, if such delinquency has not been corrected within thirty days after Vendor has given NSC written notice of such delinquency;

(b) NSC's failure to perform any other material obligation set forth in this Contract or any accepted Order, including any act of repudiation or wrongful rejection of the Equipment, if such failure has not been corrected within thirty days after Vendor has given NSC written notice of such failure; or

(c) Any act or event whereby NSC (i) is or becomes insolvent, (ii) is or becomes a party to any bankruptcy or receivership proceeding or any similar action affecting the financial condition or property of NSC.

7. GENERAL PROVISIONS

7.1 Force Majeure. Neither party shall be liable for any delays in performance (other than obligations for the payment of money) due to acts of God, war, riots, strikes, industrial or labor disputes, delays in transit, or any other cause, whether similar or dissimilar, beyond such party's control and without its fault or negligence. Each party will use its best efforts to notify the other party in writing as soon as it has knowledge that any such delays may occur, but such party shall not be liable for any failure to give such notification. Any agreed-upon schedule shall be extended for a period of time equal to the period of delay.

7.2 Entire Contract. This Contract, the attached Schedules and any accepted Orders contain the entire Contract between NSC and Vendor with respect to the subject matter of this Contract. All prior representations, demonstrations, arrangements or understandings are superseded by this Contract. In particular, there are no representations or warranties not expressly set forth in this Contract.

7.3 Non-Solicitation. Vendor shall not induce or attempt to influence, directly or indirectly, any employee or agent or partner of NSC to terminate his or her relationship or employment with NSC or to work for Vendor or any other person, and will not hire any employee of NSC during the performance of any Services for a period of one year after termination of this Contract.

7.4 Governing Law. This Agreement shall be governed in accordance with the laws of the state of Arizona and those of the United States of America, except that the provisions of the United Nations Convention on International Sale of Goods and the United Nations Convention on Statutory Limitations will not apply. This Agreement may be translated into a language other than English, but this English version of the Agreement shall control the rights and obligations of the parties regardless of any subsequent translation and regardless of any reliance by any party upon such translation. All communications and notices related to this Agreement shall be in English, and all transactions shall be in U.S. dollars unless otherwise specified.

7.5 Counterparts and Modification. Any representations purporting to waive, vary, modify or supplement the terms of this Contract shall be of no force or effect unless in writing and signed by a duly-authorized officer of NSC and Vendor. This Contract may be executed in one or more counterparts, all of which together shall constitute one complete Contract.

7.6 Notification. Unless otherwise provided in this Contract, any notice or communication required or permitted to be given to either party shall be in writing and shall be considered effective when received in the mail (postage prepaid, certified with return receipt requested), by facsimile or by courier at the address shown on page 1 of this Contract for the party to be notified, unless such party has notified the sender in writing of a change of address, in which case notice shall be mailed as described above, to the revised address.


NSC Master Purchase & Licensing Contract, Page: 3 of 3


NATIONAL SCIENTIFIC CORPORATION
MASTER PURCHASE & LICENSING CONTRACT Exhibit 10.4
Contract Number NSC-UR103

This Contract is dated this 12th day of January, 2001

By and Between

Name:      OZAKI KOREA CO., LTD.      Name:    National Scientific Corporation
           (a Korean Company)                  (a Texas State U.S. corporation)

Address:   #1208 [ILLEGIBLE]          d/b/a     NSC
           [ILLEGIBLE]  , Seoul                 4455 E. Camelback E-160
           Korea                                Phoenix, AZ 85018 USA

Telephone: 82-2-3273-6834 Telephone: 602-954-1492 Fax: 82-2-3273-6804 Fax: 602-954-1499


("Vendor") ("NSC")

1. Description and Term. This Contract establishes the basic terms and conditions which shall govern all Orders for Equipment, Software or Services between the parties and shall be incorporated by reference in Orders. These terms and conditions can only be varied in writing signed by both parties. Unless otherwise agreed to in writing by Vendor and NSC, if any printed term or condition contained in any Purchase Order, acknowledgement or other form used by Vendor is inconsistent with any term or condition contained herein, the provisions of this contract shall apply and take precedence. This Contract shall remain in effect for a term of 2 years unless terminated by either party upon ninety (90) days prior written notice or otherwise under of the attached Terms and Conditions.

2. Orders. Orders for Equipment, Software, or Services must be in writing and shall specify a Purchase Order number, the above Contract Number, the requested delivery date, the Equipment, Software or Services to be Purchased or licensed, the quantities, the prices, and the desired delivery location. No Order will be binding until issued in writing by NSC and accepted by Vendor in writing.

3. Prices / Terms and Conditions. All Purchases and sales are subject to the attached Terms and Conditions.

The undersigned Vendor has read and understands this Contract (including the Terms and Conditions) and is not entering into this Contract on the basis of any representations not expressly set forth in this Contract.

            Vendor                                 NSC

By:    OZAKI KOREA CO. LTD.             By:    /s/ Michael A. Grollman
Name:  [ILLEGIBLE]                      Name:  Michael A. Grollman
Title: President                        Title: C.O.O., Executive V.P.
Date:  1-12-2001                        Date:  1-12-2001


NSC Master Purchase & Licensing Contract, Page 1 of 3

l. PRICES; TAXES, PAYMENT.

1.1 PRICES. Prices and quantities for Equipment and Software, and Services will be specified in each Purchase Order. Unless otherwise specified in the Purchase Order, all currency amounts and payments will be in U.S. dollars.

1.2 TAXES. Tax terms for Equipment and Software, and any Services will be specified in each Purchase Order. In the event that such terms are not specified, then the Vendor shall report and pay all excise, value added, use and other domestic and foreign taxes (excluding only those taxes based on net income) designated, levied, or based (i) upon the Purchase price or any other amounts payable under this Contract; (ii) on account of this Contract; or (iii) with respect to the Equipment, Software or the Services. Vendor shall indemnify and hold harmless NSC from all claims and liability resulting from Vendor's failure to report or pay such amounts.

1.3 SHIPMENT. Shipment and delivery terms for Equipment and Software will be specified in each Purchase Order. In the event that such terms are not specified, then the Vendor shall be responsible for all shipment costs FOB the NSC warehouse is Los Angeles, California, USA.

1.4 TITLE. Title to the Equipment and Software shall pass to NSC upon NSC's receipt of the Equipment.

1.5 PAYMENT. NSC shall pay all amounts due to Vendor according to the terms specified in each Purchase Order. In the event that the Purchase Order does not specify payment terms, the default terms shall be in U.S. dollars Net 90 days of accepted delivery by NSC.

2. WARRANTIES, REPRESENTATIONS AND COVENANTS OF VENDOR. In addition to any other Contracts of Vendor set forth in this Contract, Vendor makes the following warranties, representations and covenants:

2.1 RISK OF LOSS. Until receipt by NSC in its designated warehouse, Vendor shall bear liability for all risk of loss or damage to any Equipment.

2.2 WARRANTY SUPPORT AND RETURNS. Vendor will provide warranty support to its users, if Vendor offers such support. NSC will have no obligation to pay Vendor for defective units, and will have the right to return such to Vendor or to request a credit from the Vendor for such units. Vendor is responsible for management of defective returns.

2.3 COMPLIANCE WITH LAWS. Vendor will comply with all foreign, federal, state and local laws relating to the Purchase, use and operation of the Equipment and Software, including without limitation all applicable export laws. Vendor agrees that it will not export or re-export the Equipment or Software without the appropriate United States and foreign government licenses and will not export or re-export the Equipment or Software to any countries where export or re-export is prohibited by applicable government law or regulations. Vendor shall have full responsibility for compliance with all laws that require registration or approval of this Contract or any governmental approval for sale or use of the Equipment or Software in any jurisdiction where Vendor Purchases or uses the Equipment or Software, and shall bear all costs associated with such compliance. Vendor shall indemnify and hold harmless NSC for any damages that result from a breach of this Section, and such indemnity shall survive expiration or termination of this Contract.

3. WARRANTIES AND REPRESENTATIONS OF NSC. In addition to any other Contract of Vendor set forth in this Contract, NSC makes the following warranties, representations and covenants:

3.1 INSURANCE. NSC shall maintain, at its own expense and with established insurance companies, adequate workers' compensation, comprehensive general liability and automobile liability insurance coverage and shall provide written proof of such insurance coverage upon the request of Vendor.

3.2 WARRANTY SUPPORT. NSC will provide no warranty support or support of any kind to any users of this Equipment. NSC is not responsible for management of defective returns or any other type of end user returns.

3.3 LICENSING BY NSC OF ITS TECHNOLOGIES. Vendor may issue its own Purchase Orders in Order to license NSC technologies. Such Purchase Orders shall not be binding until signed by an officer of NSC.

4. CONFIDENTIALITY. Each party agrees not to disclose to any third party the terms of this Contract (other than in general summary press release form announcing this agreement, and as otherwise required under law for disclosure) and any other information of the other party designated as confidential ("Confidential Information") and also agrees not to use any Confidential Information of the other party except as expressly permitted under this Contract or except with the prior written consent of the other party. Each party agrees to exercise the highest degree of care in safeguarding the Confidential Information of the other party against loss or other inadvertent disclosure.

5. LIMITATION OF LIABILITIES. IN NO EVENT WILL NSC BE LIABLE TO VENDOR OR TO ANY THIRD PARTY FOR INCIDENTAL, INDIRECT, EXEMPLARY, SPECIAL OR CONSEQUENTIAL DAMAGES, WHETHER FORESEEABLE OR UNFORESEEABLE, ARISING OUT OF OR OTHERWISE RELATING TO THIS CONTRACT. IN NO EVENT WILL ANY LIABILITY TO NSC EXCEED THE PURCHASE PRICE PAID BY NSC.


NSC MASTER PURCHASE & LICENSING CONTRACT, PAGE 2 OF 3

6. [MISSING COPY]

6.1 Expiration; Termination for Convenience. This Contract shall remain in effect for a term of two years unless earlier termination by either party for convenience upon 90 days prior written notice.

6.2 Termination by BSC for Breach. NSC, at its sole option, and reserving all other rights and remedies available to it at law or in equity, shall have the right to terminate this Contract or any accepted Order not then completed by giving written notice of termination to Vendor of the occurrence of, but not limited to, any of the following:

(a) Vendor's failure to perform any material obligation set forth in this Contract or any accepted Order not then completed, if such failure has not been corrected within ten days after NSC has given Vendor written notice of such failure; or

(b) Any act or event whereby Vendor (i) is or becomes insolvent, (ii) is or becomes a party to any bankruptcy or receivership proceeding or any similar action affecting the financial condition or property of Vendor.

6.3 Termination by Vendor for Breach. Vendor, at its sole option and reserving all other rights and remedies available to it at law or in equity, shall have the right to terminate this Contract or any accepted Order not then completed by giving written notice of termination to NSC of the occurrence of any of the following:

(a) NSC's failure to pay to Vendor any charge, cost, or other payment accruing under any accepted Order, if such delinquency has not been corrected within thirty days after Vendor has given NSC written notice of such delinquency;

(b) NSC's failure to perform any other material obligation set forth in this Contract or any accepted Order, including any act of repudiation or wrongful rejection of the Equipment, if such failure has not been corrected within thirty days after Vendor has given NSC written notice of such failure; or

(c) Any act or event whereby NSC (i) is or becomes insolvent, (ii) is or becomes a party to any bankruptcy or receivership proceeding or any similar action affecting the financial condition or property of NSC.

7. General Provisions

7.1 Force Majeure. Neither party shall be liable for any delays in performance (other than obligations for the payment of money) due to acts of God, war, riots, strikes, industrial or labor disputes, delays in transit, or any other cause, whether similar or dissimilar, beyond such party's control and without its fault or negligence. Each party will use its best efforts to notify the other party in writing as soon as it has knowledge that any such delays may occur, but such party shall not be liable for any failure to give such notification. Any agreed-upon schedule shall be extended for a period of time equal to the period of delay.

7.2 Entire Contract. This Contract, the attached Schedules and any accepted Orders contain the entire Contract between NSC and Vendor with respect to the subject matter of this Contract. All prior representations, demonstrations, arrangements or understandings are superseded by this Contract. In particular, there are no representations or warranties not expressly set forth in this Contract.

7.3 Non-Solicitation. Vendor shall not induce or attempt to influence, directly or indirectly, any employee or agent or partner of NSC to terminate his or her relationship or employment with NSC or to work for Vendor or any other person, and will not hire any employee of NSC during the performance of any Services for a period of one year after termination of this Contract.

7.4 Governing Law. This Agreement shall be governed in accordance with the laws of the state Arizona and those of the United States of America, except that the provisions of the United Nations Convention on International Sale of Goods the and United Nations Convention on Statutory Limitations will not apply. This Agreement may be translated into a language other than English, but this English version of the Agreement shall control the rights and obligations of the parties regardless of any subsequent of any subsequent translation and regardless of any reliance by any party upon such translation. All communications and notices related to this Agreement shall be in English, and all transaction shall be in U.S. dollars unless otherwise specified.

7.5 Counterparts and Modification. Any representations purporting to waive, vary, modify or supplement the terms of this Contract shall be of no force or effect unless in writing and signed by a duly-authorized officer of NSC and Vendor. This Contract may be executed in one or more counterparts, all of which together shall constitute one complete Contract.

7.6 Notification. Unless otherwise provided in this Contract, any notice or communication required or permitted to be given to either party shall be in writing and shall be considered effective when received in the mail (postage prepaid, certified with return receipt requested), by facsimile or by courier at the address shown on page 1 of this Contract for the party to be notified, unless such party has notified the sender in writing of a change of address, in which case notice shall be mailed as described above, to the revised address.


NSC Master Purchase & Licensing Contract, Page: 3 of 3