UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549







FORM 10-Q










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





For
the quarterly period ended March 31, 2009





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 registrant as specified in its charter)








Delaware
            
            04-2942832(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (I.R.S.
      Employer
              Identification
      No.)




900
      Middlesex Turnpike, Billerica, MA
            
            01821(Address
      of principal executive offices)
            
            (Zip
      Code)





(978)
663-7677


(Registrant’s
telephone number, including area code)




(Former
name, former address and former fiscal year, if changed since last
report.)




Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.    Yes   
x    No   
 ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes   
 ̈   
No     ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
accelerated filer   ̈    Accelerated
filer   ̈





Non-accelerated
filer   ̈    (Do
not check if a smaller reporting company)    Smaller
reporting company  x





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 Common Stock outstanding at May 13, 2009 was
4,274,496.










NATIONAL
DATACOMPUTER, INC.


INDEX


PART
I.  FINANCIAL INFORMATION




Page
      No.Item
      1.
              Financial
      Statements:Balance Sheets as of
      March 31, 2009 and December 31, 2008
              3Statements of
      Operations for the three months ended March 31, 2009 and
    2008
              4Statement of
      Stockholders’ Deficit for the three months ended March 31,
      2009
              5Statements of Cash
      Flows for the three months ended March 31, 2009 and 2008
              6Notes to Financial
      Statements
              7Item 2.
              Management’s Discussion and
      Analysis or Plan of Operation
              10Item 3.
              Quantitative and Qualitative
      Disclosures about Market Risk
              16Item 4.
              Controls and
      Procedures
              16PART II. OTHER
      INFORMATIONItem 1.
              Legal
      Proceedings
              17Item 2.
              Unregistered Sales
      of Equity Securities and Use of Proceeds
              17Item 3.
              Defaults upon Senior
      Securities
              17Item 4.
              Submissions of
      Matters to a Vote of Security Holders
              17Item 5.
              Other
      Information
              17Item 6.
              Exhibits
              17Signatures
              18Exhibit
      Index
              19




2


NATIONAL
DATACOMPUTER, INC.
 BALANCE
SHEETS
 
   March
      31,
                                                                              
                                                                              
                                                                              December
      31,2009
                                                                              
                                                                              
                                                                              2008(Unaudited)
                                                                              
                                                                              
                                                                              (Audited)AssetsCurrent
      Assets:Cash
                                                                              
                                                                              $
                                                                              196,984
                                                                              
                                                                              
                                                                              $
                                                                              119,549Accounts
      receivable, net of allowance for doubtful accounts of
    $3,000
                                                                              
                                                                              
                                                                              207,429
                                                                              
                                                                              
                                                                              
                                                                              114,874Deferred
      hardware and software costs
                                                                              
                                                                              
                                                                              17,424
                                                                              
                                                                              
                                                                              
                                                                              634,603Prepaid
      expenses
                                                                              
                                                                              
                                                                              151,835
                                                                              
                                                                              
                                                                              
                                                                              97,314Total
      current assets
                                                                              
                                                                              
                                                                              573,672
                                                                              
                                                                              
                                                                              
                                                                              966,340Property
      and equipment, net
                                                                              
                                                                              
                                                                              31,709
                                                                              
                                                                              
                                                                              
                                                                              38,926Capitalized
      software development costs, net
                                                                              
                                                                              
                                                                              1,956
                                                                              
                                                                              
                                                                              
                                                                              3,036Prepaid
      maintenance, net of current
                                                                              
                                                                              
                                                                              101,971
                                                                              
                                                                              
                                                                              
                                                                              109,257Total
      Assets
                                                                              
                                                                              $
                                                                              709,308
                                                                              
                                                                              
                                                                              $
                                                                              1,117,559Liabilities
      and Stockholders' Deficit:Current
      Liabilities:Current
      obligations under capital lease
                                                                              
                                                                              $
                                                                              19,346
                                                                              
                                                                              
                                                                              $
                                                                              20,310Accounts
      payable
                                                                              
                                                                              
                                                                              693,145
                                                                              
                                                                              
                                                                              
                                                                              704,185Customer
      deposits
                                                                              
                                                                              
                                                                              3,589
                                                                              
                                                                              
                                                                              
                                                                              2,045Accrued
      payroll and related taxes
                                                                              
                                                                              
                                                                              30,185
                                                                              
                                                                              
                                                                              
                                                                              18,266Other
      accrued expenses
                                                                              
                                                                              
                                                                              33,039
                                                                              
                                                                              
                                                                              
                                                                              44,979Deferred
      revenues
                                                                              
                                                                              
                                                                              424,395
                                                                              
                                                                              
                                                                              
                                                                              1,194,049Total
      current liabilities
                                                                              
                                                                              
                                                                              1,203,699
                                                                              
                                                                              
                                                                              
                                                                              1,983,834Deferred
      revenues, net of current
                                                                              
                                                                              
                                                                              451,938
                                                                              
                                                                              
                                                                              
                                                                              102,434Obligations
      under capital lease, net of current portion
                                                                              
                                                                              
                                                                              1,523
                                                                              
                                                                              
                                                                              
                                                                              6,323Total
      Liabilities
                                                                              
                                                                              
                                                                              1,657,160
                                                                              
                                                                              
                                                                              
                                                                              2,092,591Commitments
      and contingenciesStockholders'
      Deficit:Preferred
      stock, $0.001 par value; 3,333 shares authorized;no
      shares issued or outstanding
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              
                                                                              —Common
      stock, $0.001 par value; 6,000,000 shares authorized; 4,274,496
      sharesissued
      and outstanding at March 31, 2009 and December 31, 2008.
                                                                              
                                                                              
                                                                              4,275
                                                                              
                                                                              
                                                                              
                                                                              4,275Capital
      in excess of par value
                                                                              
                                                                              
                                                                              15,973,560
                                                                              
                                                                              
                                                                              
                                                                              15,971,797Accumulated
      deficit
                                                                              
                                                                              
                                                                              (16,925,687
                                                                              )
                                                                              
                                                                              
                                                                              (16,951,104
                                                                              )Total
      Stockholders' Deficit
                                                                              
                                                                              
                                                                              (947,852
                                                                              )
                                                                              
                                                                              
                                                                              (975,032
                                                                              )Total
      Liabilities and Stockholders' Deficit
                                                                              
                                                                              $
                                                                              709,308
                                                                              
                                                                              
                                                                              $
                                                                              1,117,559
   The
accompanying notes are an integral part of these
financial statements.
 3
 
 NATIONAL
DATACOMPUTER, INC.
 STATEMENTS
OF OPERATIONS
 (Unaudited)
 Three
      Months EndedMarch
      31,
                                  
                                  
                                  March
      31,2009
                                  
                                  
                                  2008Revenues:Product
                                  
                                  $
                                  885,358
                                  
                                  
                                  $
                                  139,271Services
                                  
                                  
                                  116,355
                                  
                                  
                                  
                                  277,921Total
      Revenues
                                  
                                  
                                  1,001,713
                                  
                                  
                                  
                                  417,192Cost
      of revenues
                                  
                                  
                                  749,785
                                  
                                  
                                  
                                  239,109Gross
      Profit
                                  
                                  
                                  251,928
                                  
                                  
                                  
                                  178,083Operating
      expenses:Selling
      and marketing
                                  
                                  
                                  79,620
                                  
                                  
                                  
                                  59,070General
      and administrative
                                  
                                  
                                  146,702
                                  
                                  
                                  
                                  188,334226,322
                                  
                                  
                                  
                                  247,404Income
      (loss) from operations
                                  
                                  
                                  25,606
                                  
                                  
                                  
                                  (69,321
                                  )Other
      income (expense):Interest
      income
                                  
                                  
                                  148
                                  
                                  
                                  
                                  2,424Gain
      on currency exchange
                                  
                                  
                                  844
                                  
                                  
                                  
                                  1,691Interest
      expense
                                  
                                  
                                  (1,181
                                  )
                                  
                                  
                                  (2,347
                                  )Net
      income (loss)
                                  
                                  $
                                  25,417
                                  
                                  
                                  $
                                  (67,553
                                  )Basic
      and diluted net income (loss) per share
                                  
                                  $
                                  0.01
                                  
                                  
                                  $
                                  (0.03
                                  )Weighted
      average shares (basic and diluted)
                                  
                                  
                                  4,274,496
                                  
                                  
                                  
                                  2,378,628
    of these
financial statements.
 4
 
 NATIONAL
DATACOMPUTER, INC.
 STATEMENT
OF STOCKHOLDERS' DEFICIT
 Common
      Stock
                                                
                                                
                                                Capital
      in
                                                
                                                
                                                
                                                
                                                
                                                TotalPar
                                                
                                                
                                                excess
                                                
                                                
                                                Accumulated
                                                
                                                
                                                stockholders'Shares
                                                
                                                
                                                value
                                                
                                                
                                                of par value
                                                
                                                
                                                deficit
                                                
                                                
                                                deficitBalance
      at December 31, 2008 (Audited)
                                                
                                                
                                                4,274,496
                                                
                                                
                                                $
                                                4,275
                                                
                                                
                                                $
                                                15,971,797
                                                
                                                
                                                $
                                                (16,951,104
                                                )
                                                
                                                $
                                                (975,032
                                                )Net
      income
                                                
                                                
                                                —
                                                
                                                
                                                
                                                —
                                                
                                                
                                                
                                                —
                                                
                                                
                                                
                                                25,417
                                                
                                                
                                                
                                                25,417Stock
      based compensation related to options
      granted
                                                
                                                
                                                —
                                                
                                                
                                                
                                                —
                                                
                                                
                                                
                                                1,763
                                                
                                                
                                                
                                                —
                                                
                                                
                                                
                                                1,763Balance
      at March 31, 2009 (Unaudited)
                                                
                                                
                                                4,274,496
                                                
                                                
                                                $
                                                4,275
                                                
                                                
                                                $
                                                15,973,560
                                                
                                                
                                                $
                                                (16,925,687
                                                )
                                                
                                                $
                                                (947,852
                                                )
    of these
financial statements.
 5
 
 NATIONAL
DATACOMPUTER, INC.
 STATEMENTS
OF CASH FLOWS
 (Unaudited)
 Three
      Months EndedMarch
      31,
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      March
      31,2009
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      2008OPERATING
      ACTIVITIES:Net
      income (loss)
                                                                                                                                                      
                                                                                                                                                      $
                                                                                                                                                      25,417
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      $
                                                                                                                                                      (67,553
                                                                                                                                                      )Adjustments
      to reconcile net income (loss) to netcash
      provided by (used for) operating activities:Depreciation
      and amortization
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      8,297
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      9,746Stock
      based compensation related to options granted
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      1,763
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      1,736Changes
      in assets and liabilities:Increase
      in accounts receivable
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      (92,555
                                                                                                                                                      )
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      (131,628
                                                                                                                                                      )Decrease
      in inventories
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      —
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      1,822Decrease
      (increase) in deferred hardware and software costs
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      617,179
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      (293,784
                                                                                                                                                      )Increase
      in prepaid expenses and other assets
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      (47,235
                                                                                                                                                      )
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      (225,821
                                                                                                                                                      )Decrease
      in accounts payable
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      (11,040
                                                                                                                                                      )
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      (716,993
                                                                                                                                                      )Increase
      in customer deposits
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      1,544
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      —Decrease
      in accrued expenses
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      (21
                                                                                                                                                      )
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      (43,537
                                                                                                                                                      )(Decrease)
      increase in deferred revenues
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      (420,150
                                                                                                                                                      )
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      1,454,420Net
      cash provided by (used for) operating activities
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      83,199
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      (11,592
                                                                                                                                                      )Cash
      flows from investing activities:Purchases
      of property and equipment
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      —
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      (12,257
                                                                                                                                                      )Net
      cash used for investing activities
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      —
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      (12,257
                                                                                                                                                      )Cash
      flows from financing activities:Principal
      payments on note payable
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      —
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      (5,862
                                                                                                                                                      )Principal
      payments on obligationsunder
      capital lease
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      (5,764
                                                                                                                                                      )
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      (6,464
                                                                                                                                                      )Net
      cash used for financing activities
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      (5,764
                                                                                                                                                      )
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      (12,326
                                                                                                                                                      )Net
      increase in cash
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      77,435
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      (36,175
                                                                                                                                                      )Cash,
      beginning of period
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      119,549
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      257,019Cash,
      end of period
                                                                                                                                                      
                                                                                                                                                      $
                                                                                                                                                      196,984
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      $
                                                                                                                                                      220,844Supplemental
      Disclosure of Cash Flow Information:Cash
      paid for interest
                                                                                                                                                      
                                                                                                                                                      $
                                                                                                                                                      1,181
                                                                                                                                                      
                                                                                                                                                      
                                                                                                                                                      $
                                                                                                                                                      2,347
    of these
financial statements.
 6


NATIONAL
DATACOMPUTER, INC.


NOTES
TO UNAUDITED FINANCIAL STATEMENTS





1.  
 Basis of presentation:





Company





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





General





The
unaudited financial statements included herein have been presented pursuant to
the rules of the Securities and Exchange Commission (the “SEC”) for quarterly
reports on Form 10-Q and do not include all of the information and note
disclosure required by accounting principles generally accepted in the United
States of America. Preparing financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses. In the opinion of management, these
statements include all adjustments, consisting only of normal, recurring
adjustments necessary for a fair presentation of the financial position of
National Datacomputer, Inc. (the “Company”) as of March 31, 2009, and the
results of their operations and cash flows for the three months ended March 31,
2009 and 2008. 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, 2008, which are included in the Company’s Form
10-K filed on March 27, 2009. The year-end condensed balance sheet data was
derived from audited financial statements.





Reverse
Stock Split





On July
31, 2008, our Board of Directors approved a reverse stock split and established
a ratio of 1-for-15. This move followed a vote at our Annual Shareholders’
Meeting on June 24, 2008, in which shareholders authorized the Board to effect
the reverse stock split. Upon market open on July 31, 2008, our common stock
began trading on a split-adjusted basis under the new trading symbol
"NDCP.”





The
number of shares of our authorized common stock was reduced from 50,000,000
shares as of July 30, 2008, to approximately 3,333,333 shares post-split. The
number of shares reserved for issuance under our stock option plans was also
reduced proportionately. As a result of the reverse stock split, every 15 shares
of common stock that was issued and outstanding was automatically combined into
one issued and outstanding share, without any change in the par value of such
shares. No fractional shares were issued in connection with the reverse stock
split. Stockholders who would be entitled to fractional shares will receive cash
in lieu of receiving fractional shares. The reverse stock split affected all
shares of common stock, stock options and warrants of NDI outstanding as of
immediately prior to the effective time of the reverse stock split.





All
shares of common stock have been adjusted to reflect a 1 for 15 reverse stock
split which was effective July 31, 2008.


7


2.   
Recent accounting pronouncements:





In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”.
SFAS 157 prescribes a single definition of fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.  The
provisions of SFAS No. 157 with respect to nonfinancial assets and liabilities
recorded fair value were effective for the Company in the first quarter of
2009.  The adoption of this standard had no effect on the Company as
it does not have any nonfinancial assets or liabilities which are measured at
fair value on a nonrecurring basis.





In April
2009, the FASB issued FSP FAS 107-1 and APB 28-1. This FSP amends SFAS
No. 107, “Disclosures about Fair Value of Financial Instruments,” to
require disclosures about fair value of financial instruments not measured on
the balance sheet at fair value in interim financial statements as well as in
annual financial statements. Prior to this FSP, fair values for these assets and
liabilities were only disclosed annually. This FSP applies to all financial
instruments within the scope of SFAS 107 and requires all entities to disclose
the method(s) and significant assumptions used to estimate the fair value of
financial instruments. This FSP shall be effective for interim periods ending
after June 15, 2009. This FSP does not require disclosures for earlier
periods presented for comparative purposes at initial adoption. In periods after
initial adoption, this FSP requires comparative disclosures only for periods
ending after initial adoption. We are currently evaluating the disclosure
requirements of this new FSP.





3.   
Share-based payments:





The
Company accounts for share-based compensation according to the provisions of
SFAS No. 123(R), “Share−based Payment”, which establishes accounting for equity
instruments exchanged for employee services. Under 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). The majority of the
Company’s share-based compensation arrangements vest over four
years.





During
the three months ended March 31, 2009 and 2008, share-based compensation expense
amounted to $1,763 and $1,736.





The
Company estimates the fair value of stock options using the Black-Scholes
valuation model.  Key input assumptions used to estimate the fair
value of stock options include the exercise price of the award, the expected
option term, the expected volatility of the Company’s stock over the option’s
expected term, the risk-free interest rate over the option’s expected term, and
the Company’s expected annual dividend rate.  The Company believes
that the valuation technique and the approach utilized to develop the underlying
assumptions are appropriate in calculating the fair values of the Company’s
stock options granted in the three months ended March 31,
2009.    Estimates of fair values are not intended to
predict actual future events or the value ultimately realized by persons who
receive equity awards.





Stock
options outstanding and related disclosures have been adjusted to reflect a 1
for 15 reverse stock split which was effective July 31, 2008.


8


There
were no options granted during the three months ended March 31, 2009. The
weighted average grant date fair value of options granted was $0.18 during the
three months ended March 31, 2008. The fair value of options at date of grant
was estimated using the Black-Scholes option-pricing model with the following
assumptions:





Three
      Months ended
              
              Three
      Months endedMarch 31,
      2009
              
              March 31, 2008Expected
      option term (1)
              
              n/a
              
              6.25
      yearsExpected
      volatility factor (2)
              
              n/a
              
              103.8%Risk-free
      interest rate (3)
              
              n/a
              
              2.62%Expected
      annual dividend rate
              
              n/a
              
              0%





(1)  The
option life was determined using the simplified method for estimating expected
option life, which qualifies as “plain-vanilla” options.


(2)  The
stock volatility for each grant is determined based on the review of the
experience of the weighted average of historical monthly price changes of the
Company’s common stock over the most recent six years, which approximates the
expected option life of the grant of 6.25 years.


(3)  The
risk-free interest rate for periods equal to the expected term of the share
option is based on the U.S. Treasury yield curve in effect at the time of
grant.





Stock
Option Plans





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.
As of March 31, 2009, there were options to purchase 1,332 shares of common
stock outstanding and no shares available for grant under the 1998 Plan. These
options are fully vested and expire in May 2009.





On March
30, 2007, the Board of Directors adopted the 2007 Employee, Director and
Consultant Stock Option Plan ("2007 Plan") which provides for the issuance of
both incentive and non-qualified stock options to employees, consultants and
directors. A maximum of 133,333 shares of common stock of the Company was
reserved for issuance in accordance with the terms of the 2007 Plan. On June 24,
2008, upon stockholders approval the maximum number of shares reserved for
issuance under the 2007 Plan was increased to 200,000.





Upon the
approval of the 2007 Plan, our 1997 Plan and our 1998 Plan terminated. All
outstanding options under our 1997 and 1998 Stock Option Plans will remain in
effect, but no additional option grants may be made. As of March 31, 2009, there
were 88,331 options outstanding under the 2007 Plan and 108,333 shares available
for grant under the 2007 Plan.


9


The
following table summarizes information about stock options outstanding at March
31, 2009:





Number
      of
                  shares
                
                
                Weighted
      average
                  exercise
      price
                
                
                Remaining
      contractual
                  life
      in years
                
                
                Aggregate
                  intrinsic
      valueOutstanding
      at December 31, 2008
                
                
                92,996
                
                
                $
                0.61
                
                
                
                8.38
                
                
                $
                —Granted
                
                
                —Exercised
                
                
                —Cancelled/forfeited
                
                
                (3,333)
                
                
                
                0.67Outstanding
      at March 31, 2009
                
                
                89,663
                
                
                
                0.61
                
                
                
                8.13
                
                
                $
                —Options
      vested or expected to vest at March 31, 2009 (1)
                
                
                79,944
                
                
                
                0.63
                
                
                
                8.12
                
                
                $
                —Options
      exercisable at March 31, 2009
                
                
                23,415
                
                
                
                1.06
                
                
                
                7.79
                
                
                $
                —





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








ITEM
2.    Management’s Discussion and Analysis or Plan of
Operation.





The
following discussion provides an analysis of the financial condition and results
of operations of the Company and should be read in conjunction with the
Unaudited Financial Statements and Notes thereto appearing elsewhere herein and
our Annual Report on Form 10-K filed with the Securities and Exchange Commission
for the year ended December 31, 2008.




The
discussion below contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
that involve risks and uncertainties. We generally use words such as “believe,”
“may,” “could,” “will,” “intend,” “expect,” “anticipate,” “plan,” and similar
expressions to identify forward-looking statements. You should not place undue
reliance on these forward-looking statements. Our actual results could differ
materially from those anticipated in the forward-looking statements for many
reasons, including the risks described in the Company’s filings with the
Security and Exchange Commission, including its Annual Report on Form 10-K for
the year ended December 31, 2008, filed on March 27, 2009.




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.





Summary





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


10


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




Although
our Datacomputers running our original RouteRider software are still available
for purchase, we have now channeled all of our experience into new portable and
highly parameterized Route Accounting solution software named RouteRider LE®,
(“RRLE”). RRLE is a mobile sales force automation application designed to
increase efficiency, improve productivity and make companies more profitable and
competitive by allowing sales and distribution personnel to gather, enter and
share data at the point of work. It has been designed to run on the very latest
industry standard MicrosoftTMoperating systems and architectures which increases our market potential
by running on industry preferred operating systems and handheld
devices.




Our goal
continues to be a leading supplier in the route accounting system markets and in
selected other market sectors which we may identify in the future. The key
elements of this strategy include: (i) listening to our customers and prospects
and then designing and building solutions that resolve their inventory and
supply chain product problems; (ii) continuously updating our software solutions
to remain current with customers' needs as well as existing technology; and
(iii) hiring people with industry experience.





Results
of Operations





Three
months ended March 31, 2009 compared to three months ended March 31,
2008.





For the
three months ended March 31, 2009, we reported a net income of $25,417 compared
to a net loss of $67,553 for the three months ended March 31, 2008. The
increased income was a direct result of higher revenues.





Revenue and Gross
Profit





Total
revenues increased 140% to $1,001,713 for the three months ended March 31, 2009
from $417,192 for the three months ended March 31, 2008. Total product revenues
increased 536% to $885,358 for the three months ended March 31, 2009 from
$139,271 for the comparable prior period. The increase was due from revenue
recognized on a large sale of our new route software product, RRLE.





Total
service revenues decreased 58% to $116,355 for the three months ended March 31,
2009 from $277,921 for the comparable prior period. The decrease is a direct
result of lower maintenance and repair contracts for our Datacomputers, combined
with lower professional service billings.





Gross
profit was $251,928 or 25% of revenues for the three months ended March 31,
2009, compared to $178,083 or 43% of revenues for the prior comparable
period.  The improved gross profit in absolute dollars was due to our
increased sales and our continued effort towards reducing our expenses. The
decreased profit as a percentage of revenues was due to sales during the three
months ended March 31, 2008 which carried a higher profit.


11


Operating
Expenses





Selling and marketing expenses for the
three months ended March 31, 2009 were $79,620 compared to $59,070 for the prior
comparable period, an increase of $20,550 or 35%.  The increase is due
primarily to higher commission expenses as a result of higher
revenue.





General
and administrative expenses for the three months ended March 31, 2009 were
$146,702 compared to $188,334 for the prior comparable period, a decrease of
$41,632 or 22%. The decrease is a result of lower legal fees combined with lower
occupancy cost related to our relocation to smaller quarters.




Liquidity
and Capital Resources





We
generated cash of $83,199 and used cash of $11,592 for operating activities for
the three months ended March 31, 2009 and 2008, respectively. For the three
months ended March 31, 2009, our principal operating cash was provided by a
decrease in deferred hardware and software costs along with our income from
operations. This was offset by a decrease in deferred revenues and an increase
in accounts receivable. For the three months ended March 31, 2008, our principal
operating cash was used to fund our loss from operations combined with a
decrease in accounts payable, along with an increase in accounts receivable,
deferred hardware and software cost and prepaid expenses, offset by an increase
in deferred revenues related to new orders for RRLE scheduled for completion in
early 2009.





We did
not use any cash for investing activities from operation for the three months
ended March 31, 2009. We used cash of $12,257 for investing activities from
operations for the three months ended March 31, 2008. The cash was used for the
purchase of capital equipment. As of March 31, 2009, we had no material
commitments for capital expenditures.





We used
cash of $5,764 and $12,326 for financing activities for the three months ended
March 31, 2009 and 2008, respectively. During the three months ended March 31,
2009, we made payments on obligations under our capital leases. During the three
months ended March 31, 2008, we made payments on obligations under our notes
payable and capital leases.





We have
an accumulated deficit of approximately $16,926,000 through March 31, 2009. As a
result of our 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, 2008 contains an explanatory
paragraph regarding substantial doubt about our ability to continue as a going
concern. As of March 31, 2009, we had approximately $197,000 in cash and
negative working capital of $630,000. In the event that we cannot generate
sufficient cash for working capital, we may have to reduce our level of
operations, which will make it more difficult for us to continue our business as
a going concern.





We
continue exploring all opportunities to improve our financial condition by
pursuing potential revenues sources through increased marketing efforts. There
is a possibility that we may not realize adequate revenues in the near future to
meet cash flow requirements, and therefore might require us to implement further
cost saving actions or attempt to obtain additional financing. We believe that
based on our current revenue expectations, the expected timing of such revenues,
and our current level of expenses we have sufficient cash to fund our operations
through the end of 2009. There can be no assurance that such financing, if
required, will be available on reasonable terms, if at all.


12


Commitments,
Contractual Obligations and 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-K for the year ended December 31, 2008.





As of
March 31, 2009, there are no material changes in our contractual obligations as
disclosed in our Annual Report on Form 10-K for the year ended December 31,
2008.





Concentration
of Credit Risk





The
Company sells its products to customers principally in the United States of
America. During the first 3 months of 2009, one customer accounted for
approximately 88% of our total revenues.





Critical
Accounting Policies and Estimates





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.





Revenue
Recognition.





We
recognize product 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
revenue arrangements sometimes involve multiple elements (i.e. products 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
undelivered 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.  When products
and services are sold together and fair values have been established, revenue
related to the hardware is generally recognized when title and risk of loss have
passed, and revenue related to services are recognized as the services are
provided.  If fair values of the various elements have not been
established, we defer all revenue until all elements have been
delivered.


13


For
revenue arrangements with multiple deliverables that include or represent
software products and services as well as any non-software deliverables for with
a software deliverable is essential to its functionality, we recognize revenue
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, and if so, whether vendor-specific objective evidence (VSOE) of fair
value exists, no significant obligations with regard to installation on
implementation remain, and customer acceptance, when applicable, is
obtained.  Our revenue arrangements may include hardware, software,
services and maintenance.  If software is essential to the
functionality of the hardware, we generally defer the recognition of revenue
related to the hardware until the software revenue can be
recognized.  If services are essential to the functionality of the
software, revenue related to the services are also deferred until the software
revenue can be recognized.  If the only undelivered element is
maintenance for which VSOE of fair value can be established, revenue related to
the software and the related elements is recognized upon customer acceptance of
the software.  The maintenance will then be recognized ratably over
the contract term.





Service
revenue that is not essential to the functionality of a software product is
recognized as the services are provided on a time and materials
basis.





Hardware
and software maintenance that is not sold as part of a multiple element
arrangement is recognized ratably over the contract maintenance
term.





Third
party hardware and software costs that are incurred in direct connection to
deferred hardware and software revenue are also deferred until recognition of
the related revenue.





Accounts
Receivable





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





Inventories





Inventories
are stated at the lower of cost or market. Cost is determined using the
first-in, first-out (FIFO) method. We evaluate our inventories to determine
excess or slow moving products based on quantities on hand, current orders and
expected future demand. For those items in which we believe we have an excess
supply or for those items that are obsolete, we estimate the net amount that we
expect to realize from the sale of such products and record 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,” we review the
carrying values of our 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.


14


Share-Based  Compensation




The
Company accounts for share-based compensation according to the provisions of
SFAS No. 123(R), “Share−based Payment”, which establishes accounting for equity
instruments exchanged for employee services. Under 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). The majority of the
Company’s share-based compensation arrangements vest over four
years.





The
Company estimates the fair value of stock options using the Black-Scholes
valuation model.  Key input assumptions used to estimate the fair
value of stock options include the exercise price of the award, the expected
option term, the expected volatility of the Company’s stock over the option’s
expected term, the risk-free interest rate over the option’s expected term, and
the Company’s expected annual dividend rate. Estimates of fair values are not
intended to predict actual future events or the value ultimately realized by
persons who receive equity awards.





Capitalized
Software Research and Development Costs.





Costs
associated with the development of computer software are charged to operations
prior to establishment of technological feasibility, as defined by Statement of
Financial Accounting Standards (SFAS) No. 86, “Accounting for the Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed”. Costs
incurred subsequent to the establishment of technological feasibility and prior
to the general release of the products are capitalized.





Capitalized
software costs are amortized on a product-by-product basis. The annual
amortization is the greater of the amount computed using (a) the ratio that
current gross revenue for a product bears to the total of current and
anticipated future gross revenues for that product or (b) the straight-line
method over the remaining estimated economic life of the product. Amortization
begins when the product is available for general release to the
customer.





Recent
accounting pronouncements





In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”.
SFAS 157 prescribes a single definition of fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.  The
provisions of SFAS No. 157 with respect to nonfinancial assets and liabilities
recorded fair value were effective for the Company in the first quarter of
2009.  The adoption of this standard had no effect on the Company as
it does not have any nonfinancial assets or liabilities which are measured at
fair value on a nonrecurring basis.





In April
2009, the FASB issued FSP FAS 107-1 and APB 28-1. This FSP amends SFAS
No. 107, “Disclosures about Fair Value of Financial Instruments,” to
require disclosures about fair value of financial instruments not measured on
the balance sheet at fair value in interim financial statements as well as in
annual financial statements. Prior to this FSP, fair values for these assets and
liabilities were only disclosed annually. This FSP applies to all financial
instruments within the scope of SFAS 107 and requires all entities to disclose
the method(s) and significant assumptions used to estimate the fair value of
financial instruments. This FSP shall be effective for interim periods ending
after June 15, 2009. This FSP does not require disclosures for earlier
periods presented for comparative purposes at initial adoption. In periods after
initial adoption, this FSP requires comparative disclosures only for periods
ending after initial adoption. We are currently evaluating the disclosure
requirements of this new FSP.


15


ITEM
3.    Quantitative and Qualitative Disclosures about Market
Risk





No
discussion is required pursuant to Form 10-Q Instruction to paragraph
305(c).





ITEM
4.    Controls and Procedures





a) Evaluation of Disclosure Controls
and Procedures. We have conducted an evaluation under the supervision of
the Chief Executive Officer and the Chief Accounting Officer (its principal
executive officer and principal financial officers, respectively), regarding the
effectiveness of the Company’s disclosure controls and procedures (as defined in
Rule 13a-15(e) and 15d-15(e) under the Exchange Act of 1934) as of March 31,
2009. Based on the aforementioned evaluation, management has concluded that our
disclosure control and procedures were not effective as of March 31, 2009
because of the existence of three material weaknesses in our internal control
over financial reporting related to (i) our finance group’s inability to perform
the testing of internal controls on financial reporting due to our limited
number of personnel engaged in accounting and finance functions and a resulting
lack in the segregation of duties, and (ii) the potential inability of our
accounting staff to handle certain complex accounting issues. and (iii) as a
result of the fact that our September 30, 2008 Form 10-Q was originally filed
without a review having been performed by our Independent Registered Public
Accounting Firm, our Independent Registered Public Accounting Firm has concluded
that as of March 31, 2009 a material weakness existed related to our disclosure
controls and procedures, specifically with regards disclosures and procedures
mandated by Securities and Exchange Commission
regulations.  Notwithstanding the existence of the material weaknesses
described above, management has concluded that the consolidated financial
statements in this Form 10-Q fairly presents, in all material respects, the
Company’s financial position, results of operations and cash flows for the
periods and dates presented.




(b)Changes in Internal Control over
Financial Reporting




No
changes in our internal control over financial reporting occurred during the
quarter ended March 31, 2009 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.


16




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.








17





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.May
      22, 2009
                    /s/ William
      B. BerensWilliam
      B. BerensPresident
      and Chief Executive Officer (principal executive
      officer)


May
      22, 2009
                /s/ Bruna
      BucacciBruna
      BucacciChief
      Accounting Officer (principal financial and accounting
      officer)


18


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.





19