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                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB

(Mark One)

  [X]    Annual report under Section 13 or 15(d) of the Securities Exchange
         Act of 1934 for the fiscal year ended December 31, 1999

  [ ]    Transition report under 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 UNDER SECTION 12(B) OF THE EXCHANGE ACT:  NONE

SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:

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

      Check whether the issuer (1) 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 $4,838,000 in the calendar
year ended December 31, 1999. The aggregate market value of the voting stock
held by non-affiliates of the registrant on March 28, 2000 was approximately
$2,067,604. As of March 28, 2000, 3,961,977 shares of Common Stock, $.08 par
value per share, of the registrant were outstanding.

      Transitional Small Business Disclosure Format:  Yes [ ]  No [X]
<PAGE>

                                     PART I

      THIS ANNUAL REPORT ON FORM 10-KSB CONTAINS FORWARD-LOOKING STATEMENTS AS
DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FOR THIS
PURPOSE, ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF HISTORICAL
FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE
FOREGOING, THE WORDS "BELIEVES", "ANTICIPATES", "PLANS", "EXPECTS", AND SIMILAR
EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THE IMPORTANT
FACTORS DISCUSSED IN ITEM 1 "DESCRIPTION OF BUSINESS" AND ITEM 6 "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AMONG
OTHERS, COULD CAUSE ACTUAL FUTURE RESULTS TO DIFFER MATERIALLY FROM THOSE
INDICATED BY FORWARD-LOOKING STATEMENTS MADE HEREIN AND PRESENTED ELSEWHERE BY
MANAGEMENT FROM TIME TO TIME.

ITEM 1.  DESCRIPTION OF BUSINESS.

GENERAL

      The mission of National Datacomputer, Inc. (the "Company"), a Delaware
corporation organized in 1987 is to provide solutions to workplace problems
through the use of mobile information systems. The Company designs,
manufactures, sells and services computerized systems used to automate the
collection, processing and communication of information related to product
sales, distribution, and inventory control. The Company's products and services
include data communication networks, application-specific software, hand-held
computers and related peripherals, and associated training and support services.
The Company's products facilitate rapid and accurate data collection, data
processing and two-way communication of information with a customer's host
information system.

      The Company invests in technologies that support its systems solution
approach, such as application software and network communication systems. The
Company believes that its future success depends on superior marketing, service
and solutions. The Company's goal is to be the leading supplier in selected
market sectors. The key elements of the Company's 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 the Company's hardware and network communications in selected
market segments.

INDUSTRY BACKGROUND

      In the 1970s, the application of 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 to 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
applications of computers 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 low-powered
CMOS

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electronics (generally categorized as semiconductors requiring small power
drain). At that point, the opportunity to create software systems with the level
of flexibility and sophistication available in other parts of the software
industry presented itself and the hand-held personal computer was introduced.

      Management believes that the future of hand-held computers is governed by
the software or solutions industry, and 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 distribution of
products on routes is a good example of this opportunity as the distribution
process can be highly automated capturing every transaction as well as supplying
additional information for management controls not previously possible.

PRODUCTS

         The Company designs, manufactures, markets and services rugged,
programmable hand-held computers, data collection devices and associated
peripherals. The Company is also a leading developer of tailored software
solutions, such as its Route Service System, for people who need the power of a
PC in the field, rather than at a desk. The Company believes that its customers
require products that allow flexible tailored software solutions in a
cost-effective and timely manner.

HARDWARE

         The Company's hand-held computers ("Datacomputer(TM)") include a
microprocessor, keyboard, LCD displays and full alphabetic and numeric character
sets. The Datacomputer is designed to be highly reliable, tolerant to human
error and easy to use. It is shock resistant, water tight and operates over a
wide temperature range. In addition, the Datacomputer's full-sized, numeric key
pad is designed for fast and accurate data entry, even while a user is wearing
gloves.

         Application programs for the Datacomputer can be written on
conventional desk-top computers with commonly-used programming languages and
then executed on the Datacomputer. Application programs and data in the
Datacomputer are stored in 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 through
bar-code readers, cables from other computers (including other Datacomputers)
and over telephone lines through a modem. The Company's Datacomputer product
line includes various models of the Datacomputer, bar-code readers, rugged
printers, communication devices, carrying cases, cables and add-on memory
boards.

DATACOMPUTER MODEL DC4(TM)

    The Datacomputer Model DC4(TM) (the "DC4") was introduced in late 1997 and
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 DC 3X, 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 the Company's
traditional markets. The DC4 is intended to complement rather than replace the
DC 3X, which will continue to be sold to its present markets. The Company
estimates that approximately 4% of its 1999 total revenue was attributable to
sales of the DC4.

DATACOMPUTER MODEL 3X(TM)

         The 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

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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, CCD and laser light beam readers for a
multitude of scanning applications. The Company estimates that approximately 27%
of its 1999 total revenue was attributable to the sale of the DC3X.

         The Company offers the DC4 and DC3X in two different sales packages.
The Pre-Sales System (the "PSS") includes a Datacomputer, software and various
peripherals for sale to customers who sell their products on routes and who book
the sales orders through a dedicated sales force. The Driver-Sales System (the
"DSS") is a packaged system that includes a Datacomputer, one of several
portable or truck-mounted printers, peripherals and software. The DSS is used by
customers who sell their products through delivery drivers. The Company believes
that the application software included in the PSS and DSS packages described
above permits a high degree of customization for a variety of customer
applications.

         The PSS is typically purchased by distributors who sell products prior
to actual delivery. Due to the fact that the salesman is not required to create
and print out a delivery slip 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.
The DSS, on the other hand, is typically purchased by distributors who do not
sell products prior to actual delivery. Accordingly, a salesperson arriving at a
stop performs an inventory check, determines how much inventory should be
delivered and prints out the delivery slip for the customer.

DATACOMPUTER MODEL 2X(TM)

         The Datacomputer Model 2X(TM) (the "DC2X") is an advanced version of
the DC2.5 described below. The DC2X provides all the features of the DC2.5, but,
is also faster, has more memory and provides for a PC card slot option.

         The Company estimates that approximately 5% of its 1999 total revenue
was attributable to the sale of the DC2X.

DATACOMPUTER MODEL 2.5(TM)

         The Datacomputer Model 2.5(TM) (the "DC2.5") is a hand-held computer
designed primarily for use by inventory auditors who enter voluminous numeric
data, mostly by touch keying. The Company offers utility software that includes
a modem, printer, bar code wand and scanner interfaces, screen and keyboard
routines, calculator functions and database functions. Due to the wide range of
optional features, the user is able to control the creation, updating and cost
of the DC2.5's software.

         The DC2.5 is marketed primarily to inventory service companies. An
inventory service company is an organization that contracts with businesses who
maintain large inventories, such as department or retail stores. The Company
estimates that approximately 11% of its 1999 total revenue was attributable to
the sale of the DC2.5.

ICAL MODEL 100R(TM)

         The ICAL Model 100R(TM) (the "ICAL 100R") is designed and used for
inventory taking for financial and 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. The ICAL 100R is a recent version of a
hand-held product sold by the Company to the inventory audit market for the last
18 years. The Company estimates that approximately 10% of its 1999 total revenue
was attributable to the sale of the ICAL 100R.

                                       3
<PAGE>

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

         Revenues generated by the ICAL 100R are almost exclusively from current
customers of the Company who wish to continue to use their installed base of
ICAL devices. The Company intends to continue to support the ICAL product line
to protect its customers' investments.

TAILORED SOFTWARE SOLUTIONS

ROUTERIDER(R)

         The RouteRIDER is a powerful but easy-to-use Route Service System that
can be custom tailored to the way customers run their business. The RouteRIDER
allows sales people to communicate orders electronically, as often as they wish
throughout the day, via modem or cellular phone.

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

         Once the results of daily activities are uploaded from the RouteRIDER
Datacomputer to the communications server, the server uploads this new data to
the customer's host system's route accounting, sales, distribution, A/R and
inventory programs, therefore saving data-entry costs and eliminating
transcription and keying errors. The server also downloads to the sales person's
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 many of the Company's customers, the implementation of the
RouteRIDER has significantly improved driver efficiency.

NDI-SURVEYPRO(TM)

         NDI-SurveyPro is a suite of software products specifically designed for
automating merchandising and competitive data collection. The two components
that make up NDI-SurveyPro are Survey Manager(TM) and SurveyRider(TM).

         SurveyManager is a Windows-based PC application which allows the
administrator to create customized questionnaires for use in the field by the
hand-held user. This easy-to-use feature rich application provides the ultimate
in flexibility 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 for the transfer of collected data to MS
Access(TM).

         The second component of NDI-SurveyPro is SurveyRider which runs on the
Company's 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 information. SurveyRider prompts the user
to enter data via easy menu picks and supports hierarchical look-up for accurate
product identification.

                                       4
<PAGE>

SMARTROUTE 2000(R)

         SMARTRoute 2000 is a Windows based communication server software.
SMARTRoute 2000 provides an important link between the Company's 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 provides archival and retrieval of electronic
signatures and DEX\UCS communications.

MARKETS

         The Company currently focuses on the route accounting system market for
sales of its Datacomputer and believes it is well positioned in this industry to
become a leading provider. Route accounting involves concurrent order taking,
product delivery and inventory tracking. Salespeople enter customer orders in
the Company's Datacomputer 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.

MARKETING AND DISTRIBUTION

         The Company has separate marketing efforts for its Datacomputer
products and its ICAL 100R. Management believes that the Datacomputer products
have a wide variety of applications that have not yet been fully exploited by
the Company or potential users of the Datacomputer.

         Recognizing the need to focus the Company's limited resources, the
Company has applied its business strategy for Datacomputers to a limited number
of selected markets. The Company is currently focused in market sectors where
businesses distribute their products on routes. The Company believes that the
route sales and service market is attractive because (i) customer acceptance of
hand-held computers has been established in several sectors; (ii) customers have
realized a substantial return on their investment in hand-held computers; and
(iii) the Company enjoys a competitive advantage in this market due to its
software and related services. To date, the Company believes it has gained the
leading positions in the office coffee service market sector, and has penetrated
the beer distribution, bakery, snacks and dairy market sectors.

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

         The Company primarily sells and distributes its systems and products
through a direct sales force that concentrates on systems sales.

DIRECT SALES FORCE

         The Company believes that the optimum method for the marketing and sale
of its products is gained through direct sales. Therefore, direct selling is the
Company's primary strategy in the route sales and service market. The Company
believes 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

         The Company believes that superior service is a vital part of its
competitive strategy and therefore emphasizes the quality of both hardware and

                                       5
<PAGE>

software service. The Customer Service department manages all installations,
preparations, and follow-up support with each customer.

         The Company typically offers industry-standard 90 day warranties and
offers several flexible service arrangements and maintenance contracts to meet
customer needs. In addition to technical support of installed systems, the
Company provides pre-installation site surveys, installation services, user
training, technical training, application software support and host information
system interface assistance.

SOURCES OF SUPPLY

         The Company believes there is more than one supplier for all of its raw
materials and maintains inventories and close working relationships with its
suppliers to ensure timely and reliable delivery. Although the Company has not
experienced major interruptions in production due to a shortage of raw
materials, prolonged supply shortages would materially and adversely affect the
Company's manufacturing operations, business and financial performance.

COMPETITION

         The market for the Company's products is highly competitive and rapidly
changing. The Company's competitors include Norand, Symbol Technologies, Telxon
and related third-parties, all of which have greater financial, marketing and
technical resources than the Company. In addition, larger corporations could
enter into the route sales and service segment of the hand-held computer market.
The Company competes on the basis of product features, software, quality,
service and price.

EMPLOYEES

         As of December 31, 1999, the Company had 33 full-time employees. Of
these employees, 4 were engaged in sales and marketing, 10 in service and
customer support, 5 in hardware and software development, 8 in manufacturing and
6 in administration and finance. The Company's employees are not represented by
a labor union. Management believes that the Company's relationship with its
employees is good.

ITEM 2.  DESCRIPTION OF PROPERTY.

         The Company maintains its principal offices and manufacturing
operations in a leased 19,000 square foot facility in Billerica, Massachusetts.
The Company's lease expires on September 30, 2000. The annual base rent for the
Company's leased facilities is approximately $123,300. The lease further
provides that the Company will pay to its landlord as additional rent its pro
rata share of certain operational and maintenance costs at the facility during
the term of the lease. The Company believes that its facilities are adequate for
its current needs and that additional space, if required, would be available at
competitive rates.

ITEM 3.  LEGAL PROCEEDINGS.

         The Company is not presently involved in any pending litigation other
than routine litigation that is incidental to the business of the Company.

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

         None.

                                     PART II


                                       6
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ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         During the year ended December 31, 1999, the Company's Common Stock was
traded on the OTC Bulletin Board ("OTC"). On March 28, 2000, the last bid price
for the Common Stock as reported by OTC was $0.0531 per share.

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

                                                    HIGH            LOW
                                                    ----            ---
                                      1998

           First Fiscal Quarter                    $ 1.81         $ 0.50
           Second Fiscal Quarter                     1.47           0.63
           Third Fiscal Quarter                      1.13           0.50
           Fourth Fiscal Quarter                     1.13           0.44

                                      1999

           First Fiscal Quarter                    $ 0.91         $ 0.44
           Second Fiscal Quarter                     0.50           0.28
           Third Fiscal Quarter                      0.31           0.18
           Fourth Fiscal Quarter                     0.31           0.19


         As of March 13, 2000, there were approximately 2,367 stockholders of
record of the Company's Common Stock.

DIVIDENDS

         Since inception, the Company has not paid any dividends on its Common
Stock and management does not anticipate the payment of any dividends to its
stockholders in the foreseeable future. The Company currently intends to
reinvest earnings, if any, in the development and expansion of its business. The
declaration of dividends in the future will be at the election of the Board of
Directors and will depend upon the earnings, capital requirements and financial
position of the Company, general economic conditions and other pertinent
factors. The Company's outstanding Preferred Stock also requires that holders of
Preferred Stock be entitled to receive dividends prior to the payment of
dividends on the Company's Common Stock.

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

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

RESULTS OF OPERATIONS

         YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998

         Revenues decreased 8% to $4,838,367 in 1999 from $5,255,027 in 1998.
The decrease in revenues reflects a broader, more desirable customer
distribution in 1999 where no customer accounted for more than 5% of total
revenue, as compared to 1998 where one customer accounted for 16% of total
revenue.

         Cost of sales and services decreased 19% to $2,260,947 in 1999 from
$2,780,698 in 1998. As a percentage of sales, cost of sales and services

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<PAGE>

decreased to 47% in 1999 from 53% in 1998. This decrease is primarily due to the
sales of a different mix of products in 1999 which carry a higher margin.

         Research and development expenses decreased to $859,365 in 1999 from
$992,495 in 1998, a decrease of 13%. The decrease in expenditures reflects a
change in emphasis in 1999 from 1998 that requires less funding. In 1999, this
represents concentration on enhancing and refining both hardware and software
products, rather than focusing in 1998 on initiating new product development.

         Selling, general and administrative expenses decreased to $1,610,328 in
1999 from $1,773,414 in 1998, a decrease of 9%. The lower level of costs
resulted primarily from a decrease in personnel costs and travel expenses.

         The Company's operating income of $107,727 in 1999 is an increase of
$399,307 as compared to a loss from operations of $291,580 in 1998. The increase
in operating income was primarily attributable to improved gross margins
combined with the lower expenses as discussed above.

         Interest expense was $7,157 in 1999 as compared to $40,128 in 1998.
This decrease resulted primarily from the amortization of approximately $26,000
of interest expense related to the discount on the convertible debt obtained in
1997.

         In 1998, the Company paid approximately $99,000 for costs related to a
proposed merger which was not consummated. These costs were expensed and
recorded as other expenses.

LIQUIDITY AND CAPITAL RESOURCES

         During fiscal 1999, the Company had net cash provided by operating
activities of $241,048, as compared to net cash used for operating activities of
$11,854 in fiscal 1998. During fiscal 1999 and fiscal 1998, net cash used for
investing activities was $25,487 and $76,108, respectively. In fiscal 1999, the
Company made payments of $41,818 on a capital lease obligation. In fiscal 1998,
net cash provided by financing activities was $370,405 consisting primarily of
the issuance of preferred stock offset by a principal payment of a convertible
note. In fiscal 1999, the Company incurred interest of $420,625 on its Series B,
C, D and F Convertible Preferred Stock as compared to $413,625 with respect to
the Series B, C and D Convertible Preferred Stock in fiscal 1998. In fiscal
1999, the Company also issued Common Stock valued at $416,250 in satisfaction of
interest due on Series B, C, D and F Convertible Preferred Stock, as compared to
$516,375 with respect to the Series B, C and D in fiscal 1998.

        In March 1998, the Company designated and sold 500 shares of Series E
Convertible Preferred Stock with a warrant to purchase up to 700,000 shares of
common stock at an exercise price of $.75 per share, for net proceeds of
$487,880. The warrant is exercisable immediately and expires on January 1, 2001.
The proceeds of this financing were allocated to the preferred shares and
warrant based on management's estimate of their relative fair values. This
resulted in $214,000 being ascribed to the value of the warrant which was
recorded as additional paid-in-capital and $273,880 being recorded as preferred
stock. Series E Convertible Preferred Stock has voting rights, dividend
preference, liquidation preference, mandatory conversion, and Company redemption
terms similar to the Company's existing Series B, Series C and Series D
Convertible Preferred Stock, and also has anti-dilution protection. The
Subscription Agreement for Series E Convertible Preferred Stock provides for a
right of first refusal on future issuances of stock by the Company. Series E
Convertible Preferred Stock is convertible into shares of common stock at a
conversion price of $.75.

      The Company, in conjunction with the issuance of Series E Convertible
Preferred Stock, canceled its previously issued warrants to purchase 700,000
shares of common stock for $4.00 per share. Additionally, the Company changed

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<PAGE>

the conversion price on Series B and Series C Convertible Preferred Stock to
$2.74 and offered anti-dilution protection with respect to these shares. In
addition, the holders of the Series E Convertible Preferred Stock agreed to
place into escrow 2,100 shares of the Series B Convertible Preferred Stock that
they also owned. The Company could have redeem the escrowed shares of Series B
Convertible Preferred Stock at a price of $1,250 per share at any time through
January 31, 2000.

      Also in March 1998, the Company refinanced the $250,000 convertible debt
by making a principal payment of $75,000 and issuing a convertible note payable
for $175,000. The note bore interest at a rate of 6% per annum, matured in March
1999, and was convertible into shares of the Company's common stock at a
conversion price equal to the average closing bid price for the Company's common
stock for the five days ending March 6, 1998. On September 24, 1998, the debt
holders agreed to convert the note payable into 175 shares of Series F
Convertible Preferred Stock.

      Series F Convertible Preferred Stock has voting rights, dividend
preference, liquidation preference, anti-dilution protection and Company
redemption terms similar to the Company's existing Series B, C, D and E
Convertible Preferred Stock. The Subscription Agreement for Series F Convertible
Preferred Stock provides for registration rights for the shares of Common Stock
which the Series F Convertible Preferred Stock may be converted into. Series F
Convertible Preferred Stock is convertible into shares of common stock at a
conversion price of $1.00 at any time after one year from the date of issuance,
until 18 months after issuance, and will be subject to adjustments thereafter in
certain circumstances.

      At December 31, 1999, the Company had cash of $664,917 and a current ratio
of 3.0:1. The Company anticipates that available cash, together with cash flow
from anticipated operations, will be sufficient to meet its working capital
needs for the remainder of fiscal 2000. However, unanticipated adverse results
of operations could impact anticipated cash flows and, as a result, there can be
no assurance that the Company will not be required to raise additional capital
or that the Company will be able to raise additional capital on favorable terms,
if at all.

IMPACT OF THE YEAR 2000 ISSUE.

      As of the date of this report, the Company has completed its year 2000
initiatives which included: (i) testing and upgrading significant information
technology systems and facilities; (ii) assessing the year 2000 readiness of its
key suppliers, vendors, and customers; and (iii) developing contingency plans.

      As a result of completing these initiatives, the Company believes that all
of its material information technology systems and critical non-information
technology systems are year 2000 compliant. In addition, the Company is not
aware of any significant supplier or vendor that has experienced material
disruption due to year 2000 issues. The Company has also developed a contingency
plan to allow its primary business operations to continue despite disruptions
due to year 2000 problems, if any, that might yet arise in the future. The costs
incurred to date by the Company in connection with the year 2000 issue have not
been material.

      While the Company to date has been successful in minimizing negative
consequences arising from year 2000 issues, there can be no assurance that in
the future the Company's business operations or financial condition may not be
impacted by year 2000 problems, such as increased warranty claims, vendor and
supplier disruptions, or litigation relating to year 2000 issues.



                                       9
<PAGE>

NEW ACCOUNTING PRONOUNCEMENTS

         In 1998, the Financial Accounting Standards Board released Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("FAS 133"), which initially would have been effective
for all fiscal quarters beginning after June 15, 1999. In June 1999, the
Financial Accounting Standards Board released Statement of Financial Accounting
Standards No. 137, Accounting for Derivative Instruments and Hedging Activities
- Deferral of Effective Date of FAS 133 ("FAS 137"). FAS 137 defers the
effective date of FAS 133 until June 15, 2000. FAS 133 standardizes the
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, by requiring that an entity recognize those items
as assets or liabilities in the statement of financial position and measure them
at fair value. The Company is currently evaluating the impact FAS 133 will have
on its future performance.

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.

         Not applicable.

                                    PART III

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

         Each Director of the Company 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 Directors then remaining in office. Officers are
elected by and serve at the discretion of the Board of Directors. The following
table sets forth the year each Director was elected a Director and the age,
positions and offices currently held by each Director. For information about
ownership of the Company's voting securities by each Director, see "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."


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

Dr. Malcolm M. Bibby       59        1996               Chairman of the Board,
                                                        President, and CEO

William R. Smart           79        1989               Director

John P. Ward               72        1967               Director


BUSINESS EXPERIENCE AND BACKGROUNDS OF THE DIRECTORS

         The background of each of the Company's current Directors is as
follows:

         DR. MALCOLM M. BIBBY has served as a Director of the Corporation since
January 1996 and was elected Chairman of the Board in July 1996. Dr. Bibby has
also served as President and Chief Executive Officer of the Company since April
1996. He was President of LXE Inc. ("LXE"), a diversified wireless data

                                       10
<PAGE>

communications products company, from 1983 to December 1994. During this period
LXE's annual revenues grew from approximately $600,000 to approximately
$63,000,000. Prior to LXE , Dr. Bibby was an Executive Assistant to the
President at Ciba Vision Care , a Vice President of Product Development at
Wesley-Jessen, Inc. and a Project Manager/Group Leader for hardware and software
development at Monsanto Co. Dr. Bibby holds a Bachelor of Science degree and a
Ph.D. both in Electrical Engineering from the University of Liverpool and an
Master of Business Administration from the University of Chicago.

         WILLIAM R. SMART has served as a Director of the Company 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 currently
serves as a Senior Vice President of the Cambridge Strategic Management Group, a
privately-held management consultant company. Mr. Smart holds a Bachelor of
Science degree in Electrical Engineering from Princeton University. Mr. Smart is
also the non-executive Chairman of 1st Carolina Corporation (the "Corporation").
The Corporation filed a Chapter 7 bankruptcy petition in the United States
Bankruptcy Court for the District of South Carolina on August 16, 1994 (Case
Number 94-73884).

         JOHN P. WARD has served as a Director of the Company since its founding
in 1967. Since February 1996, Mr. Ward has served as the Chief Executive Officer
of Midas Vision Systems, Inc., a privately held company specializing in machine
vision systems for automatic optical inspections. From 1990 to 1996 Mr. Ward was
the Chief Executive Officer and Director of Vanzetti Vision Systems, Inc., a
privately-held company specializing in infrared systems. Mr. Ward was Vice
President of Engineering, co-founder and Clerk of the Company from its founding
until December 1986. From 1953 to 1968 Mr. Ward was a Design Section Manager at
the Raytheon Company. 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.

EXECUTIVE OFFICERS

         The executive officers of the Company, their ages and positions held in
the Company are as follows:

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

Dr. Malcolm M. Bibby       59           President, Chairman of the Board and CEO

Gerald S. Eilberg          66           Vice President of Finance and
                                        Administration, Chief Financial Officer

Patrick T. Kearney         52           Vice President of Sales

BUSINESS EXPERIENCE AND BACKGROUNDS OF THE EXECUTIVE OFFICERS

         The following is a brief summary of the background of each executive
officer of the Company other than Dr. Malcolm M. Bibby, 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

                                       11
<PAGE>
graduate of the Boston University School of Management and the Columbia
University Graduate School of Business.

      PATRICK T. KEARNEY joined the Company in April 1999 as Vice President of
Sales. He has extensive experience as a sales manager in the computer, software
solutions and hand-held computer markets, servicing VARs, distributors and
end-users. Most recently, Mr. Kearney was Director of Worldwide Sales at Optical
Access International, a developer and manufacturer of network storage systems.
From 1993 to 1996, Mr. Kearney was President of Ancilla Associates, a consulting
firm serving the computer market, specializing in sales, marketing and channel
development. Previous work experience includes being Vice President and General
Manager of U.S. Sales and Operations for Eden Group Limited, Eastern Regional
Manager of Poquet Computer Corporation, National Sales Manager and National
Marketing Manager of BASF Corporation. Mr. Kearney holds a Bachelor of Science
degree in Marketing from Providence College.

         None of the Company's executive officers or Directors are related to
any other executive officer or Director.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) ("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 the Company's Common Stock to file initial
reports of ownership on Form 3 and reports of changes in ownership on Form 4
with the Securities and Exchange Commission (the "SEC") and any national
securities exchange on which the Company's securities are registered. Executive
officers, Directors and greater than ten percent (10%) beneficial owners are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.

         Based solely on a review of copies of such forms furnished to the
Company and written representations from executive officers and Directors, the
Company believes that all Section 16(a) filings applicable to its executive
officers, Directors and ten percent (10%) beneficial owners were complied with
during the fiscal year ended December 31, 1999.

ITEM 10. EXECUTIVE COMPENSATION.

EXECUTIVE OFFICERS'  COMPENSATION

The following table sets forth the compensation paid during the fiscal years
ended December 31, 1999, December 31, 1998, and December 29,1997 ("Fiscal 1999,
1998 and 1997", respectively) to Dr. Malcolm M. Bibby, the Company's President
along with the other current executive officers of the Company, who earned total
compensation in excess of $100,000 during Fiscal 1999.

                           SUMMARY COMPENSATION TABLE
<TABLE><CAPTION>
                                                                                    (e)
                                                ANNUAL COMPENSATION        LONG TERM COMPENSATION
                                                -------------------                AWARDS
        (A)                           (B)         (C)           (D)          SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION          YEAR        SALARY        BONUS            OPTIONS/SAR(#)(
---------------------------          ----        ------        -----            ---------------
<S>                                   <C>       <C>              <C>               <C>
Dr. Malcolm M. Bibby (1)(2)           1999      $151,800         $0                120,000
  President, CEO and Chairman         1998       150,461         $0                294,000
   of the Board                       1997       127,818         $0                      0

Gerald S. Eilberg (3)                 1999      $118,780         $0                200,000
 Vice President of Finance and        1998       110,413         $0                      0
  Administration and CFO              1997       102,106         $0                      0
</TABLE>
                                       12
<PAGE>

(1)      On December 21, 1999, Non-Qualified Stock Options to purchase 120,000
         shares of Common Stock at an exercise price of $0.75 were granted to
         Dr. Bibby. The options have the following vesting periods: (i) 30,000
         options will vest fully in 2001, (ii) 90,000 options will vest 25% in
         each of 2000, 2002, 2003 and 2004.

(2)      On January 1, 1998, Non-Qualified Stock Options to purchase 294,000
         shares of Common Stock at an exercise price of $0.73 were granted to
         Dr. Bibby. The 294,000 shares vest fully on December 31, 2000, but
         contain the following acceleration clauses: (a) 150,000 will vest upon
         a change in control of the Company, (b) 12,000 will vest for each
         fiscal quarter, from January 1, 1998 through December 31, 2000, in
         which the Company realizes positive net income before taxes; (c) 50,000
         will vest if the Company realizes net income before taxes of $200,000
         in any four consecutive quarters between January 1, 1998 and December
         31, 2000; (d) 10,000 will vest for each $50,000 of net income before
         taxes in excess of $200,000 that the Company realizes in any four
         consecutive quarters between January 1, 1998 and December 31, 2000.

(3)      On May 19, 1999, Non-Qualified Stock Options to purchase 200,000 shares
         of Common Stock at an exercise price of $0.75 were granted to Mr.
         Eilberg. The 200,000 shares vested fully on December 31, 1999.


<TABLE><CAPTION>
                      OPTION/SAR GRANTS IN FISCAL YEAR 1999
                               (INDIVIDUAL GRANTS)
------------------------------- ----------------------- ---------------------- ---------------------- -----------------------
                                                          PERCENT OF TOTAL
                                                              OPTIONS
                                      NUMBER OF               /SAR'S
                                      SECURITIES            GRANTED TO
                                      UNDERLYING             EMPLOYEES             EXERCISE OR
                                     OPTIONS/SAR'S           IN FISCAL              BASE PRICE              EXPIRATION
             NAME                      GRANTED                  YEAR                  ($/SH)                   DATE
             (A)                         (B)                    (C)                     (D)                    (E)
<S>                             <C>                     <C>                    <C>                    <C>
------------------------------- ----------------------- ---------------------- ---------------------- -----------------------
     MALCOLM M. BIBBY (1)              120,000                   30%                   $0.75              DECEMBER 2009
------------------------------- ----------------------- ---------------------- ---------------------- -----------------------
    GERALD S. EILBERG (2)              200,000                   50%                   $0.75                 MAY 2009
------------------------------- ----------------------- ---------------------- ---------------------- -----------------------
    PATRICK T. KEARNEY (3)              60,000                   15%                   $0.75                 MAY 2009
------------------------------- ----------------------- ---------------------- ---------------------- -----------------------
      WILLIAM SMART (4)                 10,000                  2.5%                   $0.75                 MAY 2009
------------------------------- ----------------------- ---------------------- ---------------------- -----------------------
        JOHN WARD (4)                   10,000                  2.5%                   $0.75                 MAY 2009
------------------------------- ----------------------- ---------------------- ---------------------- -----------------------
</TABLE>

(1)      On December 21, 1999, Non-Qualified Stock Options to purchase 120,000
         shares of Common Stock at an exercise price of $0.75 were granted to
         Dr. Bibby. The options have the following vesting periods: (i) 30,000
         options will vest fully in 2001, (ii) 90,000 options will vest 25% in
         each of 2002, 2003 and 2004.

(2)      On May 19, 1999, Non-Qualified Stock Options to purchase 200,000 shares
         of Common Stock at an exercise price of $0.75 were granted to Mr.
         Eilberg. The 200,000 shares vested fully on December 31, 1999.

(3)      On May 19, 1999, Non-Qualified Stock Options to purchase 60,000 shares
         of Common Stock at an exercise price of $0.75 were granted to Mr.
         Kearney. The options have the following vesting periods: (i) 15,000

                                       13
<PAGE>

         options will vest fully in 2001, (ii) 45,000 options will vest 25% in
         each of 2002, 2003 and 2004.

(4)      On May 19, 1999, Non-Qualified Stock Options to purchase 10,000 shares
         of Common Stock at an exercise price of $0.75 were granted to each of
         Messrs. Smart and Ward. The options have the following vesting periods:
         (i) 2,500 options will vest fully in 2001, (ii) 7,500 options will vest
         25% in each of 2002, 2003 and 2004.

                 AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999
                            AND FY-END OPTION VALUES
<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>
----------------------------------------- -------------------- --------------------- -------------------- --------------------
Malcolm M. Bibby                                   0                    $0             58,000/474,750             $0
   President, CEO
----------------------------------------- -------------------- --------------------- -------------------- --------------------
Gerald S. Eilberg                                  0                    $0             202,515/15,559             $0
   Vice President Finance & Admin.
    and CFO
----------------------------------------- -------------------- --------------------- -------------------- --------------------
Patrick T. Kearney                                 0                    $0                0/60,000                $0
    Vice President of Sales
----------------------------------------- -------------------- --------------------- -------------------- --------------------
William Smart                                      0                    $0                0/10,000                $0
----------------------------------------- -------------------- --------------------- -------------------- --------------------
John Ward                                          0                    $0                0/10,000                $0
----------------------------------------- -------------------- --------------------- -------------------- --------------------
</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. As of December 31, 1999, Dr. Bibby had exercisable
         options to purchase 46,000 and 12,000 shares of Common Stock at share
         exercise prices of $1.47 and $0.73 respectively. Mr. Eilberg had
         exercisable options to purchase 2,515 and 200,000 shares of Common
         Stock at share exercise prices of $1.47 and $0.75 respectively. See
         "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT". The
         fair market value of the Company's Common Stock underlying the options
         as of December 31, 1999 was $0.25 (OTC closing bid price on December
         31, 1999).

                                       14
<PAGE>

COMPENSATION OF DIRECTORS

         CASH COMPENSATION The Company's non-employee directors receive:

           o   an annual retainer of $3,000 for serving on the Board of
               Directors; and

           o   $500 plus reasonable travel and out-of-pocket expenses for
               attendance at meetings of the Board of Directors.

         STOCK COMPENSATION On May 21, 1999, Non-Qualified Stock Options to
purchase 10,000 shares of Common Stock at an exercise price of $0.75 were
granted to each of Messrs. Smart and Ward. The options have the following
vesting periods: (I) 2,500 options will vest fully in 2001, (ii) 7,500 options
will vest 25% in each of 2002, 2003 and 2004.

EMPLOYMENT AGREEMENT

         On January 1, 1998, the Company entered into an employment agreement
with Dr. Bibby for a period of three years through December 31, 2000. The
agreement is automatically renewed for successive periods of one year, unless
written notice of non-renewal is given by the Company to Dr. Bibby not less than
six months before termination of the agreement. During this period Dr. Bibby
will serve as President and Chief Executive Officer of the Company for a Base
Salary of $150,000 per annum through December 31, 1998. For future years, any
increases in Base Salary will be established by the Board of Directors. Dr.
Bibby will be entitled to receive stock option grants and bonus arrangements as
determined by the Board of Directors from time to time. The Company may
terminate this agreement, if, at any time during the duration of the agreement,
the Company has incurred losses (exclusive of extraordinary items of income and
loss) of $1,000,000 or more in any four consecutive quarters. At such time, the
Company is obligated to pay Dr. Bibby 50% of his then current annual Base
Salary, plus benefits for six months. If the agreement is not renewed by the
Company, including upon change of control, then Dr. Bibby is entitled to receive
severance benefits which will be determined based upon an amount equal to (X)
(i) 1/12th of 100% of Dr. Bibby's then current annual Base Salary, plus (ii)
1/12th of 100% of Dr. Bibby's bonus arrangement earned for the Company's most
recent fiscal year, multiplied by (Y) the greater of the remaining calendar
months under the agreement or eighteen months.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following table sets forth, as of March 21, 2000, certain
information concerning stock ownership of the Company by (i) each person who is
known by the Company to own beneficially 5% or more of the Company's voting
securities, (ii) each of the Company's Directors and officers, and (iii) all
Directors and officers as a group. Except as otherwise indicated, the
stockholders listed in the table have sole voting and investment powers with
respect to the shares indicated. For purposes of this table, the Common Stock
and the Series B Convertible Preferred Stock, Series C Convertible Preferred
Stock, Series D Convertible Preferred Stock, Series E Convertible Preferred
Stock and Series F Convertible Preferred Stock, (collectively, the "Preferred
Stock") are treated as one class. As of March 21, 2000, the Company had
3,961,977 shares of Common Stock outstanding and approximately 2,367
stockholders of record. In addition, the Company had 6,125 shares of Preferred
Stock outstanding. 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, $0.75 per share for Series E and $1.00 for
Series F. Based upon the conversion prices, the Preferred Stock would be
convertible into a total of 2,830,718 shares of Common Stock. 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. The Company has
no other voting securities.

                                       15
<PAGE>

                                              Number of Shares      Percentage
Name and Address of Beneficial Owner(1)       Beneficially Owned    of Class(2)
---------------------------------------       ------------------    -----------

Dr. Malcolm M. Bibby (3)...................         85,550             1.2%
William R. Smart (4).......................          4,375               *
John P. Ward (5)...........................         30,743               *
Gerald S. Eilberg (6)......................        210,532             3.0%
All Directors and Officers as a Group
    (4 persons) (3)(4)(5)(6)(7)............        331,200             4.7%

* 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)    Pursuant to the rules of the Securities and Exchange Commission, shares
       of Common Stock that an individual or group has a right to acquire within
       60 days pursuant to the exercise of options or warrants 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. This table reflects the ownership of all shares of Common Stock
       and the Preferred Stock voting as a single class.

(3)    Includes an aggregate of 58,000 shares of Common Stock underlying vested
       options to purchase Common Stock.

(4)    Includes 1,875 shares of Common Stock underlying vested options to
       purchase Common Stock.

(5)    Includes 1,875 shares of Common Stock underlying vested options to
       purchase Common Stock. It also includes 10,137 shares held by Mr. Ward's
       wife for which Mr. Ward disclaims beneficial ownership.

(6)    Includes 201,265 shares of Common Stock underlying vested options to
       purchase Common Stock.

(7)    Includes an aggregate of 263,015 shares of Common Stock underlying vested
       options to purchase Common Stock held by four of the Company's officers.

All of the Preferred Stock is registered in the name of RBB Bank AG ("RBB
Bank"). RBB Bank is not included in the table above because the Company has been
informed that RBB Bank holds such Preferred Stock solely in the capacity of
custodian for the benefit of numerous other investors. The Company has been
informed that none of such investors, either individually or in the aggregate
with affiliated entities, beneficially owns more than five percent (5%) of the
Company's issued and outstanding capital stock.

                                       16
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

       None


ITEM 13. EXHIBITS, LISTS 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
                                                                  ----
Report of Independent Accountants                                 F-1

Balance Sheet as of December 31, 1999 and
   December 31, 1998                                              F-2

Statement of Operations for the years ended
   December 31, 1999 and  December 31, 1998                       F-3

Statement of Stockholders'  Equity for the years
   ended December 31, 1999 and  December 31, 1998                 F-4

Statement of Cash Flows for the years ended
   December 31, 1999 and  December 31, 1998                       F-5

Notes to Financial Statements                                     F-6


                                       17
<PAGE>

         (a)(2)   EXHIBITS.

         (i)      The following exhibits are filed herewith:

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

3a*      Certificate of Incorporation, as amended. (3c)

3b*      Certificate of Amendment of Certificate of Incorporation to increase
         the number of authorized shares. (3a)

3c*      Certificate of Amendment of Certificate of Incorporation to effect a
         1:4 reverse split of Common Stock. (3b)

3d**     Statement of Designation of Series B Convertible Preferred Stock. (4a)

3e**     Statement of increase of shares designated as Series B Convertible
         Preferred Stock. (4b)

3f^      Statement of Designation of Series C Convertible Preferred Stock. (99a)

3g^      Statement of Designation of Series D Convertible Preferred Stock. (99b)

3h^^     Statement of Designation of Series E Convertible Preferred Stock.
         (4(a))

3i       Statement of Designation of Series F Convertible Preferred Stock.

3j@      Restated By-Laws. (3)

4a       Instruments defining the rights of security holders (see Exhibits 3a
         through 3j).

4b*      Specimen Certificate of Common Stock, $.08 par value per share. (4)

10a##%   1994 Stock Option Plan.

10b#%    1995 Stock Option Plan. (10)

10c##%   1997 Stock Option Plan.

10d##%   1998 Stock Option Plan.

10e^^    Form of Regulation S Offshore Subscription Agreement. (4(b))

10f##    Employment Agreement of Dr. Bibby.

11       Statement Re: Computation of Per Share Earnings.

27       Financial Data Schedule.

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

*        Previously filed with the Commission as Exhibits to, and incorporated
         herein by reference from, the Company's Annual Report on Form 10-K for
         the fiscal year ended December 29, 1996.

**       Previously filed with the Commission as Exhibits to, and incorporated
         herein by reference from, the Company's Current Report on Form 8-K
         filed September 16, 1996.

^        Previously filed with the Commission as Exhibits to, and incorporated
         herein by reference from, the Company's Current Report on Form 8-K
         filed March 3, 1997.

^^       Previously filed with the Commission as Exhibits to, and incorporated
         herein by reference from, the Company's Current Report on Form 8-K
         filed March 6, 1998.

@        Previously filed with the Commission as Exhibits to, and incorporated
         herein by reference from, the Company's Amendment No. 1 to the
         Quarterly Report on Form 10-QSB for the quarterly period ended
         September 30, 1999.

#        Previously filed with the Commission as Exhibits to, and incorporated
         herein by reference from, the Company's Annual Report on Form 10-K for
         the fiscal year ended December 31, 1995.

##       Previously filed with the Commission as Exhibits to, and incorporated
         herein by reference from, the Company's Annual Report on Form 10-KSB
         for the fiscal year ended December 31, 1998.

%        Management contract or compensatory plan, contract or arrangement.

         Where a document is incorporated by reference from a previous filing,
the Exhibit number of the document in that previous filing is indicated in
parentheses after the description of such document.

                                       18
<PAGE>

      (b)  REPORTS ON FORM 8-K.

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



                                       19
<PAGE>

                                   SIGNATURES

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

                                           NATIONAL DATACOMPUTER, INC.


Date:  March 24, 2000                      By: /s/Malcolm M. Bibby
                                               -------------------
                                               Malcolm M. Bibby
                                               President

         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.

<TABLE><CAPTION>
Name                                  Capacity                                    Date
----                                  --------                                    ----
<S>                           <C>                                              <C>
/s/Malcolm M. Bibby           Chairman of the Board, President and             March 25, 2000
--------------------          Chief Executive Officer (principal
Malcolm M. Bibby              executive officer)

/s/ William R. Smart          Director                                         March 25, 2000
--------------------
William R. Smart

/s/ John P. Ward              Director                                         March 25, 2000
--------------------
John P. Ward

/s/Gerald S. Eilberg          Chief Financial Officer (principal               March 25, 2000
--------------------          financial and accounting officer)
Gerald S. Eilberg
</TABLE>

                                       20
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS


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


In our opinion, the accompanying balance sheet 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,
1999 and 1998, and the results of its operations and its cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States, 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
audits provide a reasonable basis for the opinion expressed above.

/s/PricewaterhouseCoopers LLP

Boston, Massachusetts
March 8, 2000


                                      F-1
<PAGE>
                           NATIONAL DATACOMPUTER, INC.
                                  BALANCE SHEET
<TABLE><CAPTION>
======================================================================================================
                                                                       December 31,       December 31,
                                                                          1999               1998
                                                                      -------------      -------------
<S>                                                                   <C>                <C>
Assets
Current Assets:
      Cash and cash equivalents                                       $     664,917      $     491,174
      Accounts receivable, net of allowance for doubtful accounts
       of $199,746 and $146,600 at December 31, 1999 and
       December 31, 1998, respectively                                    1,116,509          1,048,315
      Inventories                                                         1,322,153          1,516,306
      Other current assets                                                    8,328             31,493
                                                                      -------------      -------------
         Total current assets                                             3,111,907          3,087,288
Fixed assets, net                                                           148,658            205,508
                                                                      -------------      -------------
                                                                      $   3,260,565      $   3,292,796
                                                                      =============      =============

Liabilities and stockholders' equity
Current Liabilities:
      Current obligations under capital lease                         $      28,134      $      44,198
      Accounts payable                                                      273,364            356,866
      Accrued payroll and related taxes                                      89,134             78,224
      Accrued expenses - other                                              156,968            218,264
      Accrued interest on preferred stock                                       --               6,125
      Deferred revenues, current portion                                    503,356            552,334
                                                                      -------------      -------------
         Total current liabilities                                        1,050,956          1,256,011
Obligations under capital lease                                                 --              25,754
Deferred revenues                                                            41,307              6,143
                                                                      -------------      -------------
                                                                          1,092,263          1,287,908
                                                                      -------------      -------------

Stockholders' equity
      Preferred stock, Series A convertible, $0.001 par value;
         20 shares authorized; 0 shares issued and outstanding
         at December 31, 1999 and December 31, 1998                             --                 --

      Preferred stock, Series B convertible $0.001 par value;
         4,200 shares authorized, issued and outstanding
         (liquidating preference of $4,200,000)                           3,685,206          3,685,206

      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 $350,000)                                  324,639            324,639

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

      Preferred stock, Series F convertible $0.001 par value;
         175 shares authorized, issued and outstanding
         (liquidating preference $175,000)                                  175,000            118,750

      Common stock, $0.08 par value; 5,000,000 shares authorized;
         3,961,977 and 2,276,850 shares issued and outstanding at
         December 31, 1999 and December 31, 1998, respectively              316,957            182,148

      Capital in excess of par value                                     11,258,094         10,998,903
      Accumulated deficit                                               (14,319,402)       (14,000,566)
      Unamortized stock compensation                                        (29,173)           (61,173)
      Notes receivable - employees                                         (351,269)          (351,269)
                                                                      -------------      -------------
         Total stockholders' equity                                       2,168,302          2,004,888
                                                                      -------------      -------------
                                                                      $   3,260,565      $   3,292,796
                                                                      =============      =============
</TABLE>

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

                                       F-2
<PAGE>
                           NATIONAL DATACOMPUTER, INC.
                             STATEMENT OF OPERATIONS
<TABLE><CAPTION>
======================================================================================================
                                                                                YEARS ENDED
                                                                      --------------------------------
                                                                       December 31,       December 31,
                                                                          1999               1998
                                                                      -------------      -------------
<S>                                                                   <C>                <C>

Revenues
    Net product revenue                                               $   3,149,057      $   3,507,532
    Service and other revenue                                             1,689,310          1,747,495
                                                                      -------------      -------------
                                                                          4,838,367          5,255,027
Cost of sales and services                                                2,260,947          2,780,698
                                                                      -------------      -------------
                                                                          2,577,420          2,474,329
                                                                      -------------      -------------
Operating expenses:
    Research and development                                                859,365            992,495
    Selling, general and administrative                                   1,610,328          1,773,414
                                                                      --------------     -------------
                                                                          2,469,693          2,765,909
                                                                      --------------     -------------
Income (loss) from operations                                               107,727           (291,580)

Other income (expense):
    Interest income                                                           1,219              9,534
    Interest expense                                                         (7,157)           (40,128)
    Other expense                                                               --             (99,014)
                                                                      -------------      -------------
Net income (loss)                                                     $     101,789      $    (421,188)
                                                                      =============      =============

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

    Net income (loss)                                                 $     101,789      $    (421,188)
    Preferred stock preferences                                            (476,875)          (767,977)
                                                                      -------------      -------------
Net loss attributable to common shareholders                          $    (375,086)     $  (1,189,165)
                                                                      =============      =============
Basic and diluted net loss per share
 attributable to common shareholders                                  $       (0.13)     $       (0.66)
                                                                      =============      =============
Weighted average shares                                                   2,787,346          1,798,226
                                                                      =============      =============
</TABLE>

                   The accompanying notes are an integral part
                          of these financial statements

                                       F-3
<PAGE>


NATIONAL DATACOMPUTER, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE><CAPTION>
===============================================================================================================================
                                         PREFERRED STOCK SERIES B      PREFERRED STOCK SERIES C      PREFERRED STOCK SERIES D
                                        ---------------------------   ---------------------------   ---------------------------
                                                       NET ISSUANCE                  NET ISSUANCE                  NET ISSUANCE
                                           SHARES         PRICE          SHARES         PRICE          SHARES         PRICE
                                        ------------   ------------   ------------   ------------   ------------   ------------
<S>                                     <C>            <C>            <C>            <C>            <C>            <C>
Balance at December 31, 1997                   4,200   $  3,685,206            900   $    808,412            350   $    303,995

Net loss

Issuance of preferred stock

Interest on preferred stock (Note 9)

Issuance of common stock in
   satisfaction of accrued interest

Amortization of stock compensation

Discounted conversion rate on
   Preferred Stock

Amortization of discounted
   conversion rate on Preferred Stock                                                      25,958                        20,644
                                        ------------   ------------   ------------   ------------   ------------   ------------

Balance at December 31, 1998                   4,200      3,685,206            900        834,370            350        324,639

Net income

Interest on preferred stock(Note 9)

Issuance of common stock in
   satisfaction of accrued interest

Amortization of stock compensation

Compensation related to issuance
   of warrants

Amortization of discounted
   conversion rate on Preferred Stock
                                        ------------   ------------   ------------   ------------   ------------   ------------
Balance at December 31, 1999                   4,200   $  3,685,206            900   $    834,370            350   $    324,639
                                        ============   ============   ============   ============   ============   ============





                                      PREFERRED STOCK SERIES E  PREFERRED STOCK SERIES F               COMMON STOCK
                                        ---------------------    ----------------------   ----------------------------------------
                                                                                                                       CAPITAL IN
                                                 NET ISSUANCE              NET ISSUANCE                     PAR          EXCESS
                                        SHARES       PRICE       SHARES        PRICE        SHARES         VALUE      OF PAR VALUE
                                        -------   -----------    -------    -----------   -----------   -----------   ------------
Balance at December 31, 1997                                                                1,628,332   $   130,267   $ 10,310,761

Net loss

Issuance of preferred stock                 500       273,880        175        175,000                                    214,000

Interest on preferred stock (Note 9)

Issuance of common stock in
   satisfaction of accrued interest                                                           648,518        51,881        464,494

Amortization of stock compensation

Discounted conversion rate on
   Preferred Stock                                    (75,000)   (75,000)                                   150,000

Amortization of discounted
   conversion rate on Preferred Stock                  75,000                    18,750                                   (140,352)
                                        -------   -----------    -------    -----------   -----------   -----------   ------------

Balance at December 31, 1998                500       273,880        175        118,750     2,276,850       182,148     10,998,903

Net income

Interest on preferred stock(Note 9)

Issuance of common stock in
   satisfaction of accrued interest                                                         1,685,127       134,809        281,441

Amortization of stock compensation

Compensation related to issuance
   of warrants                                                                                                              34,000

Amortization of discounted
   conversion rate on Preferred Stock                                            56,250                                    (56,250)
                                        -------   -----------    -------    -----------   -----------   -----------   ------------
Balance at December 31, 1999                500   $   273,880        175    $   175,000     3,961,977   $   316,957   $ 11,258,094
                                        =======   ===========    =======    ===========   ===========   ===========   ============





                                           NOTES        UNAMORTIZED                     TOTAL
                                         RECEIVABLE        STOCK       ACCUMULATED   STOCKHOLDERS'
                                         EMPOLYEES     COMPENSATION      DEFICIT        EQUITY
                                        ------------   ------------   ------------   ------------
Balance at December 31, 1997            $(   351,269)  $(    93,173)  $(13,165,753)  $  1,628,446

Net loss                                                                  (421,188)      (421,188)

Issuance of preferred stock                                                               662,880

Interest on preferred stock (Note 9)                                      (413,625)      (413,625)

Issuance of common stock in
   satisfaction of accrued interest                                                       516,375

Amortization of stock compensation                           32,000                        32,000

Discounted conversion rate on
   Preferred Stock

Amortization of discounted
   conversion rate on Preferred Stock
                                        ------------   ------------   ------------   ------------

Balance at December 31, 1998            (    351,269)  (     61,173)  ( 14,000,566)     2,004,888

Net income                                                                 101,789        101,789

Interest on preferred stock(Note 9)                                       (420,625)      (420,625)

Issuance of common stock in
   satisfaction of accrued interest                                                       416,250

Amortization of stock compensation                           32,000                        32,000

Compensation related to issuance
   of warrants                                                                             34,000

Amortization of discounted
   conversion rate on Preferred Stock
                                        ------------   ------------   ------------   ------------
Balance at December 31, 1999            $(   351,269)  $(    29,173)  $(14,319,402)  $  2,168,302
                                        ============   ============   ============   ============
</TABLE>

                  The accompanying notes are an integral part
                          of these financial statements

                                        F-4
<PAGE>
                           NATIONAL DATACOMPUTER, INC.
                             STATEMENT OF CASH FLOWS
<TABLE><CAPTION>
==============================================================================================
                                                                             YEARS ENDED
                                                                        ----------------------
                                                                      December 31,  December 31,
                                                                          1999         1998
                                                                        ---------    ---------
<S>                                                                     <C>          <C>
Cash flows from operating activities:
      Net income (loss)                                                 $ 101,789    $(421,188)
      Adjustments to reconcile net income (loss) to net
          cash provided by (used for) operating activities:
          Depreciation                                                     83,460      130,112
          Gain on sale of fixed asset                                      (1,124)        --
          Expense related to issuance of warrants                          34,000         --
          Amortization of stock compensation                               32,000       32,000
          Amortization of deferred debt issuance costs
               and debt discount                                             --         18,789
          Changes in assets and liabilities:
               (Increase) decrease in accounts receivable                 (68,194)     497,004
               Decrease (increase) in inventories                         194,153     (217,327)
               Decrease in other current assets                            23,165       25,788
               (Decrease) increase in accounts payable                    (83,502)       7,059
               (Decrease) in accrued expenses
                   and deferred compensation                              (60,885)    (134,300)
               (Decrease) increase in deferred revenues                   (13,814)      50,209
                                                                        ---------    ---------
      Net cash provided by (used for) operating activities                241,048      (11,854)
                                                                        ---------    ---------
Cash flows from investing activities:
      Purchases of fixed assets                                           (27,387)     (76,108)
      Proceeds from sale of fixed assets                                    1,900         --
                                                                        ---------    ---------
      Net cash used for investing activities                              (25,487)     (76,108)
                                                                        ---------    ---------
Cash flows from financing activities:
      Proceeds from issuance of  preferred stock and warrants,
          net of issuance costs                                              --        487,880
      Principal payment on convertible debt                                  --        (75,000)
      Principal payments on obligations under capital lease               (41,818)     (42,475)
                                                                        ---------    ---------
      Net cash (used for) provided by financing activities                (41,818)     370,405
                                                                        ---------    ---------
Net increase in cash and cash equivalents                                 173,743      282,443
Cash and cash equivalents at beginning of year                            491,174      208,731
                                                                        ---------    ---------
Cash and cash equivalents  at end of period                             $ 664,917    $ 491,174
                                                                        =========    =========
Supplemental Cash Flow Information:
      Cash paid for interest                                            $  17,041    $  13,964
      Noncash investing and financing activities:
          Conversion of promissory note into Series F Preferred Stock        --        175,000
          Accrued interest on preferred stock charged to
               accumulated deficit                                        420,625      413,625
          Common stock issued in satisfaction of interest on
               preferred stock                                            416,250      516,375
</TABLE>
                   The accompanying notes are an integral part
                         of these financial statements.

                                       F-5
<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.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      REVENUE RECOGNITION

      The Company recognizes revenue for products upon shipment at the time of
delivery to the customer, provided that the Company has no remaining significant
service obligations that are essential to the functionality of the product
delivered, collectibility is considered probable, and the fees are fixed and
determinable.

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

      CONCENTRATION OF CREDIT RISK

      The Company sells its products to customers in diverse industries
nationwide, particularly delivery based services such as bakeries and beer
distributors. 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 six and three customers accounted for
approximately 50% and 48% of total accounts receivable at December 31, 1999 and
December 31, 1998, 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.

      FINANCIAL INSTRUMENTS

      The Company enters into various types of financial instruments in the
normal course of business. Fair values are estimated based on assumptions
concerning the amount and timing of estimated future cash flows and assumed
discount rates reflecting varying degrees of perceived risk. Accordingly, the
fair values may not represent actual values of the financial instruments that
could have been realized as of year end or that will be realized in the future.

      Fair values for cash and cash equivalents, accounts receivable, accounts
payable and accrued expenses and convertible debt approximate their carrying
values at December 31, 1999 and December 31, 1998.

      INVENTORIES

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

                                      F-6
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

      FIXED ASSETS

      Fixed Assets are recorded at cost and depreciated over the estimated
useful lives of the assets, principally using accelerated methods. Leasehold
improvements are amortized over the shorter of the useful lives or the remaining
terms of the related leases. Maintenance and repair costs are expensed as
incurred.

      LOSS  PER SHARE

      Net loss per share is computed under SFAS No. 128, "Earnings Per Share."
Basic loss per share is computed by dividing 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 9) are added to the net
loss to determine the amount of net loss attributable to common stockholders

      Common share equivalents consist of 4,611,685 and 4,174,336 shares of
common stock which may be issuable upon exercise of outstanding stock options
and warrants and the conversion of preferred stock and convertible debt at
December 31, 1999 and December 31, 1998, 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"). The Company adopted SFAS No. 123, "Accounting for Stock
Based Compensation," for disclosure only (Note 7).

      RESEARCH AND DEVELOPMENT AND COMPUTER SOFTWARE DEVELOPMENT COSTS

      Research and development costs, other than software development costs,
have been charged to operations as incurred. SFAS No. 86, "Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed," requires
the capitalization of certain computer software development costs incurred after
technological feasibility is established. No software development costs have
been capitalized.

      USE OF ESTIMATES

      The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingencies at the date of the financial

                                      F-7
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

statements, and the reported results of operations during the reporting period.
Actual results could differ from these estimates.

      NEW ACCOUNTING PRONOUNCEMENTS

      In 1998, the Financial Accounting Standards Board released Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("FAS 133"), which initially would have been effective
for all fiscal quarters beginning after June 15, 1999. In June 1999, the
Financial Accounting Standards Board released Statement of Financial Accounting
Standards No. 137, Accounting for Derivative Instruments and Hedging Activities
- Deferral of Effective Date of FAS 133 ("FAS 137"). FAS 137 defers the
effective date of FAS 133 until June 15, 2000. FAS 133 standardizes the
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, by requiring that an entity recognize those items
as assets or liabilities in the statement of financial position and measure them
at fair value. FAS 133 will not have any impact on the Company's financial
position and results of operation.

3.    INVENTORIES

     Inventories consist of the following:

                                    DECEMBER 31,             DECEMBER 31,
                                       1999                     1998
                                 --------------------     --------------------

     Raw materials                     701,198                   424,173
     Work-in-process                   163,930                   731,730
     Finished goods                    457,025                   360,403
                                 --------------------     --------------------
                                     $1,322,153               $1,516,306
                                 ====================     ====================

4.    FIXED ASSETS

     Fixed assets consist of the following:

<TABLE><CAPTION>
                                                        ESTIMATED
                                                       USEFUL LIVES     DECEMBER 31,          DECEMBER 31,
                                                        (IN YEARS)          1999                  1998
                                                                      ------------------   -------------------
<S>                                                        <C>            <C>                  <C>
     Production and engineering equipment                  3-5            $ 870,927            $ 864,921
     Furniture, fixtures and office equipment               5               755,884               738,177
     Leasehold improvements                              Life of
                                                          lease              23,021                 23,021
                                                                      ------------------   -------------------
                                                                         $1,649,832            $1,626,119

     Less - accumulated depreciation and amortization                    (1,501,174)           (1,420,611)
                                                                      ------------------   -------------------
                                                                          $ 148,658            $ 205,508
                                                                      ==================   ===================
</TABLE>

                                      F-8
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

      At December 31, 1999, office and engineering equipment under capital lease
totaled $153,323. Related accumulated amortization of equipment under capital
lease totaled $125,195 at December 31, 1999. At December 31, 1998, office and
engineering equipment under capital lease totaled $156,998, with related
accumulated amortization of $109,059. Depreciation expense was $83,460 and
$130,112 for the years ended December 31, 1999 and December 31, 1998,
respectively.

5.    CONVERTIBLE DEBT

      In March 1997, the Company issued an unsecured Convertible Promissory Note
for $250,000 to RBB Bank AG. The note bore interest at the rate of 6% per annum
and had an original maturity date of March 1998. In March 1998, the Company
refinanced the $250,000 convertible debt by making a principal payment of
$75,000 and issuing a convertible note payable for $175,000. The note bore
interest at a rate of 6% per annum, matured in March 1999, and was convertible
into shares of the Company's common stock at a conversion price of $1.34. In
September 1998, the holders of the note payable converted the outstanding debt
of $175,000 into 175 shares, at a stated value of $1,000 per share, of Series F
Convertible Preferred Stock.

      The Convertible Promissory Note was convertible at the option of the
holder into shares of the Company's common stock at a price of $2.74 per share.
The discount of $97,626 implicit in the conversion terms at the date of
issuance, based upon the market price for the Company's common stock on that
date, was recorded as a debt discount and additional paid in capital. The debt
discount was amortized over the term of the note as a charge to interest
expense. Amortization of the debt discount totaled $16,270 in 1998.

6.    INCOME TAXES

      Deferred tax assets are comprised of the following:

<TABLE><CAPTION>
                                                   DECEMBER 31,            DECEMBER 31,
                                                       1999                    1998
<S>                                                 <C>                     <C>
      Net operating loss carryforwards              $3,991,778              $4,253,449
      Business tax credit carryforwards              290,457                    291,611
      Other                                          213,405                    189,240
                                               ---------------------    --------------------
      Gross deferred tax asset                      4,495,640                  4,734,300
      Deferred tax asset valuation allowance       (4,495,640)                (4,734,300)
                                               ---------------------    --------------------
                                                     $     -                  $     -
                                               =====================    ====================
</TABLE>

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

                                      F-9
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

<TABLE><CAPTION>
                                                                     YEAR ENDED
                                                         DECEMBER 31,          DECEMBER 31,
                                                             1999                  1998
<S>                                                         <C>                   <C>
       Statutory federal rate                               34.0%                 (34.0%)
       State taxes                                           3.66%                 (5.0%)
       Non-deductible expenses                              27.1%                   6.0%
       Other                                                  --                    4.0%
       Valuation allowance on deferred tax assets          (64.76%)                29.0%
                                                      -------------------    -----------------
                                                              0.0%                  0.0%
                                                      ===================    =================
</TABLE>

      The Company generated income from operations in the current year but
generated a loss in 1998. 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, 1999, the Company has net operating loss and tax credit
carryforwards for federal tax purposes of approximately $11,321,000 and
$290,000, respectively, which expire in various years through 2019 and 2010,
respectively. The Company has state net operating loss carryforwards for tax
purposes of approximately $4,272,000, which expire in various years through
2003.

      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.

7.    STOCK OPTIONS

      In 1989, 1994 and 1995, the Board of Directors approved 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 fiscal 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

                                      F-10
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

ten-year vesting periods, some with acceleration if certain profitability levels
are reached, and are fully exercisable by 2007.

      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 will be
reserved for issuance in accordance with the terms of the 1998 Plan.

      A summary of the status of the Company's stock option plans as of December
31, 1999 and December 31, 1998 are summarized as follows:

<TABLE><CAPTION>
                                                        December 31, 1999                      December 31, 1998

                                                                      Weighted                                Weighted
                                                                      Average                                  Average
                                                 Number of            Exercise           Number of            Exercise
                                                  Options              Price              Options               Price
                                              ----------------     ---------------     ---------------     ----------------
<S>                                               <C>                  <C>                <C>                   <C>
Outstanding at beginning of year                  546,118              $1.10              277,716               $1.56
Granted                                           400,000               0.75              354,000                0.82
Exercised                                            -                   -                   -                    -
Canceled/Expired                                 (75,151)               1.28              (85,598)               1.47
                                              ----------------     ---------------     ---------------     ----------------
Outstanding at end of year                        870,967              $0.92              546,118               $1.10
                                              ================     ===============     ===============     ================
Exercisable at end of year                        295,853              $1.06               62,338               $1.77
                                              ================     ===============     ===============     ================
Weighted   average  fair  value  of  options
granted during the period                                              $0.36                                    $0.81
                                                                   ===============                         ================
</TABLE>

      The following table summarizes information about stock options outstanding
at December 31, 1999:

<TABLE><CAPTION>
                                                                                                    Weighted
                                                     Weighted average                           average exercise
                                                         remaining              Number of           price of
                                      Number         contractual life,           options             options
      Exercise price               Outstanding           in years              exercisable         exercisable
-------------------------------   ---------------  ----------------------   ------------------  ------------------
<S>         <C>                      <C>                   <C>                   <C>                  <C>
            $ 0.73                   291,500               8.08                     -                   -
            $ 0.75                   400,000               9.57                  200,000              0.75
            $1.47                    171,042               6.56                   87,767              1.47
        $4.00 - $8.00                    8,425             4.33                     8,086             4.40
                                  ---------------                           ------------------
               Total                 870,967                                     295,853              $1.06
                                  ===============                           ==================  ==================
</TABLE>

                                      F-11
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

      During 1999, the Company extended a warrant issued to a non-employee for
one year. The Company recorded a charge to marketing expense of $34,000 in 1999
related to this warrant.

      As discussed in Note 2, the Company elected to adopt SFAS No. 123 through
disclosure only. Had compensation cost for the Company's option plans been
determined based on the fair value of the options at the grant dates, as
prescribed by SFAS No. 123, the Company's net loss and net loss per share would
have been as follows:


                                       Year ended                Year ended
                                       December 31,              December 31,
                                           1999                      1998
                                   --------------------       ------------------
      Net income (loss):
           As reported                   $101,789                  $(421,188)
           Pro forma                     $(27,568)                 $(484,800)

Basic and diluted net income
(loss) per share attributable to
common shareholders:
           As reported                    $(0.13)                    $(0.66)
           Pro forma                      $(0.18)                    $(0.70)

      The fair value of each option grant under SFAS No. 123 was estimated on
the date of grant using the Black-Scholes option pricing model with the
following assumptions used for grants in 1999 and 1998, respectively:

I.    Dividend yield of 0% for both periods;
II.   Expected volatility of 170% and 158%;
III.  Risk free interest  rates of 5.53% - 6.24% for options  granted  during
      the year ended  December 31, 1999 and 5.37% - 5.40% for the year ended
      December 31, 1998; and
IV.   Weighted average expected option term of 10 years for both periods.

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

8.    COMMON STOCK

      In January 1996, the Company entered into an agreement with a consulting
firm, whereby the Company would compensate the firm for their services through
the issuance of 31,192 shares of the Company's common stock. The value of these
shares at the time of issuance was estimated

                                      F-12
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

by management to be approximately $156,000, which is being amortized to expense
over the five year term of the agreement. Unamortized amounts are presented as a
reduction of stockholders' equity in the accompanying balance sheet.

      At December 31, 1999, the Company had reserved 1,038,023 shares of common
stock for issuance upon the exercise of common stock options and warrants and
the conversion of preferred stock. After the issuance of the Series E
convertible preferred stock, the 1998 option grants and changes made to the
conversion terms of the previously issued Series B,C and D convertible preferred
stock in 1998 the Company is required to reserve additional shares of common
stock which have not yet been authorized.

      The Board of Directors of the Company will request approval from the
stockholders to increase the number of authorized shares in fiscal 2000. The
Company expects the shareholders to approve the authorization of the required
additional shares.

9.    CONVERTIBLE PREFERRED STOCK

      In the second quarter of 1996, the Board of Directors approved the
designation of 4,200 shares of the Company's unissued preferred stock, $.001 par
value, as Series B 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.

      In February 1997, the Board of Directors approved the designation of 900
shares of the Company's unissued preferred stock, $.001 par value, as Series C
convertible preferred stock. During 1997, the Company sold 900 shares of newly
designated Series C convertible preferred stock for net proceeds of
approximately $867,000. As payment of certain offering costs associated with the
issuance of the Series C convertible preferred stock, the Company issued 43,751
shares of unregistered common stock for a value of $32,813 based on the quoted
market price.

      In February 1997, the Board of Directors approved the designation of 350
shares of the Company's unissued preferred stock, $.001 par value, as Series D
convertible preferred stock. During 1997, the Company sold 350 shares of newly
designated Series D convertible preferred stock for net proceeds of
approximately $337,400. As payment of certain offering costs associated with the
issuance of the Series C convertible preferred stock, the Company issued 17,013
shares of unregistered common stock for a value of $12,764 based on the quoted
market price.

      In January 1998, the Board of Directors approved the designation of 500
shares of the Company's unissued preferred stock, $.001 par value, as Series E
convertible preferred stock. During 1998, the Company sold 500 shares of newly
designated 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 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.

      In September 1998, the Board of Directors approved the designation of 175
shares of the Company's unissued preferred stock, $.001 par value, as Series F
convertible preferred stock. During 1998, the holders of the convertible note
payable to a related party, converted debt with

                                      F-13
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

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.

      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 fiscal 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, 1999 and December 31, 1998, the Company
incurred interest in the amount of $420,625 and $413,625, 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 1999, 1,171,211
shares were issued in satisfaction of the accrued interest due for 1999 and
261,009 shares were issued in satisfaction of the accrued and unpaid interest
due for 1998. In addition, $105,375 of interest remains unpaid and is recorded
as 421,500 shares of common shares accrued at December 31, 1999. During 1998,
380,650 shares were issued in satisfaction of the accrued interest due for 1998.
In addition, $105,375 of interest remained unpaid and is included in accrued
interest at December 31, 1998.

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.

                                      F-14
<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
fiscal 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 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 Series F convertible preferred stock is not
convertible until one year after issuance

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
fiscal 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 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.

The shareholders of Series F convertible preferred stock shall have the right to
convert each share of Series F 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 $1.00. During the six month period commencing on the one
year anniversary of the date upon the Series F shares are originally issued and
continuing until the eighteen month anniversary of the issue date, the
conversion price shall equal $1.00.

During the period after this eighteen month anniversary and continuing until all
shares are converted, the conversion price of the Series F convertible preferred
stock shall equal the lesser of (i) $1.00 and (ii) if the closing price shall
trade below $1.00 for any ten consecutive trading days, then the conversion
price shall equal 70% of the Company's average bid price for the ten days
preceding the date of the conversion notice. The shareholders of Series F
convertible preferred stock may not convert for a period of a year from the date
of issuance.

                                      F-15
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

CONVERSION DISCOUNT:
The estimated discount of $46,601 implicit in the conversion terms of the Series
C and Series D convertible preferred stock at the date of the issuance, based
upon the quoted bid price for the Company's common stock on those dates, has
been included in the computation of net loss per share (Note 2) for the year
ended December 31, 1998. The estimated discount was recorded as a discount on
the preferred stock and an increase to additional paid-in capital. The
amortization of the conversion discount of $46,601 has been recorded as an
increase to the preferred stock and a decrease to additional paid-in capital for
the year ended December 31, 1998.

The estimated discount of $56,250 and 93,750 implicit in the conversion terms of
the Series E and Series F convertible preferred stock at the date of the
issuance, based upon the quoted bid price for the Company's common stock on
those dates, has been included in the computation of net loss per share (Note 2)
for the years ended December 31, 1999 and ended December 31, 1998 respectively.
The estimated discount was recorded as a discount on the preferred stock and an
increase to additional paid-in capital. The amortization of the conversion
discount of $56,250 and $93,750 has been recorded as an increase to the
preferred stock and a decrease to additional paid-in capital for the years ended
December 31, 1999 and December 31, 1998 respectively.

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, equal 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.

In addition, in connection with the issuance of the Series E convertible
preferred stock, the shareholders of the Series B convertible preferred stock
agreed to place into escrow 2,100 shares of the Series B convertible preferred
stock. The Company may at its option and at any time through January 31, 2000
redeem the escrowed shares of Series B convertible preferred stock at a price of
$1,250 per share.

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.

At any time, the Company may in its sole discretion, but shall not be obligated
to, redeem, in whole or in part, the then issued and outstanding shares of
Series F convertible preferred stock at a price of $1,200 per share, subject to
certain anti-dilution provisions.

                                      F-16
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

10.   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.

      On January 17, 1996, the Company issued warrants to purchase 90,000 shares
of the Company's common stock at $5.24 per share to all of the former holders of
the Company's Series A Convertible Preferred Stock. These warrants were
immediately exercisable and expire after three years. These warrants were issued
in consideration of the conversion of the Series A Convertible Preferred Stock.
The fair value of these warrants was estimated by management and determined to
be materially consistent with the amount of dividends waived by the holders of
Series A Convertible Preferred Stock.

In September 1997, the Company issued warrants to purchase 700,000 shares of the
Company's common stock at $4.00 per share to the Series B stockholders. These
warrants are exercisable immediately and expire on September 30, 2000. The value
of these warrants at the time of issuance was estimated by management to be
negligible, based primarily upon the market price of the Company's stock,
accordingly, no compensation cost has been recorded. In March 1998, these
warrants were canceled in conjunction with the issuance of the Series E
Convertible Preferred Stock.

In December 1997, the Company issued a warrant to purchase 100,000 shares of the
Company's common stock at $0.75 per share to a customer. This warrant was
exercisable immediately and expired on December 21, 1999. The value of this
warrant at the time was immaterial. In December 1999, the Company extended the
warrant for one year at which time a charge was recorded to marketing expense
for the value of the warrant of $34,000. The value was calculated in December
1999 using a Black-Scholes pricing module based upon the quoted market price
assuming a dividend yield of 0%, expected volatility of 170%, a risk-free
interest rate of 6.77% and an expected term of one year.

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 expire 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.

11.   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 87,817 shares of common stock at a price of $4.00 per share. The notes
receivable, plus accrued interest, are due in March 2004, and are presented as a
reduction of stockholders' equity in the accompanying balance sheet.

                                      F-17
<PAGE>

NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS

12.   COMMITMENTS

      The Company leases its office facilities under an operating lease expiring
September 30, 2000. The lease contains an option for renewal and requires the
payment of taxes and other operating costs. At December 31, 1999, future minimum
rental payments under the operating lease consist of the following at December
31, 1999:

                  2000                             129,000

      Rent expense totaled $170,073 and $171,376 during the years ended December
31, 1999 and December 31, 1998, respectively.

      The Company also leases certain equipment under capital leases expiring at
various dates through the year 2001. Future minimum lease payments under capital
leases, consist of the following at December 31, 1999:


                       2000                                         30,000
                       2001                                          1,000
                                                              ------------------
                  Total minimum lease payments                     $31,000
                  Less: amount representing interest                 2,000
                                                              ------------------
                  Present value                                    $29,000
                                                              ==================


                                      F-18
<PAGE>