UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2009~~2010 Commission file number 000-15885

NATIONAL DATACOMPUTER, INC.

(Exact name of registrant as specified 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
19B Crosby Drive, Suite 310, Bedford, Massachusetts	01730
(Address of principal executive offices)	(Zip Code)

(978) 663-7677

(Issuer's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 par value per share

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No x

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and 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-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, and accelerated files, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o

Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The aggregate market value of the voting and non-voting Common Stock held by non-affiliates of the registrant at ~~June~~March 3031, ~~2009~~2011 was approximately $1262,~~236~~884.

As of ~~April~~March 3031, ~~2010~~2011 there were 41,~~274~~659,~~496~~419 shares of Common Stock outstanding.

TABLE OF CONTENTS

PART I			PAGE
	Item 1.	Description of Business	3
	Item 1A.	Risk Factors	76
	Item 1B.	Unresolved Staff Comments	138
	Item 2.	Properties	138
	Item 3.	Legal Proceedings	148
	Item 4.	Submission of Matters to a Vote of Security Holders	148
PART II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities	148
	Item 6.	Selected Financial Data	1510
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1510
	Item 7A.	Quantitative and Qualitative Disclosure about Market Risk	2115
	Item 8.	Financial Statements and Supplementary Data	2115
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	2215
	Item 9A.	Controls and Procedures	2115
	Item 9B.	Other Information	2315
PART III
	Item 10.	Directors, Executive Officers and Corporate Governance	2317
	Item 11.	Executive Compensation	2720
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	2822
	Item 13.	Certain Relationships and Related Transactions and Director Independence	2923
	Item 14.	Principal Accountant Fees and Services	2923
PART IV
	Item 15.	Exhibits and Financial Statement Schedules	3124
SIGNATURES			3428

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PART I

FORWARD-LOOKING STATEMENTS

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

●· adverse economic conditions;

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

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

●· adverse results of any legal proceedings;

●· the volatility of our operating results and financial condition;

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

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

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

Information regarding market and industry statistics contained in this report is included based on information available to us that we believe is accurate. It is generally based on academic and other publications that are not produced for purposes of securities offerings or economic analysis. We have not reviewed or included data from all sources, and we cannot assure our stockholders or potential investors of the accuracy or completeness of the data included in this report. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services. We have no obligation to update forward-looking information to reflect actual results or changes in assumptions or other factors that could affect those statements. See “Risk Factors” for a more detailed discussion of uncertainties and risks that may have an impact on future results.

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Item 1. Business

Description of Business.

National Datacomputer, Inc. (hereinafter referred to as the “Company”, “we”, “us” or “our”) was organized as a Delaware corporation in 1986 and began active operations in 1987 following our merger with an established computer systems engineering business. We are engaged exclusively in providing solutions through the use of mobile information systems in the distribution market segment within the product supply chain. We design, market, sell, and service computerized systems used to automate the collection, processing, and communication of information related to product sales and inventory control. Our products and services include data communication, application-specific software, handheld computers, related peripherals, and accessories, as well as associated education and support services for our products. In early January 2011, our business ceased active operations with the sale of our remaining product and service business to Micronet, Ltd. (“Micronet”).

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

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

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

During January 2007 acting as agent for certain new investors interested in purchasing shares of our common stock, we caused the transfer of 2,022,616 shares of our common stock, together with accrued but unpaid stock dividends (representing approximately 90% of our common stock in the aggregate) that Phyle had previously purchased from Capital Bank Grawe Gruppe AG (“CapitalBank”). These investors paid Phyle $250,000 for the purchase of our common stock and agreed to also provide us $350,000 to be used as working capital.

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

-During 32010, -we entered into subscription agreements with three investors, including an officer of the Company, pursuant to which we issued an aggregate of $250,000 of our secured convertible promissory notes (the “Notes”). The Notes bear interest at the rate of 7.0% per annum, compounded annually. All principal and accrued interest are payable on April 21, 2013. Our obligations under the Notes are secured by the grant of a first priority security interest in all of our assets.

At any time prior to the Maturity Date, provided that the Company then has authorized a sufficient number of unissued shares of Common Stock to permit the conversion of this Note, this Note shall be convertible (in whole or in part), at the option of the Holder (the “Conversion Option”), into such number of fully paid and non-assessable shares of Common Stock as shall be equal to (i) the aggregate amount of the principal and interest so converted, divided by (ii) $.005 per share (as adjusted to reflect stock splits, stock dividends, reorganizations, reclassifications, consolidations, mergers or sales and similar events).

Subject to applicable cure periods, the holders of a majority of the principal amount of the Notes outstanding from time to time may declare the entire unpaid principal balance of the Notes to be due and payable upon certain events of default.

The Notes may be prepaid by us at our election with the written consent of the holders of at least 75% in original principal amount of the Notes. .

The Company’s obligations under the Notes are secured by the grant of a first priority security interest in all of the Company’s assets.

The issuance of the Notes was exempt from registration under the Securities Act of 1933, as amended, pursuant to an exemption provided by Section 4(2) of the Securities Act.

Asset Purchase Agreement and Amendment to Distribution Agreement

In January 2011, due to our inability to meet our financial obligations and the impending loss of a critical distribution agreement granting us the right to distribute certain products, our secured lenders (“Secured Parties”) acting upon an event of default, sold certain of our assets (other than cash and accounts receivable) to Micronet, Ltd. (“Micronet”), an unaffiliated corporation pursuant to the terms of an asset purchase agreement between the Secured Parties and Micronet dated January 10, 2010 (the “Asset Purchase Agreement”). In order to induce Micronet to enter into the agreement, the Company also provided certain representations and warranties regarding certain business matters.

The purchase price for the assets is (a) $50,000 which was paid at closing and (b) an additional amount pursuant to the following terms (the “Additional Consideration”): Micronet shall pay an aggregate amount which equals to 25% of the Net Profit Before Tax of the Micronet's subsidiary, Micronet Mobile Technologies, Inc. (the "US Subsidiary") made during the calendar year 2011 as a result of its RouteRiderLE operations in the US. $40,000 of the initial $50,000 was considered as an advance payment on account of the Additional Consideration, and will be deducted from the first quarterly Additional Consideration payments. For the purpose of calculating the Additional Consideration, Micronet agreed that during the year 2011, it shall charge the US Subsidiary only 35% of the license and maintenance revenues of the US Subsidiary, regardless of the amount actually charged. Such charge will be considered as an expense in the RouteRiderLE US Subsidiary operation for the purpose of calculating the Net Profit Before Tax. The Additional Consideration shall be paid quarterly, within sixty (60) days of the end of each quarter. Calculations of the Additional Consideration will be made on a yearly cumulative basis. Micronet has also agreed to allow the Secured Parties, NDI and its shareholders, at NDI's expense and subject to the execution of confidentiality agreements with Micronet, access to Micronet and the US Subsidiary's quarterly and annual financial reports for the year 2011. If NDI or any of its shareholders, directors, officers or employees bring any action against Micronet other than for the enforcement of this Agreement or for damages for its breach, NDI shall not be entitled to the Additional Consideration, until such time that such action is finally adjudicated or settled.

The initial $50,000 payment was used to pay accrued salaries and payroll taxes, sums due certain creditors and for other expenses of the transaction. Any additional proceeds, if any, to be received under the Asset Purchase Agreement, will be used first to pay sums due to the Secured Parties, which, as of December 31, 2010 totaled $237,979. Interest on sums due the Secured Parties accrues interest at the rate of 7.0% per annum. If there are any additional proceeds, the Company currently intends for such proceeds to be used to pay other obligations to creditors. It is not anticipated that there will be additional proceeds from the Asset Sale for distribution to stockholders.

The foregoing description of the Asset Sale does not purport to be a complete statement of the parties’ rights under the Asset Purchase Agreement and is qualified in its entirety by reference to the full text of the Asset Purchase Agreement, a copy of which is filed with the a Current Report on Form 8-K dated January11, 2011 as Exhibit 99.1.

Products

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

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

● Expand the market into non DSD sales;

● Increase our margins;

● Increase our competitive capabilities; and

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

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

Our Tailored Software Solutions

1. RouteRider® LE

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

The software, named RouteRider® LE, (“RouteRider LE”) is a mobile sales force automation application designed to increase efficiency, improve productivity and make companies more profitable and competitive by allowing sales and distribution personnel to gather, enter and share data at the point of work.

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

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

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

RouteRider LE is a portable and highly parameterized Route Accounting solution, which is designed to run on standard Microsoft™ Windows operating systems, databases and utilizes cellular, Wi-Fi, and Bluetooth communications protocols.

2. RouteRider®

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

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

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

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Marketing and Distribution

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

Direct Sales Force

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

Service and Support

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

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

Approximately 32% of our 2009 total revenue was attributed to service and support sales.

Key Customers

During ~~2009~~2010, ~~four~~three customers accounted for approximately 8778% of our total revenues. The majority of our customers place orders with us on an “as needed basis”; however there are times when a customer will place an order for delivery over a twelve month period.

Competition

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

Employees

As of December 31, ~~2009~~2010, we had 56 full-time employees. Of these employees, two were engaged in sales and marketing, two in service and customer support, and ~~one~~two in administration and finance. Our employees are not represented by a labor union. We believe that our relationship with our employees is good. Subsequent to December 31, 2010, we have no employees.

~~- 6 -~~5

Item 1A.

Risk Factors.

RISKS RELATED TO OUR BUSINESS

WE HAVE ANO ~~HISTORY~~CURRENT OFBUSINESS ~~LOSSES AND MAY NEVER ACHIEVE OR SUSTAIN PROFITABILITY.~~OPERATIONS

WeWith ~~will~~the ~~need~~sale toof ~~generate~~our ~~more~~remaining ~~revenues~~line ~~than~~of webusiness ~~did in 2009 in order~~ to ~~become~~Micronet, ~~profitable~~we ~~and~~have ~~sustain~~no ~~profitability~~current ~~and~~business ~~positive~~other ~~cash~~than ~~flow. Our ability~~ to ~~generate~~collect any future ~~revenue~~sums ~~and~~due ~~sustain~~to ~~profitability~~us ~~will~~from ~~depend~~Micronet. We ~~on a number of factors, many of which~~ are ~~described~~currently ~~throughout~~exploring ~~this~~opportunities ~~risk~~to ~~factor~~use ~~section. Although we believe that many of the cost savings and other activities we undertook last year, together with~~ our ~~expected~~public ~~levels~~entity ofin ~~revenues~~another ~~for~~manner ~~this~~in ~~year,~~order ~~will~~to ~~allow~~seek us to ~~generate~~derive ~~cash~~some ~~flow~~additional ~~from~~benefit ~~operations, we may not achieve profitability this year or be able~~ to ~~sustain~~our ~~profitability~~creditors inand ~~future~~our ~~years~~stockholders. There ~~Failure~~can tobe ~~achieve~~no ~~and~~assurance ~~maintain~~that ~~profitability~~we will ~~likely~~be ~~adversely~~successful ~~affect~~in ~~the~~such ~~price of our Common Stock~~efforts.

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

Because we have historically had losses and only a limited amount of cash has been generated from operations, we have funded our operating activities to date primarily from the sale of securities and from the sale of a product line in 2009. In order to continue to fund our operations, we may need to raise additional capital, through the sale of securities. We cannot be certain that any such financing will be available on acceptable terms, or at all. Moreover, additional equity financing, if available, would likely be dilutive to the holders of our common stock, and debt financing, if available, would likely involve restrictive covenants and a security interest in all or substantially all of our assets. If we fail to obtain acceptable financing when needed, we may not have sufficient resources to fund our normal operations which would have a material adverse effect on our business.

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

Although we have been able to reduce our operating expenses by 29% in 2009, as compared to 2008, we still have incurred an accumulated deficit of approximately $17.2 million through December 31, 2009. As of December 31, 2009, we had approximately $110,000 in cash and negative working capital of $917,000. The 2009 results reflect significant cost reductions, which efforts we are continuing to undertake. However, even with the additional working capital from equity transactions during 2008 and 2009, we have a current ratio of 0.33 as of December 31, 2009, which is slightly lower than our current ratio of 0.46 at December 31, 2008 and is significantly less than 1.00, which is generally considered to place a company at higher financial risk. In the event that we cannot generate sufficient cash for working capital, we may have to reduce our level of operations, which will make it more difficult for us to continue our business as a going concern.

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THE CURRENT FINANCIAL CRISIS AND UNCERTAINTY IN GLOBAL ECONOMIC CONDITIONS COULD CONTINUE TO NEGATIVELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS, AND FINANCIAL CONDITION.

The current financial crisis and uncertainty in global economic conditions have resulted in a tightening in the credit markets, a low level of liquidity in many financial markets, and extreme volatility in credit, equity and fixed income markets. There could be a number of follow-on effects from these economic developments on our business, including unavailability of credit; insolvency of key suppliers resulting in product delays; customer insolvencies; rapid changes to the foreign currency exchange rates; decreased customer confidence; and decreased customer demand. Any of these events, or any other events caused by the current financial crisis, may have a material adverse effect on our business, operating results, and financial condition.

WE HAVE ONLY A SMALL NUMBER OF CUSTOMERS IN FINITE FIELDS, AND THE LOSS OF ANY OF THESE CUSTOMERS WOULD HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY’S BUSINESS.

Approximately 32% of our 2009 total revenue was attributed to service and support sales. During 2009, one customer accounted for approximately 60% of our total revenues. Additionally, in 2009 our top four customers collectively accounted for 87% of our total revenues.

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

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

● identify emerging technological trends in our market;

● identify changing customer requirements;

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

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

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

● protect our intellectual property.

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

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

The computerized route accounting industries are highly competitive, and we expect the intensity of the competition to increase. Many of our competitors have greater financial, technical, research, marketing, sales, distribution, service and other resources than we do. Moreover, our competitors may offer broader

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product lines and have greater name recognition than we do, and may offer discounts as a competitive tactic, forcing intense pricing pressure on our products. In addition, several development stage companies are currently creating or developing technologies and products that compete with or are being designed to compete with our technologies and products. Our competitors may develop or market technologies or products that are more effective or more commercially attractive than our current or future products, or that may render our technologies or products less competitive or obsolete.

OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE.

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

● availability and pricing from our suppliers;

● changes in the demand for our products by customers;

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

● rate and success of new customer development;

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

● success in attracting, retaining and motivating qualified personnel;

● changes in general economic conditions; and

● obsolescence of inventory.

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

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

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

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

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

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

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

As a public company, we are required to comply with the periodic reporting obligations of the Exchange Act, including preparing annual reports, quarterly reports and current reports. Our failure to prepare and disclose this information in a timely manner could subject us to penalties under federal securities laws, expose us to lawsuits and restrict our ability to access financing. We may identify areas requiring improvement with respect to our internal control over financial reporting, and we may be required to design enhanced processes and controls to address issues identified. This could result in significant delays and cost to us and require us to divert substantial resources, including management time, from other activities.

Our management has identified two material weaknesses in our internal control over financial reporting for the year ended December 31, 2009. If we fail to maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with the Sarbanes-Oxley Act. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent fraud.

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RISKS RELATED TO OUR INTELLECTUAL PROPERTY

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

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

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

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

From time to time, we may receive notices of claims of infringement, misappropriation or misuse of other parties’ proprietary rights. We cannot be sure that we will prevail in these actions, or that other actions alleging infringement by us of third-party patents, misappropriation or misuse by us of third-party trade secrets or the invalidity of one or more patents held by us will not be asserted or prosecuted against us, or that any assertions of infringement, misappropriation or misuse or prosecutions seeking to establish the invalidity of our patents will not seriously harm our business. For example, in a patent or trade secret action, an injunction could be issued against us requiring that we withdraw particular products from the market or necessitating that specific products offered for sale or under development be redesigned.

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

RISKS RELATING TO OUR COMMON STOCK

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

As of March 31, 2010, Anthony Stafford and his four children beneficially own an aggregate of 3,115,077 shares of our common stock, or 65.2%, and thus a majority, of all outstanding shares of our common stock. Mr. Stafford has sole voting authority over all of such shares and will thus be able to determine the outcome of all corporate matters requiring stockholder approval, including the election of all of our directors and transactions such as the sale of our company. Mr. Stafford is also a member of our Board of Directors.

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

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

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

Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

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

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

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

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

●· announcements of technological innovations or new products, or competitive developments;

●· investor perceptions and expectations regarding our or our competitors’ products;

●· acquisitions or strategic alliances by us or our competitors; and

●· the gain or loss of a significant customer or order

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

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

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

Item 1b1B. Unresolved Staff Comments.

Not applicable

Item 2.

Properties.

We maintain our principal offices and support operations in a leased 43,~~000~~500 square foot facility in ~~Billerica~~Bedford, Massachusetts. Our lease expires on April 30, ~~2010~~2011. The annual base rent for our leased facilities is approximately $6936,000. The lease contains an option for renewal, and requires, among other things, that we will pay to our landlord as additional rent our pro rata share of certain operational and maintenance costs at the facility during the term of the lease. We believe that our facilities are adequate for our current needs and that additional space, if required, may be available at competitive rates.

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Item 3.

Legal Proceedings.

We are not a party to any legal proceedings.

Item 4.

Submission of Matters to a Vote of Security-Holders.

Not applicable.

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock trades on the OTC Bulletin Board (“OTC”) under the symbol NDCP. On March 31, ~~2010~~2011, the last traded price for our common stock as reported by OTC was $0.~~016~~06 per share.

For the periods indicated below, the table sets forth the range of high and low last sale prices for our Common Stock as reported by the OTC. The quotations reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not represent actual retail transactions. ~~All information prior to July 31, 2008 and presented herein has been adjusted to reflect the reverse stock split executed on July 31, 2008.~~

2008

2009	High		Low

First Quarter	$	0.02	$	0.02
Second Quarter		0.02		0.02
Third Quarter		0.02		0.02
Fourth Quarter		0.02		0.02

	High			Low
2010	High		Low
First Quarter	$	0.3802	$	0.1502
Second Quarter		0.9002		0.1502
Third Quarter		0.9002		0.2002
Fourth Quarter		0.2002		0.1002

~~2009~~8

First Quarter	$	0.02	$	0.02
Second Quarter		0.02		0.02
Third Quarter		0.02		0.02
Fourth Quarter		0.02		0.02

As of March 31, 2011, there were approximately 928 stockholders of record of our common stock.

As of March 31, 2010, there were approximately 928 stockholders of record of our common stock.

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

Dividends

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

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Summary of Equity Compensation Plans

We maintain an equity compensation plans for employees, officers, directors and others whose efforts contribute to our success. The table below sets forth certain information as of our fiscal year ended December 31, ~~2009~~2010 regarding the shares of our common stock available for grant or granted under stock option plans that (i) were approved by our stockholders, and (ii) were not approved by our stockholders.

Plan Category	Number of Securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)	(c)
Equity compensation plans approved by security holders	8838,331	$0.4244	~~111~~161,669
Equity compensation plans not approved by security holders	0		0
Total	8838,331	$0.4244	~~111~~161,669

Unregistered Sales of Securities

The following summarizes all sales of our unregistered securities during the fiscal year ended December 31, ~~2009~~2010. The securities in each of the below-referenced transactions were (i) issued without registration and (ii) were subject to restrictions under the Securities Act and the securities laws of certain states, in reliance on the private offering exemptions contained in Sections 4(2), 4(6) and/or 3(b) of the Securities Act and on Regulation D promulgated thereunder, and in reliance on similar exemptions under applicable state laws as a transaction not involving a public offering. No placement or underwriting fees were paid in connection with these transactions. Proceeds from the sales of these securities were used for general working capital purposes.

On June 29, 2009, Anthony Stafford purchased 500,000 shares of our common stock for an aggregate purchase price of $0.10.

The securities issued as set forth above were issued in reliance upon exemptions from the registration provisions of the Securities Act set forth in Section 4(2) thereof relative to sales by an issuer not involving any public offering, to the extent an exemption from such registration was required.

Item 6.

Selected Financial Data.

Not applicable.

Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

Overview

Our total revenues for the fiscal year ended December 31, ~~2009~~2010, were $1908,~~723,361~~971 as compared to $1,~~820~~723,~~196~~361 for the fiscal year ended December 31, ~~2008~~2009, a decrease of 547%. Net loss for ~~2009~~2010 was $~~231~~288,~~994~~368, or $(0.0509) per share, as compared to a loss of $~~514~~231,~~204~~994 or $(0.1805) per share for ~~2008~~2009.

-During 152009, -we delivered a comprehensive RRLE Direct Store Delivery solution to a major national bakery. This solution had a value of approximately $1,000,000.

Starting in 2006 we divested ourselves from our audit business to better concentrate our efforts on our new Route Accounting solution. In 2006, we delivered our first hand-held route solution, interfacing with the J.D. Edwards system, to an internationally recognized company in the food services industry. The implementation was successful and the company continued to deploy additional routes in Europe during 2007 and 2008. During 2008, we delivered a comprehensive RRLE Direct Store Delivery solution to a major bottling company and also contracted to deliver a similar solution to a major national bakery. This solution, with a value of approximately $1,000,000 was delivered in 2009.

Results of Operations

WeAs ~~continue~~we tohave ~~explore~~sold all ~~opportunities~~of ~~to improve~~ our ~~financial~~operating ~~condition by pursuing potential revenues through increased marketing efforts. There can be no assurance~~business, ~~however, that~~ we ~~will realize revenues in the near future that~~ are ~~adequate~~exploring opportunities to ~~meet~~utilize our ~~cash~~corporate ~~flow~~asset ~~requirements. If we not successful in increasing our revenues sufficiently within the current fiscal year, we will be required~~ to ~~implement~~generate ~~further cost saving actions and to attempt to obtain additional financing~~revenues. ~~There can be no assurance that financing will be available to us on reasonable terms, or at all.~~ If we fail to increase our revenues and to obtain financing, we ~~may~~would beseek ~~required~~ to ~~cease operations as a going concern and/or to~~ adopt a plan of liquidation and dissolution.

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

Year Ended December 31, ~~2009~~2010 Compared with Year Ended December 31, ~~2008~~2009

For the year ended December 31, ~~2009~~2010, we reported a loss of $~~231~~288,~~994~~368, or $(0.0509) per share, as compared to a loss of $~~514~~231,~~204~~994 or $(0.1805) per share for the comparable prior year. The ~~decreased~~increased net loss was a direct result of lower ~~expenses~~revenues.

Revenue

Our total revenue for the year ended December 31, ~~2005~~2010 decreased 547% to $1908,~~723,361~~971 compared to $1,~~820~~723,~~196~~361 for the comparable prior year.

Product revenues for the year ended December 31, ~~2009~~2010 ~~increased~~decreased 859% to $1480,~~173,317~~465 compared to $1,~~082~~173,~~647~~317 for the prior year. The decrease is due to the delivery in 2009 of our RRLE Direct Store Delivery solution to a major national bakery which we were not able to repeat in 2010.

Service revenues for the year ended December 31, ~~2009~~2010 decreased 2522% to $~~550~~428,~~044~~106 compared to $~~737~~550,~~549~~044 for the prior year. The decrease is a direct result of lower maintenance and repair contracts for our Datacomputers, along with lower billings of our professional services for RRLE implementation projects.

Our gross profit was $~~466~~203,~~404~~457 or 2722% of revenues for the year ended December 31, ~~2009~~2010, compared to $~~471~~466,~~239~~404 or 2627% of revenues from the prior year. The ~~slightly~~lower ~~higher~~ margin is a direct result of ~~lower~~the ~~expenses~~decreased revenues.

Operating Expenses

Total operating expenses of $~~696~~486,~~569~~180 decreased 2930% for the year ended December 31, ~~2009~~2010 from $~~982~~696,~~240~~569 for the comparable prior year.

-Selling 16and -marketing expenses for the year ended December 31, 2010 were $163,674 compared to $209,947 for the prior year, a decrease of 22%. The decrease is due primarily to lower payroll cost resulting from reduced manpower.

~~Selling~~General and ~~marketing~~administrative expenses for the year ended December 31, ~~2009~~2010 were $~~209~~322,~~947~~506 compared to $~~294~~486,~~754~~622 for the prior year, a decrease of 2934%. The decrease is ~~due~~a ~~primarily~~result toof lower ~~payroll~~professional and legal fees combined with lower occupancy cost ~~resulting~~related ~~from~~to ~~reduced~~our ~~manpower~~relocation to smaller quarters.

General and administrative expenses for the year ended December 31, 2009 were $486,622 compared to $687,666 for the prior year, a decrease of 29%. The decrease is a result of lower legal fees combined with lower occupancy cost related to our relocation to smaller quarters.

Liquidity and Capital Resources

We used cash of $27315,~~616~~586 and $~~498~~27,~~797~~616 for operating activities for the years ended December 31, ~~2009~~2010 and ~~2008~~2009, respectively. For the year ended December 31, ~~2009~~2010, our principal operating cash requirement was used to fund our loss from operations along with a decrease in deferred revenue ~~and accounts payable~~ offset by a decrease in deferred hardware and software costs, along with a decrease in prepaid expenses and account receivable. For the year ended December 31, ~~2008~~2009, our principal operating cash requirement was used to fund our loss from ~~operation~~operations along with a decrease in ~~accounts~~deferred ~~payable~~revenue and anaccounts ~~increase~~payable ~~in other prepaid expenses,~~ offset by ~~an increase in deferred revenue and~~ a decrease in deferred hardware and software costs.

We used cash of $118,~~611and~~272 and $1511,~~408~~611 for investing activities for the years ended December 31, ~~2009~~2010 and ~~2008~~2009, respectively. The cash was used for the purchase of capital equipment and capitalized software development costs. As of December 31, ~~2009~~2010, we had no material commitments for capital expenditures.

We generated cash of $28221,~~795~~272 and $~~376~~28,~~735~~795 from financing activities for the years ended December 31, ~~2009~~2010 and ~~2008~~2009, respectively. For the year ended December 31, ~~2009~~2010, we raised capital in the amount of $50231,~~000~~700 from the issuance of convertible notes and made payments on obligations under our capital leases. ~~For~~for the year ended December 31, ~~2008~~2009, we raised capital in the amount of $~~415~~50,000 and made payments on obligations under our ~~notes payables and~~ capital leases.

Although we have been able to reduce our operating expenses by 2930% in ~~2009~~2010, as compared to ~~2008~~2009, we still have incurred an accumulated deficit of approximately $17.25 million through December 31, ~~2009~~2010. As of December 31, ~~2009~~2010, we had approximately $~~110~~6,~~000~~500 in cash and negative working capital of $~~917~~1,030,000. The ~~2009~~2010 results reflect significant cost reductions, which efforts we are continuing to undertake. However, even with the additional working capital from ~~equity~~the ~~transactions~~convertible notes during ~~2008~~2010 and equity transactions during 2009, we have a current ratio of 0.3305 as of December 31, ~~2009~~2010, ~~which~~compared isto ~~slightly lower than~~ our current ratio of 0.4633 at December 31, ~~2008~~20089, ~~and~~both is significantly less than 1.00, which is generally considered to place a company at higher financial risk. In. At ~~the~~this ~~event~~point, ~~that~~ we ~~cannot~~are ~~generate~~seeking ~~sufficient~~to ~~cash~~utilize ~~for~~our ~~working~~corporate ~~capital,~~assets ~~we may have~~ to ~~reduce~~repay ~~our~~creditors ~~level~~and, ofif ~~operations~~possible, ~~which~~distribute ~~will~~nay ~~make~~remaining itfunds, ~~more~~if ~~difficult~~any, ~~for us~~ to ~~continue~~ our ~~business as a going concern~~stockholders.

At December 31, ~~2009~~2010, approximately 95% of our accounts payable was comprised of amounts due for services to our Directors and a legal firm. Although no formal payment plans have been established, we plan on making monthly payment based on our availability of cash.

We continue to explore all opportunities to improve our financial condition by pursuing potential revenues through increased marketing efforts. There can be no assurance, however, that we will realize revenues in the near future that are adequate to meet our cash flow requirements. If we not successful in increasing our revenues sufficiently within the current fiscal quarter, we will be required to implement further cost saving actions and to attempt to obtain additional financing. There can be no assurance that financing will be available to us on reasonable terms, or at all. If we fail to increase our revenues and to obtain financing, we may be required to cease operations as a going concern and/or to adopt a plan of liquidation and dissolution.11

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

Commitments, Contractual Obligations and Off-Balance Sheet Arrangements

We lease our office facilities under an operating lease expiring April 30, ~~2010~~2011. The lease contains an option for renewal and requires the payment of taxes and other operating costs. Total rent expense under this operating lease was $6832,~~350~~258 and $~~132~~68,~~828~~350 for the years ended December 31, ~~2009~~2010 and ~~2008~~2009, respectively.

We also lease certain equipment under capital leases expiring at various dates through 2010.

Minimum future lease commitments under operating and capital leases at December 31, 2009 are as follows:

Year ending December 31,	Operating		Capital
2010	$	41,000	$	7,038
Total minimum lease payments	$	41,000		7,038
Less: amount representing interest				1,610
Obligations under capital leases			$	5,428

Recent Accounting Pronouncements

Accounting Pronouncements — The Financial Accounting Standards Board (“FASB”) is the authoritative body for financial accounting and reporting in the United States. On July 31, 2009, the FASB Accounting Standards Codification (“the Codification”) became the authoritative source of accounting principles to be applied to the financial statements of nongovernmental entities prepared in accordance with GAAP. The following is a list of recent pronouncements issued by the FASB which affect our Company:

Revenue Arrangements with Multiple Deliverables: The guidance amends the current revenue recognition guidance for multiple deliverable arrangements. It allows the use of management’s best estimate of selling price for individual elements of an arrangement when vendor specific objective evidence, vendor objective evidence, or third-party evidence is unavailable. Additionally, it eliminates the residual method of revenue recognition in accounting for multiple deliverable arrangements. The guidance is effective for fiscal years beginning on or after June 15, 2010, but early adoption is permitted. The Company isadopted ~~currently evaluating the impact that adoption of~~ this pronouncement ~~will have~~ on ~~the~~January ~~Company’s~~1, ~~Financial Statements~~2010.

-Revenue 18Arrangements with Software Elements: The pronouncement modifies the scope of the software revenue recognition guidance to exclude tangible products that contain both software and non-software components that function together to deliver the product’s essential functionality. The pronouncement is effective for fiscal years beginning on or after June 15, 2010, but early adoption is permitted. This guidance must be adopted in the same period an entity adopts the amended revenue arrangements with multiple deliverables guidance described above. The Company adopted this pronouncement on January 1, 2010.

Revenue Arrangements with Software Elements: The pronouncement modifies the scope of the software revenue recognition guidance to exclude tangible products that contain both software and non-software components that function together to deliver the product’s essential functionality. The pronouncement is effective for fiscal years beginning on or after June 15, 2010, but early adoption is permitted. This guidance must be adopted in the same period an entity adopts the amended revenue arrangements with multiple deliverables guidance described above. The Company is currently evaluating the impact that adoption of this pronouncement will have on the Company’s Financial Statements.

Critical Accounting Policies

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

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

Revenue Recognition.

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

Our revenue arrangements sometimes involve multiple elements (i.e. products and services). Revenue under multiple arrangements is recognized in accordance with Accounting Standards Codification (“ASC”) Topic 605-25 “Revenue Recognition”. Under this method, if an element is determined to be a separate unit of accounting, the revenue for the element is based on fair value and determined by verifiable objective evidence, and recognized at time of delivery. If the arrangement has an undeliverable element, we ensure that we have objective and reliable evidence of the fair value of the undeliverable element. Fair value is determined based upon the price charged when the element is sold separately. When products and services are sold together and fair values have been established, revenue related to the hardware is generally recognized when title and risk of loss have passed, and revenue related to services are recognized as the services are provided. If fair values of the various elements have not been established, we defer all revenue until all elements have been delivered.

For revenue arrangements with multiple deliverables that include or represent software products and services as well as any non-software deliverables for with a software deliverable is essential to its functionality, we recognize revenue in accordance with ASC Topic 985-605-15 Software Revenue Recognition. This requires judgment, including whether a software arrangement includes multiple elements, and if so, whether vendor-specific objective evidence (VSOE) of fair value exists, no significant obligations with regard to installation on implementation remain, and customer acceptance, when applicable, is obtained. Our revenue arrangements may include hardware, software, services and maintenance. If software is essential to the functionality of the hardware, we generally defer the recognition of revenue related to the hardware until the software revenue can be recognized. If services are essential to the functionality of the software, revenue related to the services are also deferred until the software revenue can be recognized. If the only undelivered element is maintenance for which VSOE of fair value can be established, revenue related to the software and the related elements is recognized upon customer acceptance of the software. The maintenance will then be recognized ratably over the contract term.

- 19 -

Recognition. This requires judgment, including whether a software arrangement includes multiple elements, and if so, whether vendor-specific objective evidence (VSOE) of fair value exists, no significant obligations with regard to installation on implementation remain, and customer acceptance, when applicable, is obtained. Our revenue arrangements may include hardware, software, services and maintenance. If software is essential to the functionality of the hardware, we generally defer the recognition of revenue related to the hardware until the software revenue can be recognized. If services are essential to the functionality of the software, revenue related to the services are also deferred until the software revenue can be recognized. If the only undelivered element is maintenance for which VSOE of fair value can be established, revenue related to the software and the related elements is recognized upon customer acceptance of the software. The maintenance will then be recognized ratably over the contract term.

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

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

Inventories

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

Long-Lived Assets

In accordance with ASC Topic 360-10, Property, Plant and Equipment, we review the carrying values of our long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. Any long-lived assets held for disposal are reported at the lower of their carrying amounts or fair values less costs to sell.

Share-Based Compensation

The Company accounts for share-based compensation according to the provisions of ASC Topic 718-10, Compensation – Stock Compensation, which establishes accounting for equity instruments exchanged for employee services. Share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the employee's requisite service period (generally the vesting period of the equity grant). The majority of the Company’s share-based compensation arrangements vest over four years.

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

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Capitalized Software Research and Development Costs.

Costs associated with the development of computer software are charged to operations prior to establishment of technological feasibility, as defined by ASC Topic 985-20 “Costs of Computer Software to be Sold, Leased or Marketed”. Costs incurred subsequent to the establishment of technological feasibility and prior to the general release of the products are capitalized.

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

The Company ~~capitalized~~did ~~$9,090~~not ofcapitalize any software development costs during ~~2009~~2010. Amortization of capitalized software costs was $43,~~365~~216 and $64,~~253~~365 for the years ended December 31, ~~2009~~2010 and ~~2008~~2009, respectively.

Accounting for Income Taxes.

The Company follows the provisions of ASC Topic 740-10, Income Taxes. The impact of tax positions are recognized in the financial statements if they are more likely than not to be sustained upon examination, based on the technical merits of the position. The Company has a valuation allowance against the full amount of its deferred tax assets. The Company currently provides a valuation allowance against deferred tax assets when it is more likely than not that some portion, or all of its deferred tax assets, will not be realized. Management believes the Company has no uncertain tax position at December 31, 2010 or 2009. The Company is subject to U.S. federal income tax as well as well as income tax of certain state jurisdictions. The Company has not been audited by the I.R.S. or any states in connection with income taxes. The period from ~~2005~~2007-~~2008~~2010 remains open to examination by the I.R.S. and state authorities.

Item 7A.

Quantitative and Qualitative Disclosure About Market Risk.

Not applicable.

Item 8.

Financial Statements and Supplemental Data.

The financial statements and supplementary data are listed under Part IV, Item 15 in this Annual Report on Form 10-K.

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We have conducted an evaluation under the supervision of the Chief Executive Officer and Chief Accounting Officer (our principal executive officer and principal financial officers, respectively), regarding the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2010. Based on the aforementioned evaluation, management has concluded that our disclosure controls and procedures were not effective as of December 31, 2010 because of the existence of two material weaknesses in our internal control over financial reporting related to (i) our finance group’s inability to perform the testing of internal controls on financial reporting due to our limited number of personnel engaged in accounting and finance functions and a resulting lack in the segregation of duties, and (ii) the potential inability of our accounting staff to handle certain complex accounting issues. Notwithstanding the existence of the material weaknesses described below, management has concluded that the financial statements in this Form 10-K fairly present, in all material respects, the Company’s financial position, results of operations and cash flows for the periods and dates presented.

~~- 21 -~~15

regarding the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2009. Based on the aforementioned evaluation, management has concluded that our disclosure controls and procedures were not effective as of December 31, 2009 because of the existence of two material weaknesses in our internal control over financial reporting related to (i) our finance group’s inability to perform the testing of internal controls on financial reporting due to our limited number of personnel engaged in accounting and finance functions and a resulting lack in the segregation of duties, (ii) the potential inability of our accounting staff to handle certain complex accounting issues, and (iii) as a result of the fact that our September 30, 2009 Form 10-Q was filed without a review having been performed by our Independent Registered Public Accounting Firm. Notwithstanding the existence of the material weaknesses described below, management has concluded that the consolidated financial statements in this Form 10-K fairly present, in all material respects, the Company’s financial position, results of operations and cash flows for the periods and dates presented.

(b) Management’s Annual Report on Internal Control over Financial Reporting

(i) Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system is designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial reporting and financial statement preparation and presentation.

(ii) We have assessed the effectiveness of our internal control over financial reporting as of December 31, ~~2009~~2010. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in Internal Control—Integrated Framework.

(iii) Two material weaknesses were identified in our internal control over financial reporting relative to accounting for the year ended December 31, 2008, which still exist at December 31, ~~2009~~2010. The first material weakness was comprised of inadequate segregation of duties to ensure a sufficient review of the work performed by our Chief Accounting Officer (due to the limited number of personnel we retain as employees). The second material weakness was the potential inability of our accounting staff to handle certain complex accounting issues. We believe a mitigating factor for this material weakness is the active participation of our Audit Committee. In addition, as a result of the fact that our September 30, 2009 Form 10-Q was filed without a review having been performed by ~~our~~an Independent Registered Public Accounting Firm, ~~our~~we ~~Independent~~have ~~Registered Public Accounting Firm has~~ concluded that as of September 30, 2009 a material weakness existed related to our disclosure controls and procedures, specifically with ~~regards~~regard to disclosures and procedures mandated by Securities and Exchange Commission regulations.

These material weaknesses did not result in the restatement of any previously reported financial statements or any other related financial disclosure nor did they disclose any errors or misstatements. Because of the material weaknesses described above, management has concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2009. No other material weaknesses in our internal control over financial reporting were identified.

-Because 22of -the material weaknesses described above, management has concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2010. No other material weaknesses in our internal control over financial reporting were identified.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

(iv) This annual report does not include an attestation report of ~~the~~an ~~Company’s~~independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by ~~the~~an ~~company’s~~independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the ~~company~~Company to provide only management’s report in this annual report.

No changes in our internal control over financial reporting occurred during the quarter ended December 31, ~~2009~~2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

(d) Remediation Plan for Material Weakness

In response to the identified material weaknesses described above, our management, with oversight from our Audit Committee, intends to continue to enhance our internal control over financial reporting relative to accounting during fiscal year ~~2010~~2011 as follows:

·	Interview and potentially retain third party consultants which may assist the Company’s accounting staff in providing review and analysis of complex accounting issues, and

·	Engage additional expert resources to review material transactions so as to provide a review of what are otherwise unsegregated duties of finance and accounting staff.

·	Engage additional expert resources and legal counsel to provide guidance on SEC reporting regulations.

Item 9B.

Other Information.

None.

PART III

Item 10.

Directors, Executive Officers and Corporate Governance.

On ~~September~~July 2915, ~~2009,~~2010 our Board of Directors elected one new member, ~~Bruna~~Mary ~~Bucacci~~Lee Ingoldsby, and appointed Ms. On ~~February~~Bruna 12Bucacci, ~~2008~~a ~~and~~current ~~March~~member ~~21,~~of ~~2008,~~the ~~each~~Company’s Board of ~~William~~Directors, ~~Smart~~as ~~and~~the ~~John~~interim ~~Ward~~Chairman ~~retired~~of asthe ~~Directors~~Board ~~and~~upon ~~became~~the ~~Directors~~resignation ~~Emeriti~~of Mr. Anthony Stafford. Each of our directors is elected for a period of one year and holds office until his successor is elected and qualified. Vacancies may be filled by a majority vote of the directors then remaining in office. Our officers are elected by, and serve at, the discretion of our Board of Directors. The following table sets forth the year each of our current directors was elected to our Board of Directors and the age, positions and offices currently held by each director. For information about ownership of our voting securities by each director, see Item 11 "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Name	Age	Year First Became Director	Position
Anthony Stafford	68	2007	Chairman of the Board
Bruna Bucacci	57	2009	Interim Chairman of the Board, President and Chief Executive Officer
Bruna Bucacci	56	2009	Director, President and Chief Executive Officer
John H. MacKinnon	70	2004	Director
John H. MacKinnon	69	2004	Director
Mary Lee Ingoldsby	62	2010	Director

Business Experience and Backgrounds of the Directors

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

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

Bruna A. Bucacci has served as our Chief Executive Officer since October 2009 and was elected as a Director on September 29, 2009. Ms. Bucacci joined us in May 1996 as our Controller and then on November 2005 became our Chief Accounting Officer. Prior to joining our Company, Ms. Bucacci was Corporate Controller for Thermedics Detection, Inc. from 1991 to 1996. From 1984 to 1991 she held the position of Assistant Controller for Thermedics Inc. Prior to that time Ms. Bucacci held various managerial positions for Thermo Electron, Inc. Ms. Bucacci is a graduate of Boston College where she received a BS degree in Mathematics and a graduate of Bentley College where she received a BS degree in Accounting.

John H. MacKinnon has served as one of our directors and Chairman of the Audit Committee since March 2004. Mr. MacKinnon joined PricewaterhouseCoopers LLP in 1968 and was a partner from 1978 until his retirement in 1999. Mr. MacKinnon served as a part-time consultant to the Company under an arrangement that was terminated as of February 27, 2004. Mr. MacKinnon also serves on the Boards of Directors of LoJack Corporation and Biosphere Medical Inc. Mr. MacKinnon is a Certified Public Accountant and is active in community affairs, including serving on the Boards of Trustees of Emmanuel College, Laboure College and Blessed John XXIII National Seminary.17

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

Mary Lee Ingoldsby is a licensed real estate broker and has been an Associate Broker at Coldwell Banker Residential Brokerage since 2001. Prior to 2001, she was a member of the Board of Directors of Managed Health Care Systems, a private corporation in Hingham, Mass which provides home health care services to senior citizens in their home settings. Ms. Ingoldsby was also a member of the Board of Directors of the Altwell Group, an organizational consulting group in Waltham, Mass, from 1985 to 2002. Ms. Ingoldsby received both a Bachelor of Science degree in Education and a Master of Science degree in Special Education from Boston College.

Our Board of Directors has determined that each of our directors, other than Bruna Bucacci, are “independent directors” in accordance with the rules of The NASDAQ Stock Market, Inc.

Audit Committee

The Audit Committee of our Board of Directors consists of one member, John H. MacKinnon (Chairman), who joined the committee upon his election to the Board on March 1, 2004. As a member of the Audit Committee, Mr. MacKinnon satisfies the current independence standards promulgated by the Securities and Exchange Commission and by the NASDAQ Stock Market,; as such standards apply specifically to members of audit committees. Mr. MacKinnon qualifies as an Audit Committee Financial Expert, as such term is defined under Item 401 of Regulation S-K, and has been designated the committee’s financial expert. He is also the Audit Committee Chairman.

-The 23functions of the Audit Committee include selecting, evaluating and replacing, if needed, an independent registered public accountants; approving all audit and non-audit services and fees related thereto; reviewing, in consultation with our management and independent registered public accountants, the scope and results of the interim reviews and the annual audit of our financial statements included in our quarterly and annual reports filed with the SEC; and overseeing and monitoring the processes and controls management has in place to maintain the reliability and integrity of our accounting policies and financial reporting process, to ensure the adequacy of internal accounting, financial reporting and disclosure controls and to comply with legal and regulatory requirements that may impact our financial reporting and disclosure obligations.

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

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

During 2010 and 2009, due to a lack of resources, the Audit Committee did not ~~meet~~engage ~~with~~an ~~the Company’s~~ independent registered public ~~accountants,~~accounting ~~CCR~~firm. ~~LLP,~~The toAudit ~~discuss~~Committee ~~the~~did ~~results~~not ofmeet ~~its~~during ~~audit,~~ the ~~adequacy~~years ofending ~~the~~December ~~Company’s~~31, ~~internal~~2009 and ~~external accounting controls, and the integrity of the Company’s financial reporting~~2010. ~~The Audit Committee met two times in 2009.~~

Audit Committee Report

This Audit Committee Report reviews actions taken with respect to the Company’s financial statements for the year ended December 31, ~~2009~~2010.

The Company’s management is responsible for the preparation, presentation and integrity of the Company’s financial statements and the reporting process, including the system of internal and external controls. CCR LLP, the Company’s independent registered public accounting firm, is responsible for auditing the Company’s financial statements and expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States of America. In fulfilling its responsibilities for ~~2008~~2010, the Audit Committee took the following actions:

●· ~~Reviewed~~The ~~and~~Audit ~~discussed~~Committee considered the ~~audit~~status ~~plan,~~of ~~audit~~pending ~~scope~~litigation, ~~identification~~taxation matters and other areas of ~~audit~~oversight ~~risks~~relating ~~and~~to the ~~audited~~ financial ~~statements~~reporting ~~for~~and ~~the~~audit ~~year~~process ~~ended~~that ~~December~~the ~~31,~~Committee ~~2009,~~determined ~~with management;~~appropriate.

● The members of the Audit Committee ~~also~~are ~~considered~~not professionally engaged in the ~~status~~practice of ~~pending~~auditing ~~litigation,~~or ~~taxation~~accounting ~~matters~~ and ~~other~~are ~~areas~~not employed by the Company for accounting or financial management or for any aspects of ~~oversight~~the ~~relating~~Company’s tosystem of internal accounting control. The members of the ~~financial~~Audit ~~reporting~~Committee rely, without independent verification, on the information provided to them and ~~audit~~on ~~process~~the ~~that~~representations made by management. Accordingly, the Audit Committee’s ~~determined~~oversight ~~appropriate~~does not provide an independent basis to determine that management has maintained procedures that are designed to assure compliance with accounting standards and applicable laws and regulations.

~~The~~Based ~~members~~upon of the ~~Audit~~reports, ~~Committee~~discussions ~~are~~and ~~not~~reviews ~~professionally~~described ~~engaged~~ in ~~the~~this ~~practice~~Report, ~~of auditing or accounting~~ and ~~are~~subject ~~not~~to ~~employed by~~ the ~~Company~~limitations ~~for~~on ~~accounting or financial management or for any aspects of~~ the ~~Company’s~~role ~~system~~and ofresponsibilities ~~internal accounting control. The members~~ of the ~~Audit~~ Committee ~~rely,~~referred ~~without~~to ~~independent verification~~above, on the ~~information~~Committee ~~provided~~has recommended to ~~them and on~~ the ~~representations~~Board ~~made by management~~ and the ~~Company’s~~Board ~~independent~~has ~~registered public accounting firm. Accordingly~~approved, the ~~Audit~~unaudited ~~Committee’s~~financial ~~oversight~~statements ~~does~~for ~~not~~the ~~provide~~year anended ~~independent~~December ~~basis~~31, to2010 ~~determine~~being ~~that~~included ~~management~~in ~~has maintained procedures that are designed to assure compliance with accounting standards and applicable laws and regulations. In addition,~~ the ~~Audit Committee~~Company’s ~~considerations~~Annual ~~and~~Report ~~discussions~~on ~~referred~~Form to10-K ~~above~~for ~~do not assure that~~ the ~~audit~~year ofended ~~the~~December ~~Company’s~~31, ~~financial~~2010 ~~statements~~to ~~has~~be ~~been~~filed ~~carried out in accordance~~ with ~~auditing standards of~~ the ~~Public~~Securities ~~Company~~and ~~Accounting~~Exchange ~~Oversight Board (United States)~~Commission.

- 24 -

Based upon the reports, discussions and reviews described in this Report, and subject to the limitations on the role and responsibilities of the Committee referred to above, the Committee has recommended to the Board and the Board has approved, the unaudited financial statements for the year ended December 31, 2009 being included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 to be filed with the Securities and Exchange Commission.

The Audit Committee

John H. MacKinnon, Chairman

Nominating, Compensation and Governance Committee

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

Executive Officers

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

Name		Age		Position
Bruna Bucacci		5657		President, Chief Executive Officer and Chief Accounting Officer

Business Experience and Backgrounds of the Executive Officers

The background of our executive officers, Bruna Bucacci, is summarized above.

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

Code of Ethics

We have adopted a code of ethics that applies to our chief executive officer and our senior financial officers, including our principal financial and accounting officer. The text of the code of ethics is filed as an exhibit to our Annual Report on Form 10-K and will be made available to stockholders without charge, upon request, in writing to our Corporate Secretary at National Datacomputer, Inc., ~~900~~19B ~~Middlesex~~Crosby ~~Turnpike~~Drive, ~~Bldg.~~Suite 5310, ~~Billerica~~Bedford, Massachusetts ~~01821~~01730. Disclosure regarding any amendments to or waivers from, provisions of the code of ethics that apply to our financial officers will be included in a Current Report on Form 8-K within four business days following the date of the amendment or waiver.

- 25 -

Section 16(a) Beneficial Ownership Reporting Compliance

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

To our knowledge, based solely on a review of copies of any such forms furnished to us and written representations from executive officers and directors, we believe that all Section 16(a) filings applicable to our executive officers, directors, and ten percent (10%) beneficial owners were complied with during the year ended December 31, ~~2009~~2010.

Item 11.

Executive Compensation

The following table sets forth all compensation paid or accrued during the last two fiscal years ended December 31, ~~2009~~2010 and December 31, ~~2008~~2009 to our Chief Executive Officer and to all other executive officers whose compensation exceeded $100,000 for the fiscal year ended December 31, ~~2009~~2010.

SUMMARY COMPENSATION TABLE

Name and Principal Position	Year	Salary ($)	Bonus ($)	Option Awards ($)	Total ($)
Bruna A. Bucacci, Chief Executive Officer	~~2009~~2010 ~~2008~~2009	~~101~~85,~~237~~637 ~~105~~101,~~017 (1)~~237	-0- -0-	-0- -0-	~~101~~85,~~783~~637 ~~105~~101,~~563~~237

~~(1)~~Ms. ~~Includes~~Bucacci became our Chief Executive Officer on October 2009, and has been our Chief Accounting Officer since November 21, 2005. We have not entered into a ~~bonus~~written inemployment ~~the~~agreement ~~amount~~with her, but we have arranged for her to receive an annual salary of $5101,000. ~~earned~~During in2010, Ms. Bucacci elected to reduce her salary by 10% until such time as the ~~fiscal~~financial ~~year~~status ~~ended~~of ~~December~~the 31Company would improve. We do not have any arrangements with Ms. Bucacci for any types of additional compensation, ~~2006~~including bonus payments, ~~but~~severance ~~paid~~payments, ininsurance ~~2008~~premium payments, payments upon a termination following a change of control and retirement benefits.

Ms. Bucacci became our Chief Executive Officer on October 2009, and has been our Chief Accounting Officer since November 21, 2005. We have not entered into a written employment agreement with her, but we have arranged for her to receive an annual salary of $101,000. We do not have any arrangements with Ms. Bucacci for any types of additional compensation, including bonus payments, severance payments, insurance premium payments, payments upon a termination following a change of control and retirement benefits.

Outstanding Equity Awards Table at Fiscal Year End

Name	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (1)	Option Exercise Price ($)	Option Expiration Date
Bruna Bucacci	6,666	$0.0345	4/23/17

(1)	All options vest and become exercisable ratably in four equal installments beginning on the first anniversary of the grant date, which was 4/23/07.

- 26 -

Stock Option Exercises

There were no stock options exercised by the named executive officers for the fiscal year ended December 31, ~~2009~~2010.

Director Compensation Table

The following table details the total compensation earned by the Company’s outside Directors for the year ended December 31, ~~2009~~2010. ~~Mr. Stafford received no compensation for his services as a member of the Board of Directors in Fiscal 2009.~~

Name		Fees Earned or Paid in Cash ($)
John H. MacKinnon		$-0-
Anthony Stafford		-0-
Mary Lee Ingoldsby		-0-

~~Mr.~~Member ~~MacKinnon is schedule to receive an annual compensation~~ of ~~$20,000 for his services, however due to our cash constraints, we did not paid Mr. MacKinnon during~~ the ~~year ended December 31, 2009. Mr. Stafford has elected to be compensated only for expenses related to attending the~~ Board of Directors ~~and Committee Meeting. Members~~ of the ~~Audit Committee and the Compensation Committee of the Board of Directors of the~~ Company were not compensated by the Company for their services. Additionally, none of the non-employee Directors was paid for attending board meetings. The Company reimbursed the non-employee Directors for their reasonable out-of-pocket expenses related to attending meetings of the Board of Directors or any of its committees. Management Directors did not receive any compensation for their services as Directors.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information with respect to the beneficial ownership of our common stock as of March 31, ~~2010~~2011 for (a) each stockholder known by us to own beneficially more than 5% of our common stock, (b) each current member of the Board of Directors, (c) each executive officer named in the Summary Compensation Table on page 7 hereof, and (d) all current directors and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities.

	Shares Beneficially
	Owned(1)
Name	Number		Percent
Anthony Stafford (2) c/o Codec Systems Limited Hyde House, Adelaide Road Dublin 2, Ireland		3,115,077		65.2	%
Mary Lee Ingoldsby P.O. Box 647 Hingham, MA 02043		259,841		5.4	%
John H. MacKinnon (3)		278,952		5.8	%
Bruna Bucacci		72,554		1.5	%
All executive officers and directors as a group (3 persons)		3,466,583		72.6	%

For the purpose of this table, our secured convertible promissory notes are treated on as “as converted basis” with the note being converted into such number of fully paid shares of Common Stock equal to the aggregate amount of the principal and interest so converted, divided by $.005 per share. Based upon these conversion prices, the Notes would be convertible into a total of 46,340,000 shares of our common stock.

- 27 -

	Shares Beneficially
	Owned(1)
Name	Number		Percent
Mary Lee Ingoldsby (2) P.O. Box 647 Hingham, MA 02043		32,599,841		95.9%

John H. MacKinnon (3)		278,952		6.5%

Gerald J. Adams (3)		12,000,000		87.8%

William B. Berens		543,174		32.7%

John H. MacKinnon (4)		278,952		16.8%

Bruna Bucacci (5)		2,079,220		56.7%

All executive officers and directors as a group (3 persons)		34,958,013		97.1%

(1) The number of shares of common stock issued and outstanding on March 31, ~~2010~~2011 was 41,~~274~~659,~~496~~419. The calculation of percentage ownership of each listed beneficial owner is based upon the number of shares of common stock issued and outstanding on March 31, ~~2010~~2011, including shares of common stock held upon conversion of secured convertible promissory notes, common stock subject to options and/or warrants held by such person at March 31, ~~2010~~2011 and exercisable within 60 days thereafter. The persons and entities named in the table have sole voting and investment power with respect to all Shares shown as beneficially owned by them, except as noted below.

(2) Includes ~~666~~32,~~667 shares in the aggregate beneficially owned by Mr. Stafford’s four children: Conor Stafford~~340,000 ~~Paula~~of ~~Stafford,~~common ~~Fiona~~stock ~~Stafford~~to ~~and~~be ~~Ronan~~issued ~~Stafford.~~upon ~~Mr.~~conversion ~~Stafford~~of ~~has~~secured ~~voting~~promissory ~~control~~notes ~~over~~in ~~all~~the amount of ~~such shares~~$161,700.

(3) Includes ~~144~~12,~~097~~000,000 ~~shares~~of ~~jointly~~common ~~owned~~stock byto ~~Mr.~~be ~~MacKinnon’s~~issued ~~spouse~~upon conversion of secured promissory notes in the amount of $60,000.

(4)	Includes 144,097 shares jointly owned by Mr. MacKinnon’s spouse.

(5)	Includes 6,000,000 of common stock to be issued upon conversion of secured promissory notes in the amount of $10,000.

Item 13.

Certain Relationships and Related Transactions.

The audit committee is responsible for reviewing, approving or ratifying all material transactions between us and related person. Related persons can include any of our directors or executive officers, certain of our stockholders, and any of their immediate family members. This obligation is set forth in our audit committee charter. In evaluating related person transactions, the committee members apply the same standard of good faith and fiduciary duty they apply to their general responsibilities as a committee of the board and as individual directors. In any transactions involving a related party, our audit committee considers all available material facts and circumstances of the transaction, including: (i) the direct and indirect interests of related party; (ii) if the related party is a director (or immediate family member of a director or an entity with which the director is affiliated), the impact such transaction would have on the director’s independence; (iii) the risks, costs and benefit to us; and (iv) whether any alternative transaction for comparable purposed are available. Our audit committee then makes a determination as to whether the proposed terms of the transaction are in the best interest of the Company and otherwise consistent with arm’s-length dealings with unrelated third-parties.

On July 2813, ~~2008,~~2010 ~~Anthony~~the ~~Stafford~~Company ~~purchased~~repurchased 663,~~667~~115,077 shares of ~~our~~its ~~common~~Common ~~stock~~Stock owned by Anthony Stafford, for aan aggregate purchase price of $5,000, or $0.750016 per share. Such shares constituted 65.24% of the Company’s common Stock outstanding as of such date.

On September 18, 2008, members of our Board of Directors, along with one outside investor purchases 1,825,000 shares of our common stock for a purchase price of $0.20 per share.

On June 29, 2009, Anthony Stafford purchased 500,000 shares of our common stock for a purchase price of $0.10 per share.

Item 14.

Principal Accountant Fees and Services

~~CCR~~Due ~~LLP~~to ~~has~~a ~~been~~lack ~~our~~of ~~independent registered public accounting firm since November 4~~resources, ~~2005.~~the ~~CCR~~Company ~~LLP~~did ~~has~~ not ~~performed~~engage an ~~audit~~independent orregistered ~~any~~public ~~audit~~accounting ~~services~~firm ~~related~~in to2010 ~~the~~and 2009 ~~financial statements to be included with the Form 10-K~~.

- 28 -

Audit Fees

For the year ended December 31, 2009, CCR LLP billed us $19,165 for its review of our Quarterly Reports on Form 10-Q for first and second quarters.

For the year ended December 31, 2008, CCR LLP billed us $51,054 for the audit of our financial statements and its review of our Quarterly Reports on Form 10-Q.

Audit-Related Fees

~~For the year ended December 31, 2008, CCR LLP billed us $1,315 for the review of our proxy statement.~~N/A

Tax Fees

For the year ended December 31, 2009, CCR LLP billed us $4,000 for the preparation of our 2008 corporate tax returns.

For the year ended December 31, 2008, CCR LLP billed us $3,950 for the preparation of our 2007 corporate tax returns.

All Other Fees

~~For the year ended December 31, 2008, CCR LLP billed us $7,690 for the preparation of correspondence related to comments from the SEC.~~N/A

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Certified Public Auditors

Consistent with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation and overseeing the work of the independent registered public accounting firm. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm.

Prior to engagement of the independent registered public accounting firm for the next year’s audit, management will submit an aggregate of services expected to be rendered during that year for each of four categories of services to the Audit Committee for approval.

Audit services include audit work performed in the preparation of financial statements, as well as work that generally only the independent registered auditor can reasonably be expected to provide, including comfort letters, statutory audits, and attest services and consultation regarding financial accounting and/or reporting standards.

Audit-Related services are for assurance and related services that are traditionally performed by the independent registered auditor, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements.

- 29 -

Tax services include all services performed by the independent registered auditor's tax personnel except those services specifically related to the audit of the financial statements, and includes fees in the areas of tax compliance, tax planning, and tax advice.

Other Fees are those associated with services not captured in the other categories. The Company generally does not request such services from the independent registered auditor.

Prior to engagement, the Audit Committee pre-approves these services by category of service. The fees are budgeted and the Audit Committee requires the independent registered auditor and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered auditor for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging the independent registered auditor. All of the services performed by CCR LLP during fiscal ~~2008~~2009 were preapproved by the Audit Committee.

The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.

PART IV

Item 15.

Exhibits and Financial Statement Schedules

The Company hereby furnishes the exhibits listed in the exhibit index. Exhibits, which are incorporated herein by reference, may be inspected and copied at the public reference facilities maintained by the SEC at Room 1580, Washington, D.C. 20549. Copies of such material may be obtained by mail from the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC at the address http://www.sec.gov.

(a)(1) Financial Statements

	Page
Report of Independent Registered Public Accounting Firm	n/a
Balance Sheets as of December 31, 2009 and 2008	35
Balance Sheets as of December 31, 2010 and 2009	29
Statements of Operations for the years ended December 31, 2009 and 2008	36
Statements of Operations for the years ended December 31, 2010 and 2009	30
Statement of Stockholders’ Deficit for the years ended December 31, 2009 and 2008	37
Statement of Stockholders’ Deficit for the years ended December 31, 2010 and 2009	31
Statements of Cash Flows for the years ended December 31, 2009 and 2008	38
Statements of Cash Flows for the years ended December 31, 2010 and 2009	32
Notes to Financial Statements	3933

~~- 30 -~~25

(a)(2) Exhibits.

The following exhibits are filed herewith:

Exhibit ~~No. Description~~

No. Description

3.1(a)

Certificate of Incorporation filed by the Company with the Secretary of State of Delaware on December 17, 1986.

3.2(a)

Certificate of Amendment of Certificate of Incorporation filed by the Company with the Secretary of State of Delaware on April 15, 1987 to increase the number of authorized shares.

3.3(b)

Certificate of Amendment of Certificate of Incorporation filed by the Company with the Secretary of State of Delaware on October 17, 1994 to increase the number of authorized shares.

3.3(c)

Certificate of Amendment of Certificate of Incorporation filed by the Company with the Secretary of State of Delaware on December 18, 1996 to increase the number of authorized shares.

3.4(c)

Certificate of Amendment of Certificate of Incorporation filed by the Company with the Secretary of State of Delaware on December 18, 1996 to affect a 1:4 reverse split of common stock.

3.5(d)

Certificate of Amendment of Certificate of Incorporation filed by the Company with the Secretary of State of Delaware on May 22, 2000 to increase the number of authorized shares.

3.6(j)

Certificate of Correction of Certificate of Amendment of Certificate of Incorporation filed by the Company with the Secretary of State of Delaware on June 5, 2000.

3.7(k)

Certificate of Correction of Certificate of Amendment of Certificate of Incorporations filed by the Company with the Secretary of State of Delaware on June 5, 2000.

3.8(e)

Statement of Designation of Series B Convertible Preferred Stock.

3.9(e)

Certificate of Increase of shares designated as Series B Convertible Preferred Stock.

3.10(f)

Statement of Designation of Series C Convertible Preferred Stock.

3.11(f)

Statement of Designation of Series D Convertible Preferred Stock.

3.12(g)

Statement of Designation of Series E Convertible Preferred Stock.

3.13(m)

Certificate of Amendment of Certificate of Incorporation filed by the Company with the Secretary of State of Delaware on July 31, 2008 to affect a 1:15 reverse split of common stock and reduce the number of shares of common stock authorized under the Certificate of Incorporation.

3.14(h)

Restated By-Laws

4.1	Instruments defining the rights of security holders (see Exhibits 3.1 through 3.12).

4.2(l)

Specimen Certificate of Common Stock.

10.1*(n)

2007 Employee, Director and Consultant Stock Plan, as amended.

10.2*(i)

1998 Stock Option Plan.

10.2(i)

Sixth Amendment to Lease dated August 14, 2000 by and between the Company and Middlesex Technology Center Trust V for the Company’s principal offices.

14.1(l)

Code of Ethics.

31.1	Certification of the Chief Executive Officer.

31.2	Certification of the Chief Accounting Officer.

32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

________________________

(a)	Previously filed with the Commission as Exhibit to, and incorporated herein by reference from, the Registration Statement on Form S-1 filed on April 17, 1987 (File No. 033-13392)

(b)	Previously filed with the Commission as Exhibit to, and incorporated herein by reference from, the Form 10-KSB for the fiscal year ended December 31, 1994.

(c)	Previously filed with the Commission as Exhibit to, and incorporated herein by reference from, the Form 10-KSB for the fiscal year ended December 29, 1996.

(d)	Previously filed with the Commission as Exhibit to, and incorporated herein by reference from, Form 10-QSB for the quarterly period ended June 30, 2000.

(e)	Previously filed with the Commission as Exhibit to, and incorporated herein by reference from, the Form 8-K filed September 16, 1996.

(f)	Previously filed with the Commission as Exhibit to, and incorporated herein by reference from, the Form 8-K filed March 3, 1997.

- 31 -

(g)	Previously filed with the Commission as Exhibit to, and incorporated herein by reference from, the Form 8-K filed March 6, 1998.

(h)	Previously filed with the Commission as Exhibit to, and incorporated herein by reference from, Form 10-QSB/A for the quarterly period ended September 30, 1999.

(i)	Previously filed with the Commission as Exhibit to, and incorporated herein by reference from, the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998.

(j)	Previously filed with the Commission as Exhibit to, and incorporated herein by reference from, the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2000.

(k)	Previously filed with the Commission as Exhibit to, and incorporated herein by reference from, the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2001.

(l)	Previously filed with the Commission as Exhibit to, and incorporated herein by reference from, the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003.

(m)	Previously filed with the Commission as Exhibit 3.1 to, and incorporated herein by reference from, the Company’s Current Report on Form 8-K filed with the Commission on August 5, 2008.

(n)	Previously filed with the Commission as Exhibit B to, and incorporated herein by reference from, the Company’s Proxy Statement filed with the Commission on May 8, 2008.

*	Management contract or compensatory plan, contract or arrangement.

~~- 32 -~~27

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: May 12, 2010	By:	/s/ Bruna Bucacci
Date: April 7, 2011	By:	/s/ Bruna Bucacci
		Bruna Bucacci
		President and Chief Executive Officer

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

Name	Capacity	Date
/s/ Anthony Stafford	Chairman of the Board	May 12, 2010
/s/ Bruna A. Bucacci	Chief Executive Officer	April 7, 2011
Anthony Stafford
/s/ Bruna A. Bucacci	Chief Executive Officer	May 12, 2010
Bruna A. Bucacci
/s/ John H. MacKinnon	Director	~~May~~April 127, ~~2010~~2011
John H. MacKinnon

~~- 33 -~~28

NATIONAL DATACOMPUTER, INC.

BALANCE SHEETS

	December 31,			December 31,
	2009			2008
	2010			2009
Assets
Current assets:
Cash	$	~~109~~6,~~117~~531		$	~~119~~109,~~549~~117
Accounts receivable, net of allowance for doubtful accounts of $3,000
Accounts receivable at December 31, 2010 and 2009		5,395			44,667
at December 31, 2009 and 2008		44,667			114,874
Inventories, net		1,525			1,715
Inventories, net		1,715			—
Deferred hardware and software costs		—			223,512
Deferred hardware and software costs		223,512			634,603
Prepaid expenses		40,313			79,002
Prepaid expenses		79,002			97,314
Total current assets		53,764			458,013
Total current assets		458,013			966,340
Other assets		47,173			71,941
Other assets		71,941			109,257
Property and equipment, net		7,264			12,328
Property and equipment, net		12,328			38,926
Capitalized software development costs, net		4,545			7,761
Capitalized software development costs, net		7,761			3,036
Total assets	$	112,746		$	550,043
Total assets	$	550,043		$	1,117,559
Liabilities and stockholders' deficit:
Current liabilities:
Current obligations under capital lease	$	~~5,428~~—		$	205,~~310~~428
Note payable, current portion
Accounts payable		~~673~~692,~~793~~084			~~704~~673,~~185~~793
Customer deposits		~~20,000~~—			220,~~045~~000
Accrued payroll and related taxes		1329,~~265~~112			1813,~~266~~265
Other accrued expenses		44106,~~592~~080			44,~~979~~592
Deferred revenues		~~618~~256,~~387~~551			1618,~~296,483~~387
Total current liabilities		1,~~375~~083,~~465~~827			21,~~086~~375,~~268~~465
Deferred revenues, net of current		~~324~~209,~~453~~062			324,453
Obligations under capital lease, net of current portion					6,323
Convertible debt		237,979			—
Total liabilities		1,~~699~~530,~~918~~868			21,~~092~~699,~~591~~918
Commitments and contingencies (Note 14)
Stockholders' deficit:
Preferred stock, $0.001 par value; 3,333 shares authorized;
no shares issued or outstanding		—			—
Common stock, $0.001 par value; 6,000,000 shares authorized; 4,774,496
Common stock, $0.001 par value; 6,000,000 shares authorized; 1,659,419
and 4,274,496 shares issued and outstanding at December 31, 2009 and 2008, respectively		4,775			4,275
and 4,774,496 shares issued and outstanding at December 31, 2010 and 2009, respectively		1,660			4,775
Capital in excess of par value		16,~~028~~056,~~448~~684			1516,~~971~~028,~~797~~448
Accumulated deficit		(17,183,098	)		(16,951,104	)
Treasury Stock		(5,000	)		—
Total Stockholders' deficit		(1,149,875	)		(975,032	)
Accumulated deficit		(17,471,466	)		(17,183,098	)
Total liabilities and stockholders' deficit	$	550,043		$	1,117,559
Total Stockholders' deficit		(1,418,122	)		(1,149,875	)
Total liabilities and stockholders' deficit	$	112,746		$	550,043

The accompanying notes are an integral part

of these financial statements.

~~- 34 -~~29

NATIONAL DATACOMPUTER, INC.

STATEMENTS OF OPERATIONS

	Years Ended
	December 31,			December 31,
	2009			2008
	2010			2009
Revenues:
Product	$	1480,~~173,317~~865		$	1,~~082~~173,~~647~~317
Services		~~550~~428,~~044~~106			~~737~~550,~~549~~044
Total Revenues		1908,~~723,361~~971			1,~~820~~723,~~196~~361
Cost of revenues		1705,~~256,957~~514			1,~~348~~256,957
Gross Profit		~~466~~203,~~404~~457			~~471~~466,~~239~~404
Operating expenses:
Selling and marketing		~~209~~163,~~947~~674			~~294~~209,~~754~~947
General and administrative		~~486~~322,~~622~~506			~~687~~486,~~666~~622
		696,569			982,420
		486,180			696,569
Loss from operations		(~~230~~282,~~165~~723	)		(~~511~~230,~~181~~165	)
Other income (expense):
Interest income		~~569~~105			~~2,395~~569
Gain on currency exchange		~~843~~378			~~2,851~~843
Interest expense		(36,~~241~~128	)		(83,~~269~~241	)
Net loss	$	(~~231~~288,~~994~~368	)	$	(~~514~~231,~~204~~994	)
Basic and diluted net loss per share	$	(0.0509	)	$	(0.1805	)
Weighted average shares (basic and diluted)		43,~~553~~315,~~948~~104			24,~~931~~553,~~322~~948

The accompanying notes are an integral part

of these financial statements.

~~- 35 -~~30

NATIONAL DATACOMPUTER, INC.

STATEMENT OF STOCKHOLDERS' DEFICIT

	Common Stock						Capital in					~~Total~~			Total
				Par			excess		~~Accumulated~~Treasury			~~stockholders'~~Accumulated			stockholders'
	Shares			value			of par value		~~deficit~~Stock			deficit			deficit
Balance at January 1, 2008		2,382,829		$	2,383		$	15,551,667	$	(16,436,900	)	$	(882,850	)
Balance at January 1, 2009		4,274,496		$	4,275		$	15,971,797				$	(16,951,104	)	$	(975,032	)
Net loss		—			—					~~(514,204~~	)	$	(~~514~~231,~~204~~994	)	$	(231,994	)
Net proceeds from raised capital		1500,~~891,667~~000			~~1,892~~500			~~413~~49,~~108~~500		—		$	~~415,000~~—		$	50,000
Stock based compensation related to options granted		—			—			7,022		—		$	7,022
Stock based compensation related to
Balance at December 31, 2008		4,274,496			4,275			15,971,797		(16,951,104	)		(975,032	)
options granted		—			—			7,151					—		$	7,151
Net loss										(231,994	)	$	(231,994	)
Balance at December 31, 2009		4,774,496			4,775			16,028,448		—			(17,183,098	)		(1,149,875	)
Net proceeds from raised capital		500,000			500			49,500				$	50,000
Net loss													(288,368	)	$	(288,368	)
Stock based compensation related to options granted								7,151				$	7,151
Purchase of Stafford stock		(3,115,077	)		(3,115	)		3,115		(5,000	)				$	(5,000	)
Balance at December 31, 2009		4,774,496		$	4,775		$	16,028,448	$	(17,183,098	)	$	(1,149,875	)
Elimination of Stafford debt								20,000							$	20,000
Stock based compensation related to
options granted								5,121							$	5,121
Balance at December 31, 2010		1,659,419		$	1,660		$	16,056,684	$	(5,000	)	$	(17,471,466	)	$	(1,418,122	)

The accompanying notes are an integral part

of these financial statements.

~~- 36 -~~31

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

	Years Ended			Years Ended
	December 31,			December 31,
	2009			2008
OPERATING ACTIVITIES:
Net loss	$	(231,994	)	$	(514,204	)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation and amortization		33,484			39,561
Stock based compensation related to options granted		7,151			7,022
Changes in assets and liabilities:
Decrease (increase) in accounts receivable		70,207			(38,716	)
(Increase) decrease in inventories		(1,715	)		2,401
Decrease in deferred hardware and software costs		411,091			165,020
Decrease (increase) in other prepaid expenses		55,628			(134,443	)
Decrease in accounts payable		(30,392	)		(718,444	)
Increase (decrease) in customer deposits		17,955			(7,919	)
Decrease in accrued expenses		(5,388	)		(87,500	)
(Decrease) increase in deferred revenues		(353,643	)		788,425
Net cash used for operating activities		(27,616	)		(498,797	)
Cash flows from investing activities:
Purchases of property and equipment		(2,521	)		(15,408	)
Additions to capitalized software development costs		(9,090	)		—
Net cash used for investing activities		(11,611	)		(15,408	)
Cash flows from financing activities:
Net proceeds from additional capital raised		50,000			415,000
Principal payments on note payable		—			(18,125	)
Principal payments on obligations
under capital lease		(21,205	)		(20,140	)
Net cash provided by financing activities		28,795			376,735
Net decrease in cash		(10,432	)		(137,470	)
Cash, beginning of period		119,549			257,019
Cash, end of period	$	109,117		$	119,549
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	$	3,241		$	8,269

STATEMENTS OF CASH FLOWS

	Years Ended			Years Ended

	December 31,			December 31,
	2010			2009

OPERATING ACTIVITIES:
Net loss	$	(288,368	)	$	(231,994	)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation and amortization		16,552			33,484
Stock based compensation related to options granted		5,121			7,151
Changes in assets and liabilities:
Decrease in accounts receivable		39,272			70,207
Decrease (increase) in inventories		190			(1,715	)
Decrease in deferred hardware and software costs		223,512			411,091
Decrease in other prepaid expenses		63,457			55,628
Increse (decrease) in accounts payable		18,291			(30,392	)
Increase (decrease) in customer deposits					17,955
Increase (decrease) in accrued expenses		83,614			(5,388	)
Decrease in deferred revenues		(477,227	)		(353,643	)
Net cash used for operating activities		(315,586	)		(27,616	)

Cash flows from investing activities:
Purchases of property and equipment		(8,272	)		(2,521	)
Additions to capitalized software development costs					(9,090	)
Net cash used for investing activities		(8,272	)		(11,611	)

Cash flows from financing activities:
Net proceeds from additional capital raised		—			50,000
Convertible debt		231,700			—
Purchase of treasury stock		(5,000	)		—
Principal payments on obligations
under capital lease		(5,428	)		(21,205	)
Net cash provided by financing activities		221,272			28,795

Net decrease in cash		(102,586	)		(10,432	)
Cash, beginning of period		109,117			119,549

Cash, end of period	$	6,531		$	109,117

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest	$	151		$	3,241

The accompanying notes are an integral part

of these financial statements.

~~- 37 -~~32

NATIONAL DATACOMPUTER, INC.

NOTES TO FINANCIAL STATEMENTS

1.	Organization

We ~~are~~were previously engaged in providing solutions through the use of mobile information systems in the distribution market segment within the product supply chain. We ~~design~~sold this business in early 2011. Previously, ~~market~~we designed, ~~sell~~marketed, sold, and ~~service~~serviced computerized systems used to automate the collection, processing, and communication of information related to product sales and inventory control. Our products and services ~~include~~included data communication, application-specific software, handheld computers, related peripherals, and accessories, as well as associated education and support services for our hardware and software products.

2.	Liquidity and Management Plans

We have an accumulated deficit of approximately $17,~~200~~500,000 through December 31, ~~2009~~2010. We have taken numerous steps to address this situation, such as re-aligning our spending from administration and manufacturing to maintaining key development programs while carefully managing our overall cash usage. In the event that we cannot generate sufficient cash, we will have to further reduce our level of operations, which will make it more difficult or impossible for us to continue our business as a going concern.

We continue to explore all opportunities to improve our financial condition by ~~pursuing~~seeking ~~potential~~a ~~revenues~~third ~~through~~party ~~increased marketing efforts. There can be no assurance, however, that we will realize revenues in the near future that are adequate~~ to ~~meet~~acquire our ~~cash~~corporate ~~flow requirements~~asset. If we not successful in increasing our revenues sufficiently within the current fiscal quarter, we will be required to implement further cost saving actions and to attempt to obtain additional financing. There can be no assurance that financing will be available to us on reasonable terms, or at all. If we fail to ~~increase~~identify ~~our~~a ~~revenues and to obtain financing~~purchaser, we ~~may~~will be required to cease operations as a going concern and~~/or~~ to adopt a plan of liquidation and dissolution.

3.	Summary of Significant Accounting Policies

Use of Estimates

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

Revenue Recognition.

-Our 38revenue arrangements sometimes involve multiple elements (i.e. products and services). Revenue under multiple arrangements is recognized in accordance with ASC Topic 605-25, Revenue Recognition. Under this method, if an element is determined to be a separate unit of accounting, the revenue for the element is based on fair value and determined by verifiable objective evidence, and recognized at time of delivery. If the arrangement has an undeliverable element, we ensure that we have objective and reliable evidence of the fair value of the undeliverable element. Fair value is determined based upon the price charged when the element is sold separately. When products and services are sold together and fair values have been established, revenue related to the hardware is generally recognized when title and risk of loss have passed, and revenue related to services are recognized as the services are provided. If fair values of the various elements have not been established, we defer all revenue until all elements have been delivered.

NATIONAL DATACOMPUTER, INC.

NOTES TO FINANCIAL STATEMENTS

Our revenue arrangements sometimes involve multiple elements (i.e. products and services). Revenue under multiple arrangements is recognized in accordance with ASC Topic 605-25, Revenue Recognition. Under this method, if an element is determined to be a separate unit of accounting, the revenue for the element is based on fair value and determined by verifiable objective evidence, and recognized at time of delivery. If the arrangement has an undeliverable element, we ensure that we have objective and reliable evidence of the fair value of the undeliverable element. Fair value is determined based upon the price charged when the element is sold separately. When products and services are sold together and fair values have been established, revenue related to the hardware is generally recognized when title and risk of loss have passed, and revenue related to services are recognized as the services are provided. If fair values of the various elements have not been established, we defer all revenue until all elements have been delivered.

For revenue arrangements with multiple deliverables that include or represent software products and services as well as any non-software deliverables for with a software deliverable is essential to its functionality, we recognize revenue in accordance with the ASC Topic 985-605-15, Software Revenue Recognition. This requires judgment, including whether a software arrangement includes multiple elements, and if so, whether vendor-specific objective evidence (VSOE) of fair value exists, no significant obligations with regard to installation on implementation remain, and customer acceptance, when applicable, is obtained. Our revenue arrangements may include hardware, software, services and maintenance. If software is essential to the functionality of the hardware, we generally defer the recognition of revenue related to the hardware until the software revenue can be recognized. If services are essential to the functionality of the software, revenue related to the services are also deferred until the software revenue can be recognized. If the only undelivered element is maintenance for which VSOE of fair value can be established, revenue related to the software and the related elements is recognized upon customer acceptance of the software. The maintenance will then be recognized ratably over the contract term.

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

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

Accounts Receivable

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

- 39 -

NATIONAL DATACOMPUTER, INC.

NOTES TO FINANCIAL STATEMENTS

Inventories

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

Property and Equipment

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

NATIONAL DATACOMPUTER, INC.

NOTES TO FINANCIAL STATEMENTS

Long-Lived Assets

In accordance with ASC Topic 360-10, Property, Plant and Equipment, the Company reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. Any long-lived assets held for disposal are reported at the lower of their carrying amounts or fair values less costs to sell.

Capitalized Software Research and Development Costs.

Costs associated with the development of computer software are charged to operations prior to establishment of technological feasibility, as defined by ASC Topic 985-20, (Accounting for the Costs of Computer Software to be Sold, Leased, or Marketed). Costs incurred subsequent to the establishment of technological feasibility and prior to the general release of the products are capitalized.

Income Taxes

The Company follows the provisions ASC Topic 740-10, Income Taxes. The impact of tax positions are recognized in the financial statements if they are more likely than not to be sustained upon examination, based on the technical merits of the position. The Company has a valuation allowance against the full amount of its deferred tax assets. The Company currently provides a valuation allowance against deferred tax assets when it is more likely than not that some portion, or all of its deferred tax assets, will not be realized. Management believes the Company has no uncertain tax position at December 31, 2010 or 2009. The Company is subject to U.S. federal income tax as well as well as income tax of certain state jurisdictions. The Company has not been audited by the I.R.S. or any states in connection with income taxes. The period from ~~2005~~2007-~~2008~~2010 remains open to examination by the I.R.S. and state authorities.

- 40 -

NATIONAL DATACOMPUTER, INC.

NOTES TO FINANCIAL STATEMENTS

Stock-Based Compensation

The Company accounts for share-based compensation according to the provisions of ASC Topic 718-10, Compensation-Stock Compensation, which establishes accounting for equity instruments exchanged for employee services. Share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the employee's requisite service period (generally the vesting period of the equity grant). The majority of the Company’s share-based compensation arrangements vest over four years.

During years ended December 31, ~~2009~~2010 and ~~2008~~2009, share-based compensation expense amounted to $75,~~151~~121 and $7,~~022~~151, respectively, and is included in general and administrative expense.

The Company estimates the fair value of stock options using the Black-Scholes valuation model. Key input assumptions used to estimate the fair value of stock options include the exercise price of the award, the expected option term, the expected volatility of the Company’s stock over the option’s expected term, the risk-free interest rate over the option’s expected term, and the Company’s expected annual dividend rate. The Company believes that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of the Company’s stock options granted. Estimates of fair values are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards.35

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

There were no options granted in 2009.

The weighted average grant date fair value of options granted was $0.18 during the years ended December 31, 2008. The fair value of options at date of grant was estimated using the Black-Scholes option-pricing model with the following assumptions during the year ended December 31, 2008:

	Expected option term (1)		6.25 years
	Expected volatility factor (2)		103.8%
	Risk-free interest rate (3)		2.62%
	Expected annual dividend rate		0%

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

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

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

- 41 -

NATIONAL DATACOMPUTER, INC.

NOTES TO FINANCIAL STATEMENTS

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

There were no options granted in 2010 or 2009.

Net Income (Loss) Per Share

Basic and diluted loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding. Options to purchase 8838,331 and 9288,~~996~~331 shares of common stock have not been included in the computation of diluted net loss per share for the years ended December 31, ~~2009~~2010 and ~~2008~~2009, respectively, because the effect would have been anti-dilutive.

Warranty and Return Policy

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

Shipping and Handling Costs

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

Fair Value of Financial Instruments

Cash and cash equivalents, accounts receivable, prepaid expenses, accounts payable and accrued expenses are stated at carrying amounts that approximate fair value because of the short maturity of those instruments.

4. ~~Reverse~~Recent ~~Stock~~Accounting ~~Split~~Pronouncements

OnAccounting ~~July~~Pronouncements ~~31,~~— ~~2008,~~The ~~our~~Financial Accounting Standards Board of(“FASB”) ~~Directors~~is ~~approved~~the aauthoritative ~~reverse~~body ~~stock~~for ~~split~~financial accounting and ~~established~~reporting ain ~~ratio~~the ofUnited ~~1-for-15~~States. ~~This~~On ~~move~~July 31, ~~followed~~2009, athe ~~vote~~FASB atAccounting ~~our~~Standards ~~Annual~~Codification ~~Shareholders’~~(“the ~~Meeting~~Codification”) onbecame ~~June~~the ~~24,~~authoritative ~~2008,~~source inof ~~which~~accounting ~~shareholders~~principles ~~authorized~~to ~~the~~be ~~Board~~applied to ~~effect~~ the ~~reverse~~financial ~~stock~~statements ~~split.~~of ~~Upon~~nongovernmental ~~market~~entities ~~open~~prepared onin ~~July~~accordance ~~31,~~with ~~2008,~~GAAP. ~~our~~The ~~common~~following ~~stock~~is ~~began~~a ~~trading~~list onof arecent ~~split-adjusted~~pronouncements ~~basis~~issued ~~under~~by the ~~new~~FASB ~~trading~~which ~~symbol~~affect ~~"NDCP.”~~our Company:

~~The~~Revenue ~~number~~Arrangements ofwith ~~shares~~Multiple ofDeliverables: ~~our~~The ~~authorized~~guidance ~~common~~amends ~~stock~~the ~~was~~current ~~reduced~~revenue ~~from~~recognition ~~50,000,000~~guidance ~~shares as of July 30, 2008, to 3,333,333 shares post-split. The number of shares reserved~~ for ~~issuance~~multiple ~~under~~deliverable ~~our stock option plans was also reduced proportionately~~arrangements. AsIt aallows ~~result of~~ the ~~reverse~~use ~~stock~~of ~~split,~~management’s ~~every~~best 15estimate ~~shares~~ of ~~common~~selling ~~stock~~price ~~that~~for ~~was~~individual ~~issued~~elements ~~and~~of ~~outstanding~~an ~~was~~arrangement ~~automatically~~when ~~combined~~vendor ~~into~~specific ~~one~~objective ~~issued~~evidence, ~~and~~vendor ~~outstanding~~objective ~~share~~evidence, ~~without~~or ~~any~~third-party ~~change~~evidence inis ~~the par value of such shares~~unavailable. NoAdditionally, ~~fractional~~it ~~shares~~eliminates ~~were issued in connection with~~ the ~~reverse~~residual ~~stock~~method ~~split.~~of ~~Stockholders~~revenue ~~who~~recognition ~~would be entitled to fractional shares received cash~~ in ~~lieu~~accounting offor ~~receiving~~multiple ~~fractional~~deliverable ~~shares~~arrangements. The ~~reverse~~guidance ~~stock~~is ~~split~~effective ~~affected~~for ~~all~~fiscal ~~shares~~years ofbeginning ~~common~~on ~~stock,~~or ~~stock~~after ~~options~~June 15, ~~and~~2010, ~~warrants~~but ofearly ~~NDI~~adoption ~~outstanding~~is aspermitted. ofThe ~~immediately~~Company ~~prior~~adopted to the ~~effective~~pronouncement ~~time~~on ofJanuary ~~the~~1, ~~reverse stock split~~2010.

~~All shares of common stock have been adjusted to reflect a 1 for 15 reverse stock split which was effective July 31, 2008.~~36

- 42 -

NATIONAL DATACOMPUTER, INC.

NOTES TO FINANCIAL STATEMENTS

5Revenue Arrangements with Software Elements: The pronouncement modifies the scope of the software revenue recognition guidance to exclude tangible products that contain both software and non-software components that function together to deliver the product’s essential functionality. ~~Recent~~The ~~Accounting~~pronouncement ~~Pronouncements~~is effective for fiscal years beginning on or after June 15, 2010, but early adoption is permitted. This guidance must be adopted in the same period an entity adopts the amended revenue arrangements with multiple deliverables guidance described above. The Company adopted the pronouncement on January 1, 2010.

Revenue Arrangements with Multiple Deliverables: The guidance amends the current revenue recognition guidance for multiple deliverable arrangements. It allows the use of management’s best estimate of selling price for individual elements of an arrangement when vendor specific objective evidence, vendor objective evidence, or third-party evidence is unavailable. Additionally, it eliminates the residual method of revenue recognition in accounting for multiple deliverable arrangements. The guidance is effective for fiscal years beginning on or after June 15, 2010, but early adoption is permitted. The Company is currently evaluating the impact that adoption of this pronouncement will have on the Company’s Financial Statements.

6.	Property and Equipment, net

Property and equipment related to continuing operations consist of the following:

	Estimated Useful lives (in years)	December 31, ~~2009~~2010		December 31, ~~2008~~2009
Production and engineering equipment	3-5	$	277,795	$	277,795
Furniture, fixtures and office equipment	5		~~624~~632,~~502~~774		~~621~~624,~~981~~502
Leasehold improvements	Life of lease		39,564		39,564
			941,861		939,340
			950,133		941,861
Less – accumulated depreciation and amortization			~~929~~942,~~533~~869		~~900~~929,~~414~~533
		$	127,~~328~~264	$	3812,~~926~~328

-Depreciation 43expense -was $13,336 and $29,112 for the years ended December 31, 2010 and 2009, respectively

NATIONAL DATACOMPUTER, INC.

NOTES TO FINANCIAL STATEMENTS

Depreciation expense was $29,112 and $33,308 for the years ended December 31, 2009 and 2008, respectively

7.	Capitalized Software Development Costs, net

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

Estimated Economic Lives (in years)

December 31, 2008

December 31, ~~2008~~2009

Purchased software

33,649

2433,~~559~~649

Less – accumulated amortization

2529,~~888~~104

2125,~~523~~888

74,~~761~~545

37,~~036~~761

Amortization expense was $43,~~365~~216 and $64,~~253~~365 for the years ended December 31, ~~2009~~2010 and ~~2008~~2009, respectively.

~~9. Note Payable~~37

On April 1, 2006, the Company signed an agreement with its landlord for past due rent plus interest at 12% totaling $54,607. This amount was payable over the remaining 30 months of the lease. At December 31, 2007, the remaining note balance was $18,125. The Company paid off the note in September 2008.

10. Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company has not been audited by the Internal Revenue Service or by any states in connection with income taxes. The tax returns for the years 2005 through 2008, and certain items carried forward from earlier years and utilized in those returns, remain open to examination by the IRS and various state jurisdictions.

- 44 -

NATIONAL DATACOMPUTER, INC.

NOTES TO FINANCIAL STATEMENTS

8.	Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company has not been audited by the Internal Revenue Service or by any states in connection with income taxes. The tax returns for the years 2007 through 2010, and certain items carried forward from earlier years and utilized in those returns, remain open to examination by the IRS and various state jurisdictions.

Deferred tax assets are comprised of the following:

	December 31, 2009			December 31, 2008
	December 31, 2010			December 31, 2009
Net operating loss carryforwards	$	3,~~233~~331,000		$	3,~~154~~233,000
Business tax credit carryforwards		5,000			5,000
Reserves and allowances		245,000			245,000
Depreciation and amortization		(30,000	)		(30,000	)
Accrued compensation		8,000			8,000
Gross deferred tax asset		3,~~461~~591,000			3,~~442~~461,000
Deferred tax asset valuation allowance		(3,~~461~~591,000	)		(3,~~442~~461,000	)
	$	—		$	—

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

	Year Ended
	December 31, 2009			December 31, 2008
	December 31, 2010		December 31, 2009
Statutory federal rate	34.0%	~~34.0~~	34.0%		~~34.0~~	%
Change in valuation allowance on deferred tax assets	(34.0%)	~~(34.0~~	(34.0%)		~~(34.0~~	%)
	—	—	—		—

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

At December 31, 2009, the Company has federal net operating loss carryforwards for federal tax purposes of approximately $9,033,000, which expire in various years through 2029. The Company has state net operating loss carryforwards for tax purposes of approximately $2,412,000, which expire in various years through 2014.38

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

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

- 45 -

NATIONAL DATACOMPUTER, INC.

NOTES TO FINANCIAL STATEMENTS

11At December 31, 2010, the Company has federal net operating loss carryforwards for federal tax purposes of approximately $9,300,000, which expire in various years through 2030. ~~Stock~~The ~~Options~~Company has state net operating loss carryforwards for tax purposes of approximately $1,600,000, which expire in various years through 2015.

9.	Stock Options

Share-Based Incentive Plans

On January 1, 1998, the Board of Directors adopted the 1998 Stock Option Plan ("1998 Plan") which provides for issuance of non-qualified options to employees. As of December 31, 2009, there were no longer any options outstanding and no shares available for grants under the 1998 Plan.

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

~~Upon the approval of the 2007 Plan, our 1997 Plan and our 1998 Plan terminated.~~ As of December 31, ~~2009~~2010, there were 8838,331 options outstanding under the 2007 Plan and ~~111~~161,669 shares available for grant under the 2007 Plan.

The following table summarizes information about stock options outstanding at December 31, ~~2009~~2010:

	Number of shares	Weighted average exercise price	Remaining contractual life in years	Aggregate intrinsic value
Outstanding at December 31, 2008	92,996	$0,63
Outstanding at December 31, 2009	88,331	$0.42
Granted	—	—
Exercised	—
Cancelled/forfeited	(450,~~665~~000)	3$0.6945
Outstanding at December 31, 2009	88,331	0.42	7.5	$ —
Outstanding at December 31, 2010	38,331	0.44	6.7	$ —
Options vested or expected to vest at December 31, 2009 (1)	78,612	0.45	7.5	$ —
Options vested or expected to vest at December 31, 2010 (1)	38,331	0.44	6.7	$ —
Options exercisable at December 31, 2009	39,999	0.47	7.67	$ —
Options exercisable at December 31, 2010	24,582	0.48	6.6	$ —

(1) In addition to the vested options, the Company expects a portion of the unvested options to vest at some point in the future. Options expected to vest are calculated by applying an estimated forfeiture rate to the unvested options.39

At December 31, 2009, stock-based compensation not yet recognized amounted to $14,552 and is expected to be recognized over a weighted average period of 1.5 years.

12. Equity Transactions

Anthony Stafford, an investor who has joined our Board of Directors on March 30, 2007, is now a majority stockholder of our Company after investing $400,000 for the purchase of shares of our Common Stock previously held by CapitalBank. As a condition to his investment, Mr. Stafford requested that our executive officers and members of our Board of Directors provide an aggregate of $140,000 of the $600,000 (including Mr. Stafford’s $400,000) in funds which were raised to acquire shares previously held by CapitalBank. Each of our executive officers and the members of our Board of Directors agreed to make such an investment by purchasing an aggregate of 471,944 shares of our Common Stock (the “Management Shares”) on the same terms on which Mr. Stafford purchased his shares.

- 46 -

NATIONAL DATACOMPUTER, INC.

NOTES TO FINANCIAL STATEMENTS

On(1) In ~~March~~addition ~~30,~~to ~~2007~~the ~~our~~vested ~~stockholders~~options, ~~approved~~ the ~~sale~~Company ~~and~~expects ~~issuance~~a ofportion ~~shares~~ of ~~Common~~the ~~Stock~~unvested options to ~~our~~vest ~~executive~~at ~~officers~~some ~~and~~point ~~each~~in ~~member~~the offuture. Options ~~our~~expected ~~Board~~to ofvest ~~Directors,~~are ~~and~~calculated inby ~~exchange~~applying ~~for~~ an ~~aggregate~~estimated offorfeiture ~~$600,000~~rate ~~capital~~to ~~contribution,~~ the ~~new~~unvested ~~investors received an aggregate of 2,022,616 shares of our Common Stock~~options. ~~The resulting per share purchase price was $.2966 per share.~~

~~Mr.~~At ~~Stafford,~~December ~~together with his four children~~31, ~~agreed to invest $400~~2010,~~000~~ instock-based ~~the~~compensation ~~Company,~~not ~~provided~~yet ~~that~~recognized atamounted ~~least a majority of the remaining $200,000 funds~~ to be raised be provided on an individual basis by our executive officers and the members of our Board of Directors. Our executive officers and the members of our Board of Directors agreed to invest an aggregate of $~~140~~3,~~000~~465 and ~~two~~is ~~additional~~expected ~~investors were identified~~ to ~~provide~~be ~~the~~recognized ~~remaining~~over ~~$60,000.~~a Asweighted ~~described~~average ~~above,~~period ~~these funds were used to pay AST $250,000 for our Common Stock held by CapitalBank as partial consideration for the purchase~~ of ~~the CapitalBank Shares and the remaining $350,000 will be used to provide us with needed working capital and to pay transaction expenses~~1.1 ~~Moreover, Mr~~years. Stafford agreed to acquire only our Common Stock so that we would not have to re-issue shares of our Preferred Stock, thereby ensuring that the holders of our Common Stock would not be affected by any liquidation preferences and that we would no longer have any obligation to make quarterly interest payments in cash or Common Stock with respect to the Preferred Stock.

A result of these transactions is the elimination of the outstanding shares of our Preferred Stock, which results in no other stockholder having a liquidation preference over the holders of our Common Stock as well as the cessation of our obligation to issue cash or Common Stock as interest payments with regard to the Preferred Stock, which would potentially further dilute the shares of our Common Stock that are currently outstanding10. ~~Additionally,~~Convertible ~~the stockholders will be able to vote as a single class.~~Debt

OnDuring ~~July 28~~2010, ~~2008,~~we ~~Anthony~~entered ~~Stafford~~into ~~purchased~~subscription 66agreements with three investors,~~667~~ ~~shares~~including an officer of ~~our~~the ~~common~~Company, ~~stock.~~pursuant Onto ~~September~~which ~~18,~~we ~~2008,~~issued ~~members~~an aggregate of $250,000 of our ~~Board~~secured ofconvertible ~~Directors,~~promissory ~~along~~notes ~~with~~(the ~~one~~“Notes”). ~~outside~~The ~~investor~~Notes ~~purchases~~bear ~~1,825,000~~interest ~~shares~~at the rate of ~~our~~7.0% ~~common~~per ~~stock~~annum, compounded annually. ~~Total~~All ~~proceeds~~principal ~~from~~and ~~these~~accrued ~~transactions~~interest ~~were~~are ~~$415~~payable on April 21,~~000~~ 2013.

OnOur ~~June~~obligations ~~30,~~under ~~2009,~~the ~~Anthony~~Notes ~~Stafford~~are ~~purchased~~secured ~~500,000~~by ~~shares~~the grant of ~~our~~a ~~common~~first ~~stock.~~priority ~~Total~~security ~~proceeds~~interest ~~from~~in ~~this~~all ~~transaction~~of ~~were~~our ~~$50,000~~assets.

13At any time prior to the Maturity Date, provided that the Company then has authorized a sufficient number of unissued shares of Common Stock to permit the conversion of this Note, this Note shall be convertible (in whole or in part), at the option of the Holder (the “Conversion Option”), into such number of fully paid and non-assessable shares of Common Stock as shall be equal to (i) the aggregate amount of the principal and interest so converted, divided by (ii) $.005 ~~Commitments~~per share (as adjusted to reflect stock splits, stock dividends, reorganizations, reclassifications, consolidations, mergers or sales and similar events).

~~The~~Subject ~~Company~~to ~~leases~~applicable ~~its~~cure ~~office facilities under an operating lease expiring October 31~~periods, ~~2010.~~the ~~The~~holders ~~lease~~of ~~contains~~a anmajority ~~option~~of ~~for~~the ~~renewal~~principal ~~and~~amount ~~requires~~of the ~~payment~~Notes ofoutstanding ~~real~~from ~~estate~~time ~~taxes~~to ~~and~~time ~~other~~may ~~operating~~declare ~~costs.~~the ~~Total~~entire ~~rent~~unpaid ~~expense~~principal ~~under~~balance ~~this~~of ~~operating~~the ~~lease~~Notes ~~was~~to ~~$68,350~~be due and ~~$132,828~~payable ~~for~~upon ~~the~~certain ~~years~~events ~~ended~~of ~~December 31, 2009 and 2008, respectively~~default.

The ~~Company~~Notes ~~also~~may ~~leases~~be ~~certain~~prepaid ~~equipment~~by ~~under~~us ~~capital~~at ~~leases~~our ~~expiring~~election with the written consent of the holders of at ~~various~~least ~~dates~~75% ~~through~~in original principal amount of the ~~year~~Notes. ~~2010~~.

-The 47Company’s -obligations under the Notes are secured by the grant of a first priority security interest in all of the Company’s assets.

The issuance of the Notes was exempt from registration under the Securities Act of 1933, as amended, pursuant to an exemption provided by Section 4(2) of the Securities Act.

11.	Treasury Stock

On July 13, 2010 the Company repurchased 3,115,077 shares of its Common Stock owned by Anthony Stafford, for an aggregate purchase price of $5,000, or $0.0016 per share. Such shares constituted 65.24% of the Company’s common Stock outstanding as of such date.

12.	Commitments

The Company leases its office facilities under an operating lease expiring April 30, 2011. The lease contains an option for renewal and requires the payment of real estate taxes and other operating costs. Total rent expense under operating leases was $32,258 and $68,350 for the years ended December 31, 2010 and 2009, respectively.

NATIONAL DATACOMPUTER, INC.

NOTES TO FINANCIAL STATEMENTS

~~Minimum~~13. ~~future~~Concentration ~~lease~~of ~~commitments~~Credit ~~under operating and capital leases at December 31, 2009 are as follows:~~Risk

Year ending December 31,	Operating		Capital
2010	$	41,000	$	7,038
Total minimum lease payments	$	41,000		7,038
Less: amount representing interest				1,610
Obligations under capital leases			$	5,428

The Company sells its products to customers principally in the United States of America. During 2010, three customers accounted for approximately 78% of our total revenues. During 2009, four customers accounted for 87% of our total revenues.

14The Company performs on-going credit evaluations of its customers, provides credit on an unsecured basis, and maintains reserves for potential credit losses. Such ~~Concentration~~losses, in the aggregate, have not exceeded management’s expectations. Accounts receivable from two and one customer accounted for approximately 56% and 79% of ~~Credit~~total ~~Risk~~accounts receivable at December 31, 2010 and 2009, respectively. Management does not believe that the Company is subject to any unusual credit risk beyond the normal credit risk attendant to operating its business

The Company sells its products to customers principally in the United States of America. During 2009, four customers accounted for approximately 87% of our total revenues. During 2008, three customers accounted for 83% of our total revenues.

The Company performs on-going credit evaluations of its customers, provides credit on an unsecured basis, and maintains reserves for potential credit losses. Such losses, in the aggregate, have not exceeded management’s expectations. Accounts receivable from two and one customer accounted for approximately 79% and 95% of total accounts receivable at December 31, 2009 and 2008, respectively. Management does not believe that the Company is subject to any unusual credit risk beyond the normal credit risk attendant to operating its business

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

	Percentage of net revenues	Percentage of net revenues
	2009	2008
	2010	2009
USA	7981%	8479%
Europe	2119%	1621%
Total	100%	100%

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Filing Compare · NATIONAL DATACOMPUTER INC