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

                                  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, 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 November 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 September 30, 2006
        and December 31, 2005...............................................3

        Statements of Operations for the three and nine months
        ended September 30, 2006 and 2005...................................4

        Statement of Stockholders' Deficit for the nine months
        ended September 30, 2006............................................5

        Statements of Cash Flows for the nine months
        ended September 30, 2006 and 2005...................................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..................................................20

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds........20

ITEM 3. Defaults upon Senior Securities....................................20

ITEM 4. Submissions of Matters to a Vote of Security Holders...............20

ITEM 5. Other Information..................................................20

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

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

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

                                        2
<PAGE>

                           NATIONAL DATACOMPUTER, INC.
                                  BALANCE SHEET
                                   (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE><CAPTION>
                                                                                                    September 30,     December 31,
                                                                                                        2006              2005
                                                                                                    ------------      ------------
<S>                                                                                                 <C>               <C>
Assets
Current Assets:
     Cash                                                                                           $    140,555      $    125,508
     Accounts receivable, net of allowance for doubtful accounts of $3,000
       and $1,296 at September 30, 2006 and December 31, 2005 respectively                               220,798           139,161
     Inventories, net                                                                                    119,476           175,919
     Deferred software costs                                                                             199,959              --
     Prepaid expenses                                                                                     49,031            47,008
                                                                                                    ------------      ------------
       Total current assets                                                                              729,819           487,596
Property and equipment, net                                                                               46,766            64,274
Capitalized software development costs, net                                                               21,710            37,021
                                                                                                    ------------      ------------
       Total Assets                                                                                 $    798,295      $    588,891
                                                                                                    ============      ============

Liabilities and Stockholders' Deficit
Current Liabilities:
     Current obligations under capital lease                                                        $      3,771      $      3,544
     Notes payable, current portion                                                                       36,695            54,000
     Accounts payable                                                                                    403,347           317,279
     Customer deposits                                                                                    12,278           256,756
     Accrued payroll and related taxes                                                                   160,282           157,627
     Other accrued expenses                                                                              101,183            78,174
     Deferred revenues                                                                                   769,674           349,286
                                                                                                    ------------      ------------
       Total current liabilities                                                                       1,487,230         1,216,666
Note payable, net of current portion                                                                      29,216              --
Obligations under capital lease, net of current portion                                                    7,226             9,450
                                                                                                    ------------      ------------
       Total Liabilities                                                                               1,523,672         1,226,116
                                                                                                    ------------      ------------

Convertible Preferred Stock                                                                            3,805,721         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 September 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                                                                             (19,471,603)      (19,183,201)
                                                                                                    ------------      ------------
       Total Stockholders' Deficit                                                                    (4,531,098)       (4,643,196)
                                                                                                    ------------      ------------
       Total Liabilities and Stockholders' Deficit                                                  $    798,295      $    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                 Nine Months Ended
                                                         ------------------------------      ------------------------------
                                                         September 30,     September 30,     September 30,     September 30,
                                                             2006              2005              2006              2005
                                                         ------------      ------------      ------------      ------------
<S>                                                      <C>               <C>               <C>               <C>
Revenues:
    Product                                              $    175,641      $    434,231      $    865,233      $  1,202,049
    Services                                                  358,780           289,898         1,260,898           856,470
                                                         ------------      ------------      ------------      ------------
      Total Revenues                                          534,421           724,129         2,126,131         2,058,519

Cost of revenues                                              279,088           427,803         1,055,337         1,159,118
                                                         ------------      ------------      ------------      ------------

      Gross Profit                                            255,333           296,326         1,070,794           899,401
                                                         ------------      ------------      ------------      ------------

Operating expenses:
    Research and development                                   49,769            89,768           186,431           274,299
    Selling and marketing                                      74,912           132,447           276,359           403,659
    General and administrative                                216,021           250,150           699,615           770,726
                                                         ------------      ------------      ------------      ------------
                                                              340,702           472,365         1,162,405         1,448,684
                                                         ------------      ------------      ------------      ------------
Loss from operations                                          (85,369)         (176,039)          (91,611)         (549,283)

Other income (expense):
    Interest income                                               388               419             1,022             2,147
    Gain on currency exchange                                   1,373              --               6,222              --
    Interest expense                                             (551)             (675)           (3,785)           (2,558)
                                                         ------------      ------------      ------------      ------------
Net loss                                                 $    (84,159)     $   (176,295)     $    (88,152)     $   (549,694)
                                                         ============      ============      ============      ============

Calculation of net loss per common share:

Net loss                                                 $    (84,159)     $   (176,295)     $    (88,152)     $   (549,694)
Preferred stock preferences                                   (66,750)          (66,750)         (200,250)         (200,250)
                                                         ------------      ------------      ------------      ------------
Net loss attributable to common stockholders             $   (150,909)     $   (243,045)     $   (288,402)     $   (749,944)
                                                         ============      ============      ============      ============
Basic and diluted net loss per share attributable to
    common stockholders                                  $      (0.01)     $      (0.01)     $      (0.01)     $      (0.03)
                                                         ============      ============      ============      ============
Weighted average shares outstanding                        26,640,866        22,134,181        24,636,049        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                                  --               --               --            (88,152)          (88,152)

Interest on preferred stock               --               --               --           (200,250)         (200,250)

Issuance of common stock
   in satisfaction of accrued
   interest                          4,054,185          324,335           76,165             --             400,500

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

Balance at September 30, 2006       26,640,866     $  2,131,268     $ 12,809,237     ($19,471,603)     ($ 4,531,098)
                                  ============     ============     ============     ============      ============
</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,
                                                                   2006              2005
                                                               ------------      ------------
<S>                                                            <C>               <C>
Cash flows from operating activities:
     Net loss                                                  $    (88,152)     $   (549,694)
     Adjustments to reconcile net loss to net
         cash provided by (used for) operating activities:
         Interest on loan                                             2,033              --
         Depreciation and amortization                               64,374            99,125
         Changes in assets and liabilities:
             (Increase) decrease in accounts receivable             (81,637)          199,647
             Decrease in inventories                                 56,443            21,375
             Increase in deferred software costs                   (199,959)             --
             Increase in other prepaid expenses                      (2,023)           (8,980)
             Increase in accounts payable                           138,642           104,634
             (Decrease) increase in customer deposits              (244,478)           85,392
             Increase in accrued expenses                            25,664            55,924
             Increase (decrease) in deferred revenues               420,388           (92,865)
                                                               ------------      ------------
     Net cash provided by (used for) operating activities            91,295           (85,442)
                                                               ------------      ------------

Cash flows from investing activities:
     Purchases of property and equipment                            (15,245)          (12,539)
     Purchase of capitalized software                               (16,310)          (11,600)
                                                               ------------      ------------
     Net cash used for investing activities                         (31,555)          (24,139)
                                                               ------------      ------------

Cash flows from financing activities:
     Principal payments on note payable                             (42,696)             --
     Principal payments on obligations
         under capital lease                                         (1,997)           (9,973)
                                                               ------------      ------------
     Net cash used for financing activities                         (44,693)           (9,973)
                                                               ------------      ------------

Net increase (decrease) in cash                                      15,047          (119,554)
Cash, beginning of period                                           125,508           266,463
                                                               ------------      ------------

Cash, end of period                                            $    140,555      $    146,909
                                                               ============      ============

Supplemental Disclosure of Cash Flow Information:

     Cash paid for interest                                    $      1,752      $      2,558
     Non-cash investing and financing activities:
         Accounts payable converted to note payable            $     52,574      $       --
         Accrued interest on preferred stock charged to
             accumulated deficit                               $    200,250      $    200,250
         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 $19.5
    million through September 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 September 30, 2006, the Company had approximately $141,000 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 September 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 nine months ended September 30, 2006.
    Consequently, there was no share-based compensation expense recorded during
    the nine months ended September 30, 2006.

        Additionally, for the quarter and nine months ended September 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
    periods and no options granted during the periods.

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
    September 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
    September 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 September 30, 2006:

<TABLE><CAPTION>
                                                                                              Weighted
                                            Weighted average                              Average exercise
                                               Remaining              Number of               price of
                         Number            Contractual life,           Options                options
  Exercise price      Outstanding               In years             Exercisable            Exercisable
--------------------------------------- ------------------------- -------------------   ---------------------
<S>                     <C>                       <C>                  <C>                     <C>
      $ 0.75            220,000                   2.2                  220,000                 $0.75
</TABLE>

                                       10
<PAGE>

4.  INVENTORIES

    Inventories consist of the following:

                                            SEPTEMBER 30,    DECEMBER 31,
                                                2006             2005
                                            ------------     ------------

    Raw material                            $     64,179     $     84,496
    Work-in-process                               38,989           79,232
    Finished goods                                16,308           12,191
                                            ------------     ------------

                                  Total     $    119,476     $    175,919
                                            ============     ============

5.  RECENT ACCOUNTING PRONOUNCEMENTS

    In June 2006, the FASB issued FASB Interpretation No. 48, "ACCOUNTING FOR
UNCERTAINTY IN INCOME TAXES" which is an interpretation of FASB Statement 109,
"ACCOUNTING FOR INCOME TAXES." FIN 48 requires managements to perform a two-step
evaluation of all tax positions, ensuring that these tax return positions meet
the "more-likely than not" recognition threshold and can be measured with
sufficient precision to determine the benefit recognized in the financial
statements. These evaluations provide management with a comprehensive model for
how a company should recognize, measure, present, and disclose in its financial
statements certain tax positions that the Company has taken or expects to take
on income tax returns. The provisions of FIN 48 are effective for the Company's
interim reporting period beginning January 1, 2007. The Company does not believe
the adoption of this pronouncement FIN 48 will have a material impact on its
financial position and results of operations.

    In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB
108). SAB 108 addresses how the effects of prior year uncorrected misstatements
should be considered when quantifying misstatements in current year financial
statements. SAB 108 requires companies to quantify misstatements using a balance
sheet and income statement approach and to evaluate whether either approach
results in quantifying an error that is material in light of relevant
quantitative and qualitative factors. When the effect of initial adoption is
material, companies will record the effect as a cumulative effect adjustment to
beginning of year retained earnings. The provisions of SAB 108 are effective for
the Company's interim reporting period beginning January 1, 2007. The Company
does not believe the adoption of SAB 108 will have a material impact on its
financial position or results of operations.

    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.

                                       11
<PAGE>

SFAS 157 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 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.

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

                                       12
<PAGE>

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

    NINE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 2005.

    For the nine months ended September 30, 2006, we reported a net loss of
$88,152 compared to a net loss of $549,694 for the nine months ended September
30, 2005.

    Our total revenues for the nine months ended September 30, 2006 were
approximately $2,126,000 as compared to revenues of approximately $2,059,000 for
the nine months ended September 30, 2005, representing an increase of
approximately $67,000 or 3%. 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 two customers which accounted for
approximately 32% 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 $425,000 which we expect will be
shipped during the fourth quarter of 2006.

    Cost of goods sold for the nine months ended September 30, 2006 was
approximately $1,055,000, or 50% of revenues, compared to $1,159,000 or 56% of
revenues for the nine months ended September 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, along with sales of
products which carry a higher margin.

                                       13
<PAGE>


    OPERATING EXPENSES

    Total operating expenses for the nine months ended September 30, 2006 were
approximately $1,162,000 or 55% of revenues, as compared to $1,449,000 or 70% of
revenue for the nine months ended September 30, 2005, which is a decrease of
approximately $287,000 or 20%.

    Research and development expenses for the nine months ended September 30,
2006 were approximately $186,000 compared to $274,000 for the nine months ended
September 30, 2005, a decrease of approximately $88,000 or 32%. The decrease is
due to planned reductions in personnel and consultant costs of approximately
$62,000 along with a decrease in occupancy cost of approximately $21,000. The
decrease in personnel and consultants is a result of diminished spending on
internally developed product software.

    Selling and marketing expenses for the nine months ended September 30, 2006
were approximately $276,000 compared to $404,000 for the nine months ended
September 30, 2005, a decrease of approximately $128,000 or 32%. The decrease is
due to a decrease in payroll and related costs of approximately $96,000, a
decrease in professional services of approximately $19,000, a decrease in
printing and advertising of approximately $13,000, along with a decrease in
occupancy costs of approximately $13,000 offset by an increase in sales
commissions of approximately $18,000 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 nine months ended September 30,
2006 were approximately $700,000 compared to $771,000 for the nine months ended
September 30, 2005, a decrease of approximately $71,000 or 9%. The decrease is
due to reduction in payroll and related costs of approximately $128,000, a
decrease in audit fees of approximately $18,000, and decrease in occupancy costs
of approximately $28,000, partially offset by an increase in directors' fees of
approximately $70,000 and an increase in legal fees of approximately $44,000.

LIQUIDITY AND CAPITAL RESOURCES

    We generated cash of $91,000 and used cash of $85,000 from operations for
the nine months ended September 30, 2006, and 2005, respectively. For the nine
months ended September 30, 2006, our principal operating cash requirements were
to fund our loss from operations along with an increase in deferred software
costs, an increase in trade receivables and a decrease in customer deposits,
offset by an increase in deferred revenue an increase in accounts payable and a
decrease in inventory. For the nine months ended September 30, 2005, our
principal operating cash requirements were to fund our loss from operations,
along with a decrease in deferred revenues and an increase in prepaid expenses,
partially offset by a decrease in trade receivables, an increase in accounts
payable, customer deposits and accrued expenses.

                                       14
<PAGE>

    We used cash of $32,000 and $24,000 for investing activities for the nine
months ended September 30, 2006, and 2005, respectively. The cash was used for
the purchase of capital equipment and investment in capitalized software. As of
September 30, 2006, we had no material commitments for capital expenditures.

    We used cash of $45,000 and $10,000 for financing activities for the nine
months ended September 30, 2006, and 2005, respectively to make payments on
obligations under our notes payable and capital leases.

    As of September 30, 2006 we had $141,000 in cash, compared to $147,000 as of
September 30, 2005.

    We have an accumulated deficit of approximately $19,472,000 through
September 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.

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.

                                       15
<PAGE>

CONTRACTUAL OBLIGATIONS

    As of September 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.

    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

                                       16
<PAGE>

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, 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)

                                       17
<PAGE>

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 nine months ended September 30, 2006.
Consequently, there was no share-based compensation expense recorded during the
nine months ended September 30, 2006.

    Additionally, for the quarter ended September 30, 2006, 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.

      (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

                                       18
<PAGE>

quarter, that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
































                                       19
<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

    Not Applicable.

ITEM 5. OTHER INFORMATION

    Not Applicable.

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.







                                       20
<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.



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


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






















                                       21
<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.




























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