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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)

   [X]    ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2007

                                       OR

   [ ]    TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) of THE SECURITIES
          EXCHANGE ACT OF 1934 For the transition period from _______ to _______


                           NATIONAL DATACOMPUTER, INC.
                           ---------------------------
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

            DELAWARE                                             04-2942832
  (STATE OR OTHER JURISDICTION                                 (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION)                            IDENTIFICATION NO.)

         900 MIDDLESEX TURNPIKE, BLDG. 5, BILLERICA, MASSACHUSETTS 01821
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

                                 (978) 663-7677
                (ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)

         SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE EXCHANGE
 ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE EXCHANGE ACT:

                     COMMON STOCK, $.001 PAR VALUE PER SHARE
                                (Title of class)

Check whether the issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act. |_|

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 |_|

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |_|

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 registrant had revenues of approximately $1.8 million during the fiscal year
ended December 31, 2007. As of March 26, 2008, 35,742,438 shares of the
registrant's common stock, $0.001 par value per share, were outstanding and the
aggregate market value of the common stock held by non-affiliates was
approximately $70,768 based on the closing price of $0.01 per share as reported
by the OTC Bulletin Board.

Transitional Small Business Disclosure Format:  Yes |_| No |X|


                      DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Company's Proxy Statement to be delivered to the Company's
stockholders in connection with the Company's 2008 Annual Meeting of
Stockholders, which the Company plans to file with the Securities and Exchange
Commission pursuant to Regulation 14A promulgated under the Securities Exchange
Act of 1934, on or prior to April 29, 2008, are incorporated by reference in
Part III (Items 9, 10, 11, 12 and 14) of this Form 10-KSB.
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                                TABLE OF CONTENTS


PART I                                                                     PAGE

     Item 1.      Description of Business                                    2
     Item 1A.     Risk Factors                                               8
     Item 2.      Description of Property                                   14
     Item 3.      Legal Proceedings                                         14
     Item 4.      Submission of Matters to a Vote of Security Holders       14

PART II

     Item 5.      Market for Common Equity, Related
                  Stockholder Matters and Small Business Issuer
                  Purchases of Equity Securities                            15
     Item 6.      Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                       16
     Item 7.      Financial Statements                                      24
     Item 8.      Changes in and Disagreements with Accountants on
                  Accounting and Financial Disclosure                       24
     Item 8A.     Controls and Procedures                                   24
     Item 8B.     Other Information                                         25

PART III

     Item 9.      Directors, Executive Officers, Promoters and
                  Control Persons; Compliance With Section 16(a)
                  of the Exchange Act                                       25
     Item 10.     Executive Compensation                                    29
     Item 11.     Security Ownership of Certain Beneficial Owners and
                  Management and Related Stockholder Matters                29
     Item 12.     Certain Relationships and Related Transactions            29
     Item 13.     Exhibits                                                  29
     Item 14.     Principal Accountant Fees and Services                    31
     Item 15.     Signatures                                                32


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                                     PART I

                           FORWARD-LOOKING STATEMENTS

Some of the statements under the captions of this report on Form 10-KSB titled
"Risk Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" or "Business," contained or incorporated by reference
elsewhere in this report, and in our other reports filed with the Securities
Exchange Commission ("SEC") constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements include statements that address activities, events or
developments that we expect, believe or anticipate may occur in the future,
including:

     o    adverse economic conditions;

     o    inability to raise sufficient additional capital to operate our
          business, if necessary;

     o    unexpected costs, lower than expected sales and revenues, and
          operating defects;

     o    adverse results of any legal proceedings;

     o    the volatility of our operating results and financial condition;

     o    inability to attract or retain qualified senior management personnel,
          including sales and marketing, and engineering personnel; and

     o    other specific risks that may be referred to in this report.

All statements, other than statements of historical facts, included in this
report regarding our strategy, future operations, financial position, estimated
revenue or losses, projected costs, prospects and plans and objectives of
management are forward-looking statements. When used in this report, the words
"may," "believe," "anticipate," "intend," "estimate," "expect," "project,"
"plan," "could," "would" and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain
such identifying words. All forward-looking statements speak only as of the date
of this report. We do not undertake any obligation to update any forward-looking
statements or other information contained in this report. Existing stockholders
and potential investors should not place undue reliance on these forward-looking
statements. Although we believe that our plans, intentions and expectations
reflected in or suggested by the forward-looking statements in this report are
reasonable, we cannot assure our stockholders or potential investors that these
plans, intentions or expectations will be achieved. We disclose important
factors that could cause our actual results to differ materially from our
expectations under "Risk Factors" and elsewhere in this report. These risk
factors qualify all forward-looking statements attributable to us or persons
acting on our behalf.

Information regarding market and industry statistics contained in this report is
included based on information available to us that we believe is accurate. It is
generally based on academic and other publications that are not produced for
purposes of securities offerings or economic analysis. We have not reviewed or
included data from all sources, and we cannot assure our stockholders or
potential investors of the accuracy or completeness of the data included in this
report. Forecasts and other forward-looking information obtained from these
sources are subject to the same qualifications and the additional

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uncertainties accompanying any estimates of future market size, revenue and
market acceptance of products and services. We have no obligation to update
forward-looking information to reflect actual results or changes in assumptions
or other factors that could affect those statements. See "Risk Factors" for a
more detailed discussion of uncertainties and risks that may have an impact on
future results.

ITEM 1. BUSINESS

DESCRIPTION OF BUSINESS.

     National Datacomputer, Inc. (hereinafter referred to as the "Company",
"we", "us" or "our") was organized as a Delaware corporation in 1986 and began
active operations in 1987 following our merger with an established computer
systems engineering business. We are engaged exclusively in providing solutions
through the use of mobile information systems in the distribution market segment
within the product supply chain. We design, market, sell, and service
computerized systems used to automate the collection, processing, and
communication of information related to product sales and inventory control. Our
products and services include data communication, application-specific software,
handheld computers, related peripherals, and accessories, as well as associated
education and support services for our hardware and software products.

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

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

     During the fiscal year ended December 31, 2006, we sold our audit business
line in connection with a transaction relating to shares of our preferred and
common stock held by a majority holder of our capital stock. On November 29,
2006, we entered into an arrangement with A.S.T., Inc. ("AST") and Phyle
Industries, Inc. ("Phyle") pursuant to which we sold our audit business line to
AST in exchange for 4,150 shares of our preferred stock (representing all of our
issued and outstanding preferred stock).

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

     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

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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.

PRODUCTS

     We implement software solutions, such as our Microsoft(TM) DOS(R)-based
RouteRider product and the Microsoft(TM) Pocket PC(R)-based RouteRider LE
product, for companies that need the latest technology to manage and improve
their business operations to account for inventory in route based deliveries.
Our Route Accounting solution functions as a combined point of sale and a
rolling warehouse management system with all the technical and audit
functionality needed for today's working environments.

     In June 2004 we signed a distribution partnership with Micronet, LTD,
giving us rights to market, sell and support a new mobile accounting software
product throughout the United States, Canada and Mexico. Since that time we have
worked with Micronet to modify this software so that it conforms to the North
American market. We plan to expand our sales team in order to seek to increase
revenues and boost productive partnerships with software and hardware partners.
In addition we also plan to design and develop ancillary application software to
go along with the existing Direct Store Delivery ("DSD") software. Our goal in
undertaking these projects is to:

     o    Expand the market into non DSD sales;

     o    Increase our margins;

     o    Increase our competitive capabilities; and

     o    Improve our overall position as a preferred vendor for these products
          and services.

     Products meeting these needs provide concurrent order taking, product
delivery, signature capture, inventory tracking, and asset control. Salespeople
enter customer orders in handheld computers and use portable printers to
generate invoices that are left with the customers' orders at their locations.
At the end of a route delivery day, information stored in the handheld computer
is transferred to the host information system and instructional and control
information for the next day's delivery routes is transferred back to the
handheld computer.

     OUR TAILORED SOFTWARE SOLUTIONS

1. ROUTERIDER(R) LE

     We are a recognized leader in technology in DSD or Route Accounting
software. We have accumulated over 18 years of experience by developing an
installed base of well over 100 clients. We believe that our experience and
industry knowledge are a competitive advantage as we seek to attain revenue
growth. Also, our distribution agreement with Micronet LTD, enables us to target
major food and beverage distributors, as well as distributors in other markets,
by providing them with an efficient solution which reduces costs, increases
sales, tracks operations more accurately, and enhances customer service.

     The software, named RouteRider(R) LE, ("RouteRider LE") 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.

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     We believe that RouteRider LE utilizes state of the art technology to
provide a complete and comprehensive mobile solution for sales and route
accounting applications, including pre-sale; van sale (DSD) and distribution.
The sales/field force is equipped with handheld computers or PDA's (Personal
Digital Assistants) and communicates to the host or back office system through a
dedicated communication server. RouteRider LE is designed to enable sales and
field representatives to receive timely and updated information needed to make
decisions and close transactions effectively and efficiently.

     RouteRider LE runs on standard Microsoft(TM) Windows(R) operating systems.
RouteRider LE software includes a communications server that mediates between a
back office system and the handheld computers. The server implements a unique
development that greatly increases communication data rates. The software is
designed to include all of the functions that a sales person might perform
during his or her work.

     RouteRider LE contains detailed information on customers, products, prices
and promotions. Historical information, down to the line item detail, can also
be supplied. Surveys, voice messages, notes, graphics, e-mails, business
intelligence, accounts receivable and other information are designed to improve
the efficiency of the sales person on a daily basis.

     RouteRider LE is a portable and highly parameterized Route Accounting
solution, which is designed to run on industry standard operating systems (e.g.
Microsoft's PocketPC 2002, PocketPC 2003 and soon WindowsMobile 2005), databases
and utilizes cellular, Wi-Fi, and Bluetooth communications protocols.

2. ROUTERIDER(R)

     Our Datacomputers can be equipped with our Microsoft(TM) DOS-based version
of RouteRider(R) software, which is designed to be a powerful but easy-to-use
route service system that can be customized for customers based on how they run
their businesses. RouteRider-equipped Datacomputers allow sales people to
communicate orders electronically as often as they want throughout the day, by
modem or cellular phone.

     Salespeople returning to an office or warehouse at the end of the day can
exchange information by connecting their RouteRider Datacomputer to a
communications server either directly or through NDINet(TM), our proprietary
network software, which unattended, can receive information from multiple
RouteRider Datacomputers at multiple locations. Sales people who do not return
to an office or warehouse at the end of the day can call their home base every
evening to communicate the day's activities and load the RouteRider Datacomputer
with up-to-the-minute information on products, pricing, and the next day's
customers.

     Once the results of daily activities are uploaded from the RouteRider
Datacomputer to the communications server, the server uploads this new data to
the customer's host system's route accounting, sales, distribution, accounts
receivable ("A/R"), and inventory programs, thereby saving data-entry costs and
eliminating transcription and keying errors. The server also downloads to the
salesperson's RouteRider Datacomputer all the updated information needed for the
next day's work--route schedule, customer files, history updates, customer
specific pricing changes, promotions, updated A/R status, open invoices, and
more. During the day, at each route stop, the driver takes the customer's
inventory, calculates what new stock needs to be added, prints out a delivery
slip for each customer and also captures customer signature. At the end of the
day, a complete report of the driver's deliveries can be printed. According to a
number of our customers, the use of our RouteRider Datacomputers has
significantly improved driver efficiency.

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OUR HARDWARE PRODUCTS

     Our handheld Datacomputer(R) ("Datacomputer") computers include a
microprocessor, keyboard, LCD displays, and full size alphabetic and numeric
character sets. Our Datacomputers are designed to be highly reliable, tolerant
to human error, and easy to use. They are shock and splash resistant, and
operate over a wide temperature range.

     Application programs for our Datacomputers are written on conventional
desktop computers with commonly used programming languages and then executed on
the Datacomputer or other supported handheld devices. Application programs and
data are stored in the Datacomputer's random access memory and can be readily
changed by communicating revisions or new programs to the Datacomputer through
the communications setup we provide. The Datacomputer can receive data from
bar-code readers, other computers (including other Datacomputers), over
telephone lines through a modem, and through the use of wireless technology. Our
Datacomputer product line includes various models of the Datacomputer, bar-code
readers, rugged printers, communication devices, carrying cases, cables, and
add-on memory boards.

     DATACOMPUTER MODEL DC4(TM)

     Our Datacomputer Model DC4(TM) (the "DC4"), introduced in 1997, is designed
for use by the route service market. The DC4 is an advanced version of our now
discontinued model DC3X which employs a faster processor and a faster internal
modem. Besides those enhancements, the DC4 also incorporates two significant
features not available in the DC3X, namely, a touch-screen for signature capture
capability and optical communication capability.

     We offer the DC4 usually with our RouteRider(R) software designed specially
for the DC4 Datacomputers. These solutions are typically called Pre-Sales System
("PSS") and Driver Sales System ("DSS"). Hybrids of these two systems have also
become standard features, so that one set of software can easily use PSS and DSS
functionality without the need for two versions or two computers. Typically the
PSS includes a Datacomputer, software and various peripherals for use by
customers who sell their products on routes and book the sales orders through
dedicated sales forces. The DSS is used by customers who sell and invoice their
products through delivery drivers and includes a Datacomputer, a portable or
truck-mounted printer, peripherals and software.

     The PSS and DSS versions, along with the hybrid versions, allow the
salesman or delivery person to access all of the distributor's information on
the customer's account, as well as to input the customer's next delivery order.

MARKETING AND DISTRIBUTION

     Recognizing the need to focus our marketing resources, we have targeted our
business strategy for our software solutions to a limited number of markets. We
currently focus on market sectors where businesses distribute their products
through routes. We believe that the route sales and service market is attractive
because: (i) customer acceptance of handheld computers has been established in
those sectors; (ii) customers have realized a substantial return on their
investment in handheld computers; and (iii) we enjoy a competitive advantage in
this market due to our software and related services. We continue to believe
that we have gained and maintain the leading position in the office coffee
service market, and are penetrating the beverage distribution, bakery, snacks,
and dairy markets.

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     DIRECT SALES FORCE

     We primarily sell and distribute our products through a direct sales force,
which we believe offers the best method for marketing and selling our products.
Direct selling is our primary strategy in the route sales and inventory service
market. We believe that the key elements to successful direct selling include:
(i) maintaining a well-qualified direct sales staff that is experienced in
marketing and selling solutions to medium and large accounts; (ii) using a
consultative sales approach; (iii) offering excellent service and support; and
(iv) maintaining outstanding customer references.

     SERVICE AND SUPPORT

     Superior service is a vital part of our competitive strategy and
institutionally we emphasize the quality of both our hardware and software
service. Our customer service department manages all installations, preparations
and follow-up support. We provide depot repair services for our own manufactured
hardware as well as other manufacturers' handhelds.

     We typically offer industry standard 90-day warranties and several flexible
service arrangements and maintenance contracts to meet customer needs. In
addition to technical support of installed systems, we provide pre-installation
site surveys, installation services, customization and enhancements, user
training, technical training, application software support, and host information
system interface assistance.

     Approximately 52% of our 2007 total revenue was attributed to service and
support sales.

     KEY CUSTOMERS

     During 2007, four customers accounted for approximately 68% of our total
revenues. The majority of our customers place orders with us on an "as needed
basis"; however there are times when a customer will place an order for delivery
over a twelve month period.

     COMPETITION

     The market for our route service products is highly competitive and acutely
influenced by advances in technology, new product introduction and price
competition. Our competitors include Eleven Technology, Apacheta Corporation,
BelTech Systems and Global Beverage Group, all of which have greater financial,
marketing and technical resources than we do. In addition, larger corporations
could enter the route sales and service segment of the hand-held computer
market.

     EMPLOYEES

     As of December 31, 2007, we had 9 full-time and 1 part-time employees. Of
these employees, three were engaged in sales and marketing, four in service and
customer support, and three in administration and finance. Our employees are not
represented by a labor union. We believe that our relationship with our
employees is good.

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ITEM 1A. RISK FACTORS.


                          RISKS RELATED TO OUR BUSINESS

WE HAVE A HISTORY OF LOSSES AND MAY NEVER ACHIEVE OR SUSTAIN PROFITABILITY.

     We will need to generate more revenues than we did in 2007in order to
become profitable and sustain profitability and positive cash flow. Our ability
to generate future revenue and sustain profitability will depend on a number of
factors, many of which are described throughout this risk factor section.
Although we believe that many of the cost savings and other activities we
undertook last year, together with our expected levels of revenues for this
year, will allow us to generate cash flow from operations, we may not achieve
profitability this year or be able to sustain profitability in future years.
Failure to achieve and maintain profitability will likely adversely affect the
price of our Common Stock.

WE MAY NEED TO RAISE ADDITIONAL CAPITAL IN ORDER TO CONTINUE TO OPERATE OUR
BUSINESS, AND SUCH TRANSACTIONS MAY NOT BE AVAILABLE TO US ON FAVORABLE TERMS,
IF AT ALL.

     Because we have historically had losses and only a limited amount of cash
has been generated from operations, we have funded our operating activities to
date primarily from the sale of securities and from the sale of a product line
in 2007. In order to continue to fund the development of our business, we may
need to raise additional capital, through the sale of securities. We cannot be
certain that any such financing will be available on acceptable terms, or at
all. Moreover, additional equity financing, if available, would likely be
dilutive to the holders of our common stock, and debt financing, if available,
would likely involve restrictive covenants and a security interest in all or
substantially all of our assets.

IF WE ARE UNABLE TO GENERATE ADEQUATE WORKING CAPITAL FROM OPERATIONS OR RAISE
ADDITIONAL CAPITAL THERE IS SUBSTANTIAL DOUBT ABOUT THE COMPANY'S ABILITY TO
CONTINUE AS A GOING CONCERN.

     The independent registered public accounting firm's report on our financial
statements for the year ended December 31, 2007 contains an explanatory
paragraph about our ability to continue as a going concern. Although we have
been able to reduce our operating expenses by 16% in 2007, as compared to 2006,
we still have incurred an accumulated deficit of approximately $16.4 million
through December 31, 2007. As of December 31, 2007, we had approximately
$257,000 in cash and negative working capital of $941,100. The 2007 results
reflect significant cost reductions, which efforts we are continuing to
undertake. However, even with the additional working capital from equity
transactions during 2007, we have a current ratio of 0.56, which, while an
improvement from our current ratio of 0.30 at December 31, 2006, is still
significantly less than 1.00, which is generally considered to place a company
at higher financial risk. 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 HAVE ONLY A SMALL NUMBER OF CUSTOMERS IN FINITE FIELDS, AND THE LOSS OF THESE
CUSTOMERS WOULD HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY'S BUSINESS.

     Approximately 52% of our 2007 total revenue was attributed to service and
support sales. During 2007, one customer who has been one of our top customers
since 1990 accounted for approximately 17%

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of our total revenues. Additionally, in 2007 our top four customers collectively
accounted for 68% of our total revenues.

OUR MARKETS ARE SUBJECT TO RAPID TECHNOLOGICAL CHANGE, THEREFORE, OUR SUCCESS
DEPENDS ON OUR ABILITY TO ADAPT AND/OR INTRODUCE NEW PRODUCTS IN A TIMELY
FASHION.

     The life cycle of the technology and any future products developed by us
may be limited by the emergence of new products and technologies, changes in
customer preferences and other factors. Our future performance will depend on
our ability to consistently:

     o    identify emerging technological trends in our market;

     o    identify changing customer requirements;

     o    develop or maintain competitive technology, including new product
          offerings;

     o    improve the performance, features and reliability of our products,
          particularly in response to technological change and competitive
          offerings;

     o    bring technology to market quickly at cost-effective prices; and

     o    protect our intellectual property.

     We may not succeed in developing and marketing new products that respond to
technological and competitive developments and changing customer needs, and such
products may not gain market acceptance or be incorporated into the technology
or products of third parties. Any significant delay or failure to develop new
enhanced technologies, including new product offerings, and any failure of the
marketplace to accept any new technology and product offerings would have a
material adverse effect on our business, financial condition and results of
operations.

COMPETITION IN THE HANDHELD COMPUTERIZED ROUTE ACCOUNTING INVENTORY SOLUTIONS
INDUSTRIES COULD PREVENT US FROM ACHIEVING PROFITABILITY.

     The computerized route accounting industries are highly competitive, and we
expect the intensity of the competition to increase. Many of our competitors
have greater financial, technical, research, marketing, sales, distribution,
service and other resources than we do. Moreover, our competitors may offer
broader product lines and have greater name recognition than we do, and may
offer discounts as a competitive tactic, forcing intense pricing pressure on our
products. In addition, several development stage companies are currently
creating or developing technologies and products that compete with or are being
designed to compete with our technologies and products. Our competitors may
develop or market technologies or products that are more effective or more
commercially attractive than our current or future products, or that may render
our technologies or products less competitive or obsolete.

OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE.

     Due to the nature of our business and our competitive role in the industry,
we will experience fluctuations in our quarterly operating results as we have in
the past and it is likely that these fluctuations will continue in the future.
These fluctuations are caused by many factors, including, but not limited to:

     o    availability and pricing from our suppliers;

     o    changes in the demand for our products by customers;

     o    introductions or enhancements of products, or delays in the
          introductions or enhancements of products, by us or our competitors;

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     o    rate and success of new customer development;

     o    changes in our pricing policies or those of our competitors;

     o    success in attracting, retaining and motivating qualified personnel;

     o    changes in general economic conditions; and

     o    obsolescence of inventory.

     A substantial portion of our operating expenses is related to personnel,
facilities, and sales and marketing programs and is fixed. Our expense level is
based in part on our expectations of future orders and sales, which are
extremely difficult to predict. Accordingly, we may not be able to adjust our
fixed expenses quickly enough to address any significant shortfall in demand for
our products in relation to our expectations.

     Fluctuations in our operating results may also result in fluctuations in
our common stock price. In such event, the trading price of our common stock
would likely suffer and adversely affect our ability to raise capital and the
value of your investment in the Company.

IF WE ARE UNABLE TO HIRE OR RETAIN KEY PERSONNEL, WE MAY NOT BE ABLE TO OPERATE
OUR BUSINESS SUCCESSFULLY.

     We may not be successful in recruiting and retaining executive officers and
other key management and technical personnel. The competition for employees with
the necessary high level of technical expertise to design, market and sell our
products is intense, particularly in Massachusetts. We will need to hire
executives and a number of additional technical personnel if we are to sustain
the development of new products and our ability to sell those products. Because
competition for highly skilled technical personnel is so intense, companies in
the Company's industry are subject from time to time to complaints brought by
competitors alleging interference with contractual relations or wrongful hiring
of employees. Such lawsuits may be costly, may divert management attention and
resources from the operation of our business, and may therefore adversely affect
our financial condition and results of operations. In addition, the loss of the
management and technical expertise of our senior management could seriously harm
us.

NEITHER OUR DISCLOSURE CONTROLS AND PROCEDURES NOR OUR INTERNAL CONTROL OVER
FINANCIAL REPORTING CAN PREVENT ALL ERRORS OR FRAUD.

     Our management does not expect that our disclosure controls and procedures
or our internal control over financial reporting will prevent all errors or
fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system will be attained. Furthermore, the design of a control system must
reflect the fact that there are resource constraints and the benefits of
controls must be considered relative to their costs. Because of the inherent
limitations in a cost-effective control system, no evaluation of controls can
provide absolute assurance that all misstatements due to error or fraud, if any,
may occur and not be detected on a timely basis. These inherent limitations
include the possibility that judgments in decision-making can be faulty and that
breakdowns can occur because of errors or mistakes. Our controls and procedures
can also be circumvented by the individual acts of some persons, by collusion of
two or more people or by management override of the controls. The design of any
system of controls is based in part on certain assumptions about the likelihood
of future events and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Furthermore,
controls may become inadequate because of changes in conditions or deterioration
in the degree of compliance with policies or procedures. While we seek to design
our controls and procedures to provide reasonable

                                       10
<PAGE>

assurance that information required to be disclosed in our periodic filings is
timely disclosed, these inherent limitations expose us to breakdowns in such
controls and procedures.

AS A PUBLIC COMPANY, WE NEED TO COMPLY WITH THE REPORTING OBLIGATIONS OF THE
SECURITES EXCHANGE ACT OF 1934 AND SECTION 404 OF THE SARBANES-OXLEY ACT OF
2002. IF WE FAIL TO COMPLY WITH THE REPORTING OBLIGATIONS OF THE EXCHANGE ACT
AND SECTION 404 OF THE SARBANES-OXLEY ACT, OR IF WE FAIL TO MAINTAIN ADEQUATE
INTERNAL CONTROLS OVER FINANCIAL REPORTING, OUR BUSINESS, RESULTS OF OPERATIONS
AND FINANCIAL CONDITION, AND INVESTORS' CONFIDENCE IN US, COULD BE MATERIALLY
AND ADVERSELY AFFECTED.

     As a public company, we are required to comply with the periodic reporting
obligations of the Exchange Act, including preparing annual reports, quarterly
reports and current reports. Our failure to prepare and disclose this
information in a timely manner could subject us to penalties under federal
securities laws, expose us to lawsuits and restrict our ability to access
financing. We may identify areas requiring improvement with respect to our
internal control over financial reporting, and we may be required to design
enhanced processes and controls to address issues identified. This could result
in significant delays and cost to us and require us to divert substantial
resources, including management time, from other activities. If we fail to
maintain the adequacy of our internal controls, we may not be able to ensure
that we can conclude on an ongoing basis that we have effective internal control
over financial reporting in accordance with the Sarbanes-Oxley Act. Moreover,
effective internal controls are necessary for us to produce reliable financial
reports and are important to help prevent fraud.


                   RISKS RELATED TO OUR INTELLECTUAL PROPERTY

OUR INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS MAY BE INSUFFICIENT TO PROTECT
OUR COMPETITIVE POSITION.

     Our business depends, in part, on our ability to protect our intellectual
property. We rely primarily on patent, copyright, trademark and trade secret
laws to protect our proprietary technologies. We cannot be sure that such
measures will provide meaningful protection for our proprietary technologies and
processes. We cannot be sure that any existing or future patents will not be
challenged, invalidated or circumvented, or that any rights granted thereunder
would provide us meaningful protection. The failure of any patents to provide
protection to our technology would make it easier for our competitors to offer
similar products.

     We also generally enter into confidentiality agreements with our employees
and strategic partners, and generally control access to and distribution of our
documentation and other proprietary information. Despite these precautions, it
may be possible for a third party to copy or otherwise obtain and use our
products or technology without authorization, develop similar technology
independently or design around our patents. In addition, effective copyright,
trademark and trade secret protection may be unavailable or limited in certain
foreign countries in which we operate.

WE MAY BE SUBJECT TO INTELLECTUAL PROPERTY RIGHTS DISPUTES WHICH COULD DIVERT
MANAGEMENT'S ATTENTION AND COULD BE COSTLY.

     From time to time, we may receive notices of claims of infringement,
misappropriation or misuse of other parties' proprietary rights. We cannot be
sure that we will prevail in these actions, or that other actions alleging
infringement by us of third-party patents, misappropriation or misuse by us of
third-party trade secrets or the invalidity of one or more patents held by us
will not be asserted or prosecuted against

                                       11
<PAGE>

us, or that any assertions of infringement, misappropriation or misuse or
prosecutions seeking to establish the invalidity of our patents will not
seriously harm our business. For example, in a patent or trade secret action, an
injunction could be issued against us requiring that we withdraw particular
products from the market or necessitating that specific products offered for
sale or under development be redesigned.

     Irrespective of the validity or successful assertion of various claims of
infringement, misappropriation or misuse of other parties' proprietary rights,
we would likely incur significant costs and diversion of our management and
personnel resources with respect to the defense of such claims, which could
seriously harm our business. If any claims or actions are asserted against us,
we may seek to obtain a license under a third party's intellectual property
rights. We cannot be sure that under such circumstances a license would be
available on commercially reasonable terms, if at all. Moreover, we often
incorporate the intellectual property of our strategic customers into our
designs, and we have certain obligations with respect to the non-use and non-
disclosure of such intellectual property. We cannot be sure that the steps taken
by us to prevent our or our customers' misappropriation or infringement of the
intellectual property will be successful.


                       RISKS RELATING TO OUR COMMON STOCK

A SIGNIFICANT HOLDER OF SHARES OF OUR COMMON STOCK HAS SUFFICIENT OWNERSHIP TO
SINGULARLY DETERMINE THE RESULTS OF ANY STOCKHOLDER VOTE AND CONTROL OUR BOARD
OF DIRECTORS.

     As of March 30, 2008, Anthony Stafford and his four children beneficially
own an aggregate of 20,226,157 shares of our common stock, or 56.59%, and thus a
majority, of all outstanding shares of our common stock. Mr. Stafford has sole
voting authority over all of such shares and will thus be able to determine the
outcome of all corporate matters requiring stockholder approval, including the
election of all of our directors and transactions such as the sale of our
company. Mr. Stafford is also a member of our Board of Directors.

TRADING ON THE OTC BULLETIN BOARD MAY BE VOLATILE AND SPORADIC, WHICH COULD
DEPRESS THE MARKET PRICE OF OUR COMMON STOCK AND MAKE IT DIFFICULT FOR OUR
STOCKHOLDERS TO RESELL THEIR SHARES.

     Our common stock is quoted on the OTC Bulletin Board service of the
National Association of Securities Dealers. Trading in stock quoted on the OTC
Bulletin Board is often limited and characterized by wide fluctuations in
trading prices, due to many factors that may have little to do with our
operations or business prospects. This volatility could depress the market price
of our common stock for reasons unrelated to operating performance. Moreover,
the OTC Bulletin Board is not a stock exchange, and trading of securities on the
OTC Bulletin Board is often more sporadic than the trading of securities listed
on a quotation system like Nasdaq or a stock exchange like Amex. Accordingly,
shareholders may have difficulty reselling any of the shares.

OUR STOCK IS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SEC'S
PENNY STOCK REGULATIONS AND THE NASD'S SALES PRACTICE REQUIREMENTS, WHICH MAY
LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK.

     Our stock is a penny stock. The Securities and Exchange Commission has
adopted Rule 15g-9 which generally defines "penny stock" to be any equity
security that has a market price (as defined) less than $5.00 per share or an
exercise price of less than $5.00 per share, subject to certain exceptions. Our
securities are covered by the penny stock rules, which impose additional sales
practice requirements on

                                       12
<PAGE>

broker-dealers who sell to persons other than established customers and
"accredited investors". The term "accredited investor" refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the SEC which
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customer's
account. The bid and offer quotations, and the broker-dealer and salesperson
compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing
before or with the customer's confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
these rules, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.

     In addition to the "penny stock" rules promulgated by the Securities and
Exchange Commission, the NASD has adopted rules that require that in
recommending an investment to a customer, a broker-dealer must have reasonable
grounds for believing that the investment is suitable for that customer. Prior
to recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customer's financial status, tax status, investment objectives and
other information. Under interpretations of these rules, the NASD believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. The NASD requirements make it more
difficult for broker-dealers to recommend that their customers buy our common
stock, which may limit your ability to buy and sell our stock.


FACTORS UNRELATED TO OUR BUSINESS COULD NEGATIVELY IMPACT THE MARKET PRICE OF
OUR COMMON STOCK.

     The stock markets have experienced extreme price and volume fluctuations
that have affected and continue to affect the market prices of equity securities
of many technology companies. These fluctuations often have been unrelated or
disproportionate to the operating performance of those companies. We expect that
the market price of our common stock will fluctuate as a result of variations in
our quarterly operating results, or for other reasons that are not related to
the performance of our business. These fluctuations may be exaggerated if the
trading volume of our common stock is low. In addition, due to the
technology-intensive nature of our business, the market price for our common
stock may rise and fall in response to various factors, including:

     o    announcements of technological innovations or new products, or
          competitive developments;

     o    investor perceptions and expectations regarding our or our
          competitors' products;

     o    acquisitions or strategic alliances by us or our competitors; and

     o    the gain or loss of a significant customer or order

In addition, market fluctuations, as well as general economic, political and
market conditions such as recessions, interest rate changes or international
currency fluctuations, may negatively impact the market price of our common
stock.

                                       13
<PAGE>

IF WE FAIL TO REMAIN CURRENT IN OUR REPORTING REQUIREMENTS, WE COULD BE REMOVED
FROM THE OTC BULLETIN BOARD WHICH WOULD LIMIT THE ABILITY OF BROKER-DEALERS TO
SELL OUR SECURITIES AND THE ABILITY OF STOCKHOLDERS TO SELL THEIR SECURITIES IN
THE SECONDARY MARKET.

     Companies trading on the OTC Bulletin Board, such as us, must be reporting
issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and
must be current in their reports under Section 13, in order to maintain price
quotation privileges on the OTC Bulletin Board. If we fail to remain current in
our reporting requirements, we could be removed from the OTC Bulletin Board. As
a result, the market liquidity for our securities could be severely adversely
affected by limiting the ability of broker-dealers to sell our securities and
the ability of stockholders to sell their securities in the secondary market.

ITEM 2. DESCRIPTION OF PROPERTY.

     We maintain our principal offices and manufacturing operations in a leased
14,509 square foot facility in Billerica, Massachusetts. Our lease expires on
September 30, 2008. The annual base rent for our leased facilities is
approximately $102,000. The lease contains an option for renewal, and requires,
among other things, that we will pay to our landlord as additional rent our pro
rata share of certain operational and maintenance costs at the facility during
the term of the lease. We believe that our facilities are adequate for our
current needs and that additional space, if required, may be available at
competitive rates.

ITEM 3. LEGAL PROCEEDINGS.

     We are not a party to any legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.

     On March 30, 2007, we submitted the following matters to a vote of our
stockholders:

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

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

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

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

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

     Our stockholders voted in favor of the above matters.

                                       14
<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES.

     Our common stock trades on the OTC Bulletin Board ("OTC") under the symbol
IDCP. On March 26, 2008, the last traded price for our common stock as reported
by OTC was $0.01 per share.

     For the periods indicated below, the table sets forth the range of high and
low last sale prices for our Common Stock as reported by the OTC. The quotations
reflect inter-dealer prices, without retail mark-up, markdown or commission, and
may not represent actual retail transactions.

                                                         HIGH        LOW
                                                         ----        ---
                                      2006

     First Quarter                                      $ 0.10     $ 0.09
     Second Quarter                                       0.09       0.03
     Third Quarter                                        0.04       0.03
     Fourth Quarter                                       0.08       0.02
                                      2007

     First Quarter                                      $ 0.05     $ 0.04
     Second Quarter                                       0.05       0.03
     Third Quarter                                        0.03       0.02
     Fourth Quarter                                       0.04       0.02

     As of March 26, 2008, there were approximately 2,287 stockholders of record
of our common stock.

     Since many of the shares are held by brokers and other institutions on
behalf of stockholders, the Company is unable to estimate the total number of
individual stockholders represented by these holders of record.

DIVIDENDS

     Since inception, we have not paid any dividends on our common stock and we
do not anticipate the payment of any dividends to our common stockholders in the
foreseeable future. We currently intend to reinvest earnings, if any, in the
development and expansion of our business. The declaration of dividends in the
future will be at the election of our Board of Directors and will depend upon
our earnings, capital requirements and financial position, general economic
conditions, and other pertinent factors.

UNREGISTERED SALES OF SECURITIES

     On January 23, 2007, Anthony Stafford, and his four children, purchased
20,226,157 shares of our common stock. On March 30, 2007, upon stockholders'
approval we issued 7,079,155 shares of our common stock to our executive
officers and members of our Board of Directors, as described in Item 12 "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS." On March 30, 2007, we issued 564,236
shares of our common stock to each of our directors as part of their
compensation earned during 2006.

                                       15
<PAGE>

ISSUER REPURCHASES OF EQUITY SECURITIES

On December 1, 2006, we purchased from AST all of the 4,150 shares of our issued
and outstanding preferred stock in exchange for the transfer of all the assets
and liabilities of our audit business.

     On January 2007 acting as agent for certain new investors, we caused the
transfer of 30,339,236 shares of our common stock together with rights to
receive accrued but unpaid stock dividends (representing approximately 90% of
our common stock in the aggregate) that AST had previously purchased from
Capital Bank.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

OVERVIEW

     Our total revenues from continuing operations for the fiscal year ended
December 31, 2007, were $1,761,151 as compared to $2,045,452 for the fiscal year
ended December 31, 2006, a decrease of 14%. Net loss from continuing operations
for 2007 was $520,377, or $(0.02) per share, as compared to a loss of $153,431
or $(0.01) per share for 2006.

     During the fiscal year ended December 31, 2006, we divested ourselves of
our audit business line in connection with a transaction relating to shares of
our preferred and common stock held by a majority holder of our capital stock.
On November 29, 2006, we entered into an arrangement with A.S.T., Inc. ("AST")
and Phyle Industries, Inc. ("Phyle") pursuant to which we sold our audit
business line to AST in exchange for 4,150 shares of our preferred stock
(representing all of our issued and outstanding preferred stock).

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

     One of these investors, Anthony Stafford, including his four children,
invested $400,000 for the purchase of shares of our common stock previously held
by CapitalBank. As a condition to his investment, Mr. Stafford requested that
our executive officers and members of our Board of Directors provide an
aggregate of $140,000 of the $600,000 (including Mr. Stafford's $400,000) in
funds which were raised to acquire shares previously held by CapitalBank. Each
of our executive officers and the members of our Board of Directors, upon a
majority approval from our stockholders, agreed to make such an investment and
therefore purchased an aggregate of 7,079,155 shares of our common stock on the
same terms on which Mr. Stafford purchased his shares.

     As a result of the transactions, we redeemed and retired the prior
outstanding preferred stock, with a stated liquidation preference of $3,805,721
and we sold our audit business line, which constituted less than a majority of
our revenues in 2006, to AST. In January 2007, we received $350,000 of working
capital from the new investors. We believe this transaction was beneficial to
us, as it provides us the ability to better focus on our other core line, our
Route Accounting business. The sale of the audit

                                       16
<PAGE>

business has been accounted as a discontinued operation in accordance with SFAS
No. 144. In 2006, we recorded a loss of $7,977 from the sale of our audit
business, and income of $134,115 from discontinued operations.

     CRITICAL ACCOUNTING POLICIES

     Our discussion and analysis of our financial condition and results of
operations are based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America (U.S. GAAP). The preparation of these financial statements requires us
to make significant estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. These items are monitored and analyzed by management for
changes in facts and circumstances, and material changes in these estimates
could occur in the future. Changes in estimates are recorded in the period in
which they become known. We base our estimates on historical experience and
various other assumptions that we believe to be reasonable under the
circumstances. Actual results may differ from our estimates if past experience
or other assumptions do not turn out to be substantially accurate.

     A summary of those accounting policies that we believe are most critical to
fully understanding and evaluating our financial results is set forth below.
This summary should be read in conjunction with our financial statements and the
related notes included elsewhere in this Annual Report on Form 10-KSB.

     REVENUE RECOGNITION.
     --------------------

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

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

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

                                       17
<PAGE>

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

     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.

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

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

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

     The Company accounts for its share-based compensation under the provisions
of SFAS 123R. For the year ended December 31, 2007, share-based compensation
expense amounted to $3,630. There was no share-based compensation expense
recorded for the year ended December 31, 2006.

     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.

                                       18
<PAGE>

     The Company capitalized $1,674 of software costs during 2007. Amortization
of capitalized software costs was $8,000 and $5,336 for the years ended December
31, 2007 and 2006, respectively.

     ACCOUNTING FOR INCOME TAXES.
     ----------------------------

     The Company adopted the provisions of FASB Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes - an interpretation of FASB
Statement No. 9" ("FIN 48"), on January 1, 2007. FIN 48 requires that the impact
of tax positions be recognized in the financial statements if they are more
likely than not to be sustained upon examination, based on the technical merits
of the position. The Company has a valuation allowance against the full amount
of its net deferred tax assets. The Company currently provides a valuation
allowance against deferred tax assets when it is more likely than not that some
portion, or all of its deferred tax assets, will not be realized. The
implementation of FIN 48 had no effect on the Company's financial position or
results of operations and there is no interest or penalties as management
believes the Company has no uncertain tax position at December 31, 2007.

     The Company files income tax returns in the U.S. federal jurisdiction and
various state jurisdictions. The Company has not been audited by the Internal
Revenue Service or by any states in connection with income taxes. The tax
returns for the years 2004 through 2007, and certain items carried forward from
earlier years and utilized in those returns, remain open to examination by the
IRS and various state jurisdictions.

     We record income taxes using the liability method. Deferred income tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective income tax bases and
operating loss and tax credit carryforwards. Our financial statements contain
certain deferred tax assets that have arisen primarily as a result of our
history of operating losses incurred, as well as other temporary differences
between book and tax accounting. SFAS No. 109, "Accounting for Income Taxes,"
requires the establishment of a valuation allowance to reflect the likelihood of
realization of deferred tax assets. Significant management judgment is required
in determining our provision for income taxes, our deferred tax assets and
liabilities and any valuation allowance recorded against our net deferred tax
assets. We evaluate the weight of all available evidence to determine whether it
is more likely than not that some portion or all of the deferred income tax
assets will not be realized. As a result of operating losses incurred through
2007 and uncertainty as to the extent and timing of profitability in future
periods, we maintain a full valuation allowance of $3,206,000 as of December 31,
2007. In the event that we are able to determine the realization of our deferred
tax assets in the future, an adjustment to the deferred tax assets would
increase net income in the period such determination was made. The amount of the
deferred tax asset considered realizable is based on significant estimates, and
it is at least reasonably possible that changes in these estimates in the near
term could materially affect our financial condition and results of operations.
Our effective tax rate may vary from period to period based on changes in
estimated taxable income or loss, future expansion into areas with varying
country, state, and local income tax rates, deductibility of certain costs and
expenses by jurisdiction and as a result of acquisitions.

     Any significant change in ownership, as defined in Section 382 of the
Internal Revenue Code, may result in an annual limitation on the amount of the
net operating loss and credit carryforwards which could be utilized in a single
year.

     The recapitalization of the Company in March 2007 will qualify as a
significant change of ownership, as defined in Section 382. Therefore, the
ability of the Company to fully utilize its NOL carryforwards in future periods
will be limited. At this time, the amount of the NOL limitation is unknown since
the Company has not completed their Section 382 study.

                                       19
<PAGE>

RESULTS OF OPERATIONS

     Since divesting ourselves from our audit business, we have been able to
better concentrate our efforts to our Route Accounting solution. Although a
challenging year in many respects, we have had some very positive developments.
The hand-held route solution, interfacing with the J.D. Edwards system, we
delivered in 2006 to an internationally recognized company in the food services
industry has been successful and the company has continued to deploy additional
routes in Europe. During the last quarter of 2007, we contracted to deliver a
comprehensive RRLE Direct Store Delivery solution to a major national bakery,
and also to a major bottling company. The combined orders have a value of
approximately $2,000,000 with delivery scheduled in 2008.

     On December 1, 2006, we sold our audit business in exchange for our
preferred stock. The elimination of the outstanding shares of our preferred
stock is beneficial to our current stockholders because it results in no other
stockholders having a liquidation preference over the holders of our common
stock as well as the cessation of our obligation to issue cash or common stock
as interest payments with regards to the preferred stock. We recorded a net loss
of $7,977 on the sale of our audit business. This business has been reported as
a discontinued operation in accordance with SFAS No. 144,"ACCOUNTING FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS," and all periods presented have
been restated accordingly to reflect these operations as discontinued. Revenue
of the audit business for 2006 was approximately $951,000. Income from
discontinued operations for 2006 was approximately $134,000.

     The following discussion and analysis of results of operation focuses on
continuing operations and should be read in conjunction with the financial
statements and notes thereto appearing elsewhere herein.

YEAR ENDED DECEMBER 31, 2007 COMPARED WITH YEAR ENDED DECEMBER 31, 2006

      For the year ended December 31, 2007, we reported a loss from continuing
operations of $520,377 compared to a loss of $153,431 for the comparable prior
year. The increased net loss was a direct result of lower service revenues
combined with higher material costs.

     REVENUE

     Our total revenue for the year ended December 31, 2007 decreased 14% to
$1,761,151 compared to $2,045,452 for the comparable prior year.

     Product revenues for the year ended December 31, 2007 increased 4% to
$839,451 compared to $804,521 for the prior year.

     Service revenues for the year ended December 31, 2007 decreased 26% to
$921,700 compared to $1,240,931 for the prior year. This decrease is a direct
result of lower billings of our professional services due to the completion of a
major customer solution in 2006.

     Our gross profit was $531,090 or 30% of revenues for the year ended
December 31, 2007, compared to $1,121,353, or 55% of revenues from the prior
year. The lower margin is a direct result of lower service revenues combined
with higher material costs.

                                       20
<PAGE>

     OPERATING EXPENSES

     Total operating expenses of $1,068,857 decreased 16% for the year ended
December 31, 2007 from $1,274,851 for the comparable prior year.

     We incurred no expenses for research and development for the year ended
December 31, 2007, as compared to $75,596 for the prior year. This is due to the
fact that at the present time we have temporarily suspended our research and
development activities in light of the recent addition of our new generation
software product, RouteRider LE ("RRLE").

     Selling and marketing expenses for the year ended December 31, 2007 were
$298,156 compared to $296,292 for the prior year, an increase of 1%. The
increase is due to higher expenses incurred to elevate the company's Web
presence in order to support marketing of our flagship RouteRider LETM DSD
solution in the office coffee service market, and continue penetrating the
beverage distribution, bakery, snacks, and dairy markets. The increase was
offset by lower commission and occupancy expenses.

     General and administrative expenses for the year ended December 31, 2007
were $770,701 compared to $902,963 for the prior year, a decrease of 15%. The
decrease is a result of reduced legal and directors' fees.

     LIQUIDITY AND CAPITAL RESOURCES

     We used cash of $111,263 and generated cash of $7,317 from operating
activities from continuing operations for the years ended December 31, 2007 and
2006, respectively. For the year ended December 31, 2007, our principal
operating cash requirement was used to fund our loss from operations along with
an increase in deferred hardware and software costs and prepaid expenses, offset
by an increase in accounts payable and deferred revenues. For the year ended
December 31, 2006, our principal operating cash for continuing operations was
generated by an increase in accounts payable and accrued expenses along with a
decrease in accounts receivable offset by a decrease in customer deposits and
the loss from continuing operations.

     We used cash of $16,861 and $28,437 for investing activities from
continuing operations for the years ended December 31, 2007 and 2006,
respectively. The cash was used for the purchase of capital equipment. As of
December 31, 2007, we had no material commitments for capital expenditures.

     We generated cash of $222,360 and used cash of $65,437 for financing
activities from continuing operations for the years ended December 31, 2007 and
2006, respectively. For the year ended December 31, 2007, we raised capital, net
of expenses in the amount of $262,165 and made payments on obligations under our
notes payable and capital leases. For the year ended December 31, 2006, the cash
was used to make payments on obligations under our notes payable and capital
leases.

     We have an accumulated deficit of approximately $16,437,000 through
December 31, 2007. As a result of this deficit and our cash position, the report
of our independent registered public accounting firm contains an explanatory
paragraph regarding substantial doubt about our ability to continue as a going
concern. We have taken numerous steps to address this situation. During the
fiscal year ended December 31, 2006, we divested ourselves of our audit business
line in connection with a transaction

                                       21
<PAGE>

relating to shares of our preferred and common stock held by a majority holder
of our capital stock. On November 29, 2006, we entered into an arrangement with
A.S.T., Inc. ("AST") and Phyle Industries, Inc. ("Phyle") pursuant to which we
sold our audit business line to AST in exchange for 4,150 shares of our
preferred stock (representing all of our issued and outstanding preferred
stock). During January 2007 acting as agent for certain new investors interested
in purchasing shares of our common stock, we caused the transfer of 30,339,236
shares of our common stock, together with accrued but unpaid stock dividends
(representing approximately 90% of our common stock in the aggregate) that Phyle
had previously purchased from Capital Bank Grawe Gruppe AG ("CapitalBank").
These investors paid Phyle $250,000 for the purchase of our common stock and
agreed to also provide us $350,000 to be used as working capital.

     At December 31, 2007, we had current assets of $1,187,518 and current
liabilities of $2,128,614, reflecting a current ratio of 0.56. At December 31,
2006, we had current assets of $295,617 and current liabilities of $973,744,
reflecting a current ratio of 0.30. Although our current ratio has improved, we
continue to have a current ratio of less than 1.00, which is generally
considered to place a company at higher financial risk.

     At December 31, 2007, approximately 31% of our accounts payable was
comprised of amounts due for services to our Directors and legal firm. Although
no formal payment plans have been established, we plan on making monthly payment
based on our availability of cash until such time as these amounts are paid in
full.

     We are exploring all opportunities to improve our financial condition by
aggressively pursuing potential revenues. 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 action or attempt to
obtain additional financing. We believe that based on our current revenue
expectations, the expected timing of such revenues, and our current level of
expenses we have sufficient cash to fund our operations through the end of 2008.
There can be no assurance that such financing, if required, will be available on
reasonable terms, if at all.

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

COMMITMENTS, CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

     We lease our office facilities under an operating lease expiring September
30, 2008. The lease contains an option for renewal and requires the payment of
taxes and other operating costs. Total rent expense under this operating lease
was $153,996 and $140,343 for the years ended December 31, 2007 and 2006,
respectively.

     We also lease certain equipment under capital leases expiring at various
dates through 2009.

     Minimum future lease commitments under operating and capital leases at
December 31, 2007 are as follows:

                                            Year ending
                                            December 31,   Operating    Capital
                                            ------------   ---------    -------
                                                2008        $124,740   $ 26,110
                                                2009            --       24,027
                                                2010            --        7,038
                                                            --------   --------
     Total minimum lease payments                           $124,740     57,175
                                                            ========
     Less: amount representing interest                                  10,402
                                                                       --------
     Present value of minimum lease payments                             46,773
     Less: Current obligations                                           19,093
                                                                       --------
     Obligations under capital leases, net of current portion          $ 27,680
                                                                       ========

                                       22
<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

     In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
("SFAS No. 157"), which clarifies the definition of fair value, establishes
guidelines for measuring fair value, and expands disclosures regarding fair
value measurements. SFAS No. 157 does not require any new fair value
measurements and eliminates inconsistencies in guidance found in various prior
accounting pronouncements. SFAS No. 157 will be effective for the Company on
January 1, 2008. The Company is currently evaluating the impact of adopting SFAS
No. 157 but does not believe that the adoption of SFAS No. 157 will have any
material impact on its financial position, cash flows, or results of operations.

     In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities" ("SFAS No. 159"), which permits
entities to choose to measure many financial instruments and certain other items
at fair value that are not currently required to be measured at fair value. SFAS
No. 159 will be effective for the Company on January 1, 2008. The Company is
currently evaluating the impact of adopting SFAS No. 159 on its financial
position, cash flows, and results of operations.

     In December 2007, the FASB issued SFAS No. 141R, "Business Combinations,"
which changes how business acquisitions are accounted. SFAS No. 141R requires
the acquiring entity in a business combination to recognize all (and only) the
assets acquired and liabilities assumed in the transaction and establishes the
acquisition-date fair value as the measurement objective for all assets acquired
and liabilities assumed in a business combination. Certain provisions of this
standard will, among other things, impact the determination of acquisition-date
fair value of consideration paid in a business combination (including contingent
consideration); exclude transaction costs from acquisition accounting; and
change accounting practices for acquired contingencies, acquisition-related
restructuring costs, in-process research and development, indemnification assets
and tax benefits. SFAS No. 141R is effective for the Company for business
combinations and adjustments to an acquired entity's deferred tax asset and
liability balances occurring after December 31, 2008. The Company is currently
evaluating the future impacts and disclosures of this standard.

     In December 2007, the SEC issued SAB No. 110. SAB 110 allows for the
continued use of a "simplified" method, as discussed in SAB No. 107, in
developing an estimate of expected term of "plain vanilla" share options in
accordance with SFAS 123 (revised 2004). Originally the staff stated in SAB 107
that it would not expect a company to use the simplified method for share option
grants after December 31, 2007. Accordingly, the SEC staff will continue to
accept, under certain circumstances, the use of the simplified method beyond
December 31, 2007. The Company will evaluate the use of the simplified method
for determining the value of options granted after December 31, 2007.

                                       23
<PAGE>

ITEM 7. FINANCIAL STATEMENTS.

     See Item 13 below and the Index therein for a listing of the financial
statements and supplementary data filed as part of this report.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

     None.

ITEM 8A. CONTROLS AND PROCEDURES.

     a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Our management has
evaluated, with the participation of our Chief Executive Officer and our
principal financial and accounting officer, the effectiveness of our disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the
fiscal year covered by this Annual Report on Form 10-KSB. Based upon that
evaluation, the Chief Executive Officer and the principal financial and
accounting officer have concluded that as of the end of such fiscal year, our
current disclosure controls and procedures were not effective, because of the
material weaknesses in internal control over financial reporting described
below. We have taken, and are continuing to take, steps to address these
weaknesses as described below. With the exception of such weaknesses, however,
the Chief Executive Officer and principal financial and accounting officer
believe that our current disclosure controls and procedures are adequate to
ensure that information required to be disclosed in the reports we file under
the Exchange Act is recorded, processed, summarized and reported on a timely
basis.

     b) MATERIAL WEAKNESSES AND CHANGES IN INTERNAL CONTROLS. During the audit
of our financial statements for the year ended December 31, 2007, our
independent registered public accounting firm identified material weaknesses
regarding our internal controls due to our finance group inability to perform
the testing of internal controls on financial reporting, the lack of segregation
of duties within the finance and accounting staff. A factor for these internal
control deficiencies is the small size of the company, our limited accounting
staff and our lack of resources to hire additional staff. In addition, there is
an inability of the accounting staff to handle complex accounting issues. A
mitigating factor for this material weakness is the active participation of the
Audit Committee. As defined by the Public Company Accounting Oversight Board
Auditing Standard No. 2, a material weakness is a significant control deficiency
or a combination of significant control deficiencies that results in there being
more than a remote likelihood that a material misstatement of the annual or
interim financial statements will not be prevented or detected. These material
weaknesses did not result in the restatement of any previously reported
financial statements or any other related financial disclosure nor did they
disclose any errors or misstatements. These material weaknesses continue to
exist as of March 31, 2008, and our financial condition is currently preventing
us from soliciting the services of an outside consulting firm to assist in the
review of our accounting systems and transactions. Management is nonetheless
continuing to monitor and assess the controls to ensure continued compliance.

     c) Except for the changes in controls described above, there were no
changes in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal year covered
by this Annual Report on Form 10-KSB that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

     d) Because the market value of the Company's common equity was less than
$50 million as of the last day of the Company's fiscal year, the Company is not
required to comply with Sarbanes-Oxley

                                       24
<PAGE>

Section 404 requirements relating to an audit of its internal controls for the
fiscal year ended December 31, 2007. As such, no audit of internal controls was
conducted for the fiscal year ended December 31, 2007, by our independent
registered public accounting firm and, therefore, no opinion has been rendered.

ITEM 8B. OTHER INFORMATION.

     None

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.

     On March 30, 2007, our Board of Directors elected two new members, Anthony
Stafford and William Berens. On February 12, 2008 and March 21, 2008, each of
William Smart and John Ward retired as Directors and became Directors Emeriti.
Each of our directors is elected for a period of one year and holds office until
his successor is elected and qualified. Vacancies may be filled by a majority
vote of the directors then remaining in office. Our officers are elected by and
serve at the discretion of our Board of Directors. The following table sets
forth the year each of our current directors was elected to our Board of
Directors and the age, positions and offices currently held by each director.
For information about ownership of our voting securities by each director, see
Item 11 "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS. Mr. Smart resigned as Director and was named as
Director Emeritus on February 12, 2008.

                                     YEAR
                                 FIRST BECAME
NAME                    AGE        DIRECTOR        POSITION
----                    ---        --------        --------

Anthony Stafford        66          2007           Chairman of the Board

William B. Berens       54          2007           Director, President and Chief
                                                   Executive Officer

John H. MacKinnon       67          2004           Director


BUSINESS EXPERIENCE AND BACKGROUNDS OF THE DIRECTORS

     The background of each of our current directors is as follows:

     ANTHONY STAFFORD joined our Board of Directors on March 30, 2007 upon his
election to Chairman. Mr. Stafford is the principal founder, chairman and owner
of Codec Systems Ltd. ("Codec"). Codec is a European leader in performance
management and business intelligence software which was established in August
1985 and currently has offices in Dublin, Warsaw, Cologne and London. Prior to
the establishment of Codec Mr. Stafford served as a financial controller in
multi-national organizations including General Foods, IBM and Toyota. Mr.
Stafford is also the co-founder and Board Member of Catalina Avalon S.p. z.o.o.,
a privately held Polish company which specializes in the construction industry
in Poland. Mr. Stafford is also a Fellow of the Chartered Institute of
Management Accountants.

                                       25
<PAGE>

     WILLIAM B. BERENS has served as our President and Chief Executive Officer
since March 2006 and was elected as a director on March 30, 2007. Mr. Berens
joined us on May 2003 as a consultant and then on March 1, 2004 became our Vice
President of Sales and Marketing. Prior to joining us, Mr. Berens served as
business consultant to high-tech companies. He was Vice President of business
development for Tower Technology from 2001 to 2002, and for Interleaf (later
acquired by BroadVision) from 1998 to 2000. Mr. Berens has spent the past 25
years in the information processing industry in a variety of positions and
industries. From 1978 to 1991 Mr. Berens served in various management capacities
with Wang Laboratories, with his largest responsibility managing over 200 people
and $60M in revenue. In 1991, he became Director of Business Systems for Siemens
Nixdorf Information Systems, and was responsible for image and data entry sales
in the U.S. market. In 1996 he joined DSA - Software as Vice President of Sales,
but quickly became President of the warehouse management systems company. Mr.
Berens graduated from Boston College in 1976 with a BS in Computer Science and
Economics.

     JOHN H. MACKINNON has served as one of our directors and Chairman of the
Audit Committee since March 2004. Mr. MacKinnon joined PricewaterhouseCoopers
LLP in 1968 and was a partner from 1978 until his retirement in 1999. Mr.
MacKinnon served as a part-time consultant to the Company under an arrangement
that was terminated as of February 27, 2004. Mr. MacKinnon also serves on the
Boards of Directors of LoJack Corporation and Biosphere Medical Inc. Mr.
MacKinnon is a Certified Public Accountant and is active in community affairs,
including serving on the Boards of Trustees of Emmanuel College, Laboure College
and Blessed John XXIII National Seminary.

     Our Board of Directors has determined that each of our directors, other
than William B. Berens, are "independent directors" in accordance with the rules
of The NASDAQ Stock Market, Inc.

AUDIT COMMITTEE

     The Audit Committee of our Board of Directors consists of one member, John
H. MacKinnon (Chairman), who joined the committee upon his election to the Board
on March 1, 2004. As a member of the Audit Committee, Mr. MacKinnon satisfies
the current independence standards promulgated by the Securities and Exchange
Commission and by the NASDAQ Stock Market, as such standards apply specifically
to members of audit committees. The Board has determined that Mr. MacKinnon is
an "audit committee financial expert," as the Securities and Exchange Commission
has defined that term in Item 401 of Regulation S-B.

     The functions of the Audit Committee include selecting, evaluating and
replacing, if needed, our independent registered public accountants; approving
all audit and non-audit services and fees related thereto; reviewing, in
consultation with our management and independent registered public accountants,
the scope and results of the interim reviews and the annual audit of our
financial statements included in our quarterly and annual reports filed with the
SEC; and overseeing and monitoring the processes and controls management has in
place to maintain the reliability and integrity of our accounting policies and
financial reporting process, to ensure the adequacy of internal accounting,
financial reporting and disclosure controls and to comply with legal and
regulatory requirements that may impact our financial reporting and disclosure
obligations.

     The Audit Committee has furnished the Audit Committee Report set forth
below. The Audit Committee is governed by an audit committee charter, adopted by
the Board of Directors during 2007.

     The Audit Committee has met with the Company's independent registered
public accountants, Carlin, Charron & Rosen, LLP, to discuss the results of its
audit, the adequacy of the Company's internal

                                       26
<PAGE>

and external accounting controls, and the integrity of the Company's financial
reporting. The Audit Committee met five times in 2007.


     AUDIT COMMITTEE REPORT

     This Audit Committee Report reviews actions taken with respect to the
Company's financial statements for the year ended December 31, 2007.

     The Company's management is responsible for the preparation, presentation
and integrity of the Company's financial statements and the reporting process,
including the system of internal and external controls. Carlin, Charron & Rosen,
LLP, the Company's independent registered public accounting firm, is responsible
for auditing the Company's financial statements and expressing an opinion on the
conformity of those audited financial statements with accounting principles
generally accepted in the United States of America. In fulfilling its
responsibilities for 2007, the Audit Committee took the following actions:

     o    Reviewed and discussed the audit plan, audit scope, identification of
          audit risks and the audited financial statements for the year ended
          December 31, 2007, with management and Carlin, Charron & Rosen, LLP;

     o    Discussed with Carlin, Charron & Rosen, LLP the matters required to be
          discussed by Statement on Auditing Standards No. 61 relating to the
          conduct of the audit; and

     o    Received written disclosures and the letter from Carlin, Charron &
          Rosen, LLP regarding its independence as required by Independence
          Standards Board Standard No. 1. The Audit Committee further discussed
          with Carlin, Charron & Rosen, LLP its independence. The Audit
          Committee considered, with a view to maintaining the independence of
          its independent registered public accounting firm, the nature and
          scope of the non-audit services supplied to the Company by its
          independent registered public accounting firm.

     o    The Audit Committee also considered the status of pending litigation,
          taxation matters and other areas of oversight relating to the
          financial reporting and audit process that the Committee determined
          appropriate.

     The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting and are not employed by the Company for
accounting or financial management or for any aspects of the Company's system of
internal accounting control. The members of the Audit Committee rely, without
independent verification, on the information provided to them and on the
representations made by management and the Company's independent registered
public accounting firm. Accordingly, the Audit Committee's oversight does not
provide an independent basis to determine that management has maintained
procedures that are designed to assure compliance with accounting standards and
applicable laws and regulations. In addition, the Audit Committee's
considerations and discussions referred to above do not assure that the audit of
the Company's financial statements has been carried out in accordance with
auditing standards of the Public Company Accounting Oversight Board (United
States).

     Based upon the reports, discussions and reviews described in this Report,
and subject to the limitations on the role and responsibilities of the Committee
referred to above, the Committee has recommended to the Board and the Board has
approved, the audited financial statements for the year

                                       27
<PAGE>

ended December 31, 2007 being included in the Company's Annual Report on Form
10-KSB for the year ended December 31, 2007 to be filed with the Securities and
Exchange Commission.

                                                             The Audit Committee
                                                     John H. MacKinnon, Chairman


NOMINATING, COMPENSATION AND GOVERNANCE COMMITTEE

     The Nominating, Compensation and Governance Committee of the Board of
Directors consists of two members, Anthony Stafford (Chairman) and John H.
MacKinnon The committee reviews, approves and makes recommendations regarding
our compensation policies, practices and procedures, including determination of
the compensation for our Chief Executive Officer. The committee also makes
recommendations to the full Board as to the size and composition of the Board
and makes recommendations as to particular nominees. The committee considers
nominations for our Board in accordance with our Restated By-Laws, a copy of
which is incorporated by reference as an exhibit to this Annual Report on Form
10-KSB. The Committee also reviews and makes recommendations to the full Board
concerning corporate governance matters. The members of the Nominating,
Compensation and Governance Committee qualify as independent under the
definition promulgated by the NASDAQ Stock Market.

EXECUTIVE OFFICERS

     Our executive officers, their ages and positions with the Company are as
follows:

NAME                      AGE        POSITION
----                      ---        --------

William B. Berens         54         President and Chief Executive Officer

Bruna A. Bucacci          54         Chief Accounting Officer and Director of
                                     Operations

BUSINESS EXPERIENCE AND BACKGROUNDS OF THE EXECUTIVE OFFICERS

     The following is a brief summary of the background of each of our executive
officers other than William B. Berens whose background is summarized above.

     BRUNA A. BUCACCI has served as our Chief Accounting Officer since November
2005. Ms. Bucacci joined us in May 1996 as our Controller. In April 2004 she
also assumed the position of Director of Operations. Prior to joining our
Company, Ms. Bucacci was Corporate Controller for Thermedics Detection, Inc.
from 1991 to 1996. From 1984 to 1991 she held the position of Assistant
Controller for Thermedics Inc. Prior to that time Ms. Bucacci held various
managerial positions for Thermo Electron, Inc. Ms. Bucacci is a graduate of
Boston College where she received a BS degree in Mathematics and a graduate of
Bentley College where she received a BS degree in Accounting.

None of our executive officers or directors is related to any other executive
officer or director.

                                       28
<PAGE>

CODE OF ETHICS

     We have adopted a code of ethics that applies to our chief executive
officer and our senior financial officers, including our principal financial and
accounting officer. The text of the code of ethics is filed as an exhibit to our
Annual Report on Form 10-KSB and will be made available to stockholders without
charge, upon request, in writing to our Corporate Secretary at National
Datacomputer, Inc., 900 Middlesex Turnpike, Bldg. 5, Billerica, Massachusetts
01821. Disclosure regarding any amendments to or waivers from, provisions of the
code of ethics that apply to our financial officers will be included in a
Current Report on Form 8-K within four business days following the date of the
amendment or waiver.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
executive officers, directors, and persons who beneficially own more than ten
percent (10%) of our common stock to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission.
Executive officers, directors, and greater than ten percent (10%) beneficial
owners are required by SEC regulations to furnish us with copies of all Section
16(a) forms they file.

     To our knowledge, based solely on a review of copies of any such forms
furnished to us and written representations from executive officers and
directors, we believe that all Section 16(a) filings applicable to our executive
officers, directors, and ten percent (10%) beneficial owners were complied with
during the year ended December 31, 2007, except that an Initial Statement of
Beneficial Ownership of Securities on Form 3 for Bruna A. Bucacci, who became an
executive officer on November 18, 2005, was filed late; and Statement of Changes
of Beneficial Ownership of Securities on Form 4 for our officers John P. Ward,
William B. Berens and Bruna A. Bucacci and for our directors John H. MacKinnon
and Bill Smart for stock grants on December 29, 2005 were not filed.

ITEM 10. EXECUTIVE COMPENSATION

     The Company will furnish to the SEC a definitive proxy statement no later
than 120 days after the close of the fiscal year ended December 31, 2007 (the
"Proxy Statement"). Certain information required by this item is incorporated
herein by reference to the Proxy Statement under the caption "Executive
Compensation".

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

     The information required by this item is incorporated herein by reference
to the Proxy Statement under the caption "Security Ownership of Certain
Beneficial Owners and Management".

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information required by this item is incorporated herein by reference
to the Proxy Statement under the caption "Certain Relationships and Related
Transactions".

ITEM 13. EXHIBITS.

     (a)(1) Financial Statements. The financial statements required to be filed
by Item 7 herewith are as follows:

                                       29
<PAGE>

                                                                         PAGE
                                                                         ----

Report of Independent Registered Public Accounting Firm                   33

Balance Sheets as of December 31, 2007 and 2006                           34

Statements of Operations for the years ended
   December 31, 2007 and 2006                                             35

Statement of Stockholders' Deficit for the years
   ended December 31, 2007 and 2006                                       36

Statements of Cash Flows for the years ended
   December 31, 2007 and 2006                                             37

Notes to Financial Statements                                             38

     (a)(2) EXHIBITS.

     (i) The following exhibits are filed herewith:

Exhibit
No.      Description
---      -----------

3.1(a)   Certificate of Incorporation filed by the Company with the Secretary of
         State of Delaware on December 17, 1986.
3.2(a)   Certificate of Amendment of Certificate of Incorporation filed by the
         Company with the Secretary of State of Delaware on April 15, 1987 to
         increase the number of authorized shares.
3.3(b)   Certificate of Amendment of Certificate of Incorporation filed by the
         Company with the Secretary of State of Delaware on October 17, 1994 to
         increase the number of authorized shares.
3.3(c)   Certificate of Amendment of Certificate of Incorporation filed by the
         Company with the Secretary of State of Delaware on December 18, 1996 to
         increase the number of authorized shares.
3.4(c)   Certificate of Amendment of Certificate of Incorporation filed by the
         Company with the Secretary of State of Delaware on December 18, 1996 to
         affect a 1:4 reverse split of common stock.
3.5(d)   Certificate of Amendment of Certificate of Incorporation filed by the
         Company with the Secretary of State of Delaware on May 22, 2000 to
         increase the number of authorized shares.
3.6(j)   Certificate of Correction of Certificate of Amendment of Certificate of
         Incorporation filed by the Company with the Secretary of State of
         Delaware on June 5, 2000.
3.7(k)   Certificate of Correction of Certificate of Amendment of Certificate of
         Incorporations filed by the Company with the Secretary of State of
         Delaware on June 5, 2000.
3.8(e)   Statement of Designation of Series B Convertible Preferred Stock.
         3.9(e) Certificate of Increase of shares designated as Series B
         Convertible Preferred Stock. 3.10(f) Statement of Designation of Series
         C Convertible Preferred Stock. 3.11(f) Statement of Designation of
         Series D Convertible Preferred Stock. 3.12(g) Statement of Designation
         of Series E Convertible Preferred Stock. 3.13(h) Restated By-Laws 4.1
         Instruments defining the rights of security holders (see Exhibits 3.1
         through 3.12). 4.2(l) Specimen Certificate of Common Stock.
10.1*(i) 1997 Stock Option Plan. 10.2*(i) 1998 Stock Option Plan.
10.3(i)  Sixth Amendment to Lease dated August 14, 2000 by and between the
         Company and Middlesex Technology Center Trust V for the Company's
         principal offices.
14.1(l)  Code of Ethics.
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.

                                       30
<PAGE>

-------------------
(a)      Previously filed with the Commission as Exhibit to, and incorporated
         herein by reference from, the Registration Statement on Form S-1 filed
         on April 17, 1987 (File No. 033-13392)
(b)      Previously filed with the Commission as Exhibit to, and incorporated
         herein by reference from, the Form 10-KSB for the fiscal year ended
         December 31, 1994.
(c)      Previously filed with the Commission as Exhibit to, and incorporated
         herein by reference from, the Form 10-KSB for the fiscal year ended
         December 29, 1996.
(d)      Previously filed with the Commission as Exhibit to, and incorporated
         herein by reference from, Form 10-QSB for the quarterly period ended
         June 30, 2000.
(e)      Previously filed with the Commission as Exhibit to, and incorporated
         herein by reference from, the Form 8-K filed September 16, 1996.
(f)      Previously filed with the Commission as Exhibit to, and incorporated
         herein by reference from, the Form 8-K filed March 3, 1997.
(g)      Previously filed with the Commission as Exhibit to, and incorporated
         herein by reference from, the Form 8-K filed March 6, 1998.
(h)      Previously filed with the Commission as Exhibit to, and incorporated
         herein by reference from, Form 10-QSB/A for the quarterly period ended
         September 30, 1999.
(i)      Previously filed with the Commission as Exhibit to, and incorporated
         herein by reference from, the Company's Annual Report on Form 10-KSB
         for the fiscal year ended December 31, 1998.
(j)      Previously filed with the Commission as Exhibit to, and incorporated
         herein by reference from, the Company's Annual Report on Form 10-KSB
         for the fiscal year ended December 31, 2000.
(k)      Previously filed with the Commission as Exhibit to, and incorporated
         herein by reference from, the Company's Annual Report on Form 10-KSB
         for the fiscal year ended December 31, 2001.
(l)      Previously filed with the Commission as Exhibit to, and incorporated
         herein by reference from, the Company's Annual Report on Form 10-KSB
         for the fiscal year ended December 31, 2003.

* Management contract or compensatory plan, contract or arrangement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The information required by this item is incorporated herein by reference
to the Proxy Statement under the caption "Information Regarding the Company's
Independent Registered Public Accounting Firm".

                                       31
<PAGE>

                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.


                                       NATIONAL DATACOMPUTER, INC.


Date: March 28, 2008                   By: /s/ William B. Berens
                                           -----------------------------
                                           William B. Berens
                                           President and Chief Executive Officer


     In accordance with the Securities Exchange Act of 1934, as amended, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


Name                          Capacity                            Date
----                          --------                            ----

/s/ Anthony Stafford          Chairman of the Board               March 28, 2008
-----------------------
Anthony Stafford


/s/ William B. Berens         President and Chief Executive       March 28, 2008
-----------------------       Officer (principal executive
William B. Berens             officer and director)


/s/ Bruna A. Bucacci          Chief Accounting Officer            March 28, 2008
-----------------------       (principal financial and
Bruna A. Bucacci              accounting officer)


/s/ John H. MacKinnon         Director                            March 28, 2008
-----------------------
John H. MacKinnon

                                       32
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors and Stockholders
National Datacomputer, Inc.

We have audited the accompanying balance sheets of National Datacomputer, Inc.
as of December 31, 2007 and 2006, and the related statements of operations,
stockholders'deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. An audit includes consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion of the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of National Datacomputer, Inc. as
of December 31, 2007 and 2006, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 5 to the
financial statements, the Company has recurring operating losses and has
incurred an accumulated deficit of approximately $16.4 million at December 31,
2007. These conditions raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans regarding those matters are also
described in Note 5. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

/s/ Carlin, Charron & Rosen LLP
Westborough, Massachusetts
March 28, 2008

                                       33

<PAGE>
<TABLE><CAPTION>
                           NATIONAL DATACOMPUTER, INC.
                                 BALANCE SHEETS
----------------------------------------------------------------------------------------

                                                            December 31,    December 31,
                                                                2007            2006
                                                            ------------    ------------
<S>                                                         <C>             <C>
Assets
Current Assets:
     Cash                                                   $    257,019    $    162,783
     Accounts receivable, net of allowance for doubtful
       accounts of $3,000 at December 31, 2007 and 2006           76,158          98,985
     Inventories, net                                              2,401          10,000
     Deferred hardware and software costs                        799,623          15,064
     Prepaid expenses                                             52,317           8,785
                                                            ------------    ------------
       Total current assets                                    1,187,518         295,617
Prepaid Expenses                                                  19,811            --
Property and equipment, net                                       56,826          22,539
Capitalized software development costs, net                        9,289          15,615
                                                            ------------    ------------
       Total Assets                                         $  1,273,444    $    333,771
                                                            ============    ============

Liabilities and Stockholders' Deficit:
Current Liabilities:
     Current obligations under capital lease                $     19,093    $      3,844
     Note payable, current portion                                18,125          27,775
     Accounts payable                                          1,422,629         460,691
     Customer deposits                                             9,964          24,911
     Accrued payroll and related taxes                            52,535          52,023
     Other accrued expenses                                       98,210         155,587
     Deferred revenues                                           508,058         248,913
                                                            ------------    ------------
       Total current liabilities                               2,128,614         973,744
Note payable, net of current portion                                --            18,125
Obligations under capital lease, net of current portion           27,680           6,420
                                                            ------------    ------------
       Total Liabilities                                       2,156,294         998,289
                                                            ------------    ------------

Convertible Preferred Stock (Note 14)                               --              --

Commitments and contingencies (Note 15)

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

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

     Capital in excess of par value                           15,518,308      15,225,364
     Accumulated deficit                                     (16,436,900)    (15,916,523)
                                                            ------------    ------------
       Total Stockholders' Deficit                              (882,850)       (664,518)
                                                            ------------    ------------
       Total Liabilities and Stockholders' Deficit          $  1,273,444    $    333,771
                                                            ============    ============
</TABLE>

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

                                       34
<PAGE>
<TABLE><CAPTION>
                           NATIONAL DATACOMPUTER, INC.
                            STATEMENTS OF OPERATIONS
----------------------------------------------------------------------------------------

                                                                     Years Ended
                                                            ----------------------------
                                                            December 31,    December 31,
                                                                2007            2006
                                                            ------------    ------------
<S>                                                         <C>             <C>
Revenues:
    Product                                                 $    839,451    $    804,521
    Services                                                     921,700       1,240,931
                                                            ------------    ------------
         Total Revenues                                        1,761,151       2,045,452

Cost of revenues                                               1,230,061         924,099
                                                            ------------    ------------

         Gross Profit                                            531,090       1,121,353
                                                            ------------    ------------

Operating expenses:
    Research and development                                        --            75,596
    Selling and marketing                                        298,156         296,292
    General and administrative                                   770,701         902,963
                                                            ------------    ------------
                                                               1,068,857       1,274,851
                                                            ------------    ------------
Loss from operations                                            (537,767)       (153,498)

Other income (expense):
    Interest income                                                6,574           1,958
    Gain on currency exchange                                     21,770           6,747
    Interest expense                                             (10,954)         (8,638)
                                                            ------------    ------------
Loss from continuing operations                                 (520,377)       (153,431)

    Income from discontinued operations (Note 3)                    --           134,115
    Loss on sale of discontinued operations                         --            (7,977)
                                                            ------------    ------------
Net loss                                                    $   (520,377)   $    (27,293)
                                                            ============    ============

Calculation of net loss per common share:

Net loss                                                    $   (520,377)   $    (27,293)
Preferred stock preferences                                         --          (244,750)
                                                            ------------    ------------
Net loss attributable to common stockholders                $   (520,377)   $   (272,043)
                                                            ============    ============
Basic and diluted net loss per share attributable to
    common stockholders:
    Loss from continuing operations                         $      (0.02)   $      (0.01)
    Income from discontinued operations                             --              0.01
    Preferred stock preferences                                     --             (0.01)
                                                            ------------    ------------
    Net loss attributable to common stockholders            $      (0.02)   $      (0.01)
                                                            ============    ============

Weighted average shares                                       33,457,937      25,141,373
                                                            ============    ============
</TABLE>

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

                                       35
<PAGE>
<TABLE><CAPTION>
NATIONAL DATACOMPUTER, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
------------------------------------------------------------------------------------------------------------------------------------

                                                   Common Stock
                                            ---------------------------                   Capital in                      Total
                                                              Par          Preferred        excess      Accumulated    stockholders'
                                               Shares         value          Stock       of par value     deficit        deficit
                                            ------------   ------------   ------------   ------------   ------------   ------------
<S>                                           <C>          <C>              <C>          <C>            <C>            <C>
Balance at January 1, 2006                    22,586,681   $     22,587           --     $ 14,517,418   ($19,183,201)  ($ 4,643,196)

Net loss                                            --             --             --             --          (27,293)       (27,293)

Reclassification of Convertible
   Preferred Stock                                  --             --        3,538,721        467,250           --        4,005,971

Interest on preferred stock (Note 14)               --             --             --          244,750       (244,750)          --

Issuance of common stock
   in satisfaction of accrued interest         4,054,185          4,054           --           (4,054)          --             --

Retirement of Preferred Stock                       --             --       (3,538,721)          --        3,538,721           --

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

Balance at December 31, 2006                  26,640,866         26,641           --       15,225,364    (15,916,523)      (664,518)

Net loss                                            --             --             --             --         (520,377)      (520,377)

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

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

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

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

Stock based compensation related to
   options granted                                  --             --             --            3,630           --            3,630

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

Balance at December 31, 2007                  35,742,438   $     35,742   $       --     $ 15,518,308   ($16,436,900)  ($   882,850)
                                            ============   ============   ============   ============   ============   ============
</TABLE>

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

                                       36
<PAGE>
<TABLE><CAPTION>
                           NATIONAL DATACOMPUTER, INC.
                            STATEMENTS OF CASH FLOWS
----------------------------------------------------------------------------------------------------

                                                                                 Years Ended
                                                                        ----------------------------

                                                                        December 31,    December 31,
                                                                            2007            2006
                                                                         ----------      ----------
<S>                                                                      <C>             <C>
OPERATING ACTIVITIES:
     Net loss                                                            $ (520,377)     $  (27,293)
     Less: Income from discontinued operations                                 --          (134,115)
     Plus: loss on sale of discontinued operations                             --             7,977
                                                                         ----------      ----------
     Loss from continuing operations                                       (520,377)       (153,431)
        Adjustments to reconcile net loss to net
           cash provided by (used for) operating activities:
           Interest on loan                                                    --             2,033
           Depreciation and amortization                                     37,439          31,155
           Stock based compensation related to options granted                3,630            --
           Changes in assets and liabilities:
              Decrease in accounts receivable                                22,827          28,600
              Decrease (increase) in inventories                              7,599         (10,000)
              Increase in deferred hardware and software costs             (784,559)        (15,064)
              (Increase) decrease in other prepaid expenses                 (63,343)         13,724
              Increase in accounts payable                                  884,399         146,100
              (Decrease) in customer deposits                               (14,947)       (118,120)
              (Decrease) increase in accrued expenses                        56,924          75,609
              Increase in deferred revenues                                 259,145           6,711
                                                                         ----------      ----------
     Net cash (used for) provided by continuing operations                 (111,263)          7,317
     Net cash provided by discontinued operations                              --           128,857
                                                                         ----------      ----------
     Net cash (used for) provided by operating activities                  (111,263)        136,174
                                                                         ----------      ----------

Cash flows from investing activities:
     Purchases of property and equipment                                    (15,187)        (17,152)
     Purchase of capitalized software                                        (1,674)        (11,285)
                                                                         ----------      ----------
     Net cash used for continuing operations                                (16,861)        (28,437)
     Net cash used for discontinued operations                                 --            (5,025)
                                                                         ----------      ----------
     Net cash used for investing activities - continuing operations         (16,861)        (33,462)
                                                                         ----------      ----------

Cash flows from financing activities:
     Net proceeds from additional capital raised                            262,165            --
     Principal payments on note payable                                     (27,775)        (62,707)
     Principal payments on obligations
           under capital lease                                              (12,030)         (2,730)
                                                                         ----------      ----------

     Net cash provided by (used for) financing activities -
       continuing operations                                                222,360         (65,437)
                                                                         ----------      ----------

Net increase in cash                                                         94,236          37,275
Cash, beginning of year                                                     162,783         125,508
                                                                         ----------      ----------

Cash, end of year                                                        $  257,019      $  162,783
                                                                         ==========      ==========

Supplemental Disclosure of Cash Flow Information:

     Cash paid for interest                                              $   10,954      $    8,638
     Non-cash investing and financing activities:
           Accrued compensation paid with stock                          $   21,250      $     --
           Deferred compensation paid with stock                         $   15,000      $     --
           Acquisition of property and equipment under capital lease     $   48,539      $     --
           Accrued expenses converted to accounts payable                $   77,539      $     --
           Accounts payable converted to note payable                    $     --        $   52,574
           Accrued interest on preferred stock charged to
              accumulated deficit                                        $     --        $  244,750
           Issuance of common stock in satisfaction of
              accrued interest                                           $     --        $  400,500
</TABLE>

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

                                       37
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     USE OF ESTIMATES
     ----------------

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

     RECLASSIFICATIONS
     -----------------

     Certain accounts previously reported in the 2006 financial statements have
been reclassified to facilitate comparability with the current year
presentation. These reclassifications had no effect on 2006 net income as
previously reported.

     REVENUE RECOGNITION.
     --------------------

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

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

     We recognize revenue for software licenses in accordance with the American
Institute of Certified Public Accountants ("AICPA")'s Statement of Position
97-2, "SOFTWARE REVENUE RECOGNITION" ("SOP 97-2"). The application of SOP 97-2
requires judgment, including whether a software arrangement includes multiple
elements. License revenue is recognized upon customer acceptance, provided that

                                       38
<PAGE>
NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

persuasive evidence of an arrangement exists, no significant obligations with
regards to installation or implementation remain, fees are fixed or
determinable, and collectibility is probable.

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

     ACCOUNTS RECEIVABLE
     -------------------

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

     INVENTORIES
     -----------

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

     PROPERTY AND EQUIPMENT
     ----------------------

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

     LONG-LIVED ASSETS
     -----------------

     In accordance with Statement of Financial Accounting Standards ("SFAS") No.
144 "ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS," the
Company reviews the carrying values of its long-lived assets for possible
impairment whenever events or changes in circumstances indicate that the
carrying amounts of the assets may not be recoverable. Any long-lived assets
held for disposal are reported at the lower of their carrying amounts or fair
values less costs to sell.

     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.

                                       39
<PAGE>
NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

     INCOME TAXES
     ------------

     The Company accounts for income taxes in accordance with SFAS No. 109,
"ACCOUNTING FOR INCOME TAXES," which requires the recognition of deferred taxes
for the difference between the financial statement and tax bases of assets and
liabilities, utilizing current tax rates. Deferred tax benefit or expense is
recognized as a result of the change in the deferred asset or liability during
the year. Valuation allowances are established, if necessary, to reduce the
deferred tax asset to the amount that will more likely than not be realized.

     STOCK-BASED COMPENSATION
     ------------------------

     In December 2004, the Financial Accounting Standard Board (FASB) issued
Statement of Financial Accounting Standards No. 123R, "SHARE-BASED PAYMENT"
(SFAS 123R). SFAS 123R establishes accounting for equity instruments exchanged
for employee services. Under the provision of SFAS 123(R), share-based
compensation is measured at the grant date, based upon the fair value of the
award, and is recognized as an expense over the employee's requisite service
period (generally the vesting period of the equity grant). The majority of the
Company's share-based compensation arrangements vest over four years.

     The Company accounts for its share-based compensation under the provisions
of SFAS 123R. For the year ended December 31, 2007, share-based compensation
expense amounted to $3,630, and was recorded in general and administrative
expenses in the accompanying statement of operations. There was no share-based
compensation expense recorded for the year ended December 31, 2006.

     The Company estimates the fair value of stock options using the
Black-Scholes valuation model. Key input assumptions used to estimate the fair
value of stock options include the exercise price of the award, the expected
option term, the expected volatility of the Company's stock over the option's
expected term, the risk-free interest rate over the option's expected term, and
the Company's expected annual dividend rate. The Company believes that the
valuation technique and the approach utilized to develop the underlying
assumptions are appropriate in calculating the fair values of the Company's
stock options granted in the year ended December 31, 2007. Estimates of fair
values are not intended to predict actual future events or the value ultimately
realized by persons who receive equity awards.

     The weighted average grant date fair value of options granted was $0.03 for
the year ended December 31, 2007. There were no options granted for the year
ended December 31, 2006. The following assumptions were used to estimate the
fair market value of options granted using the Black-Scholes evaluation method:


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

                                       40
<PAGE>
NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

(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.

     NET INCOME (LOSS) PER SHARE
     ---------------------------

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

     Interest payable to preferred stockholders, the fair value of inducements
to convert preferred stock into common stock, and any discounts implicit in the
conversion terms upon issuance of preferred stock (Note 14) are subtracted from
the net income (loss) to determine the amount of net income (loss) attributable
to common stockholders.

     WARRANTY AND RETURN POLICY
     --------------------------

     The Company's warranty policy provides 90-day coverage on all parts and
labor on all products. The policy with respect to sales returns provides that a
customer may not return inventory except at the Company's option. The Company's
warranty costs have historically been insignificant.

     SHIPPING AND HANDLING COSTS
     ---------------------------

     Shipping and handling costs are classified as a component of cost of goods
sold. The Company accounts for shipping and handling costs passed on to
customers as revenues.

3. DISCONTINUED OPERATIONS

     On November 29, 2006, the Company sold its audit business line to AST Inc.
("AST") in exchange for all our outstanding preferred stock. In early November
2006, AST informed our Board of Directors that it had acquired approximately 90%
of our outstanding common stock and all of our outstanding preferred stock for
$750,000 from Capital Bank Grawe Gruppe AG ("CapitalBank") based on AST's
assessment that the value of the Common Stock held by CapitalBank was $250,000
and the value of the Preferred Stock held by CapitalBank was $500,000.

     The Company sold its audit business to better focus on its route accounting
business. The audit business has been reported as a discontinued operation in
accordance with SFAS No. 144, "ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF
LONG-LIVED ASSETS," and all periods presented have been revised to reflect the
operations as discontinued.

     Revenues and income for the audit business for the calendar year 2006 were
as follow:

     Total Sales                     $951,099

     Income                           134,115

4. LIQUIDITY AND MANAGEMENT PLANS

     We have an accumulated deficit of approximately $16,437,000 through
December 31, 2007. As a result of this deficit and our cash position, the report
of our independent registered public accounting firm contains an explanatory
paragraph regarding substantial doubt about the Company's ability to

                                       41
<PAGE>
NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

continue as a going concern. We have taken numerous steps to address this
situation. In November 2006, in an effort to focus solely on our route
accounting business, we sold our audit business line to AST in exchange for our
Preferred Stock. In January 2007, a group of investors made a cash investment of
$600,000, of which they used $250,000 to purchase 30,339,236 shares of our
common stock together with accrued but unpaid stock dividends (representing
approximately 90% of our common stock in the aggregate) held by CapitalBank and
provided us $350,000 to be used as working capital.

     We have re-aligned our spending from administration and manufacturing to
maintain key development programs while carefully managing our overall cash
usage. We are exploring all opportunities to improve our financial condition by
aggressively pursuing potential sales. There is a possibility that the latter
might not result in adequate revenues in the near future to meet cash flow
requirements, and therefore might require us to implement further cost saving
action or attempt to obtain additional financing. We believe that based on our
current revenue expectations, the expected timing of such revenues, and our
current level of expenses, we will have sufficient cash to fund our operations
through December 31, 2008. However, there are no assurances that these plans
will be successful or sufficient.

5. RECENT ACCOUNTING PRONOUNCEMENTS

     In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
("SFAS No. 157"), which clarifies the definition of fair value, establishes
guidelines for measuring fair value, and expands disclosures regarding fair
value measurements. SFAS No. 157 does not require any new fair value
measurements and eliminates inconsistencies in guidance found in various prior
accounting pronouncements. SFAS No. 157 will be effective for the Company on
January 1, 2008. The Company is currently evaluating the impact of adopting SFAS
No. 157 but does not believe that the adoption of SFAS No. 157 will have any
material impact on its financial position, cash flows, or results of operations.

     In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities" ("SFAS No. 159"), which permits
entities to choose to measure many financial instruments and certain other items
at fair value that are not currently required to be measured at fair value. SFAS
No. 159 will be effective for the Company on January 1, 2008. The Company is
currently evaluating the impact of adopting SFAS No. 159 on its financial
position, cash flows, and results of operations.

     In December 2007, the FASB issued SFAS No. 141R, "Business Combinations,"
which changes how business acquisitions are accounted. SFAS No. 141R requires
the acquiring entity in a business combination to recognize all (and only) the
assets acquired and liabilities assumed in the transaction and establishes the
acquisition-date fair value as the measurement objective for all assets acquired
and liabilities assumed in a business combination. Certain provisions of this
standard will, among other things, impact the determination of acquisition-date
fair value of consideration paid in a business combination (including contingent
consideration); exclude transaction costs from acquisition accounting; and
change accounting practices for acquired contingencies, acquisition-related
restructuring costs, in-process research and development, indemnification assets
and tax benefits. SFAS No. 141R is effective for the Company for business
combinations and adjustments to an acquired entity's deferred tax asset and
liability balances occurring after December 31, 2008. The Company is currently
evaluating the future impacts and disclosures of this standard.

     In December 2007, the SEC issued SAB No. 110. SAB 110 allows for the
continued use of a "simplified" method, as discussed in SAB No. 107, in
developing an estimate of expected term of "plain

                                       42
<PAGE>
NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

vanilla" share options in accordance with SFAS 123 (revised 2004). Originally
the staff stated in SAB 107 that it would not expect a company to use the
simplified method for share option grants after December 31, 2007. Accordingly,
the SEC staff will continue to accept, under certain circumstances, the use of
the simplified method beyond December 31, 2007. The Company will evaluate the
use of the simplified method for determining the value of options granted after
December 31, 2007.

6. INVENTORIES

     Inventories related to continuing operations consist of the following:

                                                 DECEMBER 31,   DECEMBER 31,
                                                     2007           2006
                                                 ------------   ------------
     Raw materials                                 $   --         $   --
     Work-in-process                                  2,401         10,000
                                                    633,491        535,316
     Finished goods                                    --              --
                                                    434,483        477,135
                                                   --------       --------
                                                   $  2,401       $ 10,000
                                                   ========       ========

7. PROPERTY AND EQUIPMENT, NET

     Property and equipment related to continuing operations consist of the
following:
<TABLE><CAPTION>
                                                  ESTIMATED
                                                 USEFUL LIVES   DECEMBER 31,   DECEMBER 31,
                                                  (IN YEARS)        2007           2006
                                                 ------------   ------------   ------------
<S>                                                 <C>          <C>            <C>
     Production and engineering equipment            3-5         $ 277,795      $ 277,795
     Furniture, fixtures and office equipment         5            606,573        542,847
                                                   Life of
     Leasehold improvements                         Lease           39,564         39,564
                                                                 ---------      ---------
                                                                   923,932        860,206
                                                                 1,402,054      1,229,648

     Less - accumulated depreciation and amortization              867,106        837,667
                                                                 ---------      ---------
                                                                 $  56,826      $  22,539
                                                                 =========      =========
</TABLE>

     Depreciation expense from continuing operations was $29,439 and $25,819 for
the years ended December 31, 2007 and 2006, respectively

8. CAPITALIZED SOFTWARE DEVELOPMENT COSTS, NET

     Capitalized software development costs related to continuing operations
consist of the following:

                                        ESTIMATED
                                        ECONOMIC
                                          LIVES     DECEMBER 31,   DECEMBER 31,
                                       (IN YEARS)      2007           2006
                                       ----------   ------------   ------------
     Internally developed software         3          $   --         $   --
     Purchased software                    3            24,559         22,885
                                                      --------       --------
                                                      $ 24,559       $ 22,885

     Less - accumulated amortization                    15,270          7,270
                                                      --------       --------
                                                      $  9,289       $ 15,615
                                                      ========       ========

                                       43
<PAGE>
NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

     Amortization expense from continuing operations was $8,000 and $5,336 for
the years ended December 31, 2007 and 2006, respectively.

9. NOTE PAYABLE

     On December 31 2001, the Company signed an unsecured promissory note
payable to a vendor for a principal sum of $108,000 at an interest rate of 2%
per annum. The note required the Company to make eighteen principal payments of
$6,000 per month from January 2002 through June 2003. Upon default of payment,
the remaining principal balance will become immediately due and payable without
notice or demand. The Company was in default of this note at December 31, 2005;
however, the event of default was waived by the holder, and payments recommenced
in March 2006. The Company paid off the note by March 31, 2007.

     On April 1, 2006, the Company signed an agreement with its landlord for
past due rent plus interest at 12% totaling $54,607. This amount is payable over
the remaining 30 months of the lease. At December 31, 2007, the remaining note
balance was $18,125.

10. INCOME TAXES

     The Company adopted the provisions of FASB Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes - an interpretation of FASB
Statement No. 9" ("FIN 48"), on January 1, 2007. FIN 48 requires that the impact
of tax positions be recognized in the financial statements if they are more
likely than not to be sustained upon examination, based on the technical merits
of the position. The Company has a valuation allowance against the full amount
of its net deferred tax assets. The Company currently provides a valuation
allowance against deferred tax assets when it is more likely than not that some
portion, or all of its deferred tax assets, will not be realized. The
implementation of FIN 48 had no effect on the Company's financial position or
results of operations and there is no interest or penalties as management
believes the Company has no uncertain tax position at December 31, 2007.

     The Company files income tax returns in the U.S. federal jurisdiction and
various state jurisdictions. The Company has not been audited by the Internal
Revenue Service or by any states in connection with income taxes. The tax
returns for the years 2004 through 2007, and certain items carried forward from
earlier years and utilized in those returns, remain open to examination by the
IRS and various state jurisdictions.

     Deferred tax assets are comprised of the following:

                                                   DECEMBER 31,    DECEMBER 31,
                                                       2007            2006
                                                   ------------    ------------
       Net operating loss carryforwards            $  2,922,000    $  2,909,000
       Business tax credit carryforwards                  5,000           5,000
       Reserves and allowances                          338,000         338,000
       Depreciation and amortization                    (80,000)        (80,000)
       Accrued compensation                              21,000          64,000
                                                   ------------    ------------
       Gross deferred tax asset                       3,206,000       3,236,000
       Deferred tax asset valuation allowance        (3,206,000)     (3,236,000)
                                                   ------------    ------------
                                                   $       --      $       --
                                                   ============    ============

                                       44
<PAGE>
NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

     The Company's effective tax rate differs from the statutory U.S. federal
     tax rate as follows:

                                                           YEAR ENDED

                                                   DECEMBER 31,    DECEMBER 31,
                                                       2007            2006
                                                   ------------    ------------
       Statutory federal rate                           34.0%           34.0%
       Change in valuation allowance on
       deferred tax assets                             (34.0%)         (34.0%)
                                                      -------         -------
                                                         --              --
                                                      =======         =======

     The Company generated losses from operations in prior years. Although
management's operating plans anticipate taxable income in future periods, such
plans make significant assumptions which cannot be reasonably assured, including
continued development and market acceptance of new products and expansion of the
Company's customer base. Based on the weight of all available evidence, the
Company has provided a full valuation allowance for deferred tax assets since
the realization of these future benefits is not sufficiently assured. As the
Company achieves profitability, these deferred tax assets would be available to
offset future income tax liabilities and expense.

     At December 31, 2007, the Company has federal net operating loss
carryforwards for federal tax purposes of approximately $8,293,000, which expire
in various years through 2027. The Company has state net operating loss
carryforwards for tax purposes of approximately $1,702,000, which expire in
various years through 2012.

     Any significant change in ownership, as defined in Section 382 of the
Internal Revenue Code, may result in an annual limitation on the amount of the
net operating loss and credit carryforwards which could be utilized in a single
year.

     The recapitalization of the Company in March 2007 will qualify as a
significant change of ownership, as defined in Section 382. Therefore, the
ability of the Company to fully utilize its NOL carryforwards in future periods
will be limited. At this time, the amount of the NOL limitation is unknown since
the Company has not completed their Section 382 study.

11. STOCK OPTIONS

     The Company accounts for share-based payment arrangements under the
provisions of SFAS 123R, SHARE BASED PAYMENT, which established accounting for
equity instruments exchanged for employee services. Under SFAS 123R, 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).

     For the year ended December 31, 2007, share-based compensation expense
amounted to $3,630. There was no share-based compensation expense recorded
during the year ended December 31, 2006.

                                       45
<PAGE>
NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

SHARE-BASED INCENTIVE PLANS
---------------------------

     On August 19, 1997, the Board of Directors adopted the 1997 Stock Option
Plan ("1997 Plan") which provided for issuance of both incentive stock options
and non-qualified options to employees. As of December 31, 2007, there were
options to purchase 200,000 shares of common stock outstanding and no shares
available for grant under the 1997 Plan.

      On January 1, 1998, the Board of Directors adopted the 1998 Stock Option
Plan ("1998 Plan") which provides for issuance of non-qualified options to
employees. A maximum of 300,000 shares of common stock of the Company was
reserved for issuance in accordance with the terms of the 1998 Plan. As of
December 31, 2007, there were options to purchase 20,000 shares of common stock
outstanding and 280,000 shares available for grant under the 1998 Plan.

     On March 30, 2007, the Board of Directors adopted the 2007 Employee,
Director and Consultant Stock Option Plan ("2007 Plan") which provides for the
issuance of both inventive and non-qualified stock options to employees,
directors and consultants. A maximum of 2,000,000 shares of common stock of the
Company was reserved for issuance in accordance with the terms of the 2007 Plan.
As of December 31, 2007, there were 1,125,000 options outstanding and 875,000
shares available for grant under the 2007 Plan.

     Upon approval of the 2007 Plan, our 1997 Plan and our 1998 Plan were
terminated. All outstanding options under our 1997 and 1998 Plans will remain in
effect, but no additional options may be granted.

     The following table sets forth the stock option transaction for the year
ended December 31, 2007, as well as the average price and contractual life
information about options outstanding and exercisable at December 31, 2007:

<TABLE><CAPTION>
                                                              Weighted
                                                              average       Remaining       Aggregate
                                                 Number of    exercise    contractual       intrinsic
                                                  shares       price      life in years       value
                                                 ---------    --------    -------------     ---------
<S>                                              <C>          <C>            <C>             <C>
Outstanding at December 31, 2006                   220,000     $ 0.75          1.4            $  --
Granted                                          1,125,000       0.04         9.83
Exercised                                             --
Cancelled/forfeited                                   --
Outstanding at December 31, 2007                 1,345,000       0.15         8.53            $  --
Options vested or expected to vest at            1,007,500       0.19         7.92            $  --
December 31, 2007 (1)
Options exercisable at December 31, 2007           220,000     $ 0.75          .93            $  --
</TABLE>

(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.

12. EQUITY TRANSACTIONS

     Anthony Stafford, an investor who has joined our Board of Directors on
March 30, 2007, is now a majority stockholder of our Company after investing
$400,000 for the purchase of shares of our Common Stock previously held by
CapitalBank. As a condition to his investment, Mr. Stafford requested that our
executive officers and members of our Board of Directors provide an aggregate of
$140,000 of the

                                       46
<PAGE>
NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

$600,000 (including Mr. Stafford's $400,000) in funds which were raised to
acquire shares previously held by CapitalBank. Each of our executive officers
and the members of our Board of Directors agreed to make such an investment by
purchasing an aggregate of 7,079,155 shares of our Common Stock (the "Management
Shares") on the same terms on which Mr. Stafford purchased his shares.

     On March 30, 2007 our stockholders approved the sale and issuance of shares
of Common Stock to our executive officers and each member of our Board of
Directors, and in exchange for an aggregate of $600,000 capital contribution,
the new investors received an aggregate of 30,339,236 shares of our Common
Stock. The resulting per share purchase price was $.0197764 per share.

     Mr. Stafford, together with his four children, agreed to invest $400,000 in
the Company, provided that at least a majority of the remaining $200,000 funds
to be raised be provided on an individual basis by our executive officers and
the members of our Board of Directors. Our executive officers and the members of
our Board of Directors agreed to invest an aggregate of $140,000 and two
additional investors were identified to provide the remaining $60,000. As
described above, these funds were used to pay AST $250,000 for our Common Stock
held by CapitalBank as partial consideration for the purchase of the CapitalBank
Shares and the remaining $350,000 will be used to provide us with needed working
capital and to pay transaction expenses. Moreover, Mr. Stafford agreed to
acquire only our Common Stock so that we would not have to re-issue shares of
our Preferred Stock, thereby ensuring that the holders of our Common Stock would
not be affected by any liquidation preferences and that we would no longer have
any obligation to make quarterly interest payments in cash or Common Stock with
respect to the Preferred Stock.

     A result of these transactions is the elimination of the outstanding shares
of our Preferred Stock, which results in no other stockholder having a
liquidation preference over the holders of our Common Stock as well as the
cessation of our obligation to issue cash or Common Stock as interest payments
with regard to the Preferred Stock, which would potentially further dilute the
shares of our Common Stock that are currently outstanding. Additionally, the
stockholders will be able to vote as a single class.

13. COMMON STOCK

     On March 30, 2007, the Company issued 8,037,336 shares of Common Stock in
satisfaction of accrued interest on Preferred Stock for the period beginning
October 1, 2005 and ending November 29, 2006.

     On March 30, 2007, the Company issued 564,236 shares of Common Stock to the
members of the Board of Directors as part of their 2006 compensation. The
shares, accrued as an expense by the Company in 2006, had a per share fair value
of $0.038 for a total of $21,250.

     On May 17, 2007, the Company issued 500,000 shares of Common Stock to one
of its officers as partial payment for 2006 deferred compensation. The shares
had a per share fair value of $0.03 for a total of $15,000.

14. CONVERTIBLE PREFERRED STOCK

     Until November 30, 2006, CapitalBank acted as investment agent and held
shares of our capital stock in its name on behalf of a number of investors who
purchased shares of our Preferred Stock in a series of transactions between 1996
and 1998. Holders of our Preferred Stock were entitled to, among other things,
quarterly interest payments based on the value of the Preferred Stock as
determined between the Company and the initial holders of the Preferred Stock.
Such mandatory interest payments were

                                       47
<PAGE>
NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

payable in cash or in shares of our common Stock. As the first shares of our
Preferred Stock were issued in 1996, and as a result of the Company's poor
operating performance, which resulted in, among other things, limited cash
assets, we issued a substantial amount of shares of our Common Stock to
CapitalBank as mandatory interest payments.

     On November 30, 2006, CapitalBank held 22,301,900 shares of Common Stock,
which primarily consisted of shares of our Common Stock issued as interest
payments due through March 31, 2006. This amount excluded an additional
8,037,336 shares of Common Stock that the Company became obligated to issue as
interest payments due for the period beginning April 1, 2006 and ending November
30, 2006.

     During November 2006, AST entered into an agreement with CapitalBank to
acquire the CapitalBank Shares for $750,000. On November 29, 2006, we entered
into a written agreement with AST to act as agent for certain investors to
purchase the Common Stock held by AST in exchange for $250,000. We also
purchased the Preferred Stock held by AST in exchange for the transfer of all
the assets and liabilities of our audit business. Upon receiving the Preferred
Stock, our Board of Directors voted in favor of retiring the stock.

INTEREST:

     The Company did not incur any interest in the year ended December 31, 2007
due to the purchase and retirement of the Preferred Stock on November 30, 2006.
Until such time, the Series B convertible preferred shareholders were entitled
to receive interest equal to 8% per annum. Series C and Series D convertible
preferred shareholders were entitled to receive interest equal to 6% per annum.

     During the year ended December 31, 2006, the Company incurred interest in
the amount of $244,750 for Series B, Series C, and Series D convertible
preferred stock, for which the Company recorded a charge to accumulated deficit.
During 2006, we issued 4,054,185 shares of common stock in satisfaction of
accrued interest for the last three quarter of 2004 and the first three quarters
of 2005.

     As of December 31, 2006 the Company owed $311,500 or 8,037,336 shares of
Common Stock in satisfaction of accrued interest for the period beginning
October 1, 2005 and ending November 29, 2006. These shares were issued March 30,
2007.

15. COMMITMENTS

     The Company leases its office facilities under an operating lease expiring
September 30, 2008. The lease contains an option for renewal and requires the
payment of real estate taxes and other operating costs. Total rent expense under
this operating lease was $153,996 and $140,343 for the years ended December 31,
2007 and 2006, respectively.

     The Company also leases certain equipment under capital leases expiring at
various dates through the year 2010.

     Minimum future lease commitments under operating and capital leases at
December 31, 2007 are as follows:

                                       Year ending
                                       December 31,    Operating     Capital
                                       ------------    ---------     -------
                                           2008        $ 124,740    $  26,110
                                           2009             --         24,027
                                           2010             --          7,038
                                                       ---------    ---------
     Total minimum lease payments                      $ 124,740       57,175
                                                       =========
     Less: amount representing interest                                10,402
                                                                    ---------
     Present value of minimum lease payments                           46,773
     Less: Current obligations                                         19,093
                                                                    ---------
     Obligations under capital leases, net of current portion       $  27,680
                                                                    =========

                                       48
<PAGE>
NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

16. CONCENTRATION OF CREDIT RISK

     The Company sells its products to customers principally in the United
States of America. During 2007, four customers accounted for approximately 68%
of our total revenues.

     The Company performs on-going credit evaluations of its customers, provides
credit on an unsecured basis, and maintains reserves for potential credit
losses. Such losses, in the aggregate, have not exceeded management's
expectations. Accounts receivable from one customer accounted for approximately
51% and 58% of total accounts receivable at December 31, 2007 and 2006,
respectively. Management does not believe that the Company is subject to any
unusual credit risk beyond the normal credit risk attendant to operating its
business

     The Company's total net revenues were generated by sales to customers in
the following countries:

                                    Percentage of      Percentage of
                                    net revenues       net revenues
                                        2007               2006

              USA                        80%                90%
              Japan                      --%                 1%
              Europe                     20%                 9%

                       TOTAL            100%               100%






                                       49