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

                                  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: June 30, 2006

                                       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 IDENTIFICATION #)
 INCORPORATION OR ORGANIZATION)

                   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 $0.08,
outstanding as of August 1, 2006 was 26,640,866.

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 June 30, 2006
        and December 31, 2005...............................................3

        Statements of Operations for the three and six months
        ended June 30, 2006 and 2005........................................4

        Statement of Stockholders' Deficit for the six months
        ended June 30, 2006.................................................5

        Statements of Cash Flows for the six months
        ended June 30, 2006 and 2005........................................6

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


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION..........11

ITEM 3. CONTROLS AND PROCEDURES............................................17

                           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...........................................................19

SIGNATURES.................................................................20

EXHIBIT INDEX..............................................................21

                                        2
<PAGE>

                           NATIONAL DATACOMPUTER, INC.
                                  BALANCE SHEET
                                   (UNAUDITED)
<TABLE><CAPTION>
----------------------------------------------------------------------------------------------------------

                                                                              June 30,        December 31,
                                                                                2006              2005
                                                                            ------------      ------------
<S>                                                                         <C>               <C>
Assets
Current Assets:
     Cash                                                                   $    317,643      $    125,508
     Accounts receivable, net of allowance for doubtful
       accounts of $1,296                                                        248,457           139,161
     Inventories, net                                                            128,649           175,919
     Deferred software costs                                                     206,315              --
     Prepaid expenses                                                             49,524            47,008
                                                                            ------------      ------------
       Total current assets                                                      950,588           487,596
Property and equipment, net                                                       51,581            64,274
Capitalized software development costs, net                                       22,009            37,021
                                                                            ------------      ------------
       Total Assets                                                         $  1,024,178      $    588,891
                                                                            ============      ============

Liabilities and Stockholders' Deficit
Current Liabilities:
     Current obligations under capital lease                                $      3,702      $      3,544
     Notes payable, current portion                                               49,043            54,000
     Accounts payable                                                            503,733           317,279
     Customer deposits                                                             6,482           256,756
     Accrued payroll and related taxes                                           174,772           157,627
     Other accrued expenses                                                       82,805            78,174
     Deferred revenues                                                           807,651           349,286
                                                                            ------------      ------------
       Total current liabilities                                               1,628,188         1,216,666
Note payable, net of current portion                                              29,216              --
Obligations under capital lease, net of current portion                            7,992             9,450
                                                                            ------------      ------------
       Total Liabilities                                                       1,665,396         1,226,116
                                                                            ------------      ------------

Convertible Preferred Stock                                                    3,738,971         4,005,971
                                                                            ------------      ------------

Commitments and contingencies

Stockholders' Deficit:
     Preferred stock, Series A convertible, $0.001 par
       value; 20 shares authorized; no shares issued or
       outstanding                                                                  --                --

     Common stock, $0.08 par value; 30,000,000 shares authorized;
       26,640,866 and 22,586,681 shares issued and outstanding at
       June 30, 2006 and December 31, 2005                                     2,131,268         1,806,933

     Capital in excess of par value                                           12,809,237        12,733,072
     Accumulated deficit                                                     (19,320,694)      (19,183,201)
                                                                            ------------      ------------
       Total Stockholders' Deficit                                            (4,380,189)       (4,643,196)
                                                                            ------------      ------------
       Total Liabilities and Stockholders' Deficit                          $  1,024,178      $    588,891
                                                                            ============      ============
</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                   Six Months Ended
                                                         ------------------------------      ------------------------------
                                                           June 30,          June 30,          June 30,          June 30,
                                                             2006              2005              2006              2005
                                                         ------------      ------------      ------------      ------------
<S>                                                      <C>               <C>               <C>               <C>
Revenues:
    Product                                              $    381,070      $    260,230      $    689,592      $    767,818
    Services                                                  439,103           271,283           902,118           566,572
                                                         ------------      ------------      ------------      ------------
      Total Revenues                                          820,173           531,513         1,591,710         1,334,390

Cost of revenues                                              383,651           329,649           776,249           731,315
                                                         ------------      ------------      ------------      ------------

      Gross Profit                                            436,522           201,864           815,461           603,075
                                                         ------------      ------------      ------------      ------------

Operating expenses:
    Research and development                                   56,223            90,070           136,662           184,531
    Selling and marketing                                      86,015           131,870           201,447           271,212
    General and administrative                                244,783           244,779           483,594           520,576
                                                         ------------      ------------      ------------      ------------
                                                              387,021           466,719           821,703           976,319
                                                         ------------      ------------      ------------      ------------
Income (loss) from operations                                  49,501          (264,855)           (6,242)         (373,244)

Other income (expense):
    Interest income                                               371               664               634             1,728
    Gain on currency exchange                                   4,193              --               4,849              --
    Interest expense                                             (585)             (830)           (3,234)           (1,883)
                                                         ------------      ------------      ------------      ------------
Net income (loss)                                        $     53,480      $   (265,021)     $     (3,993)     $   (373,399)
                                                         ============      ============      ============      ============

Calculation of net income (loss) per common share:

Net income (loss)                                        $     53,480      $   (265,021)     $     (3,993)     $   (373,399)
Preferred stock preferences                                   (66,750)          (66,750)         (133,500)         (133,500)
                                                         ------------      ------------      ------------      ------------
Net loss attributable to common stockholders             $    (13,270)     $   (331,771)     $   (137,493)     $   (506,899)
                                                         ============      ============      ============      ============
Basic and diluted net loss per share attributable to
  common stockholders                                    $      (0.00)     $      (0.01)     $      (0.01)     $      (0.02)
                                                         ============      ============      ============      ============
Weighted average shares outstanding                        24,636,049        22,134,181        23,617,026        22,134,181
                                                         ============      ============      ============      ============
</TABLE>

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

                                        4
<PAGE>

NATIONAL DATACOMPUTER, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
(Unaudited)
<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 January 1, 2006          22,586,681     $  1,806,933     $ 12,733,072     ($19,183,201)     ($ 4,643,196)

Net loss                                  --               --               --             (3,993)           (3,993)

Interest on preferred stock               --               --               --           (133,500)         (133,500)

Issuance of common stock
   in satisfaction of accrued
   interest                          4,054,185          324,335           76,165             --             400,500
                                  ------------     ------------     ------------     ------------      ------------
Balance at June 30, 2006            26,640,866     $  2,131,268     $ 12,809,237     ($19,320,694)     ($ 4,380,189)
                                  ============     ============     ============     ============      ============
</TABLE>

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

















                                        5
<PAGE>
                           NATIONAL DATACOMPUTER, INC.
                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE><CAPTION>
----------------------------------------------------------------------------------------------

                                                                       Six Months Ended
                                                                ------------------------------

                                                                  June 30,          June 30,
                                                                    2006              2005
                                                                ------------      ------------
<S>                                                             <C>               <C>
Cash flows from operating activities:
      Net loss                                                  $     (3,993)     $   (373,399)
      Adjustments to reconcile net loss to net
          cash provided by (used for) operating activities:
          Interest on loan                                             2,033              --
          Depreciation and amortization                               49,897            65,083
          Changes in assets and liabilities:
              (Increase) decrease in accounts receivable            (109,296)           30,120
              (Decrease) increase in inventories                      47,270            (6,390)
              Increase in deferred software costs                   (206,315)             --
              Increase in other prepaid expenses                      (2,516)          (17,641)
              Increase in accounts payable                           239,028           121,126
              Decrease in customer deposits                         (250,274)           (9,395)
              Increase in accrued expenses                            21,776            41,127
              Increase (decrease) in deferred revenues               458,365           (12,036)
                                                                ------------      ------------
      Net cash provided by (used for) operating activities           245,975          (161,405)
                                                                ------------      ------------

Cash flows from investing activities:
      Purchases of property and equipment                            (13,283)           (7,153)
      Purchase of capitalized software                                (8,910)             --
                                                                ------------      ------------
      Net cash used for investing activities                         (22,193)           (7,153)
                                                                ------------      ------------

Cash flows from financing activities:
      Principal payment on note payable                              (30,348)             --
      Principal payments on obligations
          under capital lease                                         (1,299)           (9,806)
                                                                ------------      ------------
      Net cash used for financing activities                         (31,647)           (9,806)
                                                                ------------      ------------

Net increase (decrease) in cash                                      192,135          (178,364)
Cash, beginning of period                                            125,508           266,463
                                                                ------------      ------------

Cash, end of period                                             $    317,643      $     88,099
                                                                ============      ============

Supplemental Disclosure of Cash Flow Information:

      Cash paid for interest                                    $      1,201      $        830
      Non-cash investing and financing activities:
          Accounts payable converted to note payable            $     52,574      $       --
          Accrued interest on preferred stock charged to
              accumulated deficit                               $    133,500      $    133,500
          Issuance of common 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") designs, manufactures, services
and distributes rugged, programmable hand-held computers, data collection
devices, printers and associated accessories. We are also a leading implementer
of software solutions, such as our Microsoft(TM) DOS(R)-based RouteRider proDUCT
and the Microsoft(TM) Pocket PC(R)-based RouteRider LE product, for people who
need portable solutions in THE field rather than at a desk. We also provide
additional software solutions specific to the inventory service market.

BASIS OF PRESENTATION
---------------------

     The financial statements included in this report have been prepared by the
Company pursuant to the rules and regulations of the Unites 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, 2005, 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

     The Company has incurred an accumulated deficit of approximately $19.3
million through June 30, 2006. As a result of this accumulated deficit and our
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,
2005 contains an explanatory paragraph regarding substantial doubt about the
Company's ability to continue as a going concern. The Company's plans to address
the situation are

                                        7
<PAGE>

presented below. However, there are no assurances that these plans will be
successful or sufficient.

     In the event our operations continue to be unprofitable or do not generate
sufficient cash to fund the business, or if we fail to obtain additional
financing, management will have to substantially reduce its level of operations.
These circumstances raise substantial doubt about our ability to continue as a
going concern. These financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

     As of June 30, 2006, the Company had approximately $318,000 in cash. In
order to improve our cash position, we have taken a number of steps to reduce
and control our expenses. During the fourth quarter of 2005 and the first
quarter of 2006 we initiated cost reduction programs such as reducing our
manpower by approximately 21%, decreasing our rented space by approximately 25%
and diminishing our health insurance premiums by increasing employees'
contributions. These programs will be instrumental in reducing our annual
operating expenses by approximately $650,000, and we believe that based on our
current level of expenses and sales we currently have sufficient cash to fund
our operations through the end of 2006.

     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 sales potentials. 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.

     On May 15, 2006, we issued an aggregate 4,054,185 shares of our common
stock to Capital Bank Grawe Gruppe AG ("Capital Bank" and formerly RBB Bank) in
satisfaction of an aggregate interest payment of $400,500, which interest was
due under the terms of our Series B, C, and D Convertible Preferred Stock that
are currently issued, outstanding, and held by Capital Bank.

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.

                                        8
<PAGE>

NET LOSS PER SHARE
------------------

     Basic net loss per share is computed by dividing net loss, after deducting
certain amounts associated with the Company's preferred stock, by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share is computed using the weighted average number of common shares outstanding
and gives effect to all dilutive common share equivalents outstanding during the
period.

     Common share equivalents consist of 2,328,784 and 2,380,209 shares of
common stock which may be issuable upon exercise of outstanding stock options,
warrants, and the conversion of preferred stock at June 30, 2006 and 2005,
respectively. All common share equivalents have been excluded from the
calculation of weighted average shares outstanding, as their inclusion would be
anti-dilutive.

     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.

SHARE-BASED COMPENSATION
------------------------

     Effective January 1, 2006, the Company adopted 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). Prior to January 1, 2006, the Company accounted for
share-based compensation to employees in accordance with Accounting Principles
Board (APB) Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and
related interpretations. The Company also followed the disclosure requirements
of SFAS 123, ACCOUNTING FOR STOCK-BASED COMPENSATION. The Company elected to
adopt the modified prospective transition method as provided by SFAS 123(R) and,
accordingly, financial statement amounts for the prior periods presented in the
Form 10-QSB have not been restated to reflect the fair value method of expensing
share-based compensation.

     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 yield. 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. Estimates of fair value are not intended to

                                        9
<PAGE>

predict actual future events or the value ultimately realized by persons who
receive equity awards.

     At the date of adoption, there were no unvested options outstanding and no
options were granted during the six months ended June 30, 2006. Consequently,
there was no share-based compensation expense recorded during the six months
ended June 30, 2006.

     Additionally, for the quarter ended June 30, 2005, there was no proforma
disclosure of stock based compensation expense because there were no unvested
options outstanding as of the beginning of the quarter and no options granted
during the quarter.

3. STOCK OPTION PLANS

     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. A maximum of 200,000 shares of common
stock was reserved for issuance in accordance with the terms of the 1997 Plan.
The 1997 Plan now only provides for the issuance of non-qualified options since
stockholder approval was not obtained. As of June 30, 2006, 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 June
30, 2006, there were options to purchase 20,000 shares of common stock
outstanding and 250,000 shares available for grant under the 1998 Plan.

     The following table summarizes information about stock options outstanding
at June 30, 2006:

                                                                    Weighted
                                Weighted average                Average exercise
                                   Remaining        Number of       price of
                    Number     Contractual life,     Options        options
Exercise price   Outstanding        In years       Exercisable    Exercisable
--------------   -----------   -----------------   -----------    -----------

    $ 0.75         220,000            2.4            220,000         $0.75





                                       10
<PAGE>

4. INVENTORIES

     Inventories consist of the following:          JUNE 30,     DECEMBER 31,
                                                      2006           2005
                                                   ---------     ------------

     Raw material                                  $  93,388       $  84,496
     Work-in-process                                  19,570          79,232
     Finished goods                                   15,691          12,191
                                                   ---------       ---------
                  Total                            $ 128,649       $ 175,919
                                                   =========       =========

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 and inventory control market segment within the
product supply chain. We design, manufacture, 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,
hand-held computers, related peripherals, and accessories, as well as associated
education and support services for our hardware and software products. We were
organized as a Delaware corporation in 1986 and began active operations in 1987
following our merger with an established computer systems engineering business.
Since that time we have delivered hardware and software solutions to the
distribution and inventory audit markets we have targeted.

     Our hand-held Datacomputer computers include a microprocessor, keyboard,
LCD displays, and full alphabetic and numeric character sets. Our Datacomputers
are designed to be highly reliable, tolerant to human error, and easy to use.
They are shock resistant, and operate over a wide temperature range. Our current
generation Datacomputer, the DC5, was launched in the beginning of 2001 into the
Inventory Audit Specialist marketplace. The DC5 is designed as a rugged,
Microsoft Windows CE based mobile Datacomputer with optional radio frequency
(RF) connectivity to provide fast, real-time, wireless transmission of collected
data to a host computer, a process that can greatly reduce the cost of inventory
data collection and management.

      We are also a leading implementer of software solutions, such as our
Microsoft(TM) DOS(R)-based RouteRIDER product and the Microsoft(TM) Pocket
PC(R)-based RouteRider LE product, for people who need portable solutionS IN the
field rather than at a desk. We also provide additional software solutions
specific to the inventory service market.

                                       11
<PAGE>

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 on Form 10-KSB filed with the Securities and Exchange
Commission for the year ended December 31, 2005.
    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 above and elsewhere in this report.
    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

     SIX MONTHS ENDED JUNE 30, 2006 COMPARED TO SIX MONTHS ENDED JUNE 30, 2005.

     For the six months ended June 30, 2006, we reported a net loss of $3,993
compared to a net loss of $373,399 for the six months ended June 30, 2005.

     Our total revenues for the six months ended June 30, 2006 were
approximately $1,592,000 as compared to revenues of approximately $1,334,000 for
the six months ended June 30, 2005, representing an increase of approximately
$258,000 or 19%. The increase for this period is due almost entirely to an
increase in professional services for deployment of our new route software
product, RouteRider LE ("RRLE") to one customer which accounted for
approximately 27% of our total revenues.

     RRLE is a portable and highly parameterized Route Accounting solution,
which is designed to run on industry standard operating systems (e.g.
Microsoft's PocketPC 2002, PocketPC 2003 and WindowsMobile2005), and databases.
RRLE utilizes cellular, Wi-Fi, and Bluetooth communications protocols. We
currently have a backlog for RRLE of approximately $400,000 which we expect will
be shipped by the end of third quarter of 2006.

                                       12
<PAGE>

     Cost of goods sold for the six months ended June 30, 2006 was approximately
$776,000, or 49% of revenues, compared to $731,000 or 55% of revenues for the
six months ended June 30, 2005. The decrease in cost of goods sold as a
percentage of sales is a direct result of our cost cutting efforts put in place
during the first quarter of 2006.

     OPERATING EXPENSES

     Total operating expenses for the six months ended June 30, 2006 were
approximately $822,000 or 52% of revenues, as compared to $976,000 or 73% of
revenue for the six months ended June 30, 2005, which is a decrease of
approximately $155,000 or 16%.

     Research and development expenses for the six months ended June 30, 2006
were approximately $137,000 compared to $185,000 for the six months ended June
30, 2005, a decrease of approximately $48,000 or 26%. The decrease is due to
planned reductions in personnel and consultant costs of approximately $37,000
along with a decrease in occupancy cost of approximately $10,000. The decrease
in personnel is a result of diminished spending on internally developed product
software.

     Selling and marketing expenses for the six months ended June 30, 2006 were
approximately $201,000 compared to $271,000 for the six months ended June 30,
2005, a decrease of approximately $70,000 or 26%. The decrease is due to a
decrease in payroll and related costs of approximately $55,000, a decrease in
professional services of approximately $13,000, a decrease in printing and
advertising of approximately $8,000, along with a decrease in occupancy costs of
approximately $7,000 offset by an increase in sales commissions of approximately
$15,000 due to higher sales. The decrease in payroll was partly due to the
transfer of our Vice President of Sales to general and administrative upon his
appointment to Chief Executive Officer.

     General and administrative expenses for the six months ended June 30, 2006
were approximately $484,000 compared to $521,000 for the six months ended June
30, 2005, a decrease of approximately $37,000 or 7%. The decrease is due to
reduction in payroll and related costs of approximately $79,000, a decrease in
audit fees of approximately $16,000, and decrease in occupancy costs of
approximately $14,000, partially offset by an increase in directors' fees of
approximately $44,000 and an increase in legal fees of approximately $37,000.

LIQUIDITY AND CAPITAL RESOURCES

     We generated cash of $246,000 and used cash of $161,000 from operations for
the six months ended June 30, 2006, and 2005, respectively. For the six months
ended June 30, 2006, our principal operating cash requirements were to fund an
increase in deferred software costs, along with an increase in trade receivable
and a decrease in customer deposits, partially offset by an increase in deferred
revenue and an increase in accounts payable. For the six months ended June 30,
2005, our principal operating cash requirements were to fund our loss from
operation, along with an increase in prepaid

                                       13
<PAGE>

expenses, and a decrease in deferred revenues, partially offset by an increase
in accounts payable, and increase in accrued expenses and decrease in trade
receivable.

     We used cash of $22,000 and $7,000 for investing activities for the six
months ended June 30, 2006, and 2005, respectively. The cash was used for the
purchase of capital equipment. As of June 30, 2006, we had no material
commitments for capital expenditures.

     We used cash of $32,000 and $10,000 for financing activities for the six
months ended June 30, 2006, and 2005, respectively to make payments on
obligations under our notes payable and capital leases.

     As of June 30, 2006 we had $318,000 in cash, compared to $88,000 as of June
30, 2005.

     We have an accumulated deficit of approximately $19,321,000 through June
30, 2006. As a result of this accumulated deficit and our cash position, the
report of our independent registered public accounting firm contained an
explanatory paragraph regarding substantial doubt about the Company's ability to
continue as a going concern at December 31, 2005. The Company's plans to address
the situation are presented below. However, there are no assurances that these
plans will be successful or sufficient.

     In order to improve our cash position, we have taken a number of steps to
reduce and control our expenses. During the fourth quarter of 2005 and the first
quarter of 2006 we initiated cost reduction programs such as reducing our
manpower by approximately 21%, decreasing our facilities space by approximately
25% and diminishing our health insurance premiums by increasing employees'
contribution. These programs will be instrumental in reducing our annual
operating expenses by approximately $650,000. 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 2006.

     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 sales potentials. 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 maintain adequate levels of inventory and have not experienced any
interruption of supplies or services from vendors.

                                       14
<PAGE>

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, 2005.

CONTRACTUAL OBLIGATIONS

     As of June 30, 2006, 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, 2005.

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.

                                       15
<PAGE>

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

     The Company records trade receivables at their principal amount, adjusted
for write-offs and allowances for uncollectable 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 uncollectable 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.

     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.

     SHARE-BASED COMPENSATION
     ------------------------

     Effective January 1, 2006, the Company adopted 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). Prior to January 1, 2006,

                                       16
<PAGE>

the Company accounted for share-based compensation to employees in accordance
with Accounting Principles Board (APB) Opinion No. 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES, and related interpretations. The Company also followed the
disclosure requirements of SFAS 123, ACCOUNTING FOR STOCK-BASED COMPENSATION.
The Company elected to adopt the modified prospective transition method as
provided by SFAS 123(R) and, accordingly, financial statement amounts for the
prior periods presented in the Form 10-QSB have not been restated to reflect the
fair value method of expensing share-based compensation.

     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 yield. 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. Estimates of fair value are not intended to predict actual future
events or the value ultimately realized by persons who receive equity awards.

     At the date of adoption, there were no unvested options outstanding and no
options were granted during the six months ended June 30, 2006. Consequently,
there was no share-based compensation expense recorded during the six months
ended June 30, 2006.

     Additionally, for the quarter ended June 30, 2005, there was no proforma
disclosure of stock based compensation expense because there were no unvested
options outstanding as of the beginning of the quarter and no options granted
during the quarter.

ITEM 3.

CONTROLS AND PROCEDURES

     (a) Evaluation of Disclosure Controls and Procedures.

     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.

                                       17
<PAGE>

     (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.

































                                       18
<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

     On May 15, 2006, we issued an aggregate 4,054,185 shares of our common
stock to Capital Bank Grawe Gruppe AG ("Capital Bank" and formerly RBB Bank) in
satisfaction of an aggregate interest payment of $400,500, which interest was
due under the terms of our Series B, C, and D Convertible Preferred Stock that
are currently issued, outstanding, and held by Capital Bank. No underwriters
were involved in the transaction, and there were no underwriting discounts or
commissions. We relied upon Section 4(2) of the Securities Act of 1933 as
amended, because the transaction did not involve any public offering by the
Company.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     Not Applicable.

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

     Not Applicable.

ITEM 5. OTHER INFORMATION

     On August 11, 2006, the Company issued a press release announcing financial
results for the fiscal quarter ended June 30, 2006. The full text of the press
release is set forth in Exhibit 99.1 hereto. The exhibit is furnished under this
Item 5 in lieu of its being furnished under cover of and pursuant to Item 2.02
of Form 8-K. This information furnished pursuant to this Item 5 (including the
exhibits hereto) shall not be deemed "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the
liabilities of that section, nor shall it be deemed incorporated by reference in
any filing under the Securities Act of 1933 or the Exchange Act, except as
expressly set forth by specific reference in such a filing.

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.
         99.1     Press release dated August 11, 2006

                                       19
<PAGE>

                                   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.



August 14, 2006                          /s/ William B. Berens
                                         ------------------------------
                                         William B. Berens
                                         President and Chief Executive Officer
                                         (principal executive officer)

August 14, 2006                          /s/ Bruna Bucacci
                                         ------------------------------
                                         Bruna Bucacci
                                         Chief Accounting Officer (principal
                                         financial and accounting officer)













                                       20
<PAGE>

                                  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.

  99.1        Press release dated August 11, 2006


























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