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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 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, 2002

                                       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, $.08 PAR VALUE PER SHARE
                                (Title of class)

     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. [X]

     The registrant had revenues of approximately $4,186,000 during the fiscal
year ended December 31, 2002. As of April 7, 2003, 14,760,733 shares of the
registrant's common stock, $0.08 par value per share, were outstanding and the
aggregate market value of the common stock held by non-affiliates was
approximately $588,854 based on an average bid and asked price of $0.04 per
share as reported by the OTC Bulletin Board.

          Transitional Small Business Disclosure Format: Yes [ ] No [X]
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                                     PART I


     THE SECURITIES AND EXCHANGE COMMISSION ENCOURAGES COMPANIES TO DISCLOSE
FORWARD-LOOKING INFORMATION SO THAT INVESTORS CAN BETTER UNDERSTAND A COMPANY'S
FUTURE PROSPECTS AND MAKE INFORMED INVESTMENT DECISIONS. THIS ANNUAL REPORT ON
FORM 10-KSB CONTAINS SUCH "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE STATEMENTS MAY BE MADE
DIRECTLY IN THIS ANNUAL REPORT, AND THEY MAY ALSO BE MADE A PART OF THIS ANNUAL
REPORT BY REFERENCE TO OTHER DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, WHICH IS KNOWN AS "INCORPORATION BY REFERENCE."

     WORDS SUCH AS "MAY," "ANTICIPATE," "ESTIMATE," "EXPECTS," "PROJECTS,"
"INTENDS," "PLANS," "BELIEVES" AND WORDS AND TERMS OF SIMILAR SUBSTANCE USED IN
CONNECTION WITH ANY DISCUSSION OF FUTURE OPERATING OR FINANCIAL PERFORMANCE,
IDENTIFY FORWARD-LOOKING STATEMENTS. ALL FORWARD-LOOKING STATEMENTS ARE
MANAGEMENT'S PRESENT EXPECTATIONS OF FUTURE EVENTS AND ARE SUBJECT TO A NUMBER
OF RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE DESCRIBED IN THE FORWARD-LOOKING STATEMENTS. THESE RISKS AND
UNCERTAINTIES INCLUDE, AMONG OTHER THINGS: OUR INABILITY TO FURTHER IDENTIFY,
DEVELOP AND ACHIEVE COMMERCIAL SUCCESS FOR NEW PRODUCTS AND TECHNOLOGIES; THE
POSSIBILITY OF DELAYS IN PRODUCT DEVELOPMENT, MANUFACTURING AND SHIPMENT; THE
LEVELS AND TIMING OF PAYMENTS BY OUR CUSTOMERS; THE DEVELOPMENT OF COMPETING
PRODUCTS; OUR ABILITY TO PROTECT OUR PROPRIETARY TECHNOLOGIES;
PATENT-INFRINGEMENT CLAIMS; AND RISKS OF NEW, CHANGING AND COMPETITIVE
TECHNOLOGIES AND REGULATIONS IN THE UNITED STATES AND INTERNATIONALLY.

     IN LIGHT OF THESE ASSUMPTIONS, RISKS AND UNCERTAINTIES, THE RESULTS AND
EVENTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS ANNUAL
REPORT OR IN ANY DOCUMENT INCORPORATED BY REFERENCE MIGHT NOT OCCUR.
STOCKHOLDERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE FORWARD-LOOKING
STATEMENTS, WHICH SPEAK ONLY OF THE DATE OF THIS ANNUAL REPORT OR THE DATE OF
THE DOCUMENT INCORPORATED BY REFERENCE IN THIS ANNUAL REPORT. WE ARE NOT UNDER
ANY OBLIGATION, AND WE EXPRESSLY DISCLAIM ANY OBLIGATION, TO UPDATE OR ALTER ANY
FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE
EVENTS OR OTHERWISE. ALL SUBSEQUENT FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO
THE COMPANY OR TO ANY PERSON ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN
THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS CONTAINED OR REFERRED TO IN THIS
SECTION.


ITEM 1.  DESCRIPTION OF BUSINESS.

GENERAL

     Our mission is to provide solutions to workplace problems through the use
of mobile information systems. We design, manufacture, sell, and service
computerized systems used to automate the collection, processing, and
communication of information related to product sales, distribution, and
inventory control. Our products and services include data communication
networks, application-specific software, hand-held computers and related
peripherals, as well as associated training and support services. Our products
are designed to facilitate rapid and accurate data collection, data processing
and two-way communication of information with a customer's host information
system. We were organized as a Delaware corporation in 1986 and began active
operations in 1987 following our merger with an established computer systems
engineering business.

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     We invest in technologies that support our systems-solution approach, such
as application software and network communication systems. We believe that our
future success depends on superior marketing, service, and solutions. Our goal
is to be the leading supplier in selected market sectors. The key elements of
this strategy include: (i) performing effective market research to assess and
identify market sectors that represent viable business opportunities; (ii)
providing system communications to a customer's host information system in
addition to data collection software and hardware; (iii) updating hardware and
software solutions to remain current with customers' needs as well as existing
technology; and (iv) maintaining superior software to run on our hardware and
network communications in selected market segments.

INDUSTRY BACKGROUND

     In the 1970s, microprocessor-powered equipment began to find applications
where portable, battery-powered units were required. These units found their
largest applications in the retail industry for entering re-order information
into the distribution systems, which supply retail stores. A number of other
data collection applications also began to appear in the inventory service
industry.

     The state of the art in microprocessors at the time was units with small
memories and programs written in proprietary or machine languages contained in
firmware. The applications were, by necessity, simple compared to other computer
applications in business and industry. As the need for more flexible and
sophisticated programs grew, the use of units requiring firmware became less and
less desirable. This situation existed until the mid-1980s when personal
computers blossomed and the computer industry shifted to electronics with
low-powered complementary metal oxide semiconductors ("CMOS"), which generally
require less power. At that point, it became possible to create software systems
with the level of flexibility and sophistication available in other parts of the
software industry, and the hand-held personal computer was introduced.

     We believe that the future of hand-held computers is dependent on the
software or solutions industry. The opportunity to design computers for "people
who don't work at a desk" has opened up large new markets. The application of
this software technology to industries involving product distribution on routes
is a good example of this opportunity, since the distribution process can be
highly automated, capturing every transaction as well as supplying additional
information for management controls not previously possible.

PRODUCTS

     We design, manufacture, market and service rugged, programmable hand-held
computers, data collection devices and associated peripheral products. We are
also a leading developer of tailored software solutions, such as our Route
Service System, for people who need the power of a PC in the field rather than
at a desk. We also provide software solutions specific to the inventory service
market. We believe that our customers require products that allow flexible,
tailored software solutions in a cost-effective and timely manner.

HARDWARE.

     Our hand-held Datacomputer(R) ("Datacomputer") computers include a
microprocessor, keyboard, LCD displays, and full alphabetic and numeric
character sets. Our Datacomputers are designed to be highly reliable, tolerant
to human error, and easy to use. They are shock resistant, watertight and
operate over a wide temperature range. In addition, the Datacomputer's
full-sized, numeric keypad is designed for fast and accurate data entry, even
while a user is wearing gloves.

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     Application programs for our Datacomputers can be written on conventional
desktop computers with commonly used programming languages and then executed on
the Datacomputer. Application programs and data are stored in the Datacomputer's
random access memory ("RAM") and can be readily changed by communicating
revisions or new programs to the Datacomputer through its industry standard
serial port. The Datacomputer can receive data from bar-code readers, cables
from 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 DC5(TM)

     In the first quarter of fiscal year 2001, we announced the introduction of
our Datacomputer Model DC5(TM) (the "DC5") as a new generation of hand-held
Datacomputers designed for the inventory service industry.

     The DC5 is designed as a rugged, Microsoft(TM) Windows(R) CE based mobile
Datacomputer with radio frequency (RF) connectivity to provide fast, real-time,
wireless transmission of collected data to a host computer, a process that can
greatly reduce the cost of inventory data collection and management.

     We believe that the DC5 is an ideal inventory management solution for
inventory service companies where having employees on the clock uploading
collected data is an expensive, time-consuming task. An inventory service
company is an organization that contracts with businesses that maintain large
inventories, such as department or retail stores, to perform periodic physical
inventories.

     The DC5 is designed to speed the inventory taking process by freeing
employees from manually uploading information. Therefore, employees count
continuously, increasing business productivity and cost effectiveness. It also
allows inventory service companies to streamline their business process with
access to real-time data, real-time SKU inventory with real-time terminal
emulation.

     We believe there is a fundamental shift underway in the way inventory
service companies do business. The DC5 is designed to capitalize on this change.
Approximately 39% of our 2002 total revenue was attributed to sales of the newer
DC5.

DATACOMPUTER MODEL DC4(TM)

     Our Datacomputer Model DC4(TM) (the "DC4"), introduced in late 1997, is
designed for use by the route service market. The DC4 is an advanced version of
the DC3X described below in that it employs a faster processor and a faster
internal modem. The DC4 also incorporates several significant features not
available in the DC3X, such as a touch-screen, a signature capture capability,
two slots for PC-cards, and a high-speed modem. The enhanced processing power
and ruggedness of the DC4 is drawing interest from markets other than our
traditional markets. The DC4 has been upgraded to also operate on the
Microsoft(TM) Windows(R) CE operating system.

     We offer the DC4 with two different software solutions. The Pre-Sales
System (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 Driver-Sales System (the "DSS") is used by
customers who sell their products through delivery drivers and includes a
Datacomputer, one of several portable or truck-mounted printers, peripherals,
and software. We believe that the application software included in our PSS and
DSS solutions offers a high degree of customization for a variety of customer
applications.

                                        3
<PAGE>

     Distributors, who sell products prior to actual delivery, typically
purchase the PSS. Due to the fact that the salesman is not required to create
and print out a delivery invoice for any customer, there is no need for a
printer. The PSS allows the salesman to access all of the distributor's
information on the customer's account as well as to input the customer's next
delivery order. Distributors who do not sell products prior to actual delivery,
on the other hand, typically purchase the DSS. The DSS allows a salesperson
arriving at a stop to perform an inventory check, determine the level of
inventory to be delivered, and print out a delivery slip for the customer.

     Approximately 8% of our 2002 total revenue was attributed to sales of the
DC4.

DATACOMPUTER MODEL 3X(TM)

     Our Datacomputer Model 3X(TM) (the "DC3X") was designed for use by people
whose jobs involve entry and access to a computer as they stand or move about.
The DC3X contains an industry standard bar-code port that allows quick and
convenient scanning of bar codes for accurate inventory management. The DC3X
also supports fixed beam pencil wands, charge coupled device (CCD) and laser
light beam readers for a multitude of scanning applications. In October 2001, we
discontinued the manufacture of the DC3X due to technological obsolescence and
discontinuance of components by our suppliers.

ICAL MODEL 100R(TM)

     Our ICAL Model 100R(TM) (the "ICAL 100R") is designed for taking inventory
for financial and shrinkage control purposes. The ICAL 100R allows a user to
divide a store's inventory into a maximum of 128 separate departments and keep a
running total in each department. We have sold the ICAL 100R to the inventory
audit market for the last 14 years.

     The primary customers for the ICAL 100R are inventory service companies
that take inventory for retailers and other institutions on a contract basis,
and retailers such as convenience store chains or others selling large
quantities of relatively low priced items.

     Approximately 5% of our 2002 total revenue was attributed to the sale of
the ICAL 100R. Revenues generated by the ICAL 100R are almost exclusively from
customers who wish to continue to use their installed base of ICAL devices. We
intend to continue supporting the ICAL product line to protect our customers'
investments.

TAILORED SOFTWARE SOLUTIONS

ROUTERIDER(R)

     Our Datacomputers can be equipped with our RouteRIDER(R) ("RouteRIDER")
software, which is designed to be a powerful but easy-to-use route service
system that can be customized to the way customers 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.

     Sales people 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.

                                        4
<PAGE>

     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
sales person'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 statuses, 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 and prints out a delivery
slip for each customer. 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.


NDI-SURVEYPRO(TM)

     NDI-SurveyPro(TM) ("NDI-SurveyPro") is a suite of software products
designed to offer a seamless interface between the distribution system of
Anheuser-Busch(R) and its wholesalers' systems by integrating with the
Anheuser-Busch's proprietary Wholesaler Equity Agreement Reporting System
("WEARS").

     Designed to offer Anheuser-Busch(R) wholesalers a solution to collect and
process competitive data in the beer market, we believe that the NDI-SurveyPro
provides unique flexibility through the effective use of individually tailored
software applications that allow companies to create customized questionnaires
for use in pre-sell and driver sell operations.

     NDI-SurveyPro features two main components: SurveyManager(TM)
("SurveyManager") and SurveyRider(TM) ("SurveyRider").

     SurveyManager is a Microsoft(R) Windows-based PC application designed to
allow the creation of customized questionnaires for use in the field by
hand-held operators. We believe this easy-to-use; feature rich application
provides flexibility in allowing the administrator many options in the creation
of custom surveys, and the scheduling and grouping of both custom and standard
surveys. Additionally, SurveyManager allows collected data to be transferred to
Microsoft Access(TM) software.

     SurveyRider runs on our Datacomputers either as an integrated application
within RouteRIDER or as a stand-alone application. SurveyRider displays standard
surveys and custom questionnaires prepared by a customer's marketing
administrator for collection of key merchandising and competitive data.
SurveyRider prompts the user to enter data via simple menus, and supports
hierarchical look-up for accurate product identification.

SMARTROUTE 2000(R)

     SMARTRoute 2000(R) ("SMARTRoute") is a Windows-based communication server
software application. We believe that SMARTRoute provides an important link
between our Datacomputers and the customer's host computer. It manages
communications to and from the Datacomputer. It maintains logs, back-ups for the
Datacomputer, system reports, and data archiving. It also archives and retrieves
electronic signatures and provides DEX\UCS communications.

                                        5
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W.I.N.

     Wireless Inventory Network ("W.I.N.") is a Windows application designed for
the inventory service market to provide faster and more efficient inventory
audits. W.I.N. is designed to deliver wireless connectivity through a radio
frequency carrier of 2.4 GHZ over line-of-sight distances of up to 1,000 feet.
Using our DC5 together with a PC base station allows the user to transmit each
inventory record in real-time from simultaneous multiple remote hand-helds.
W.I.N. also delivers Stock Keeping Unit ("SKU") scanning capability to allow the
user control of their inventory down to an individual item level.

NDI-DEJA VIEW(TM)

     NDI-DeJa View(TM) ("NDI-DeJa View") is file conversion software for the
route sales markets. Designed for collecting, retrieving and archiving
documents, this application is intended to help route operators meet their
specific needs for information management in an effortless, quick and efficient
way. We believe NDI-DeJa View is a flexible, user-friendly interface, which
provides a fast, intuitive method for retrieving any signed document, with
signature.

MARKETS

     We currently focus on two markets for sales of our Datacomputers:

     THE ROUTE ACCOUNTING SYSTEM MARKET. Route accounting involves concurrent
order taking, product delivery, inventory tracking, and asset control.
Salespeople enter customer orders in our Datacomputers 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
Datacomputer is transferred to the host information system and instructional and
control information for the next day's delivery routes is transferred back to
the Datacomputer.

     THE INVENTORY SERVICES MARKET. This market has requirements for products
with smaller displays and larger keyboards, both of which run counter to the
modern trends of hand-held computers providing larger displays and smaller
keyboards. These markets demand intensive numerical input and large memory
storage. We offer hardware products that meet these needs, together with
financial audit software, and real-time wireless software that aids in the
collection of inventory data.

MARKETING AND DISTRIBUTION

     We utilize separate marketing efforts for our Datacomputer products and our
ICAL 100R product. We believe that our Datacomputer products have a wide variety
of applications that have not yet been fully commercialized.

     Recognizing the need to focus our marketing resources, we have targeted our
business strategy for Datacomputers 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 hand-held computers has been established in
those sectors; (ii) customers have realized a substantial return on their
investment in hand-held computers; and (iii) we enjoy a competitive advantage in
this market due to our software and related services. To date, we believe we
have gained the leading position in the office coffee service market, and have
penetrated the beverage distribution, bakery, snacks, and dairy markets.

     The DC5, both wireless and non wireless, is sold to existing and new
inventory service customers as well as the Value Added Reseller ("VAR") market.
As a Windows CE based solution, the DC5 provides a wide array of communication
functions, from wireless, to IrDA and Ethernet 10 BaseT. Additionally, support
for Bluetooth wireless is included for when Bluetooth becomes available. Due to
the high-speed keyboard and extremely rugged design, we believe the DC5 is
highly suited to data collection in a wide range of environments.

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<PAGE>

     The ICAL 100R is sold principally to repeat inventory service customers who
already have a sizable investment in their use and applications for ICAL
products. We devote relatively few resources to generate additional sales of
ICAL units above those demanded by our existing customers.

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 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) performing
well-executed software solutions; (iii) offering excellent service; and (iv)
maintaining good customer references.

SERVICE AND SUPPORT

     We believe that superior service is a vital part of our competitive
strategy and we emphasize the quality of both our hardware and software service.
Our customer service department manages all installations, preparations and
follow-up support.

     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 41% of our 2002 total revenue was attributed to service and
support sales.

SOURCES OF SUPPLY

     We maintain our own raw material inventories and have close working
relationships with our suppliers in order to ensure timely and reliable delivery
of our raw materials. However, prolonged supply shortages would materially and
adversely affect our manufacturing operations, business and financial
performance.

COMPETITION

     The market for our route service products is highly competitive and rapidly
changing. Our competitors include Intermec Technologies Corporation, Symbol
Technologies/Telxon and related third parties, 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. We compete in the hand-held computer market on the basis of
product features, software, quality and service.

     We enjoy a leadership position in the inventory service market and have one
known competitor, Inventory Science Systems Corporation ("ISS"). While ISS has
been in business since 1996, we have not experienced any negative impact on our
business and see limited acceptance of their product in the market. We compete
in the inventory service market on the basis of product features, software,
quality and service.

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EMPLOYEES

     As of December 31, 2002, we had 29 full-time employees. Of these employees,
3 were engaged in sales and marketing, 9 in service and customer support, 2 in
hardware and software development, 8 in manufacturing and 7 in administration
and finance. Our employees are not represented by a labor union. We believe that
our relationship with our employees is good.


ITEM 2. DESCRIPTION OF PROPERTY.

     We maintain our principal offices and manufacturing operations in a leased
19,000 square foot facility in Billerica, Massachusetts. Our lease expires on
September 30, 2005. The annual base rent for our leased facilities is
approximately $178,000. The lease, among other things, provides 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.

     As reported in our Form 10-QSB for the fiscal quarter ended March 31, 2000,
we filed a complaint in March 2000 in Middlesex Superior Court for the
Commonwealth of Massachusetts against Infos International, Inc. and Infos Group,
Inc. (the "Defendants"). The complaint seeks damages (of an unspecified amount)
and injunctive relief with respect to certain confidential information and trade
secrets of the Company which we alleged are being used by Defendants in
connection with their sales and production of computerized data collection
products. The parties are in the process of participating in non-binding
mediation.


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

     None.














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                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     During the fiscal year ended December 31, 2002, our common stock was traded
on the OTC Bulletin Board ("OTC") under the symbol IDCP. On April 7, 2003, the
last bid price for the common stock as reported by OTC was $0.04 per share.

     For the periods indicated below, the table sets forth the range of high and
low bid 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 transactions.

                                                             HIGH        LOW
                                      2001

           First Fiscal Quarter                             $ 0.22     $ 0.06
           Second Fiscal Quarter                              0.19       0.11
           Third Fiscal Quarter                               0.12       0.06
           Fourth Fiscal Quarter                              0.09       0.05

                                      2002

           First Fiscal Quarter                             $ 0.18     $ 0.06
           Second Fiscal Quarter                              0.09       0.06
           Third Fiscal Quarter                               0.09       0.06
           Fourth Fiscal Quarter                              0.07       0.05

     As of April 7, 2003, there were approximately 2,303 stockholders of record
of our common stock.

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. Our outstanding preferred stock
requires that holders of preferred stock be entitled to receive dividends prior
to the payment of any dividends on our common stock.

CHANGES IN SECURITIES

     On December 23, 2002, we issued an aggregate of 1,908,378 shares of our
common stock to Capital Bank Grawe Gruppe AG ("Capital Bank" and formerly RBB
Bank) in satisfaction of an aggregate interest payment of $133,500, which
interest was due under the terms of our Series B, C, and D Convertible Preferred
Stock that are currently issued, outstanding, and held by Capital Bank. No
underwriters were involved in the transaction, and there were no underwriting
discounts or commissions. We relied upon Section 4(2) of the Securities Act of
1933, as amended, because the transaction did not involve any public offering by
the Company.

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

     The following table sets forth for the periods indicated the percentage
relationship of certain items in the statement of operations to revenues and the
percentage increase or decrease of such items as compared to the indicated prior
period:

                                        Relationship to       Period to period
                                         revenues year       increase (decrease)
                                       ended December 31,        Year ended

                                        2002        2001          2002-2001
                                      -------     -------         ---------
     Revenues:
        Product                           59%         60%               2%
        Service                           41%         40%               7%
                                      -------     -------          -------
                                         100%        100%               4%

     Cost of goods sold                   55%         56%               4%
     Amortization of software
      development costs                    2%          0%             453%
                                      -------     -------          -------
     Gross Profit                         43%         44%               1%

     Selling & Marketing                  15%         19%             (16%)
     Research & Development               18%         16%              19%
     General & Administrative             35%         35%               4%
                                      -------     -------          -------
     Net loss                            (26%)       (26%)              3%


     The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto appearing elsewhere herein.

     YEAR ENDED DECEMBER 31, 2002 COMPARED WITH YEAR ENDED DECEMBER 31, 2001

     For the year ended December 31, 2002 ("2002"), we reported a net loss of
$1,070,814, or $.09 per basic share, compared to an operating loss of
$1,038,644, or $.011 per basic share for the year ended December 31, 2001
("2001")

     Total revenues increased 4% to $4,186,144 in 2002 from $4,012,857 in 2001.
The increase in revenue is due to increased sales volume of our new line of
inventory service market products, the DC5, coupled with higher service contract
revenues.

     The DC5 is a rugged, Microsoft(TM) Windows(R) CE based hand-held
Datacomputer with radio frequency (RF) connectivity. The DC5 is designed for the
inventory service market to provide

                                       10
<PAGE>

fast, real-time, wireless transmission of collected data to a host computer
allowing companies to streamline their business process with access to real-time
data, real-time SKU inventory with real-time terminal emulation.

     The DC5 replaces our previous inventory service hand-held products, the
DC2.X and the DC2.5.

     We have also equipped our existing DC4 with the Microsoft(TM) Windows(R) CE
operating system to be used for other broad-based applications. The DC4 has
replaced our previous route accounting system hand-held, the DC3X, discontinued
in the later part of 2001.

     Cost of revenues as a percentage of net revenues for 2002, was 57% or
$2,393,410 compared to 56% or $2,241,598 for 2001. This net increase is
primarily attributable to an increase in amortization of capitalized software
development due to product released in the fourth quarter of 2001. Amortization
of software development costs was $68,764 and $12,430 in December 31, 2002 and
2001 respectively.

     Research and development expenses increased 19% to $747,090 for 2002 from
$626,005 in 2001. This increase is due to a decrease in the amount of
capitalized costs incurred for internally developed product software where
economic and technological feasibility has been established.

     Selling and marketing expenses decreased 16% to $642,168 for 2002 from
$764,427 in 2001. The decrease is a result of cost containment efforts
implemented in 2002.

     General and administrative ("G&A") expenses increased 4% to $1,465,055 for
2002 from $1,411,959 in 2001. As a percentage of net revenues, G&A expenses were
consistent at 35% in 2002 and 2001. The increase is attributable to a provision
for doubtful subscriptions receivable offset in part by lower professional fees
in 2002.

     LIQUIDITY AND CAPITAL RESOURCES

     The accompanying financial statements have been prepared assuming the
Company will continue as a going concern, which contemplates continuity of
operations, realization of assets and the satisfaction of liabilities and
commitments in the normal course of business. The Company has incurred an
accumulated deficit of approximately $17.5 million through December 31, 2002,
recorded a net loss of approximately $1.1 million during 2002 and used
approximately $0.2 million of cash for operations during 2002. As of December
31, 2002, the Company had approximately $0.2 million in cash and a negative
working capital of approximately $0.15 million. In the event the Company's
operations are not profitable or do not generate sufficient cash to fund the
business, or if the Company fails to obtain additional financing, if required,
management will have to substantially reduce its level of operations. These
circumstances raise substantial doubt about the Company's ability to continue as
a going concern. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

     Cash used for operating activities in 2002 was $240,748. This was primarily
caused by the loss we experienced in 2002 offset by a decrease in working
capital, primarily attributable to a decrease in accounts receivable and
inventories. Cash used for investing activities was $94,506, consistent with our
commitment to growth through technological improvement.

                                       11
<PAGE>

COMMITMENTS

     The Company leases its office facilities under an operating lease expiring
September 30, 2005. 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 $274,629 and $231,120 for the years ended December 31, 2002
and 2001, respectively.

     The Company also leases certain equipment under capital leases expiring at
various dates through 2005. The total cost of equipment recorded under these
capital leases was $232,730 at December 31, 2002 and 2001, respectively.

     Minimum future lease commitments under operating and capital leases at
December 31, 2002 are as follows:

                                                  OPERATING        CAPITAL

                        2003                       $178,000        $24,293
                        2004                        181,000         24,293
                        2005                        141,000          9,104
                                                 ----------      ---------

     Total Minimum Lease Payments                  $500,000        $57,690
                                                 ==========
     Less: amount representing interest                             10,680
                                                                 ---------
     Present Value                                                 $47,010
                                                                 =========

SUMMARY OF CRITICAL ACCOUNTING POLICIES; SIGNIFICANT JUDGMENTS AND ESTIMATES

     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. 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 constantly 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.

                                       12
<PAGE>

o    REVENUE RECOGNITION AND ACCOUNTS RECEIVABLE. We recognize revenue when
     there is persuasive evidence of an arrangement, title and risk of loss have
     passed, delivery has occurred or the services have been rendered, the sales
     price is fixed or determinable and collection of the related receivable is
     reasonably assured. Title and risk of loss passes to the customer at the
     time of delivery of the product to a common carrier. At the time of the
     transaction, we assess whether the sales price is fixed or determinable
     based upon the payment of terms of the arrangement. If a significant
     portion of the sales price is not due with normal payment terms, the sales
     price may not be deemed fixed and revenue would be recognized as the
     amounts become due.

     Our product revenue is recognized upon delivery provided that customer
     acceptance criteria can be demonstrated prior to shipment. Where the
     criteria cannot be demonstrated prior to shipment, or in the case of new
     products, revenue is deferred until acceptance has been received. We
     recognize revenue for maintenance services ratably over the contract term,
     which is generally one year or less.

     We assess collectibility based on a number of factors, including past
     transaction and collection history with a customer. If we determine that
     collectibility of the sales price is not reasonably assured, revenue is
     deferred until such time as collection becomes reasonably assured, which is
     generally upon receipt of payment from the customer. Our normal payment
     terms are 30 days from invoice date. We maintain allowances for doubtful
     accounts for estimated losses resulting from the inability of our customers
     to make required payments. We base our estimates on our historical
     collection experience, current trends, credit policy and percentage of our
     accounts receivable by aging category. In determining these estimates, we
     look at historical write-offs of our receivables and review each customer's
     account to identify any specific collection issue. While such credit losses
     have historically been within our expectations and the allowances we
     established, we cannot guarantee that we will continue to experience the
     same credit loss rates that we have in the past. If the financial condition
     of our customers were to deteriorate, resulting in an impairment of their
     ability to make payment, additional allowances may be required. Our failure
     to accurately estimate the losses for doubtful accounts and ensure that
     payments are received on a timely basis could have a material adverse
     effect on our business, financial condition and results of operations. For
     the year ended December 31, 2002 and 2001, $1,033 and $34,134,
     respectively, were provided for doubtful accounts.

o    INVENTORIES. Inventories, which include materials, labor and manufacturing
     overhead, are stated at the lower of cost (first-in, first-out basis) or
     net realizable value. We record a provision for excess and obsolete
     inventory when impairment is identified through our review process. Excess
     and obsolete inventory in excess of estimated usage over the next 12 months
     is written down to its estimated net realizable value, if less than cost.
     The excess and obsolescence evaluation is based upon assumptions about
     future demand, product mix and possible alternative uses. In 2002, we
     recorded an inventory provision for excess and obsolete inventory of
     $47,157. If actual demand, product mix or possible alternative uses are
     less favorable than those projected by management, additional inventory
     write-downs may be required.

o    CAPITALIZED SOFTWARE RESEARCH AND DEVELOPMENT COSTS. We capitalize internal
     software development costs subsequent to establishing technological
     feasibility. Amortization of such costs as cost of sales is done on a
     product-by-product basis based on the straight-line method over the
     remaining estimated useful life of the software, which we currently
     estimate to be three years. We continually evaluate the recoverability of
     capitalized costs. No capitalized software costs were written down for the
     year ended December 31, 2002. Amortization of capitalized software costs
     were $68,764 and $12,430 for the years ended December 31, 2002 and 2001,
     respectively.

                                       13
<PAGE>

o    ACCOUNTING FOR INCOME TAXES. We record income taxes using the asset and
     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. Statement of Financial Accounting Standards 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 in 2002,
     anticipated additional operating losses for the first quarter of 2003 and
     uncertainty as to the extent and timing of profitability in future periods,
     we maintain a full valuation allowance of $5,174,000 as of December 31,
     2002. 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.

NEW ACCOUNTING PRONOUNCEMENTS

     In June 2002, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities." SFAS No. 146 provides guidance on the accounting for recognizing,
measuring and reporting of costs associated with exit and disposal activities,
including restructuring activities. The pronouncement nullifies Emerging Issues
Task Force ("EITF") No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity." Under EITF 94-3, a
liability is recognized solely upon an entity's commitment to a plan. SFAS No.
146 adjusts the timing of when a liability for termination benefits is to be
recognized based upon whether the employee is required to render future service.
A liability for costs to terminate an operating lease or other contract before
the end of its term is to be recognized when the entity terminates the contract
or ceases using the rights conveyed by the contract. All other costs associated
with an exit or disposal activity are to be expensed as incurred. SFAS No. 146
requires the liability to be measured at its fair value with subsequent changes
in fair value to be recognized each reporting period utilizing an interest
allocation approach. The pronouncement is effective for exit or disposal
activities initiated after December 31, 2002, with earlier application
encouraged. We adopted SFAS No. 146 effective January 1, 2003, and we do not
expect that the pronouncement will have a material impact on our financial
position or results of operations.

     In November 2002, the EITF reached a consensus on issue 00-21, "Revenue
Arrangements with Multiple Deliverables." EITF 00-21 addresses revenue
recognition on arrangements encompassing multiple elements that are delivered at
different points in time, defining criteria that must be met for elements to be
considered to be a separate unit of accounting. If an element is determined to
be a separate unit of accounting, the revenue for the element is recognized at
the time of delivery. We do not expect that the pronouncement will have a
material impact on our financial position or results of operations.

                                       14
<PAGE>

     In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (the "Interpretation"). This
Interpretation elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under certain
guarantees that it has issued. It also clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. The Company adopted the
disclosure requirements of the Interpretation in 2002. We do not expect that
this Interpretation will have a material impact on our financial position or
results of operations.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation--Transition and Disclosure--an amendment of FASB Statement No.
123." SFAS No. 148, provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation, and amends the disclosure requirements of SFAS No. 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting and the effect of the method used on reported results. We
adopted the new disclosure requirements of SFAS No. 148 for the year ended
December 31, 2002. As permitted, we will continue to apply the provisions of
Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees" for stock-based compensation.

     In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of Variable Interest Entities." In general, a variable interest entity is a
corporation, partnership, trust or any other legal structure used for business
purposes that either (a) does not have equity investors with voting rights or
(b) has equity investors that do not provide sufficient financial resources for
the entity to support its activities. A variable interest entity often holds
financial assets, including loans or receivables, real estate or other property.
Variable interest entities have been commonly referred to as special-purpose
entities or off-balance sheet structures. This interpretation requires a
variable interest entity to be consolidated by a company if that company is
subject to a majority of the risk of loss from the variable interest entity's
activities or entitled to receive a majority of the entity's residual returns or
both. We do not expect that this interpretation will have a material impact on
our financial position or results of operations.


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.

     As previously reported in the Forms 8-K filed with the Securities and
Exchange Commission on January 15, 2003 and April 1, 2003, we dismissed
Pricewaterhouse Coopers LLP as our independent accountants effective January 10,
2003, and named BDO Seidman, LLP as our independent accountants effective March
31, 2003.

                                    PART III

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

     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 the Board of Directors. The following
table sets forth the year each of our current directors was elected to the Board

                                       15
<PAGE>

and the age, positions and offices currently held by each director. For
information about ownership of our voting securities by each director, see
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."

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

John P. Ward         75          1967          Chairman of the Board, President,
                                               and Chief Executive Officer

William R. Smart     82          1989          Director


BUSINESS EXPERIENCE AND BACKGROUNDS OF THE DIRECTORS

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

     JOHN P. WARD has served on our Board of Directors since our formation and
on the Board of our predecessor in interest since 1967. He has served as our
Chairman, President and Chief Executive Officer since April 2001. From February
1996, through March 2001, Mr. Ward served as founder, director, and Chairman
Emeritus of MIDAS Vision Systems, Inc., a privately held company specializing in
machine vision systems for automatic optical inspections. Prior to MIDAS, Mr.
Ward served for a period of fifteen years in the capacities of electronics
design engineer for the Raytheon Company. Mr. Ward has 34 years of experience as
an entrepreneur during which he co-founded three high-tech companies, while
managing all aspects of new venture operations. Mr. Ward holds a Bachelor of
Science degree in Electrical Engineering from the Massachusetts Institute of
Technology and a Master of Science degree in Electrical Engineering from
Northeastern University.

     WILLIAM R. SMART has served as one of our directors since December 1989. He
spent 32 years with the General Electric Company where his responsibilities
included distribution and marketing management and general management as a
division vice president. He spent nine years with Honeywell, Inc. where he
served as vice president in charge of European operations and Senior Vice
President of Honeywell Information Systems, responsible for international
operations as well as for the corporate staff. Mr. Smart holds a Bachelor of
Science degree in Electrical Engineering from Princeton University. Mr. Smart is
a director of American Petroleum Company and Hollingsworth & Vose Company.

AUDIT COMMITTEE

     Mr. Smart, who meets the independence and experience requirements set forth
in Section 303.01 of the New York Stock Exchange listing standards, serves as
the sole member of the Audit Committee of our Board of Directors. The Audit
Committee has furnished the Audit Committee Report set forth below. The Audit
Committee is not governed by an audit committee charter. Our Board of Directors
had determined that the Audit Committee does not contain an "audit committee
financial expert" as that term is defined by Item 401 of Regulation S-B
promulgated by the Securities and Exchange Commission. None of the members of
the Board of Directors meets this definition.

     The Audit Committee has met with BDO Seidman, LLP to discuss the results of
its audit, the adequacy of the Company's internal and external accounting
controls, and the integrity of the Company's financial reporting. The Audit
Committee met once in 2002.

                                       16
<PAGE>

     AUDIT COMMITTEE REPORT

     This Audit Committee Report reviews actions taken with respect to the
Company' financial statements for the year ended December 31, 2002.

     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. BDO Seidman, LLP, the
Company's independent accountants, 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 2002, the
Audit Committee took the following actions:

     o    Reviewed and discussed the audit plans, audit scope, identification of
          audit risks and the audited financial statements for the year ended
          December 31, 2002, with management and BDO Seidman, LLP;

     o    Discussed with BDO Seidman, 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 BDO Seidman, LLP
          regarding its independence as required by Independence Standards Board
          Standard No. 1. The Audit Committee further discussed with BDO Seidman
          its independence. The Audit Committee considered, with a view to
          maintaining the independence of its independent auditors, the nature
          and scope of the non-audit services supplied to the Company by its
          independent auditors.

     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 member of the Audit Committee is not professionally engaged in the practice
of auditing or accounting and is not employed by the Company for accounting or
financial management or for any aspects of the Company's system of internal
accounting control. The member of the Audit Committee relies, without
independent verification, on the information provided to him and on the
representations made by management and the Company's independent auditors.
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 generally accepted auditing
standards.

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, that the audited financial statements for the year ended December 31,
2002 be included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2002 to be filed with the Securities and Exchange Commission.

                                                     The Audit Committee
                                                        William R. Smart

                                       17
<PAGE>

EXECUTIVE OFFICERS

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

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

John P. Ward               75            Chairman of the Board, President,
                                         and Chief Executive Officer

Gerald S. Eilberg          69            Senior Vice President, and
                                         Chief Financial Officer


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 John P. Ward, whose background is summarized above.

     GERALD S. EILBERG joined the Company in September 1988 as Vice President of
Finance and Administration and Chief Financial Officer. From October 1986 to
August 1988, Mr. Eilberg served as a financial consultant to small private and
public companies. From September 1982 to September 1986, he was President of
Direct Marketing Inc. Previous positions included Division and Corporate
Controller positions with large public companies. Mr. Eilberg is a graduate of
the Boston University School of Management and the Columbia University Graduate
School of Business.

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

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 (the
"SEC"). 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, 2002.

                                       18
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

EXECUTIVE OFFICERS' COMPENSATION

     The following table sets forth the compensation paid during the three years
ended December 31, 2002, to (i) our Chief Executive Officer, (ii) our Chief
Financial Officer and (iii) our former Vice President of Sales, who earned total
compensation in excess of $100,000 during the year ended December 31, 2002.


                           SUMMARY COMPENSATION TABLE

                                                                     LONG TERM
                       ANNUAL COMPENSATION                          COMPENSATION
 ---------------------------------------------------------------    ------------
           (A)                    (B)         (C)          (D)          (G)
                                                                     SECURITIES
                                                                     UNDERLYING
                                             SALARY       BONUS      OPTIONS/SAR
NAME AND PRINCIPAL POSITION       YEAR        ($)          ($)          (#)

John P. Ward (1)                  2002      $169,997       $0            0
President, CEO and Chairman       2001       122,450        -            0
Of the Board                      2000         -            -            0

Gerald S. Eilberg                 2002      $118,457     $5,000          0
Vice President of Finance and     2001       118,344        -            0
Administration and CFO            2000       118,780        -            0

T. Patrick Kearney                2002      $124,433     $8,000          0
Vice President of Sales (2)       2001       115,296        -            0
                                  2000       122,118        -            0

(1)  Mr. Ward has served as our President, Chief Executive Officer and Chairman
     of the Board since April 1, 2001.

(2)  Mr. Kearney left the Company on December 30, 2002.


     We did not grant any stock options or stock appreciation rights to our
executive officers or directors during the year ended December 31, 2002.

                                       19
<PAGE>

                 AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2002
                        AND FISCAL YEAR-END OPTION VALUES

     The following table shows information regarding exercises of options to
purchase our common stock by each executive officer named in the Summary
Compensation Table during the fiscal year ended December 31, 2002. The table
also shows the aggregate value of options held by each executive officer named
in the Summary Compensation Table as of December 31, 2002.

<TABLE><CAPTION>
                                                                                     NUMBER OF
                                                                                    SECURITIES
                                                                                    UNDERLYING            VALUE OF
                                                                                    UNEXERCISED          UNEXERCISED
                                                                                     OPTIONS/           IN-THE-MONEY
                                                                                       SARS                OPTIONS
                                                                                     AT FY-END            AT FY-END
                                       SHARES ACQUIRED           VALUE             EXERCISABLE/         EXERCISABLE/
                                         ON EXERCISE            REALIZED           UNEXERCISABLE        UNEXERCISABLE
                  NAME                       (#)                  ($)                   (#)                ($)(1)
                  (a)                        (b)                  (c)                   (D)                  (E)
------------------------------------ -------------------- --------------------- -------------------- --------------------
<S>                                           <C>                  <C>             <C>                       <C>
John P.Ward,                                  0                    $0              12,500/10,387             $0
  President, CEO
------------------------------------ -------------------- --------------------- -------------------- --------------------
Gerald S. Eilberg                             0                    $0             205,000/13,059             $0
  Vice President Finance & Admin.
  And CFO
------------------------------------ -------------------- --------------------- -------------------- --------------------
T. Patrick  Kearney                           0                    $0                30,000/0                $0
  Former Vice President of Sales
------------------------------------ -------------------- --------------------- -------------------- --------------------
</TABLE>

(1)      In-the-Money options are those options for which the fair market value
         of the underlying shares of common stock is greater than the exercise
         price of the option. The value of the unexercised in-the-money options
         at year end is based on a value of $0.05 per share, the closing bid
         price of our common stock on the OTC Bulletin Board on December 31,
         2002, less the per share exercise price. Mr. Eilberg had exercisable
         options to purchase 5,000 and 200,000 shares of our common stock at
         exercise prices of $1.47 and $0.75, respectively. Mr. Ward had
         exercisable options to purchase 12,500 and 5,000 shares of our common
         stock at exercise prices of $1.47 and $0.75 per share, respectively.
         Mr. Kearney had exercisable options to purchase 30,000 shares of our
         common stock at an exercise price of $0.75 per share.

COMPENSATION OF DIRECTORS

     Our non-employee director receives:

     o    an annual retainer of $6,000 for serving on the Board of Directors;
          and
     o    $1,000 plus reasonable travel and out-of-pocket expenses for
          attendance at each meeting of the Board of Directors.


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

     The following table and accompanying footnotes sets forth information
concerning the beneficial ownership of our securities, as of April 7, 2003, for:

                                       20
<PAGE>

     o    our directors;
     o    each executive officer named in the Summary Compensation Table; and
     o    all of our Directors and executive officers, as a group.

     In addition, the table sets forth information concerning the beneficial
ownership of our voting securities as of April 7, 2003 for each person known to
us to be the beneficial owner of more than five percent of our voting
securities. As of April 7, 2003, there were 14,760,733 shares of our common
stock outstanding. Except as otherwise noted, each named individual has sole
voting and investment power with respect to the securities set forth in the
table.

     For the purpose of this table, the common stock and the 2,400 shares of our
Series B Convertible Preferred Stock, 900 shares of our Series C Convertible
Preferred Stock, 350 shares of our Series D Convertible Preferred Stock and 500
shares of our Series E Convertible Preferred Stock (collectively, the "Preferred
Stock") are treated as one class on as "as converted" basis. Each holder of
Preferred Stock is entitled to the number of votes equal to the number of shares
of common stock into which such Preferred Stock is convertible. Each share of
Preferred Stock, which has a face value of $1,000, is convertible into common
stock at a conversion price of $2.74 per share for the Series B, C and D, and
$0.75 per share for Series E. Based upon these conversion prices, the Preferred
Stock would be convertible into a total of 1,998,783 shares of our common stock.

     All of the 4,150 shares of Preferred Stock issued and outstanding and
10,586,748 shares of common stock are registered in the name of Capital Bank
Grawe Gruppe or its predecessor in interest, RBB Bank AG ("Capital Bank").
Capital Bank has informed us that it holds all of our securities solely in the
capacity as custodian for the benefit of numerous other investors, none of which
either individually or in the aggregate with affiliated entities, beneficially
own more than five percent (5%) of our issued and outstanding capital stock. On
a fully diluted basis, Capital Bank would own approximately 75% of our common
stock outstanding as of April 7, 2003.

     Pursuant to the rules of the Securities and Exchange Commission (the
"SEC"), shares of our securities that an individual or group has the right to
acquire within 60 days of April 7, 2003, pursuant to the exercise of options,
warrants or other securities convertible into such securities, are deemed to be
outstanding for the purpose of computing the percentage ownership of such
individual or group, but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person shown in the table.


                                                NUMBER OF SHARES      PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER(1)        BENEFICIALLY OWNED      OF CLASS
---------------------------------------        ------------------      --------

Gerald S. Eilberg (2)......................          213,017             1.4%
John P. Ward (3)...........................           41,368               *
T. Patrick Kearney (4).....................           30,000               *
William R. Smart (5).......................           15,000               *
All Directors and Executive Officers as
 a Group (4 persons) (6)...................          299,385             2.0%

* Less than 1%.

     (1)  The address for all of the named entities is c/o National
          Datacomputer, Inc., 900 Middlesex Turnpike, Bldg. 5, Billerica,
          Massachusetts 01821.

     (2)  Includes 205,000 shares of common stock underlying currently
          exercisable options to purchase common stock. It also includes 8,017
          shares held by Mr. Eilberg.

                                       21
<PAGE>

     (3)  Includes 12,500 shares of Common Stock underlying currently
          excercisable options to purchase common stock. It also includes 28,868
          shares held by Mr. Ward.

     (4)  Includes 30,000 shares of common stock underlying currently
          excercisable options to purchase common stock.

     (5)  Includes 12,500 shares of common stock underlying currently
          exercisable options to purchase common stock. It also includes 2,500
          shares held by Mr. Smart.

     (6)  Includes an aggregate of 260,000 shares of common stock underlying
          currently excercisable options to purchase common stock held by our
          four current executive officers, and 39,385 shares held by the
          executive officers.

EQUITY COMPENSATION PLAN INFORMATION

The following table provides certain aggregate information with respect to all
of the Company's equity compensation plans in effect as of December 31, 2002:

<TABLE><CAPTION>
                                                                                                   NUMBER OF SECURITIES
                                                                                                  REMAINING AVAILABLE FOR
                                                                                                   FUTURE ISSUANCE UNDER
                                                                                                 EQUITY COMPENSATION PLANS
                                      NUMBER OF SECURITIES TO BE    WEIGHTED AVERAGE EXERCISE      (EXCLUDING SECURITIES
                                        ISSUED UPON EXERCISE OF       PRICE OF OUTSTANDING          REFLECTED IN FIRST
           Plan Category                  OUTSTANDING OPTIONS                OPTIONS                    COLUMN(A))
                                                  (A)                          (B)                         (C)
------------------------------------- ---------------------------- ---------------------------- ----------------------------
<S>                                            <C>                           <C>                         <C>
Equity compensation plans approved
by security holders (1)                         42,841                        $1.47                       193,027
------------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity compensation plans not
approved by security holders (2)                472,000                       $0.73                       28,000
------------------------------------- ---------------------------- ---------------------------- ----------------------------
Total                                           514,841                       $0.79                       221,027
------------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>

     (1)  These plans consist of our 1986 Stock Option Plan, 1989 Stock Option
          Plan, 1994 Stock Option Plan and 1995 Stock Option Plan.

     (2)  These plans consist of our 1997 Stock Option Plan and 1998 Stock
          Option Plan, the terms of which are described in Note 10 to our
          audited financial statements for the year ended December 31, 2002
          included in this Annual Report on Form 10-KSB. Additional terms of the
          1997 Stock Option Plan and 1998 Stock Option Plan are summarized as
          follows: Options may be granted to employees, directors and
          consultants of the Company. No options may be granted after the tenth
          anniversary of the date on which each plan was adopted by the Board of
          Directors. The term and vesting provisions of each option are
          determined by the Board of Directors. Upon cessation of employment,
          unless otherwise specified in the option award, options which have not
          vested are forfeited and options which have vested must be exercised
          within the earlier of three years or the original term of the option.
          Options to non-employees terminate upon termination of service unless
          otherwise specified in the award.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     None

                                       22
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

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

                                                                        PAGE
                                                                        ----

Reports of Independent Auditors                                         30-31

Balance Sheets as of December 31, 2002 and
   December 31, 2001                                                     32

Statements of Operations for the years ended
   December 31, 2002 and December 31, 2001                               33

Statement of Stockholders' Equity for the years
   ended December 31, 2002 and December 31, 2001                         34

Statements of Cash Flows for the years ended
   December 31, 2002 and December 31, 2001                               35

Notes to Financial Statements                                            36







                                       23
<PAGE>

     (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
         effect 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(l)   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      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(l)  Statement of Designation of Series F Convertible Preferred Stock.
3.14(h)  Restated By-Laws.
4.1      Instruments defining the rights of security holders (see Exhibits 3.1
         through 3.12 and 10.7 through 10.9).
4.2(l)   Specimen Certificate of Common Stock, $.08 par value per share.
         10.1*(a) 1986 Stock Option Plan. 10.2*(i) 1989 Stock Option Plan.
10.3*(j) 1994 Stock Option Plan. 10.4*(k) 1995 Stock Option Plan. 10.5*(j) 1997
         Stock Option Plan. 10.6*(j) 1998 Stock Option Plan.
10.7(g)  Form of Series E Convertible Preferred Stock Subscription Agreement
10.8(l)  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.
99.1     Section 906 Certification of Chief Executive Officer and Chief
         Financial Officer
--------------------

(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 03313392)
(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.

                                       24
<PAGE>

(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, 1988.
(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, 1998.
(k)      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, 1995.
(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, 2000.

* Management contract or compensatory plan, contract or arrangement.


     (b) REPORTS ON FORM 8-K.

     During the last quarter of the period for which this report is filed, we
did not file any reports on Form 8-K.


ITEM 14. CONTROLS AND PROCEDURES

     (a) Evaluation of Disclosure Controls and Procedures.

     Within 90 days prior to the filing date of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of its disclosure controls and
procedures pursuant to the Securities Exchange Act Rule 13a-14(c). "Disclosure
controls and procedures" are controls and procedures that are designed to ensure
that information required to be disclosed by the Company in reports filed or
submitted under the Exchange Act is recorded, processed, summarized and reported
within the time period specified in the Securities and Exchange Commission's
rules and forms. Based upon that evaluation, the Company's Chief Executive
Officer and the Chief Financial Officer concluded that the Company's disclosure
controls and procedures are adequate and effective for these purposes as of the
date of the evaluation.

     (b) Changes in Internal Controls.

     There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective act with regard to
significant deficiencies and material weaknesses.

                                       25
<PAGE>

ITEM 15. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     In March 31, 2003, the Board of Directors appointed BDO Seidman, LLP,
independent public accountants, to audit our financial statements for the year
ended December 31, 2002 and ending December 31, 2003. PricewaterhouseCoopers LLP
was our independent public accountants during 2001 and 2002 but did not audit
our financial statements for the year ended December 31, 2002.

     Audit Fees
     ----------

     BDO Seidman, LLP has billed us $35,000 for the audit of our financial
statements for the year ended December 31, 2002. PricewaterhouseCoopers, LLP
billed us a total of $65,000 for the audit of our annual financial statements
for the year ended December 31, 2001 and $24,000 for its review of our Quarterly
Reports on Form 10-Q filed during the year ended December 31, 2002.

     Audit-Related Fees
     ------------------

     We did not pay any additional fees to our independent public accountants
for assurance and related services during the years ended December 31, 2002 and
2001.

     All Other Fees
     --------------

     We did not pay any additional fees to our independent public accountants
for other products or services during the years ended December 31, 2002 and
2001.









                                       26
<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: April 15, 2003                 By: /s/ John P. Ward
                                         -------------------------------
                                         John P. Ward
                                         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/John P. Ward          Chairman of the Board, President and     April 15, 2003
----------------------   Chief Executive Officer (principal
John P. Ward             executive officer)


/s/ William R. Smart     Director                                 April 15, 2003
----------------------
William R. Smart


/s/Gerald S. Eilberg     Chief Financial Officer (principal       April 15, 2003
----------------------   financial and accounting officer)
Gerald S. Eilberg









                                       27
<PAGE>

                                 CERTIFICATIONS

I, John Ward, Chief Executive Officer of National Datacomputer, Inc. certify
that:

1.   I have reviewed this annual report on Form 10-KSB of National Datacomputer;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a.   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this report is being
          prepared;

     b.   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this report (the "Evaluation Date"); and

     c.   presented in this report our conclusions about the effectiveness of
          the disclosure controls and procedures based on our evaluation as of
          the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent functions):

     a.   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b.   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     report whether there were significant changes in internal controls or in
     other factors that could significantly affect internal controls subsequent
     to the date of our most recent evaluation, including any corrective actions
     with regard to significant deficiencies and material weaknesses.


     Date: April 15, 2003

     /s/ John P. Ward
     -------------------------
     John P. Ward
     Chairman of the Board,
     President and CEO

                                       28
<PAGE>

                                 CERTIFICATIONS

I, Gerald S. Eilberg, Chief Financial Officer of National Datacomputer, Inc.,
certify that:

1.   I have reviewed this annual report on Form 10-KSB of National Datacomputer;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a.   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this report is being
          prepared;

     b.   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this report (the "Evaluation Date"); and

     c.   presented in this report our conclusions about the effectiveness of
          the disclosure controls and procedures based on our evaluation as of
          the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent functions):

     a.   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b.   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     report whether there were significant changes in internal controls or in
     other factors that could significantly affect internal controls subsequent
     to the date of our most recent evaluation, including any corrective actions
     with regard to significant deficiencies and material weaknesses.


     Date: April 15, 2003

     /s/ Gerald S. Eilberg
     --------------------------
     Gerald S. Eilberg
     Chief Financial Officer

                                       29
<PAGE>

                          INDEPENDENT AUDITORS' REPORT


Board of Directors and Stockholders
National Datacomputer, Inc.
Billerica, Massachusetts



We have audited the accompanying balance sheet of National Datacomputer, Inc. as
of December 31, 2002 and the related statements of operations, stockholders'
equity and cash flows for the year 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 audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides 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. at
December 31, 2002, and the results of its operations and its cash flows for the
year 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 2 to the
financial statements, the Company has suffered recurring losses from operations
that raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.


Boston, Massachusetts
April 8, 2003

                                       30
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Stockholders
of National Datacomputer, Inc.:

In our opinion, the accompanying balance sheets and the related statements of
operations, stockholders' equity and cash flows present fairly, in all material
respects, the financial position of National Datacomputer, Inc. at December 31,
2001, and the results of its operations and its cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America. 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 audit. We conducted our audit of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit 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, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company's losses from operations and limited capital
resources raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


PricewaterhouseCoopers, LLP

Boston, Massachusetts
March 11, 2002

                                       31
<PAGE>

                           NATIONAL DATACOMPUTER, INC.
                                 BALANCE SHEETS
--------------------------------------------------------------------------------
<TABLE><CAPTION>
                                                                                 December 31,    December 31,
                                                                                    2002            2001
                                                                                ------------    ------------
Assets
Current Assets:
<S>                                                                             <C>             <C>
  Cash                                                                          $    176,492    $    568,644
  Accounts receivable, net of allowance for doubtful accounts of $1,033
     and $34,134 in 2002 and 2001, respectively.                                      64,901         330,953
  Inventories                                                                        773,841       1,142,959
  Other current assets                                                                23,925          14,930
                                                                                ------------    ------------
     Total current assets                                                          1,039,159       2,057,486
Fixed assets, net                                                                    199,311         277,294
Capitalized software development costs, net                                          236,719         242,553
                                                                                ------------    ------------
     Total Assets                                                               $  1,475,189    $  2,577,333
                                                                                ============    ============

Liabilities and stockholders' equity
Current Liabilities:
  Current obligations under capital lease                                       $     19,950    $     17,595
  Note payable, current portion                                                       66,000          72,000
  Accounts payable and other                                                         423,933         387,885
  Accrued payroll and related taxes                                                   87,208          94,270
  Other accrued expenses                                                              80,744         178,742
  Deferred revenues                                                                  518,533         775,222
                                                                                ------------    ------------
     Total current liabilities                                                     1,196,368       1,525,714
Obligations under capital lease, net of current portion                               27,060          44,313
Note payable, net of current portion                                                     --           36,000
                                                                                ------------    ------------
     Total Liabilities                                                             1,223,428       1,606,027
                                                                                ------------    ------------
Commitments (Note 15):

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

  Preferred stock, Series B convertible $0.001 par value; 4,200 shares
     authorized; 2,400 issued and outstanding
     (liquidating preference of $2,400,000 )                                       2,105,832       2,105,832

  Preferred stock, Series C convertible $0.001 par value; 900 shares
     authorized, issued and outstanding (liquidating preference of $900,000)         834,370         834,370

  Preferred stock, Series D convertible $0.001 par value; 350 shares
     authorized, issued and outstanding (liquidating preference of $350,000)         324,639         324,639

  Preferred stock, Series E convertible $0.001 par value; 500 shares
     authorized, issued and outstanding (liquidating preference of $500,000)         273,880         273,880

  Preferred stock, Series F convertible $0.001 par value; 175 shares
     authorized; no shares issued and outstanding)                                       --              --

  Common stock, $0.08 par value; 30,000,000 shares authorized; 14,760,733
     and 11,115,397 shares issued and outstanding in 2002 and 2001,
     respectively                                                                  1,180,857         889,230

  Capital in excess of par value                                                  12,989,198      13,013,825
  Accumulated deficit                                                            (17,457,015)    (16,119,201)
  Stock subscriptions receivable, net of allowance for doubtful
     accounts of $351,269 in 2002                                                         --         (351,269)
                                                                                ------------    ------------
     Total Stockholders' Equity                                                      251,761         971,306
                                                                                ------------    ------------
     Total Liabilities and Stockholders' Equity                                 $  1,475,189    $  2,577,333
                                                                                ============    ============
</TABLE>

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

                                       32
<PAGE>

                           NATIONAL DATACOMPUTER, INC.
                            STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------

                                                           Years Ended
                                                   ----------------------------
                                                    December 31,    December 31,
                                                       2002            2001
                                                   ------------    ------------
Revenues:
    Product                                        $  2,459,742    $  2,406,085
    Services                                          1,726,402       1,606,772
                                                   ------------    ------------
       Total Revenues                                 4,186,144       4,012,857

Cost of revenues                                      2,393,410       2,241,598
                                                   ------------    ------------

       Gross Profit                                   1,792,734       1,771,259
                                                   ------------    ------------
Operating expenses:
    Research and development                            747,090         626,005
    Selling and marketing                               642,168         764,427
    General and administrative                        1,465,055       1,411,959
                                                   ------------    ------------
                                                      2,854,313       2,802,391
                                                   ------------    ------------
Loss from operations                                 (1,061,579)     (1,031,132)

Other income (expense):
    Interest income                                         --            3,948
    Interest expense                                     (9,235)        (11,460)
                                                   ------------    ------------
Net loss                                           $ (1,070,814)   $ (1,038,644)
                                                   ============    ============


Calculation of net loss per common share and dilutive share equivalent:


Net loss                                           $ (1,070,814)   $ (1,038,644)
Preferred stock preferences                            (267,000)       (269,625)
                                                   ------------    ------------
Net loss attributable to common stockholders       $ (1,337,814)   $ (1,308,269)
                                                   ============    ============
Basic and diluted net loss per share
  attributable to common stockholders              $      (0.11)   $      (0.14)
                                                   ============    ============
Weighted average shares                              12,094,707       9,282,232
                                                   ============    ============

   The accompanying notes are an integral part of these financial statements

                                       33
<PAGE>
<TABLE><CAPTION>
                          NATIONAL DATACOMPUTER, INC.
                       STATEMENT OF STOCKHOLDERS' EQUITY
----------------------------------------------------------------------------------------------------------------------------------
                                          Preferred               Preferred               Preferred             Preferred
                                        Stock Series B          Stock Series C          Stock Series D        Stock Series E
                                    ----------------------  ----------------------  ----------------------  ----------------------
                                              Net issuance            Net issuance            Net issuance            Net issuance
                                     Shares      price       Shares      price       Shares      price       Shares      price
                                    --------  ------------  --------  ------------  --------  ------------  --------  ------------
<S>                                   <C>      <C>              <C>      <C>            <C>      <C>            <C>      <C>
Balance at December 31, 2000           2,400    $2,105,832       900      $834,370       350      $324,639       500      $273,880

Net loss                                 --            --        --            --        --            --        --            --

Conversion of preferred stock            --            --        --            --        --            --        --            --

Interest on preferred stock
  (Note 12)                              --            --        --            --        --            --        --            --

Issuance of common stock
  in satisfaction of accrued
  interest                               --            --        --            --        --            --        --            --
                                    --------  ------------  --------  ------------  --------  ------------  --------  ------------
Balance at December 31, 2001           2,400    $2,105,832       900      $834,370       350      $324,639       500      $273,880
                                    ========  ============  ========  ============  ========  ============  ========  ============

Net loss                                 --            --        --            --        --            --        --            --

Interest on preferred stock
  (Note 12)                              --            --        --            --        --            --        --            --

Issuance of common stock
  in satisfaction of accrued
  interest                               --            --        --            --        --            --        --            --
                                    --------  ------------  --------  ------------  --------  ------------  --------  ------------
Balance at December 31, 2002           2,400    $2,105,832       900      $834,370       350      $324,639       500      $273,880
                                    ========  ============  ========  ============  ========  ============  ========  ============


                                     Preferred
                                   Stock Series F                 Common Stock
                               ----------------------  ------------------------------------
                                                                                Capital in     Stock                      Total
                                         Net issuance                  Par        excess    subscriptions Accumulated  stockholders'
                                Shares      price        Shares       value    of par value  receivable     deficit       equity
                               --------  ------------  ----------  ----------  ------------  ----------  ------------  ------------
Balance at December 31, 2000        175      $175,000   5,382,540    $430,601   $13,027,829   ($351,269) ($14,810,932)   $2,009,950

Net loss                            --            --          --          --            --          --     (1,038,644)  ($1,038,644)

Conversion of preferred stock      (175)     (175,000)  3,134,689     250,775       (75,775)        --            --            --

Interest on preferred stock
  (Note 12)                         --            --          --          --            --          --       (269,625)    ($269,625)

Issuance of common stock
  in satisfaction of accrued
  interest                          --            --    2,598,168     207,854        61,771         --            --       $269,625
                               --------  ------------  ----------  ----------  ------------  ----------  ------------  ------------
Balance at December 31, 2001        --          $ --   11,115,397    $889,230   $13,013,825   ($351,269) ($16,119,201)     $971,306
                               ========  ============  ==========  ==========  ============  ==========  ============  ============

Net loss                            --            --          --          --            --          --    ($1,070,814)  ($1,070,814)

Increase in allowance for
  doubtful accounts                 --            --          --          --            --      351,269           --        351,269
Interest on preferred stock
  (Note 12)                         --            --          --          --            --          --       (267,000)    ($267,000)

Issuance of common stock
  in satisfaction of accrued
  interest                          --            --    3,645,336     291,627       (24,627)        --            --       $267,000
                               --------  ------------  ----------  ----------  ------------  ----------  ------------  ------------
Balance at December 31, 2002        --          $ --   14,760,733  $1,180,857   $12,989,198         --   ($17,457,015)     $251,761
                               ========  ============  ==========  ==========  ============  ==========  ============  ============
</TABLE>

    The accompanying notes are an integral part of these financial statements

                                       34
<PAGE>

                           NATIONAL DATACOMPUTER, INC.
                            STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------

                                                            Years Ended
                                                    ---------------------------
                                                    December 31,   December 31,
                                                        2002           2001
                                                    ------------   ------------

Cash flows from operating activities:
  Net loss                                          $ (1,070,814)  $ (1,038,644)
  Adjustments to reconcile net loss to net
   cash used for operating activities:
    Increase in allowance for doubtful
     subscriptions receivable                            351,269            --
    Depreciation and amortization                        178,323        121,166
  Changes in assets and liabilities:
    Decrease in accounts receivable                      266,052         83,641
    Decrease in inventories                              369,118          3,748
    (Increase) decrease in other current assets           (8,995)        33,682
    Increase in note payable                                 --         108,000
    Increase in accounts payable                          36,048        165,002
    (Decrease) increase in accrued expenses             (105,060)        46,665
    (Decrease) increase in deferred revenues            (256,689)       244,448
                                                    ------------   ------------
  Net cash used for operating activities                (240,748)      (232,292)
                                                    ------------   ------------

Cash flows from investing activities:
  Purchases of fixed assets                              (31,576)      (141,718)
  Purchase of capitalized software                           --         (60,000)
  Additions to capitalized software
    development costs                                    (62,930)      (194,983)
                                                    ------------   ------------
  Net cash used for investing activities                 (94,506)      (396,701)
                                                    ------------   ------------

Cash flows from financing activities:
  Principal payment on note payable                      (42,000)           --
  Principal payment on obligations
    under capital lease                                  (14,898)       (15,806)
                                                    ------------   ------------
  Net cash used for financing activities                 (56,898)       (15,806)
                                                    ------------   ------------

Net decrease in cash                                    (392,152)      (644,799)
Cash, beginning of year                                  568,644      1,213,443
                                                    ------------   ------------
Cash, end of year                                   $    176,492   $    568,644
                                                    ============   ============

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

                                       35
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION

     National Datacomputer, Inc. (the "Company") designs, develops,
manufactures, markets and services a line of hand-held battery powered
microprocessor-based data collection products and computers and associated
peripherals for use in mobile operations. The Company's products and services
include data communications networks, application-specific software, hand-held
computers and related peripherals, associated training and support services.

2. LIQUIDITY

     The accompanying financial statements have been prepared assuming the
Company will continue as a going concern, which contemplates continuity of
operations, realization of assets and the satisfaction of liabilities and
commitments in the normal course of business. The Company has incurred an
accumulated deficit of approximately $17.5 million through December 31, 2002,
recorded a net loss of approximately $1.1 million during 2002 and used
approximately $0.2 million of cash for operations during 2002. As of December
31, 2002, the Company had approximately $0.2 million in cash and a negative
working capital of approximately $0.15 million. In the event the Company's
operations are not profitable or do not generate sufficient cash to fund the
business, or if the Company fails to obtain additional financing, if required,
management will have to substantially reduce its level of operations. These
circumstances raise substantial doubt about the Company's ability to continue as
a going concern. These financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REVENUE RECOGNITION
-------------------

     The Company recognizes revenue upon shipment, provided persuasive evidence
of an arrangement exists, the sales price is fixed or determinable and
collection of the related receivable is probable.

     Revenue from installation and training is recognized upon the completion of
the project. Service revenue is recognized ratably over the contractual period.

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 been historically insignificant.

FINANCIAL INSTRUMENTS
---------------------

     Fair values for cash, accounts receivable, and accounts payable approximate
their carrying values at December 31, 2002 and 2001 due to their short
maturities.

                                       36
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

     Based on borrowing rates currently available to the Company for loans with
similar terms, the carrying value of capital lease obligations approximate fair
value.

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

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

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

     Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method.

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

     Shipping and handling costs are classified as a component of cost of goods
sold.

FIXED ASSETS
------------

     Fixed Assets are recorded at cost and depreciated over the estimated useful
lives of the assets, which range from 3 to 5 years. 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 DEVELOPMENT COSTS
--------------------------------------

     Costs associated with the development of computer software are charged to
operations prior to establishment of technological feasibility, as defined by
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.

                                       37
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

     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 bear 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 including the
period being reported on. Amortization begins when the product is available for
general release to the customer. The Company policy is to amortize software
development costs using the straight-line method over the estimated economic
life of the product, which is generally three years.

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.

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

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

     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 12) are subtracted from
the net income (loss) to determine the amount of net income (loss) attributable
to common stockholders.

     Common share equivalents consist of 2,623,624 and 2,653,732 shares of
common stock which may be issuable upon exercise of outstanding stock options
and warrants and the conversion of preferred stock at December 31, 2002 and
2001, respectively. All common share equivalents have been excluded from the
calculation of weighted average shares outstanding, as their inclusion would be
anti-dilutive.

STOCK COMPENSATION
------------------

     The Company's employee stock option plans are accounted for in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," ("APB 25") and related interpretations. The Company adopted SFAS No.
123, "Accounting for Stock Based Compensation," for disclosure only (Note 10).

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure", which (i) amends SFAS Statement No.
123, "Accounting for Stock-Based Compensation," to provide alternative methods
of transition for an entity that voluntarily changes to the fair value based
method of accounting for stock-based

                                       38
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

employee compensation (ii) amends the disclosure provisions of SFAS 123 to
require prominent disclosure about the effects on reported net income of an
entity's accounting policy decisions with respect to stock-based employee
compensation and (iii) amend APB opinion No. 28, "Interim Financial Reporting"
to require disclosure about those effects in interim financial information.
Items (ii) and (iii) of the new requirements in SFAS 148 are effective for
financial statements for years ending after December 15, 2002. The Company
adopted the disclosure requirements of SFAS 148 for the year ended December 31,
2002 and continues to account for stock-based compensation utilizing the
intrinsic value method. The additional disclosures required by SFAS 148 are as
follows:

                                              Year ended           Year ended
                                             December 31,         December 31,
                                                 2002                 2001
                                            --------------       --------------
     Net loss:
           As reported                       $(1,070,814)         $(1,038,644)
           Pro forma                         $(1,077,317)         $(1,052,641)

Basic and diluted net loss per share
attributable to common stockholders:

           As reported                          $(0.11)              $(0.14)
           Pro forma                            $(0.11)              $(0.15)

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.

COMPREHENSIVE INCOME (LOSS)
---------------------------

     SFAS No. 130, "Reporting Comprehensive Income." requires disclosure of all
components of comprehensive income (loss) on an annual and interim basis.
Comprehensive income (loss) is defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. The Company's comprehensive loss is the same as its
reported loss for the years ended December 31, 2002 and 2001.

RECLASSIFICATION
----------------

     Amortization expenses of capitalized software development costs in 2001
have been reclassified to cost of revenues and service from research and
development expenses to conform to the 2002 presentation.

                                       39
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

4. NEW ACCOUNTING PRONOUNCEMENTS

     In June 2002, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities." SFAS No. 146 provides guidance on the accounting for recognizing,
measuring and reporting of costs associated with exit and disposal activities,
including restructuring activities. The pronouncement nullifies Emerging Issues
Task Force ("EITF") No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity." Under EITF 94-3, a
liability is recognized solely upon an entity's commitment to a plan. SFAS No.
146 adjusts the timing of when a liability for termination benefits is to be
recognized based upon whether the employee is required to render future service.
A liability for costs to terminate an operating lease or other contract before
the end of its term is to be recognized when the entity terminates the contract
or ceases using the rights conveyed by the contract. All other costs associated
with an exit or disposal activity are to be expensed as incurred. SFAS No. 146
requires the liability to be measured at its fair value with subsequent changes
in fair value to be recognized each reporting period utilizing an interest
allocation approach. The pronouncement is effective for exit or disposal
activities initiated after December 31, 2002, with earlier application
encouraged. The Company adopted SFAS No. 146 effective January 1, 2003, and
management does not expect that the pronouncement will have a material impact on
the Company's financial position or results of operations.

     In November 2002, the EITF reached a consensus on issue 00-21, "Revenue
Arrangements with Multiple Deliverables." EITF 00-21 addresses revenue
recognition on arrangements encompassing multiple elements that are delivered at
different points in time, defining criteria that must be met for elements to be
considered to be a separate unit of accounting. If an element is determined to
be a separate unit of accounting, the revenue for the element is recognized at
the time of delivery. Management does not expect that the pronouncement will
have a material impact on the Company's financial position or results of
operations.

     In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (the "Interpretation"). This
Interpretation elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under certain
guarantees that it has issued. It also clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. Management does not expect
that this Interpretation will have a material impact on the Company's financial
position or results of operations.

     In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of Variable Interest Entities." In general, a variable interest entity is a
corporation, partnership, trust or any other legal structure used for business
purposes that either (a) does not have equity investors with voting rights or
(b) has equity investors that do not provide sufficient financial resources for
the entity to support its activities. A variable interest entity often holds
financial assets, including loans or receivables, real estate or other property.
Variable interest entities have been commonly referred to as special-purpose
entities or off-balance sheet structures. This interpretation requires a
variable interest entity to be consolidated by a company if that company is
subject to a majority of the risk of loss from the variable interest entity's
activities or entitled to receive a majority of the entity's residual returns or
both. Management does not expect that this interpretation will have a material
impact on the Company's financial position or results of operations.

                                       40
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

5. INVENTORIES

     Inventories consist of the following:
                                                   DECEMBER 31,    DECEMBER 31,
                                                       2002            2001
                                                   ------------    ------------
     Raw materials                                    $529,790        $581,949
     Work-in-process                                   155,200         371,355

     Finished goods                                     88,851         189,655
                                                   ------------    ------------

                                                      $773,841       $1,142,959
                                                   ============    ============

6. FIXED ASSETS

     Fixed assets consist of the following:

<TABLE><CAPTION>
                                                   ESTIMATED
                                                  USEFUL LIVES    DECEMBER 31,    DECEMBER 31,
                                                   (IN YEARS)         2002            2001
                                                  ------------    ------------    ------------
<S>                                                   <C>         <C>             <C>
     Production and engineering equipment             3-5         $    664,528    $    660,549
     Furniture, fixtures and office equipment          5               848,781         821,184
     Leasehold improvements                         Life of
                                                     Lease              29,749          29,749
                                                                  ------------    ------------
                                                                  $  1,543,058    $  1,511,482

     Less - accumulated depreciation                                (1,343,747)     (1,234,188)
                                                                  ------------    ------------
                                                                  $    199,311    $    277,294
                                                                  ============    ============
</TABLE>

     At December 31, 2002 and 2001, equipment under capital lease totaled
$232,730. Related accumulated depreciation totaled $196,249 and $180,368,
respectively at December 31, 2002 and 2001. Depreciation expense was $109,559
and $108,736 for the years ended December 31, 2002 and 2001, respectively.

                                       41
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

7. CAPITALIZED SOFTWARE DEVELOPMENT COSTS

     Capitalized software development costs consist of the following:


                                      ESTIMATED
                                   ECONOMIC LIVES   DECEMBER 31,   DECEMBER 31,
                                     (IN YEARS)         2002           2001
                                   --------------   ------------   ------------

     Internally developed software       3          $    257,913   $    194,983
     Purchased software                  3                60,000         60,000
                                                    ------------   ------------
                                                    $    317,913   $    254,983

     Less - accumulated amortization                     (81,194)       (12,430)
                                                    ------------   ------------
                                                    $    236,719   $    242,553
                                                    ============   ============

     As of December 31, 2002, the Company has capitalized $257,913 of costs
     incurred for the development of its Windows CE operating system. The
     Company has capitalized $60,000 of costs associated with the purchase of
     software for the development of its W.I.N. Windows application.
     Amortization expense was $68,764 and $12,430 for the years ended December
     31, 2002 and 2001 respectively.

8. 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, 2002; however, the event of default was waived by
     the holder. At December 31, 2002, the note payable balance was $66,000.


                                       42
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

9. INCOME TAXES

     Deferred tax assets are composed of the following:

                                                   DECEMBER 31,    DECEMBER 31,
                                                       2002            2001
                                                   ------------    ------------
     Net operating loss carryforwards              $  4,820,000    $  4,666,365
     Business tax credit carryforwards                  114,000         172,479
     Other                                              240,000         119,819
                                                   ------------    ------------

     Gross deferred tax asset                      $  5,174,000    $  4,958,663
     Deferred tax asset valuation allowance          (5,174,000)     (4,958,663)
                                                   ------------    ------------
                                                   $        --     $        --
                                                   ============    ============

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

                                                            YEAR ENDED

                                                   DECEMBER 31,    DECEMBER 31,
                                                       2002            2001
                                                   ------------    ------------
     Statutory federal rate                              (34.0%)         (34.0%)
     State taxes                                          (9.5%)          (5.4%)
     Non-deductible expenses                              14.0%            7.0%
     Other                                                 0.0%           (5.6%)
     Change in valuation allowance on
      deferred tax assets                                 29.5%           38.0%
                                                   ------------    ------------
                                                            --              --
                                                   ============    ============

     The Company generated losses from operations in 2002 and 2001. 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, 2002, the Company has net operating loss and tax credit
carryforwards for federal tax purposes of approximately $13,500,000 and
$107,000, respectively, which expire in various years through 2021 and 2011,
respectively. The Company has state net operating loss carryforwards for tax
purposes of approximately $3,500,000, which expire in various years through
2007.

                                       43
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

     Any significant change in ownership, as defined in 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.

10. STOCK OPTIONS

     In 1986, 1989, 1994 and 1995, the Board of Directors approved the 1986
Stock Option Plan, the 1989 Stock Option Plan, the 1994 Stock Option Plan and
the 1995 Stock Option Plan (the "Plans"), respectively. The Plans provide for
the granting of incentive stock options and non-qualified stock options to
purchase up to 323,685 shares of common stock of the Company to employees,
officers, directors and consultants. The exercise price for incentive stock
options granted may not be less than 100% of the fair market value per share of
the common stock on the date granted (110% for options granted to holders of
more than 10% of the voting stock of the Company). The exercise price per share
for non-qualified options may not be less than the lesser of 50% of the fair
market value per share of the common stock on the date of grant or the book
value per share of common stock as of the end of the year immediately preceding
the date of grant. The term of options granted under the Plans cannot exceed ten
years (five years for options granted to holders of more than 10% of the voting
stock of the Company). Outstanding options are written generally with five to
ten-year vesting periods, some with acceleration if certain profitability levels
are reached.

     On August 19, 1997, the Board of Directors, adopted the 1997 Stock Option
Plan ("1997 Plan") which provided for issuance of both incentive stock options
and non-qualified options to employees. A maximum of 200,000 shares of Common
Stock was reserved for issuance in accordance with the terms of the 1997 Plan.
The 1997 Plan now only provides for the issuance of non-qualified options since
a stockholder meeting was not held.

     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.








                                       44
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

     A summary of the status of the Company's stock option plans as of December
31, 2002 and 2001 is as follows:
<TABLE><CAPTION>
                                            December 31, 2002               December 31, 2001
                                      ----------------------------    ----------------------------
                                                        Weighted                        Weighted
                                                        Average                         Average
                                       Number of        Exercise        Number of       Exercise
                                        Options          Price           Options         Price
                                      ------------    ------------    ------------    ------------
<S>                                        <C>               <C>           <C>               <C>
Outstanding at beginning of year           544,949           $0.79         869,376           $0.79
Granted                                        --              --              --              --
Exercised                                      --              --              --              --
Canceled/Expired                           (30,108)           0.69        (324,427)           0.67
                                      ------------    ------------    ------------    ------------

Outstanding at end of year                 514,841           $0.80         544,949           $0.80
                                      ============    ============    ============    ============

Exercisable at end of year                 483,645           $0.77         460,003           $0.77
                                      ============    ============    ============    ============
</TABLE>

The following table summarizes information about stock options outstanding at
December 31, 2002:

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

    $ 0.73         222,000           5.01          222,000         $0.73
    $ 0.75         250,000           6.41          240,000          0.75
    $ 1.47          42,841           2.75           21,645          1.47
                 -----------                     -----------  ----------------
    Total          514,841                         483,645         $0.77
                 ===========                     ===========  ================

     In calculating the pro forma effect of SFAS No. 123, the fair value of each
option grant was estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions used for grants in 1999:

     I.   Dividend yield of 0%;

     II.  Expected volatility of 170%;

     III. Risk free interest rates of 5.53% - 6.24% for options granted during
          the year ended December 31, 1999; and

     IV.  Weighted average expected option term of 10 years.

                                       45
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

     Because options vest over several years and additional option grants are
expected to be made in subsequent years, the pro forma disclosures are not
necessarily representative of the pro forma effects on reported net income
(loss) for future years.

11. COMMON STOCK

     At December 31, 2002, the Company had reserved 1,998,783 shares of common
stock for issuance upon the exercise of common stock options and warrants and
the conversion of preferred stock.

     On May 1, 2000, the Company amended the Certificate of Incorporation to
increase the Company's authorized number of shares of common stock, $.08 par
value per share, from 5,000,000 shares to 30,000,000 SHARES.

12. CONVERTIBLE PREFERRED STOCK

     During 1996, the Company sold 4,200 shares of the newly designated Series B
convertible preferred stock for net proceeds of approximately $3,685,200.

     During 1997, the Company sold 900 shares of Series C convertible preferred
stock for net proceeds of approximately $867,000.

     During 1997, the Company sold 350 shares of Series D convertible preferred
stock for net proceeds of approximately $337,400.

     During 1998, the Company sold 500 shares of Series E convertible preferred
stock with attached warrants to purchase up to 700,000 shares of common stock at
$.75 per share, for net proceeds of approximately $487,880. The proceeds of this
financing were allocated to the preferred shares and warrants based on
management's estimation of their relative fair values. This resulted in $214,000
being ascribed to warrants, which was recorded as additional paid-in-capital and
$273,880 being recorded as preferred stock.

     During 1998, the holders of a convertible note payable to a related party,
converted the note payable with an outstanding principal balance of $175,000
into 175 shares of Series F convertible preferred stock at a stated value of
$1,000 per share.

     On March 21, 2000, the Company issued 656,934 shares of its common stock,
par value $.08 per share (the "Shares"), to Capital Bank Grawe Gruppe AG
("Capital Bank" and formerly RBB Bank) upon the conversion by Capital Bank of
1,800 shares of the Company's Series B convertible preferred stock at a
conversion price of $2.74 per share.

     On January 4, 2001, the Company issued 1,423,825 shares of its common
stock, par value $.08 per share (the "Shares"), to Capital Bank Grawe Gruppe AG
("Capital Bank") upon the conversion by Capital Bank of 75 shares of the
Company's Series F convertible preferred stock at a conversion price of $1.00
per share

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<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

     On January 9, 2001, the Company issued 1,710,864 shares of its common
stock, par value $.08 per share (the "Shares"), to Capital Bank upon the
conversion by Capital Bank of 100 shares of the Company's Series F convertible
preferred stock at a conversion price of $1.00 per share. No underwriters were
involved in the transaction.

     The Series B, Series C, Series D, Series E, and Series F convertible
preferred stock have the following characteristics:

VOTING:

     Holders of the Series B, Series C, Series D, Series E, and Series F
convertible preferred stock are entitled to a number of votes equal to the
number of shares of common stock into which these shares of convertible
preferred stock are then convertible. All shares of convertible preferred stock
are entitled to vote with the holders of common stock as a single class.

DIVIDENDS:

     Holders of the Series B, Series C, Series D, Series E, and Series F
convertible preferred stock are entitled to receive dividends, when and if
declared by the Company's Board of Directors, prior and in preference to common
shareholders, equal to the amount of the per share dividend of common stock
declared, multiplied by the number of shares of common stock into which the
convertible preferred shares are then convertible.

INTEREST:

     In addition to the dividend preference, the holders of the Series B, Series
C, Series D, and Series F convertible preferred stock shall receive interest per
annum based on the stated value of such shares. Series B convertible preferred
shareholders are entitled to receive interest equal to 8% per annum. Series C,
Series D and Series F convertible preferred shareholders are entitled to receive
interest equal to 6% per annum. Such interest will accrue from the original
issuance date, and shall be payable in cash or common stock, at the Company's
option, on a quarterly basis, commencing on the first quarter ended after
issuance. Payment of interest due with respect to those shares that remain
issued and outstanding at the end of the Company's quarters, shall be made
within 15 days after the filing with the Securities and Exchange Commission of
the applicable report.

     During the years ended December 31, 2002 and 2001, the Company incurred
interest in the amount of $267,000 and $269,625, respectively for Series B,
Series C, Series D, and Series F convertible preferred stock, for which the
Company has recorded a charge to accumulated deficit. During 2002, 2,804,101
shares were issued in satisfaction of the accrued interest due for 2002 and
841,233 were issued in satisfaction of the accrued and unpaid interest due for
2001, which was included in Capital in excess of par at December 31, 2001.
During 2001, 2,178,073 were issued in satisfaction of the accrued interest due
for 2001 and 420,095 were issued in satisfaction of the accrued and unpaid
interest due for 2000.

LIQUIDATION PREFERENCE:

     Upon liquidation of the Company, the holders of Series B, Series C, Series
D, Series E, and Series F convertible preferred stock have preference over the
common stockholders to receive liquidating distributions which equal the stated
value of such shares of stock, plus all accrued and unpaid dividends.

                                       47
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

CONVERSION:

     In connection with the issuance of Series E convertible preferred stock,
the Company, with the approval of the shareholders of Series B, Series C, and
Series D convertible preferred stock, changed the conversion price of the Series
B, Series C, and Series D convertible preferred stock to $2.74 and provided
these shareholders with certain anti-dilution provisions. If at any time prior
to January 31, 2003, the Corporation's stockholders' equity at the end of any
quarter as reported on the Company's Form 10-KSB, or quarterly on Form 10-QSB
filing with the Securities and Exchange Commission does not exceed $1,500,000
plus 50% of the net proceeds of any future equity financing, then the conversion
price shall equal the lesser of $2.74 or sixty percent of the Corporation's
average closing price of its common stock for the five trading days prior to the
conversion.

     Each share of the Series B, Series C, Series D and Series E convertible
preferred stock is convertible at any time, at the option of the holders into
shares of common stock computed by dividing the stated value of the preferred
stock by the conversion price.

     The shareholders of Series E convertible preferred stock shall have the
right to convert each share of Series E convertible stock into an amount of
shares of common stock equal to the stated value of $1,000 per share divided by
the conversion price of $0.75.

     On or after December 31, 1998, the conversion price for the Series E
convertible preferred stock shall equal sixty percent of the Corporation's
average closing bid price for the twenty trading days preceding the date of such
conversion, but in no event less than $0.60 and no more than $0.75 per share. If
at any time prior to January 31, 2003 the Company's stockholders' equity at the
end of any quarter does not exceed $1.5 million plus 50% of the net proceeds of
any future equity financing by any third party, then the conversion price shall
equal the lesser of $0.75 or sixty percent of the Company's bid price of its
common stock for the five trading days prior to the date of such conversion
notice. The shareholders of Series E convertible preferred stock may not convert
for a period of forty days from the date of issuance.

REDEMPTION:

     In the event that the price of the Company's common stock, as reported by
the NASDAQ SmallCap market or the National Association of Securities Dealers,
Electronic Bulletin Board, equals or exceeds $20.00 per share for a period of
twenty consecutive trading days, the Company may redeem at its option the Series
B, Series C and Series D convertible preferred stock at a price of $1,000 per
share, subject to certain anti-dilution provisions.

     At any time, on and after the expiration of the restrictions of conversion,
if the closing bid price of the Company's common stock as reported by the
principal stock exchange in which the Corporation's common stock then trades
equals or exceeds $5.00 for twenty consecutive trading days, then the Company at
its option may redeem the then issued and outstanding shares of Series E
convertible preferred stock at a price of $1,000 per share, subject to certain
anti-dilution provisions.

                                       48
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

13. ISSUANCE OF WARRANTS

     On December 30, 1995, the Company issued warrants to purchase 110,000
shares of the Company's common stock at $4.00 per share to a former
officer/stockholder in consideration of the officer providing collateral for the
Company's line of credit with a bank in the amount of $440,000. The Company
paid-off the note in April 1996. As a result, the bank returned the certificate
of deposits to the officer/stockholder.

     In March 1998, in connection with the issuance of Series E convertible
preferred stock, the Company issued warrants to purchase a total of 700,000
shares of the Company's common stock at an exercise price of $0.75 per share.
These warrants were exercisable immediately and expired on January 1, 2001. The
fair value of these warrants at the time of issuance was estimated by management
to be $214,000 using a Black-Scholes pricing model based upon the quoted market
price assuming a dividend yield of 0%, expected volatility of 172%, a risk-free
interest rate of 5.65% and an expected term of two years. The value of the
warrant was recorded as decrease to Series E convertible preferred stock and an
increase to additional paid-in-capital.

14. CASHLESS OPTION EXERCISE PROGRAM

     On March 1, 1994, the Board of Directors approved the 1994 cashless option
exercise program for all employees. The program allows employees to purchase
shares of common stock, payable with both recourse and non-recourse long term
promissory notes receivable. Under the above program, employees purchased a
total of 87,818 shares of common stock at a price of $4.00 per share. The notes
receivable are due in March 2004, and are presented as a reduction of
stockholders' equity, net of related reserve for uncollectible amounts, in the
accompanying balance sheets.

15. COMMITMENTS

     The Company leases its office facilities under an operating lease expiring
September 30, 2005. The lease contains an option for renewal and requires the
payment of real estate taxes and other operating costs. Total rent expenses
under this operating lease was $274,629 and $231,120 for the years ended
December 31, 2002 and 2001, respectively.

     The Company also leases certain equipment under capital leases expiring at
various dates through the year 2005. The total cost of equipment recorded under
these capital leases was $232,730 at December 31, 2002 and 2001. The total
interest paid in connection with the capital lease obligations was $9,235 and
$11,460 for 2002 and 2001, respectively.

     Minimum future lease commitments under operating and capital leases at
December 31, 2002 are as follows:

                                       49
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

                                              OPERATING        CAPITAL
                                              ---------        -------

                        2003                    $178,000        $24,293
                        2004                     181,000         24,293
                        2005                     141,000          9,104
                                              ----------     ----------
     Total Minimum Lease Payments               $500,000        $57,690
                                              ==========
     Less: amount representing interest                          10,680
                                                             ----------
     Present Value                                              $47,010
                                                             ==========

16. CONCENTRATION OF RISK

     The Company sells its products to customers principally in the United
States of America. 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 four and three customers
accounted for approximately 66% of total accounts receivable at December 31,
2002 and 2001, 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.

     Four customers accounted for 36% and 35% of total net revenue for the year
ended December 31, 2002 and 2001, respectively.

     Sales in foreign countries accounted for approximately 12% and 23% of net
revenues in the years ended December 31, 2002 and 2001, respectively.











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