An Open Letter to National Scientific Corporation Investors from Michael Grollman, Chairman & Chief Executive Officer

National Scientific Corporation (OTCBB: NSCT), emerging leader in location-sensitive technologies, discussed its recent strategy update (disclosed in its 10Q report) through this open letter to investors.

National Scientific Corporation (NSC) has established a respected family of location-sensitive technologies and products, which are expected to provide the basis for considerable organic growth in the months and years ahead. Management intends to supplement that growth with a bold new merger and acquisition strategy that will greatly expand NSC's offerings and income.

NSC has determined that there are a significant number of privately held companies operating in niche markets that are shared by, or complementary to, those presently served by NSC. Recognizing that substantial economies of scale and cross-marketing advantages can be achieved by combining these entities, NSC management is conducting a strategic, aggressive M&A campaign to acquire a number of healthy, well-managed businesses to fully realize those advantages. Our near-term focus is on companies serving the school bus and first responder segments; targeting will extend into other areas as our product lines expand.

Organic Growth

NSC's current primary product lines - Travado� IBUS� digital video recording and student tracking systems, which offer security and monitoring for school buses, and Travado IRespond� security and monitoring systems for first responders (police, fire and others) and homeland security - are firmly established as technology and value leaders, and are positioned for dramatic sales growth.

Demand for reliable, affordable tracking technology is being driven by three factors. First, government agencies, businesses and individuals are placing greater emphasis on security and safety, and they want direct access to information and control. Second, a host of cost-effective wireless tracking system components have emerged, offering precision locating, real-time video and other features suitable for many situations. Third, the cost of tracking technology has plummeted, making it affordable for schools, law enforcement, hospitals, fleet operators, parents and everyone else who needs to monitor the location of people, vehicles and other high-value assets. Many public agencies have already recognized the need for these products and have funding in place to support immediate or near-term purchasing.

NSC's successful showcase installations, such as the Scottsdale Unified School District, and alliances with world-class municipal contractors, such as SAP and the nationwide Digital Cities initiative, are providing NSC with new credibility and valuable marketing exposure. Our product lines are readily adaptable to a number of related markets, such as public safety, utilities, mobile service industries and delivery businesses. NSC can profitably move into those markets with minimal R&D expense, and added economies of scale.

Mergers and Acquisition

Management's objective is to consummate approximately one acquisition per quarter. The Company is working closely with a respected Chicago-based investment banking group to prepare acquisition packages that will be attractive to targeted companies, at the same time advancing and protecting the interests of NSC shareholders. Acquisitions will be accomplished with a new class of preferred stock that may trade separately from NSC common stock in the public market, and will be convertible at a future date into the common stock of new NSC subsidiaries. In the meanwhile, NSC will hold all the common stock of the subsidiaries.

The program is participatory, rather than predatory, meaning that principals and management of targeted firms will be actively engaged in the merger process, and will in most cases continue to provide their proven managerial skills to the business after acquisitions are complete. Targeted companies will have operating integrity, good revenue streams, professional-class management and personnel, and desirable products or services in their markets. The benefits of this strategy will be so significant that NSC management believes it will be able to acquire, in some instances, entities much larger than NSC itself. Management further believes that the rate of earnings growth acceleration may be dramatic.

Management intends to make acquisitions that are aligned or synergistic with NSC's current and expanding initiatives and direction, to reflect a cohesive corporate vision. Management will pursue companies that are operating in complementary technology spaces with valuable channels to market. Given the Company's current focus on the Travado family of offerings for school bus and first response operators and providers, NSC will initially target providers of software, hardware and services that are in demand among those customers. With this strategy, NSC will offer one-stop shopping for school districts and municipalities who are looking for superior comprehensive solutions, or simply efficient upgrades, for their transport, safety and security operations.

Michael Grollman
Chairman & Chief Executive Officer

2000-2006 National Scientific Corp.

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