================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB
(MARK ONE)

   (X)    QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
          ACT OF 1934

               For the Quarterly Period Ended: September 30, 2007

                                       OR

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

                         COMMISSION FILE NUMBER 0-15885

                           NATIONAL DATACOMPUTER, INC.
        (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)

            DELAWARE                                         04-2942832
(STATE OR OTHER JURISDICTION OF                            (IRS EMPLOYER
 INCORPORATION OR ORGANIZATION)                           IDENTIFICATION #)

                   900 MIDDLESEX TURNPIKE, BILLERICA, MA 01821
               (Address of principal executive offices) (Zip Code)

        REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (978) 663-7677

                  ---------------------------------------------

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such report(s), and (2)
has been subject to such filing requirements for the past ninety (90) days.
Yes [X] No [ ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]


The number of shares of the Registrant's common stock, par value $0.001,
outstanding as of November 6, 2007 was 35,742,438.

Transitional Small Business Disclosure Format Yes [ ] No [X]
================================================================================
<PAGE>

                           NATIONAL DATACOMPUTER, INC.
                                      INDEX
                          PART I. FINANCIAL INFORMATION

                                                                        Page No.
                                                                        --------
ITEM 1.   FINANCIAL STATEMENTS:

          Balance Sheets as of September 30, 2007
          and December 31, 2006 ............................................3

          Statements of Operations for the three and nine months
          ended September 30, 2007 and 2006.................................4

          Statement of Stockholders' Deficit for the nine months
          ended September 30, 2007..........................................5

          Statements of Cash Flows for the nine months
          ended September 30, 2007 and 2006.................................6

          Notes to Financial Statements.....................................7


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION........12

ITEM 3.   CONTROLS AND PROCEDURES..........................................18

                           PART II. OTHER INFORMATION

ITEM 1.   Legal Proceedings................................................19

ITEM 2.   Unregistered Sales of Equity Securities and Use of Proceeds......19

ITEM 3.   Defaults upon Senior Securities..................................19

ITEM 4.   Submissions of Matters to a Vote of Security Holders.............19

ITEM 5.   Other Information................................................19

ITEM 6.   Exhibits.........................................................20

SIGNATURES.................................................................21

EXHIBIT INDEX..............................................................22

                                        2
<PAGE>

                           NATIONAL DATACOMPUTER, INC.
                                 BALANCE SHEETS
--------------------------------------------------------------------------------
<TABLE><CAPTION>
                                                                       September 30,     December 31,
                                                                           2007              2006
                                                                       ------------      ------------
                                                                       (Unaudited)        (Audited)
<S>                                                                    <C>               <C>
Assets
Current Assets:
     Cash                                                              $    171,783      $    162,783
     Accounts receivable, net of allowance for doubtful
       accounts of $3,000                                                    77,228            98,985
     Inventories, net                                                         3,598            10,000
     Deferred hardware and software costs                                    17,427            15,064
     Prepaid expenses                                                        83,420             8,785
                                                                       ------------      ------------
       Total current assets                                                 353,456           295,617
Property and equipment, net                                                  66,168            22,539
Capitalized software development costs, net                                  11,335            15,615
                                                                       ------------      ------------
       Total Assets                                                    $    430,959      $    333,771
                                                                       ============      ============

Liabilities and Stockholders' Deficit:
Current Liabilities:
     Current obligations under capital lease                           $     20,982      $      3,844
     Note payable, current portion                                           23,815            27,775
     Accounts payable                                                       518,426           366,229
     Customer deposits                                                       14,812            24,911
     Accrued payroll and related taxes                                      128,805           146,485
     Other accrued expenses                                                 108,740           155,587
     Deferred revenues                                                      349,488           248,913
                                                                       ------------      ------------
       Total current liabilities                                          1,165,068           973,744
Note payable, net of current portion                                           --              18,125
Obligations under capital lease, net of current portion                      28,312             6,420
                                                                       ------------      ------------
       Total Liabilities                                                  1,193,380           998,289
                                                                       ------------      ------------

Commitments and contingencies

Stockholders' Deficit:
     Preferred stock, $0.001 par value; 50,000 shares authorized;
       no shares issued or outstanding                                         --                --

     Common stock, $0.001 par value; 50,000,000 shares authorized;
       35,742,438 and 26,640,866 shares issued and outstanding at
       September 30, 2007 and December 31, 2006, respectively                35,742            26,641

     Capital in excess of par value                                      15,516,944        15,225,364
     Accumulated deficit                                                (16,315,107)      (15,916,523)
                                                                       ------------      ------------
       Total Stockholders' Deficit                                         (762,421)         (664,518)
                                                                       ------------      ------------
       Total Liabilities and Stockholders' Deficit                     $    430,959      $    333,771
                                                                       ============      ============
</TABLE>
                   The accompanying notes are an integral part
                         of these financial statements.

                                        3
<PAGE>

                           NATIONAL DATACOMPUTER, INC.
                            STATEMENTS OF OPERATIONS
                                   (Unaudited)
--------------------------------------------------------------------------------
<TABLE><CAPTION>
                                                               Three Months Ended                  Nine Months Ended
                                                         ------------------------------      ------------------------------
                                                         September 30,     September 30,     September 30,     September 30,
                                                             2007              2006              2007              2006
                                                         ------------      ------------      ------------      ------------
<S>                                                      <C>               <C>               <C>               <C>
Revenues:
    Product                                              $    444,686      $     78,162      $    797,739      $    304,009
    Services                                                  222,982           273,183           683,279           985,994
                                                         ------------      ------------      ------------      ------------
         Total Revenues                                       667,668           351,345         1,481,018         1,290,003

Cost of revenues                                              511,986           165,152         1,029,243           570,613
                                                         ------------      ------------      ------------      ------------

         Gross Profit                                         155,682           186,193           451,775           719,390
                                                         ------------      ------------      ------------      ------------

Operating expenses:
    Research and development                                     --              11,577              --              46,333
    Selling and marketing                                      76,758            57,703           243,378           210,147
    General and administrative                                175,048           203,521           625,507           662,115
                                                         ------------      ------------      ------------      ------------
                                                              251,806           272,801           868,885           918,595
                                                         ------------      ------------      ------------      ------------
Loss from operations                                          (96,124)          (86,608)         (417,110)         (199,205)

Other income (expense):
    Interest income                                             1,518               388             6,013             1,022
    Gain (loss) on currency exchange                           12,543             1,373            20,561             6,222
    Interest expense                                           (3,398)             (551)           (8,048)           (3,785)
                                                         ------------      ------------      ------------      ------------
Loss from continuing operations                               (85,461)          (85,398)         (398,584)         (195,746)

    Income from discontinued operations (Note 1)                 --               1,239              --             107,594
                                                         ------------      ------------      ------------      ------------
Net (loss) income                                        $    (85,461)     $    (84,159)     $   (398,584)     $    (88,152)
                                                         ============      ============      ============      ============

Calculation of net loss per common share:

Net (loss) income                                        $    (85,461)     $    (84,159)     $   (398,584)     $    (88,152)
Preferred stock preferences                                      --             (66,750)             --            (200,250)
                                                         ------------      ------------      ------------      ------------
Net loss attributable to common stockholders             $    (85,461)     $   (150,909)     $   (398,584)     $   (288,402)
                                                         ============      ============      ============      ============
Basic and diluted net loss per share attributable to
    common stockholders:
    Loss from continuing operations                      $      (0.00)     $      (0.01)     $      (0.01)     $       0.00
    Income from discontinued operations                          0.00              0.00              0.00              0.00
    Preferred stock preferences                                  0.00             (0.00)             0.00             (0.01)
                                                         ------------      ------------      ------------      ------------
    Net loss attributable to common stockholders         $      (0.00)     $      (0.01)     $      (0.01)     $      (0.01)
                                                         ============      ============      ============      ============

Weighted average shares                                    35,742,438        26,640,866        32,687,347        24,636,049
                                                         ============      ============      ============      ============
</TABLE>
                   The accompanying notes are an integral part
                         of these financial statements.

                                        4
<PAGE>

                           NATIONAL DATACOMPUTER, INC.
                       STATEMENT OF STOCKHOLDERS' DEFICIT
--------------------------------------------------------------------------------
<TABLE><CAPTION>
                                                     Common Stock
                                              -----------------------------      Capital in                            Total
                                                                   Par             excess           Accumulated     stockholders'
                                                 Shares           value         of par value          deficit         deficit
                                              ------------     ------------     ------------      ------------      ------------
<S>                                           <C>              <C>              <C>               <C>               <C>
Balance at December 31, 2006 (Audited)          26,640,866     $     26,641     $ 15,225,364      ($15,916,523)     ($   664,518)

Net loss                                              --               --               --            (398,584)         (398,584)

Issuance of stock in satisfaction
   of accrued interest                           8,037,336            8,037           (8,037)             --                --

Additional capital raised, net
   of costs of $87,835 (Note 1)                       --               --            262,165              --             262,165

Issuance of stock in
   satisfaction of accrued compensation            564,236              564           20,686              --              21,250

Issuance of stock in
   satisfaction of deferred compensation           500,000              500           14,500              --              15,000

Stock based compensation related to
   options granted                                    --               --              2,266              --               2,266
                                              ------------     ------------     ------------      ------------      ------------
Balance at September 30, 2007 (Unaudited)       35,742,438     $     35,742     $ 15,516,944      ($16,315,107)     ($   762,421)
                                              ============     ============     ============      ============      ============
</TABLE>
                   The accompanying notes are an integral part
                         of these financial statements.

                                        5
<PAGE>

                           NATIONAL DATACOMPUTER, INC.
                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)
--------------------------------------------------------------------------------
<TABLE><CAPTION>
                                                                                Nine Months Ended
                                                                         ------------------------------
                                                                         September 30,     September 30,
                                                                             2007              2006
                                                                         ------------      ------------
<S>                                                                      <C>               <C>
OPERATING ACTIVITIES:
     Net loss                                                            $   (398,584)     $    (88,152)
     Less: Income from discontinued operations                                   --            (107,594)
                                                                         ------------      ------------
     Loss from continuing operations                                         (398,584)         (195,746)
        Adjustments to reconcile net loss to net
           cash provided by (used for) operating activities:
           Interest on loan                                                      --               2,033
           Depreciation and amortization                                       26,051            26,585
           Stock based compensation related to options granted                  2,266              --
           Changes in assets and liabilities:
               Decrease (increase) in accounts receivable                      21,757           (83,392)
               Decrease in inventories                                          6,402              --
               Increase in deferred hardware and software costs                (2,363)         (199,959)
               Increase in other prepaid expenses                             (74,635)          (13,720)
               Increase in accounts payable                                   152,197           167,763
               Decrease in customer deposits                                  (10,099)         (130,753)
               (Decrease) increase in accrued expenses                        (28,277)           23,463
               Increase in deferred revenues                                  100,575           403,776
                                                                         ------------      ------------
     Net cash (used for) provided by continuing operatIons                   (204,710)               50
     Net cash provided by discontinued operatIons                                --              86,220
                                                                         ------------      ------------
     Net cash (used for) provided by operating activities                    (204,710)           86,270
                                                                         ------------      ------------

Cash flows from investing activities:
     Purchases of property and equipment                                      (15,187)          (15,245)
     Additions to capitalized software development costs                       (1,674)          (11,285)
                                                                         ------------      ------------
     Net cash used for investing activities - continuing operations           (16,861)          (26,530)
                                                                         ------------      ------------

Cash flows from financing activities:
     Net proceeds from additional capital raised                              262,165              --
     Principal payments on note payable                                       (22,085)          (42,696)
     Principal payments on obligations
           under capital lease                                                 (9,509)           (1,997)
                                                                         ------------      ------------
     Net cash provided by (used for) financing activities -
       continuing operations                                                  230,571           (44,693)
                                                                         ------------      ------------

Net increase in cash                                                            9,000            15,047
Cash, beginning of period                                                     162,783           125,508
                                                                         ------------      ------------

Cash, end of period                                                      $    171,783      $    140,555
                                                                         ============      ============

Supplemental Disclosure of Cash Flow Information:

     Cash paid for interest                                              $      8,048      $      1,752
     Non-cash investing and financing activities:
           Accrued compensation paid with stock                          $     21,250              --
           Deferred compensation paid with stock                         $     15,000              --
           Acquisition of property and equipment under capital lease     $     48,539              --
           Accounts payable converted to note payable                    $       --        $     52,574
           Accrued interest on preferred stock charged to
               accumulated deficit                                       $       --        $    200,250
           Issuance of stock in satisfaction of
               accrued interest                                          $       --        $    400,500
</TABLE>

                   The accompanying notes are an integral part
                         of these financial statements.

                                        6
<PAGE>

                           NATIONAL DATACOMPUTER, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.  ORGANIZATION

    National Datacomputer, Inc. (the "Company") is engaged exclusively in
providing solutions through the use of mobile information systems in the
distribution market segment within the product supply chain. We design, market,
sell, and service computerized systems used to automate the collection,
processing, and communication of information related to product sales and
inventory control. Our products and services include data communication,
application-specific software, handheld computers, related peripherals, and
accessories, as well as associated education and support services for our
hardware and software products.

BASIS OF PRESENTATION

    The financial statements included in this report have been prepared by the
Company pursuant to the rules and regulations of the United States Securities
and Exchange Commission for interim financial reporting and include all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation. These financial
statements have not been audited.

    Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to such
rules and regulations for interim reporting. The Company believes that the
disclosures contained herein are adequate to make the information presented not
misleading. However, these financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's annual
report for the year ended December 31, 2006, which are included in the Company's
Form 10-KSB.

    The year-end condensed balance sheet data was derived from audited financial
statements, but does not include all disclosures required by accounting
principles generally accepted in the United States of America.

LIQUIDITY AND CAPITAL RESOURCES

    We have an accumulated deficit of approximately $16,315,000 through
September 30, 2007. As a result of our deficit and cash position, the report of
our independent registered public accounting firm as of and for the year ended
December 31, 2006 contains an explanatory paragraph regarding substantial doubt
about our ability to continue as a going concern. We have taken numerous steps
to address this situation. During the fiscal year ended December 31, 2006, we
divested ourselves of our audit business line in connection with a transaction
relating to shares of our preferred and common stock held by a majority

                                        7
<PAGE>

holder of our capital stock. On November 29, 2006, we entered into an
arrangement with A.S.T., Inc. ("AST") and Phyle Industries, Inc. ("Phyle")
pursuant to which we sold our audit business line to AST in exchange for 4,150
shares of our preferred stock (representing all of our issued and outstanding
preferred stock).

    During January 2007 acting as agent for certain new investors interested in
purchasing shares of our common stock, we caused the transfer of 30,339,236
shares of our common stock, together with accrued but unpaid stock dividends
(representing approximately 90% of our common stock in the aggregate) that Phyle
had previously purchased from Capital Bank Grawe Gruppe AG ("CapitalBank").
These investors paid Phyle $250,000 for the purchase of our common stock and
agreed to also provide us a capital infusion of $350,000 to be used for working
capital.

    We have re-aligned our spending from administration and manufacturing to
maintain key development programs while carefully managing our overall cash
usage. We are exploring all opportunities to improve our financial condition by
aggressively pursuing potential sales. There is a possibility that the latter
might not result in adequate revenues in the near future to meet cash flow
requirements, and therefore might require us to implement further cost saving
action or attempt to obtain additional financing. We believe that based on our
current revenue expectations, the expected timing of such revenues, and our
current level of expenses we have sufficient cash to fund our operations through
the end of 2007. However, there are no assurances that these plans will be
successful or sufficient.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

    The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.

NET LOSS PER SHARE

    Basic and diluted loss per share is calculated by dividing net loss
attributable to common stockholders by the weighted-average number of common
shares outstanding.

    Interest payable to preferred stockholders, the fair value of inducements to
convert preferred stock into common stock, and any discounts implicit in the
conversion terms upon issuance of preferred stock are subtracted from the net
loss to determine the amount of net loss attributable to common stockholders.

                                        8
<PAGE>

3.  STOCK OPTION PLANS

    In December 2004, the Financial Accounting Standard Board (FASB) issued
Statement of Financial Accounting Standards No. 123R, "SHARE-BASED PAYMENT"
(SFAS 123R). This Statement is a revision of SFAS No. 123, "ACCOUNTING FOR
STOCK-BASED COMPENSATION" (SFAS 123), and supersedes Accounting Principles Board
Opinion No. 25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES" (APB 25), and its
related implementation guidance. SFAS 123R establishes accounting for equity
instruments exchanged for employee services.

    Under the provision of SFAS 123(R), share-based compensation is measured at
the grant date, based upon the fair value of the award, and is recognized as an
expense over the employee's requisite service period (generally the vesting
period of the equity grant). The majority of the Company's share-based
compensation arrangements vest over four years.

    The Company accounts for its share-based compensation under the provisions
of SFAS 123R. During the three months and nine months ended September 30, 2007,
share-based compensation expense amounted to $1,363 and $2,266 respectively.
There was no share-based compensation expense recorded during the three months
and nine months ended September 30, 2006.

    The Company estimates the fair value of stock options using the
Black-Scholes valuation model. Key input assumptions used to estimate the fair
value of stock options include the exercise price of the award, the expected
option term, the expected volatility of the Company's stock over the option's
expected term, the risk-free interest rate over the option's expected term, and
the Company's expected annual dividend rate. The Company believes that the
valuation technique and the approach utilized to develop the underlying
assumptions are appropriate in calculating the fair values of the Company's
stock options granted in the three months and nine months ended September 30,
2007. Estimates of fair values are not intended to predict actual future events
or the value ultimately realized by persons who receive equity awards.

    The weighted average grant date fair value of options granted was $0.03
during the three months and nine months ended September 30, 2007. There were no
options granted during the three months and nine months ended September 30,
2006. The following assumptions were used to estimate the fair market value of
options granted using the Black-Scholes evaluation method:

                                                      NINE MONTHS ENDED
                                                      SEPTEMBER 30, 2007
                                                      ------------------

        Expected option term (1)                         6.25 years
        Expected volatility (2)                             99.6%
        Risk-free interest rate (3)                          4.57%
        Expected annual dividend rate                        0%

                                        9
<PAGE>

(1) The option life was determined using the simplified method for estimating
expected option life, which qualifies as "plain-vanilla" options. (2) The stock
volatility for each grant is determined based on the review of the experience of
the weighted average of historical monthly price changes of the Company's common
stock over the most recent six years, which approximates the expected option
life of the grant of 6.25 years. (3) The risk-free interest rate for periods
equal to the expected term of the share option is based on the U.S. Treasury
yield curve in effect at the time of grant.

    On August 19, 1997, the Board of Directors adopted the 1997 Stock Option
Plan ("1997 Plan") which provided for issuance of both incentive stock options
and non-qualified options to employees. As of September 30, 2007, there were
options to purchase 200,000 shares of common stock outstanding and no shares
available for grant under the 1997 Plan.

    On January 1, 1998, the Board of Directors adopted the 1998 Stock Option
Plan ("1998 Plan") which provides for issuance of non-qualified options to
employees. A maximum of 300,000 shares of common stock of the Company was
reserved for issuance in accordance with the terms of the 1998 Plan. As of
September 30, 2007, there were options to purchase 20,000 shares of common stock
outstanding and no shares available for grant under the 1998 Plan.

    On March 30, 2007, the Board of Directors adopted the 2007 Employee,
Director and Consultant Stock Option Plan ("2007 Plan") which provides for the
issuance of both incentive and non-qualified stock options to employees,
consultants and directors. A maximum of 2,000,000 shares of common stock of the
Company was reserved for issuance in accordance with the terms of the 2007 Plan.
Upon the approval of the 2007 Plan, our 1997 Plan and our 1998 Plan terminated.
All outstanding options under our 1997 and 1998 Stock Option Plans will remain
in effect, but no additional option grants may be made. As of September 30,
2007, there were 1,125,000 options outstanding and 875,000 shares available for
grant under the 2007 Plan.

    The following table summarizes information about stock options outstanding
at September 30, 2007:
<TABLE><CAPTION>
                                                          Weighted
                                                          average     Remaining      Aggregate
                                              Number of   exercise    contractual    intrinsic
                                               shares       price    life in years     value
-------------------------------------------- ----------- ---------- --------------- -----------
<S>                                           <C>          <C>           <C>           <C>
Outstanding at December 31, 2006               220,000     $0.75         1.4           $  --

Granted                                       1,125,000     0.03         9.83

Exercised                                         --

Cancelled/forfeited                               --

Outstanding at September 30, 2007             1,345,000     0.15         8.53          $  --

Options vested or expected to vest at         1,007,500     0.19         7.92          $  --
September 30, 2007 (1)

Options exercisable at September 30, 2007      220,000     $0.75         1.1           $  --
</TABLE>

                                       10
<PAGE>

(1) In addition to the vested options, the Company expects a portion of the
unvested options to vest at some point in the future. Options expected to vest
are calculated by applying an estimated forfeiture rate to the unvested options.


4.  INVENTORIES

    Inventories consist of the following:    SEPTEMBER 30,     DECEMBER 31,
                                                  2007             2006
                                             -------------     ------------

    Raw material                                 $3,598          $10,000
    Work-in-process                                 --               --
    Finished goods                                  --               --
                                             -------------     ------------
                                  Total          $3,598          $10,000
                                             =============     ============

5.  INCOME TAXES

    The Company adopted the provisions of FASB Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes - an interpretation of FASB
Statement No. 9" ("FIN 48"), on January 1, 2007. FIN 48 requires that the impact
of tax positions be recognized in the financial statements if they are more
likely than not to be sustained upon examination, based on the technical merits
of the position. As discussed in the financial statements in the 2006 Form
10-KSB, the Company has a valuation allowance against the full amount of its net
deferred tax assets. The Company currently provides a valuation allowance
against deferred tax assets when it is more likely than not that some portion,
or all of its deferred tax assets, will not be realized. The implementation of
FIN 48 had no effect on the Company's financial position or results of
operations and there is no interest or penalties as management believes the
Company has no uncertain tax position at September 30, 2007.

    The Company is subject to U.S. federal income tax as well as well as income
tax of certain state jurisdictions. The Company has not been audited by the
I.R.S. or any states in connection with income taxes. The period from 2003-2006
remains open to examination by the I.R.S. and state authorities.

6.  RECENT ACCOUNTING PRONOUNCEMENTS

    In September 2006, the FASB issued SFAS No. 157, "FAIR VALUE MEASUREMENTS".
SFAS 157 prescribes a single definition of fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The Company
does not believe the adoption of SFAS 157 will have a material impact on its
financial condition or results of operations. SFAS 157 is effective for the
Company's interim reporting period beginning January 1, 2008.

                                       11
<PAGE>

    In February 2007, the FASB issued SFAS No. 159, "THE FAIR VALUE OPTION FOR
FINANCIAL ASSETS AND FINANCIAL LIABILITIES." This statement permits entities to
choose to measure many financial instruments and certain other items at fair
value. The objective is to improve financial reporting by providing entities
with the opportunity to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. The Company does not believe the adoption
of SFAS 159 will have a material impact on its financial condition or results of
operations. SFAS 159 is effective for the Company's interim reporting period
beginning January 1, 2008.

    ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

OVERVIEW

    Our mission is to provide solutions through the use of mobile information
systems in the distribution market segment within the product supply chain. We
design, market, sell, and service computerized systems used to automate the
collection, processing, and communication of information related to product
sales and inventory control. Our products and services include data
communication, application-specific software, handheld computers, related
peripherals, and accessories, as well as associated education and support
services for our hardware and software products.

    From the very beginning we designed our software solution based on the
customer's unique specifications. Our first entry into the market was a
DOS-based Route Accounting software solution named RouteRider(R) which we
developed in 1988. The RouteRider software, running on our first generation of
rugged handheld Datacomputer(R) ("Datacomputer") the DC3.0, was originally
designed and built for an office coffee service company. Since that time
multiple generations of Datacomputers (DC3X, DC4 and DC4CE) were designed and
brought to market and our software application was improved customer by customer
and market by market. To date we have provided dependable solutions for
distribution markets such as baking, dairy, beer, soda, water, wine and spirits.

    Although our Datacomputers running our original RouteRider software are
still available for purchase, we have now channeled all of our experience into a
new portable and highly parameterized Route Accounting solution designed to run
on the very latest industry standard Microsoft(TM) operating systems and
architectures which increases our market potential by running on industry
preferred operating systems and handheld devices.

FORWARD LOOKING STATEMENTS

    The foregoing discussion and analysis should be read in conjunction with the
unaudited financial statements and notes thereto appearing elsewhere herein and
our Annual Report

                                       12
<PAGE>

on Form 10-KSB filed with the Securities and Exchange Commission for the year
ended December 31, 2006.

    This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
that involve risks and uncertainties. We generally use words such as "believe,"
"may," "could," "will," "intend," "expect," "anticipate," "plan," and similar
expressions to identify forward-looking statements. You should not place undue
reliance on these forward-looking statements. Our actual results could differ
materially from those anticipated in the forward-looking statements for many
reasons, including the risks described in the Company's filings with the
Security and Exchange Commission, including its Annual Report on Form 10-KSB for
the year ended December 31, 2006.

    Although we believe the expectations reflected in the forward-looking
statements are reasonable, they relate only to events as of the date on which
the statements are made, and we cannot assure you that our future results,
levels of activity, performance or achievements will meet these expectations.
Moreover, neither we nor any other person assumes responsibility for the
accuracy and completeness of the forward-looking statements. We do not intend to
update any of the forward-looking statements after the date of this report to
conform these statements to actual results or to changes in our expectations,
except as required by law.

RESULTS OF OPERATIONS

    NINE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 2006.

    For the nine months ended September 30, 2007, we reported a net loss of
$398,584 compared to a net loss of $88,152 for the nine months ended September
30, 2006. For the nine months ended September 30, 2007, we reported a loss from
continuing operations of $398,584 compared to a loss of $195,746 for the nine
months ended September 30, 2006.

    Total revenues increased $191,015, or 15% to $1,481,018 for the nine months
ended September 30, 2007 from $1,290,003 for the nine months ended September 30,
2006. Total product revenues increased by approximately $495,000 due primarily
to higher sales of our new route software product, RouteRider LE ("RRLE"). This
increase was offset by lower service revenue of approximately $300,000.
Subsequent to the end of the current quarter, we contracted to deliver a
comprehensive RRLE Direct Store Delivery solution to a major national bakery
based in Baltimore, MD. The total order has a value of approximately $1,000,000
and will be delivered in 2008.

    Gross profit for the nine months ended September 30, 2007 was $451,775, or
31% of revenues, compared to $719,390 or 56% of revenues for the nine months
ended September 30, 2006. The decreased profit is a direct result of higher cost
of material. The Company's two major product lines have different profit margins
as well as multiple profit margins within each product line. In the course of
the periods compared, there may be significant

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<PAGE>

changes in the gross profit as a percentage of revenue depending on the mix of
the product sold.

    OPERATING EXPENSES

    We incurred no expenses for research and development for the nine months
ended September 30, 2007, as compared to $46,333 for the nine months ended
September 30, 2006. This is due to the fact that at the present time we no
longer have a research and development department.

    Selling and marketing expenses for the nine months ended September 30, 2007
were $243,378 compared to $210,147 for the nine months ended September 30, 2006,
an increase of $33,231 or 16%. The increase is due to higher expenses incurred
to elevate the company's Web presence in order to support marketing of our
flagship RouteRider LE(TM) Direct Store Delivery solution for the Beverage,
Baking, Coffee & Tea, Dairy, and Snack Food industries.

    General and administrative expenses for the nine months ended September 30,
2007 were $625,507 compared to $662,115 for the nine months ended September 30,
2006, a decrease of $36,608 or 6%. The decrease is a result of reduced legal and
directors' fees. The decrease was offset by higher occupancy expense due to the
allocation of under utilized leased space to general and administrative.

LIQUIDITY AND CAPITAL RESOURCES

    We used cash of $204,710 and generated cash of $50 from operating activities
from continuing operations for the nine months ended September 30, 2007 and
2006, respectively. For the nine months ended September 30, 2007, our principal
operating cash for continuing operations was used to fund our loss from
operations combined with increases in prepaid expenses, along with a decrease in
customer deposits and accrued expenses, offset by an increase in accounts
payable and deferred revenues. For the nine months ended September 30, 2006, our
principal operating cash for continuing operations was generated by an increase
in deferred revenues and accounts payable, offset by our loss from operations
along with an increase in deferred hardware and software costs, and. accounts
receivable.

    We used cash of $16,861 and $26,530 for investing activities from continuing
operations for the nine months ended September 30, 2007 and 2006, respectively.
The cash was used for the purchase of capital equipment. As of September 30,
2007, we had no material commitments for capital expenditures.

    We generated cash of $230,571 and used cash of $44,693 for financing
activities from continuing operations for the nine months ended September 30,
2007 and 2006, respectively. During the nine months ended September 30, 2007, we
raised capital, net of expenses, in the amount of $262,165. During the nine
months ended September 30, 2006,

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<PAGE>

cash was used to make payments on obligations under our notes payable and
capital leases.

    We have an accumulated deficit of approximately $16,315,000 through
September 30, 2007. As a result of our deficit and cash position, the report of
our independent registered public accounting firm relating to the financial
statements as of and for the year ended December 31, 2006 contains an
explanatory paragraph regarding substantial doubt about our ability to continue
as a going concern. We have taken numerous steps to address this situation.
During the fiscal year ended December 31, 2006, we divested ourselves of our
audit business line in connection with a transaction relating to shares of our
preferred and common stock held by a majority holder of our capital stock. On
November 29, 2006, we entered into an arrangement with A.S.T., Inc. ("AST") and
Phyle Industries, Inc. ("Phyle") pursuant to which we sold our audit business
line to AST in exchange for 4,150 shares of our preferred stock (representing
all of our issued and outstanding preferred stock).

    During January 2007 acting as agent for certain new investors interested in
purchasing shares of our common stock, we caused the transfer of 30,339,236
shares of our common stock, together with accrued but unpaid stock dividends
(representing approximately 90% of our common stock in the aggregate) that Phyle
had previously purchased from Capital Bank Grawe Gruppe AG ("CapitalBank").
These investors paid Phyle $250,000 for the purchase of our common stock and
agreed to also provide us a capital infusion of $350,000 to be used for working
capital.

    We have re-aligned our spending from administration and manufacturing to
maintain key development programs while carefully managing our overall cash
usage. We are exploring all opportunities to improve our financial condition by
aggressively pursuing potential sales. There is a possibility that the latter
might not result in adequate revenues in the near future to meet cash flow
requirements, and therefore might require us to implement further cost saving
action or attempt to obtain additional financing. We believe that based on our
current revenue expectations, the expected timing of such revenues, and our
current level of expenses we have sufficient cash to fund our operations through
the end of 2007.

OFF-BALANCE SHEET ARRANGEMENTS

    Our only off-balance sheet arrangements are non-cancelable operating leases
entered into in the ordinary course of business, as discussed in our Annual
Report on Form 10-KSB for the year ended December 31, 2006.

CONTRACTUAL OBLIGATIONS

    As of September 30, 2007, there are no material changes in our contractual
obligations as disclosed in our Annual Report on Form 10-KSB for the year ended
December 31, 2006.

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<PAGE>

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

    The Company's financial statements and accompanying notes are prepared in
accordance with accounting principles generally accepted in the United States of
America (U.S. GAAP). Preparing financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses. These estimates and assumptions are affected
by management's application of accounting policies. Critical accounting policies
for the Company include revenue recognition, share-based compensation,
impairment of long-lived assets, inventory reserves, and allowance for doubtful
accounts.

    REVENUE RECOGNITION

    We recognize the majority of our revenue in accordance with SEC Staff
Accounting Bulletin No. 104, "REVENUE RECOGNITION IN FINANCIAL STATEMENTS".
Revenue related to product sales is recognized upon shipment provided that title
and risk of loss have passed to the customer, there is persuasive evidence of an
arrangement, the sales price is fixed or determinable, collection of the related
receivable is reasonably assured and customer acceptance criteria, if any, have
been successfully demonstrated. Where the criteria cannot be demonstrated prior
to shipment, or in the case of new products, revenue is deferred until
acceptance has been received. Our sales contracts provide for the customer to
accept title and risk of loss at the time of delivery of the product to a common
carrier.

    Our transactions sometimes involve multiple elements (i.e. systems and
services). Revenue under multiple arrangements is recognized in accordance with
Emerging Issues Task Force ("EITF") Issue No. 00-21, "ACCOUNTING FOR REVENUE
ARRANGEMENTS WITH MULTIPLE DELIVERABLES". Under this method, if an element is
determined to be a separate unit of accounting, the revenue for the element is
based on fair value and determined by verifiable objective evidence, and
recognized at time of delivery. If the arrangement has an undeliverable element,
we ensure that we have objective and reliable evidence of the fair value of the
undeliverable element. Fair value is determined based upon the price charged
when the element is sold separately.

    We recognize revenue for software licenses in accordance with the American
Institute of Certified Public Accountants ("AICPA")'s Statement of Position
97-2, "SOFTWARE REVENUE RECOGNITION" ("SOP 97-2"). The application of SOP 97-2
requires judgment, including whether a software arrangement includes multiple
elements. License revenue is recognized upon customer acceptance, provided that
persuasive evidence of an arrangement exists, no significant obligations with
regards to installation or implementation remain, fees are fixed or
determinable, and collectibility is probable.

    Hardware and software maintenance is marketed under annual and multi-year
arrangements and revenue is recognized ratably over the contract maintenance
term.

    ACCOUNTS RECEIVABLE

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<PAGE>

    The Company records trade receivables at their principal amount, adjusted
for write-offs and allowances for uncollectible amounts. The Company reviews its
trade receivables monthly, and determines, based on management's knowledge and
the customer's payment history, any write-off or allowance that may be
necessary. The Company follows the practice of writing off uncollectible amounts
against the allowance provided for such accounts.

    INVENTORIES

    Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method. The Company evaluates its
inventories to determine excess or slow moving products based on quantities on
hand, current orders and expected future demand. For those items in which the
Company believes it has an excess supply or for those items that are obsolete,
the Company estimates the net amount that the Company expects to realize from
the sale of such products and records an allowance.

    PROPERTY AND EQUIPMENT

    Property and equipment are recorded at cost and depreciated over the
estimated useful lives of the assets using the straight-line method. Leasehold
improvements are amortized over the shorter of the useful lives or the remaining
terms of the related leases. Maintenance and repair costs are charged to
operations as incurred.

    LONG-LIVED ASSETS

    In accordance with Statement of Financial Accounting Standards ("SFAS") No.
144 "Accounting for the Impairment or Disposal of Long-Lived Assets," the
Company reviews the carrying values of its long-lived assets for possible
impairment whenever events or changes in circumstances indicate that the
carrying amounts of the assets may not be recoverable. Any long-lived assets
held for disposal are reported at the lower of their carrying amounts or fair
values less costs to sell.

    STOCK-BASED COMPENSATION

    The Company accounts for its share-based compensation under the provisions
of Statement of Financial Accounting Standards (SFAS) 123(R), SHARE-BASED
PAYMENT which establishes accounting for equity instruments exchanged for
employee services. Under the provisions of SFAS 123(R), share-based compensation
cost is measured at the grant date, based on the fair value of the award, and is
recognized as an expense over the employee's requisite service period (generally
the vesting period of the equity grant).

ITEM 3.

CONTROLS AND PROCEDURES

    (a) Evaluation of Disclosure Controls and Procedures.

                                       17
<PAGE>

    Our principal executive officer and principal financial officer, after
evaluating the effectiveness of our disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the
period covered by this Quarterly Report on Form 10-QSB, have concluded that,
based on such evaluation, our disclosure controls and procedures were adequate
and effective to ensure that material information relating to us, was made known
to them by others within the Company, particularly during the period in which
this Quarterly Report on Form 10-QSB was being prepared. In designing and
evaluating our disclosure controls and procedures, our management recognizes
that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and our management necessarily is required to apply its judgment in evaluating
the cost-benefit relationship of possible controls and procedures.

    (b) Changes in Internal Controls.

    There were no changes in our internal control over financial reporting,
identified in connection with the evaluation of such internal control that
occurred during our last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

ITEM 3A (T) CONTROLS AND PROCEDURES

    This quarterly report does not include a report of management's assessment
regarding internal control over financial reporting or an attestation report of
the Company's independent registered public accounting firm due to a transition
period established by the rules of the Securities and Exchange Commission.

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<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

    We are not a party to any legal proceedings.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

    Not Applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

    Not Applicable.

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

    As described in our Form 8-K filing on April 5, 2007, on March 30, 2007, we
submitted the following matters to a vote of our stockholders:

    1.   To approve an amendment to the Company's Certificate of Incorporation,
         as amended (the "Certificate of Incorporation") to increase the number
         of authorized shares of the Company's common stock;

    2.   To approve an amendment to the Company's Certificate of Incorporation
         to decrease the par value of the Company's common stock;

    3.   To approve an amendment to the Company's Certificate of Incorporation
         to authorize the issuance of serial preferred stock, with authority
         vested in the Board of Directors of the Company to prescribe the
         classes, series and number of each class or series of the preferred
         stock of the Company and the voting powers, designations, preferences
         limitations, restrictions and relative rights of each class or series
         of the preferred stock of the Company;

    4.   To adopt the 2007 Employee, Director and Consultant Stock Plan and to
         reserve 2,000,000 shares of the Company's common stock for grant under
         that plan;

    5.   To approve the sale and issuance of shares of the Company's common
         stock to the Company's current executive officers and members of the
         Board of Directors.

    Our stockholders voted in favor of the above matters as described in the
report on Form 8-K.

ITEM 5. OTHER INFORMATION

    Not Applicable.

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ITEM 6. EXHIBITS

(a) Exhibits

  31.1  Certification of the Chief Executive Officer
  31.2  Certification of the Chief Accounting Officer
  32.1  Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

























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                                   SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                         NATIONAL DATACOMPUTER, INC.


November 14, 2007                        /s/ William B. Berens
                                         ------------------------------
                                         William B. Berens
                                         President and Chief Executive Officer
                                         (principal executive officer)

November 14, 2007                        /s/ Bruna Bucacci
                                         ------------------------------
                                         Bruna Bucacci
                                         Chief Accounting Officer (principal
                                         financial and accounting officer)









                                       21
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                                  EXHIBIT INDEX

EXHIBIT NO.                TITLE


31.1    Certification of the Chief Executive Officer.

31.2    Certification of the Chief Accounting Officer.

32.1    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


























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