Attached files
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EX-32 - EXECUTIVE OFFICER CERTIFICATIONS - NATIONAL DATACOMPUTER INC | exh32-1_16751.htm |
EX-31.1 - EXECUTIVE OFFICER CERTIFICATION - NATIONAL DATACOMPUTER INC | exh31-1_16751.htm |
UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM 10-Q
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
For
the quarterly period ended September 30, 2009
OR
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
For
the transition period from
to
Commission
File Number 0-15885
NATIONAL
DATACOMPUTER, INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
04-2942832
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
900
Middlesex Turnpike, Billerica, MA
|
01821
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(978)
663-7677
(Registrant’s
telephone number, including area code)
(Former
name, former address and former fiscal year, if changed since last
report.)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x
No ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes ¨ No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer ¨ Accelerated
filer ¨
Non-accelerated
filer ¨ (Do
not check if a smaller reporting company) Smaller
reporting company x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.) Yes ¨
No x
The
number of shares of Common Stock outstanding at February 15, 2010 was
4,774,496.
NATIONAL
DATACOMPUTER, INC.
INDEX
PART
I. FINANCIAL INFORMATION
|
|
Item
1. Financial
Statements:
|
Page
No.
|
Balance
Sheets as of September 30, 2009 and December 31, 2008
|
3
|
Statements
of Operations for the three and nine months ended September 30, 2009 and
2008
|
4
|
Statement
of Stockholders’ Deficit for the nine months ended September 30,
2009
|
5
|
Statements
of Cash Flows for the nine months ended September 30, 2009 and
2008
|
6
|
|
|
Notes
to Financial Statements
|
7
|
Item
2. Management’s Discussion and Analysis or Plan of
Operation
|
11
|
Item 3. Quantitative and Qualitative
Disclosures about Market Risk
|
15
|
Item
4. Controls and Procedures
|
15
|
PART
II. OTHER INFORMATION
|
|
Item 1.
Legal Proceedings
|
16
|
Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds
|
16
|
Item 3.
Defaults upon Senior Securities
|
16
|
Item 4.
Submissions of Matters to a Vote of Security
Holders
|
16
|
|
|
Item 5.
Other Information
|
16
|
Item
6. Exhibits
|
16
|
|
|
Signatures
|
17
|
|
|
Exhibit
Index
|
18
|
- 2
-
NATIONAL
DATACOMPUTER, INC.
BALANCE
SHEETS
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
Assets
|
||||||||
Current
Assets:
|
||||||||
Cash | $ | 28,491 | $ | 119,549 | ||||
Accounts receivable, net of allowance for doubtful accounts of $3,000 | 37,668 | 114,874 | ||||||
Deferred hardware and software costs | 79,301 | 634,603 | ||||||
Prepaid expenses | 104,664 | 97,314 | ||||||
Total Current Assets | 250,124 | 966,340 | ||||||
Property
and equipment, net
|
19,574 | 38,926 | ||||||
Capitalized
software development costs, net
|
8,658 | 3,036 | ||||||
Prepaid
maintenance, net of current
|
72,366 | 109,257 | ||||||
Total Assets | $ | 350,722 | $ | 1,117,559 | ||||
Liabilities
and Stockholders' Deficit:
|
||||||||
Current
Liabilities:
|
||||||||
Current obligations under capital lease | $ | 10,252 | $ | 20,310 | ||||
Accounts payable | 708,081 | 704,185 | ||||||
Customer deposits | 3,589 | 2,045 | ||||||
Accrued payroll and related taxes | 35,012 | 18,266 | ||||||
Other accrued expenses | 32,590 | 44,979 | ||||||
Deferred revenues | 383,017 | 1,194,049 | ||||||
Total Current Liabilities | 1,172,541 | 1,983,834 | ||||||
Deferred
revenues, net of current
|
341,177 | 102,434 | ||||||
Obligations
under capital lease, net of current portion
|
- | 6,323 | ||||||
Total Liabilities | 1,513,718 | 2,092,591 | ||||||
Commitments
and contingencies
|
||||||||
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 and 4,274,496 shares | ||||||||
issued and outstanding at September 30, 2009 and December 31, 2008, respectively | 4,775 | 4,275 | ||||||
Capital in excess of par value | 16,026,645 | 15,971,797 | ||||||
Accumulated deficit | (17,194,416 | ) | (16,951,104 | ) | ||||
Total Stockholders' Deficit | (1,162,996 | ) | (975,032 | ) | ||||
Total Liabilities and Stockholders' Deficit | $ | 350,722 | $ | 1,117,559 |
The
accompanying notes are an integral part
of these financial
statements.- 3
-
NATIONAL
DATACOMPUTER, INC.
STATEMENTS
OF OPERATIONS
(Unaudited)
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
Sept
30
|
Sept
30
|
Sept
30
|
Sept
30
|
|||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Revenues:
|
||||||||||||||||
Product
|
$ | 47,472 | $ | 19,175 | $ | 954,151 | $ | 1,006,077 | ||||||||
Services
|
149,716 | 139,950 | 411,198 | 635,215 | ||||||||||||
Total
Revenues
|
197,188 | 159,125 | 1,365,349 | 1,641,292 | ||||||||||||
Cost
of revenues
|
150,864 | 175,858 | 1,021,894 | 1,188,807 | ||||||||||||
Gross
Profit
|
46,324 | (16,733 | ) | 343,455 | 452,485 | |||||||||||
Operating
expenses:
|
||||||||||||||||
Selling
and marketing
|
51,783 | 94,321 | 176,736 | 251,152 | ||||||||||||
General
and administrative
|
130,548 | 216,951 | 408,592 | 586,003 | ||||||||||||
182,331 | 311,272 | 585,328 | 837,155 | |||||||||||||
Income
(loss) from operations
|
(136,007 | ) | (328,005 | ) | (241,873 | ) | (384,670 | ) | ||||||||
Other
income (expense):
|
||||||||||||||||
Interest
income
|
181 | 132 | 504 | 2,650 | ||||||||||||
Gain
on currency exchange
|
— | 784 | 844 | 2,768 | ||||||||||||
Interest
expense
|
(675 | ) | (2,325 | ) | (2,787 | ) | (7,309 | ) | ||||||||
Net
income (loss)
|
(136,501 | ) | (329,414 | ) | (243,312 | ) | (386,561 | ) | ||||||||
(0.03 | ) | (0.12 | ) | (0.05 | ) | (0.16 | ) | |||||||||
Basic
and diluted net income (loss) per share
|
$ | (0.03 | ) | $ | (0.12 | ) | $ | (0.05 | ) | $ | (0.16 | ) | ||||
Weighted
average shares (basic and diluted)
|
4,774,496 | 2,670,375 | 4,479,624 | 2,478,678 |
The
accompanying notes are an integral part
of these financial
statements.- 4
-
NATIONAL
DATACOMPUTER, INC.
STATEMENT
OF STOCKHOLDERS' DEFICIT
Common
Stock
|
Capital
in
|
Total
|
||||||||||||||||||
Par
|
excess
|
Accumulated
|
stockholders'
|
|||||||||||||||||
Shares
|
value
|
of par value
|
deficit
|
deficit
|
||||||||||||||||
Balance
at December 31, 2008 (Audited)
|
4,274,496 | $ | 4,275 | $ | 15,971,797 | $ | (16,951,104 | ) | $ | (975,032 | ) | |||||||||
Net
income
|
— | — | — | (243,312 | ) | (243,312 | ) | |||||||||||||
Stock
based compensation related to options granted
|
— | — | 5,348 | — | 5,348 | |||||||||||||||
Net
proceeds from sale of common stock
|
500,000 | 500 | 49,500 | — | 50,000 | |||||||||||||||
Balance
at September 30, 2009 (Unaudited)
|
4,774,496 | $ | 4,775 | $ | 16,026,645 | $ | (17,194,416 | ) | $ | (1,162,996 | ) |
The
accompanying notes are an integral part
of these financial
statements.- 5
-
NATIONAL
DATACOMPUTER, INC.
STATEMENTS
OF CASH FLOWS
(Unaudited)
Nine
Months Ended
|
||||||||
Sept
30,
|
Sept
30,
|
|||||||
2009
|
2008
|
|||||||
OPERATING
ACTIVITIES:
|
||||||||
Net
loss
|
$ | (243,312 | ) | $ | (386,561 | ) | ||
Adjustments
to reconcile net loss to net
|
||||||||
cash
used for operating activities:
|
||||||||
Depreciation
and amortization
|
25,341 | 30,567 | ||||||
Stock based compensation related to options granted
|
5,348 | 5,527 | ||||||
Changes
in assets and liabilities:
|
||||||||
Decrease
(increase) in accounts receivable
|
77,206 | (82,739 | ) | |||||
Decrease
in inventories
|
— | 2,401 | ||||||
Decrease in deferred hardware and software costs
|
555,302 | 130,222 | ||||||
Decrease (increase) in prepaid expenses and other assets
|
29,541 | (206,220 | ) | |||||
Increase
(decrease) in accounts payable
|
3,896 | (633,917 | ) | |||||
Increase
(decrease) in customer deposits
|
1,544 | (8,774 | ) | |||||
Increase
(decrease) in accrued expenses
|
4,357 | (37,476 | ) | |||||
(Decrease)
increase in deferred revenues
|
(572,289 | ) | 727,765 | |||||
Net
cash used for operating activities
|
(113,066 | ) | (459,205 | ) | ||||
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 sale of common stock
|
50,000 | 415,000 | ||||||
Principal
payments on note payable
|
— | (18,125 | ) | |||||
Principal
payments on obligations
|
||||||||
under
capital lease
|
(16,381 | ) | (15,451 | ) | ||||
Net
cash provided by financing activities
|
33,619 | 381,424 | ||||||
Net
decrease in cash
|
(91,058 | ) | (93,189 | ) | ||||
Cash,
beginning of period
|
119,549 | 257,019 | ||||||
Cash,
end of period
|
$ | 28,491 | $ | 163,830 | ||||
Supplemental
Disclosure of Cash Flow Information:
|
||||||||
Cash
paid for interest
|
$ | 2,786 | $ | 6,848 | ||||
The
accompanying notes are an integral part
of these financial
statements.- 6
-
NATIONAL
DATACOMPUTER, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
1.
Basis of presentation:
Company
National
Datacomputer is engaged exclusively in providing solutions through the use of
mobile information systems in the distribution market segment within the product
supply chain. We design, market, sell and service computerized systems used to
automate the collection, processing, and communication of information related to
product sales and inventory control. Our products and services include
application-specific software, data communication, handheld computers, related
peripherals and accessories, as well as associated education and
support.
General
The
unaudited financial statements included herein have not been reviewed by our
Independent Registered Public Accounting Firm. They have been
presented pursuant to the rules of the Securities and Exchange Commission (the
“SEC”) for quarterly reports on Form 10-Q and, accordingly, do not include all
of the information and note disclosure required by accounting principles
generally accepted in the United States of America. Preparing financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses. In the opinion
of management, these statements include all adjustments, consisting only of
normal, recurring adjustments necessary for a fair presentation of the financial
position of National Datacomputer, Inc. (the “Company”) as of September 30,
2009, and the results of its operations and its cash flows for the nine months
ended September 30, 2009 and 2008. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company’s annual report for the year ended December 31, 2008, which are included
in the Company’s Form 10-K filed on March 27, 2009. The year-end condensed
balance sheet data was derived from audited financial statements.
These
accompanying unaudited interim condensed consolidated financial statements
recognize the effects of all subsequent events that provide additional evidence
about conditions that existed at September 30, 2009, including the estimates
inherent in the process of preparing financial statements. We have
evaluated such subsequent events through February 25, 2010, which is the date
the accompanying financial statements were issued.
As of
September 30, 2009, we had approximately $28,000 in cash and negative working
capital of approximately $922,000. We have an accumulated deficit of
approximately $17,200,000 through September 30, 2009. As a result of our cash
position and our accumulated deficit, the report of our Independent Registered
Public Accounting Firm relating to the financial statements as of and for the
year ended December 31, 2008 contains an explanatory paragraph regarding
substantial doubt about our ability to continue as a going concern. 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 potential
- 7
-
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.
Reverse
Stock Split
On July
31, 2008, our Board of Directors approved a reverse stock split and established
a ratio of 1-for-15. This move followed a vote at our Annual Shareholders’
Meeting on June 24, 2008, in which shareholders authorized the Board to effect
the reverse stock split. Upon market open on July 31, 2008, our common stock
began trading on a split-adjusted basis under the new trading symbol
"NDCP.”
The
number of shares of our authorized common stock was reduced from 50,000,000
shares as of July 30, 2008, to approximately 3,333,333 shares post-split. The
number of shares reserved for issuance under our stock option plans was also
reduced proportionately. As a result of the reverse stock split, every 15 shares
of common stock that was issued and outstanding were automatically combined into
one issued and outstanding share, without any change in the par value of such
shares. No fractional shares were issued in connection with the reverse stock
split. Stockholders who would be entitled to fractional shares will receive cash
in lieu of receiving fractional shares. The reverse stock split affected all
shares of common stock, stock options and warrants of NDI outstanding as of
immediately prior to the effective time of the reverse stock split.
All
shares of common stock have been adjusted to reflect a 1 for 15 reverse stock
split which was effective July 31, 2008.
2.
Recent accounting pronouncements:
In June
2009, the Financial Accounting Standards Board (“FASB”) issued FASB ASC 105,
Generally Accepted Accounting
Principles , which establishes the FASB Accounting Standards Codification
(“ASC”) as the sole source of authoritative generally accepted accounting
principles (“GAAP”). Pursuant to the provisions ofFASB ASC 105, the Company has
updated references to GAAP in its financial statements issued for the period
ended September 30, 2009. The adoption of FASB ASC 105 did not impact the
Company’s financial position or results of operations.
In May
2009, the FASB issued new authoritative guidance now codified as FASB ASC Topic
855 related to subsequent events, which establishes general standards of
accounting for and disclosures of subsequent events that occur after the balance
sheet date but prior to the issuance of financial statements. The guidance
requires additional disclosure regarding the date through which subsequent
events have been evaluated by the entity as well as whether that date is the
date the financial statements were issued. This guidance became effective for
the Company’s financial statements as of June 30, 2009. The Company has
evaluated subsequent events through February 9, 2010, the date these financial
statements were issued.
- 8
-
3.
Fair Value 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.
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. For
the three and nine months ended September 30, 2009, options to purchase 88,331
shares of common stock have not been included in the computation of diluted net
loss per share because the effect would have been anti-dilutive. For
the three and nine months ended September 30, 2008, options to purchase 106,334
shares of common stock have not been included in the computation of diluted net
loss per share because the effect would have been anti-dilutive.
5.
Share-based payments:
The
Company accounts for share-based compensation arrangements in accordance with
generally accepted accounting principles (GAAP). Under GAAP, share-based
compensation associated with time-based awards is measured at the grant date,
based upon the fair value of the award, and is recognized as an expense over the
employee’s requisite service period, which is generally the vesting period of
the equity grant.
Share-based
compensation expense amounted to $5,348 and $5,527 for the nine months ended
September 30, 2009 and 2008, respectively, and $1,802 and $1,905 for the three
months ended September 30, 2009 and 2008, respectively.
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. Management 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.
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 during the three months or nine months ended September
30, 2009. The weighted average grant date fair value of options granted was
$0.01 during the nine months ended September 30, 2008. The fair value of options
at date of grant was estimated using the Black-Scholes option-pricing model with
the following assumptions:
- 9
-
Nine
Months ended
|
Nine
Months ended
|
||||
September 30, 2009
|
September 30, 2008
|
||||
Expected
option term
|
n/a
|
6.25
years
|
|||
Expected
volatility factor
|
n/a
|
103.8%
|
|||
Risk-free
interest rate
|
n/a
|
2.62%
|
|||
Expected
annual dividend rate
|
n/a
|
0%
|
The
expected term of the grant is determined based on the vesting period and
contractual terms of the options. The expected 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 term of the grant of
6.25 years. The risk-free interest rate for the expected term of the stock
option is based on the U.S. Treasury yield.
Stock
Option Plans
On
January 1, 1998, the Board of Directors adopted the 1998 Stock Option Plan
("1998 Plan") which provides for issuance of non-qualified options to employees.
During the second quarter of 2009, options to purchase 1,332 shares of common
stock expired; no further grants are available 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
September 30, 2009, there were 88,331 options outstanding under the 2007 Plan
and 111,669 shares available for grant under the 2007 Plan.
The
following table summarizes information about stock options outstanding at
September 30, 2009:
Number
of shares
|
Weighted
average exercise price
|
Remaining
contractual life in years
|
Aggregate
intrinsic value
|
||||
Outstanding
at December 31, 2008
|
92,996
|
$0.61
|
8.38
|
||||
Granted
|
-
|
||||||
Exercised
|
-
|
||||||
Cancelled/forfeited
|
(4,665)
|
0.70
|
|||||
Outstanding
at September 30, 2009
|
88,331
|
0.45
|
7.75
|
$ -
|
|||
Options
vested or expected to vest at September 30, 2009 (1)
|
78,612
|
0.45
|
7.75
|
$ -
|
|||
Options
exercisable at September 30, 2009
|
39,999
|
$0.47
|
7.67
|
$ -
|
(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.
|
- 10
-
ITEM
2. Management’s
Discussion and Analysis or Plan of Operation.
The
following discussion provides an analysis of the financial condition and results
of operations of the Company and should be read in conjunction with the
Unaudited Financial Statements and Notes thereto appearing elsewhere herein and
our Annual Report on Form 10-K filed with the Securities and Exchange Commission
for the year ended December 31, 2008.
The
interim financial statements for the nine months ended September 30, 2009 have
not been reviewed by our Independent Registered Public Accounting
Firm.
The
discussion below contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
that involve risks and uncertainties. We generally use words such as “believe,”
“may,” “could,” “will,” “intend,” “expect,” “anticipate,” “plan,” and similar
expressions to identify forward-looking statements. You should not place undue
reliance on these forward-looking statements. Our actual results could differ
materially from those anticipated in the forward-looking statements for many
reasons, including the risks described in the Company’s filings with the
Security and Exchange Commission, including its Annual Report on Form 10-K for
the year ended December 31, 2008, filed on March 27, 2009.
Although
we believe the expectations reflected in the forward-looking statements are
reasonable, they relate only to events as of the date on which the statements
are made, and we cannot assure you that our future results, levels of activity,
performance or achievements will meet these expectations. Moreover, neither we
nor any other person assumes responsibility for the accuracy and completeness of
the forward-looking statements. We do not intend to update any of the
forward-looking statements after the date of this report to conform these
statements to actual results or to changes in our expectations, except as
required by law.
Summary
Our
mission is to provide solutions through the use of mobile information systems in
the distribution market segment within the product supply chain. We design,
market, sell, and service computerized systems used to automate the collection,
processing, and communication of information related to product sales and
inventory control. Our products and services include application-specific
software, data communication, handheld computers, related peripherals, and
accessories, as well as associated education and support.
From the
very beginning we designed our software solution based on the customer’s unique
specifications. Our first entry into the market was a DOS-based Route Accounting
software solution named RouteRider® which we developed in 1988. The RouteRider
software, running on our first generation of rugged handheld Datacomputer®
(“Datacomputer”) the DC3.0, was originally designed and built for an office
coffee service company. Since that time multiple generations of Datacomputers
(DC3X, DC4 and DC4CE) were designed and brought to market and our software
application was improved customer by customer and market by market. To date we
have provided dependable solutions for distribution markets such as baking,
dairy, beer, soda, water, wine and spirits.
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Although
our Datacomputers running our original RouteRider software are still available
for purchase, we have now channeled all of our experience into new portable and
highly parameterized Route Accounting solution software named RouteRider LE®,
(“RRLE”). RRLE is a mobile sales force automation application designed to
increase efficiency, improve productivity and make companies more profitable and
competitive by allowing sales and distribution personnel to gather, enter and
share data at the point of work. It has been designed to run on the very latest
industry standard Microsoft™
operating systems and architectures which increases our market potential
by running on industry preferred operating systems and handheld
devices.
Our goal
continues to be a leading supplier in the route accounting system markets and in
selected other market sectors which we may identify in the future. The key
elements of this strategy include: (i) listening to our customers and prospects
and then designing and building solutions that resolve their inventory and
supply chain product problems; (ii) continuously updating our software solutions
to remain current with customers' needs as well as existing technology; and
(iii) hiring people with industry experience.
Results
of Operations
Three
months ended September 30, 2009 compared to three months ended September 30,
2008.
For the
three months ended September 30, 2009, we reported a net loss of $136,501
compared to a net loss of $329,414 for the three months ended September 30,
2008. The decreased loss was a direct result of the company’s continued effort
to lower expenses.
Revenue and Gross
Profit
Total
revenues increased 24% to $197,188 for the three months ended September 30, 2009
from $159,125 for the three months ended September 30, 2008. Total product
revenues increased 148% to $47,472 for the three months ended September 30, 2009
from $19,175 for the comparable prior period. The increase was due to additional
hardware shipments.
Total
service revenues increased 7% to $149,716 for the three months ended September
30, 2009 from $139,950 for the comparable prior period. The increase is a direct
result higher support contracts offset by of lower billings of our professional
services.
Gross
profit was $46,324 or 23% of revenues for the three months ended September 30,
2009, compared to a negative gross profit of $16,733 for the prior comparable
period. The improved gross profit was due to reduction in
expenses.
Operating
Expenses
Selling and marketing expenses for the
three months ended September 30, 2009 were $51,783 compared to $94,321 for the
prior comparable period, a decrease of $42,538 or 45%. The decrease is due
primarily to lower payroll cost resulting from reduced
manpower.
General
and administrative expenses for the three months ended September 30, 2009 were
$130,548 compared to $216,951 for the prior comparable period, a decrease of
$86,403 or 40%. The decrease is a
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result of
lower legal fees combined with lower occupancy cost related to our relocation to
smaller quarters.
Nine
months ended September 30, 2009 compared to nine months ended September 30,
2008.
For the
nine months ended September 30, 2009, we reported a net loss of $243,312
compared to a net loss of $386,561 for the nine months ended September 30, 2008.
The decreased loss was a direct result of lower operating expenses, offset by
decreased revenues.
Revenue and Gross
Profit
Total
revenues decreased 17% to $1,365,349 for the nine months ended September 30,
2009 from $1,641,292 for the nine months ended September 30, 2008. Total product
revenues decreased 5% to $954,151 for the nine months ended September 30, 2009
from $1,006,077 for the comparable prior period. The decrease was due to lower
sales of our new route software product, RRLE.
Total
service revenues decreased 35% to $411,198 for the nine months ended September
30, 2009 from $635,215 for the comparable prior period. The decrease is a direct
result of lower professional service billings.
Gross
profit was $343,455 or 25% of revenues for the nine months ended September 30,
2009, compared to $452,485 or 28% of revenues for the prior comparable
period. The decreased gross profit in absolute dollars was due to our
decreased sales. The decreased profit margin as a percentage of revenues was due
to sales during the nine months ended September 30, 2008 which carried a higher
profit.
Operating
Expenses
Selling and marketing expenses for the
nine months ended September 30, 2009 were $176,736 compared to $251,152 for the
prior comparable period, a decrease of $74,416 or 30%. The decrease is due
primarily to lower payroll costs due to reduced manpower.
General
and administrative expenses for the nine months ended September 30, 2009 were
$408,592 compared to $586,003 for the prior comparable period, a decrease of
$177,411 or 30%. The decrease is a result of lower professional fees combined
with lower occupancy cost related to our relocation to smaller
quarters.
Liquidity
and Capital Resources
We used
cash of $113,066 and $459,205 for operating activities for the nine months ended
September 30, 2009 and 2008, respectively. For the nine months ended September
30, 2009, our principal operating cash was used to fund our loss from operation
combined with a decrease in deferred revenue. This was offset by a decrease in
deferred hardware and software costs along with a decrease in accounts
receivable. For the nine months ended September 30, 2008, our principal
operating cash was used to fund our loss from operations combined with a
decrease in accounts payable, along with an increase in prepaid expenses and
accounts receivable. This was offset by an increase in deferred revenues related
to new orders for RRLE scheduled for completion in early 2009.
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We used
cash of $11,611 and $15,408 for investing activities from operation for the nine
months ended September 30, 2009 and 2008, respectively. The cash was used for
the purchase of capital equipment and development of software. As of September
30, 2009, we had no material commitments for capital expenditures.
We
generated cash of $33,619 and $381,424 for financing activities for the nine
months ended September 30, 2009 and 2008, respectively. During the nine months
ended September 30, 2009, we raised capital from the private sale of 500,000
shares of our common stock, to the Chairman of our Board of Directors, in the
amount of $50,000 and made payments on obligations under our capital leases.
During the nine months ended September 30, 2008, we raised capital in the amount
of $415,000, and made payments on obligations under our notes payable and
capital leases.
As of
September 30, 2009, we had approximately $28,000 in cash and negative working
capital of approximately $922,000. We have an accumulated deficit of
approximately $17,200,000 through September 30, 2009. As a result of our cash
position and our accumulated deficit, the report of our Independent Registered
Public Accounting Firm relating to the financial statements as of and for the
year ended December 31, 2008 contains an explanatory paragraph regarding
substantial doubt about our ability to continue as a going concern. 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 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.
Critical
Accounting Policies and Estimates
The accompanying discussion and
analysis of the Company’s financial condition and results of operations are
based on the Company’s financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America (“GAAP”). The Company’s most critical accounting policies have a
significant impact on the preparation of these financial statements. These
policies include estimates and significant judgments that affect the reported
amounts of assets, liabilities, revenues, and expenses. The Company
continues to have the same critical accounting policies and estimates as are
described in Item 7, in the Company’s Annual Report on Form 10-K for fiscal year
2008 filed with the United States Securities and Exchange
Commission.
Commitments,
Contractual Obligations and Off-Balance Sheet Arrangements
Our only
off-balance sheet arrangements are non-cancelable operating leases entered into
in the ordinary course of business, as discussed in our Annual Report on Form
10-K for the year ended December 31, 2008.
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As
of September 30, 2009, there are no material changes in our contractual
obligations as disclosed in our Annual Report on Form 10-K for the year ended
December 31, 2008.
Concentration
of Credit Risk
The
Company sells its products to customers principally in the United States of
America. During the first nine months of 2009, one customer accounted for
approximately 72% of our total revenues.
ITEM
3. Quantitative
and Qualitative Disclosures about Market Risk
No
discussion is required pursuant to Form 10-Q Instruction to paragraph
305(c).
ITEM
4. Controls
and Procedures
a) Evaluation of Disclosure Controls
and Procedures. We have conducted an evaluation under the supervision of
the Chief Executive Officer and the Chief Accounting Officer (its principal
executive officer and principal financial officers, respectively), regarding the
effectiveness of the Company’s disclosure controls and procedures (as defined in
Rule 13a-15(e) and 15d-15(e) under the Exchange Act of 1934) as of September 30,
2009. Based on the aforementioned evaluation, management has concluded that our
disclosure control and procedures were not effective as of September 30, 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, and (ii) the potential inability of our accounting
staff to handle certain complex accounting issues.
(b)Changes in Internal Control over
Financial Reporting. No changes in our internal control over financial
reporting occurred during the quarter ended September 30, 2009 that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting, except as follows:
The Board
of Directors of National Datacomputer, Inc. (the “Company”) accepted Mr. Berens’
resignation as Director, President and Chief Executive Officer of the Company,
effective September 29, 2009. Mr. Berens indicated that his resignation was due
to a personal decision to pursue other interests and was not the result of any
disagreements with the Company’s management or Board of Directors.
Also on
September 29, 2009, the Board of Directors appointed Ms. Bruna Bucacci as the
Company’s President and Chief Executive Officer. Ms. Bucacci was also appointed
as a Director of the Company. These appointments were effective as of September
29, 2009. Ms. Bucacci remains as our Chief Accounting Officer and her
appointment as Chief Executive Officer reduces our segregation of
duties.
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PART
II - OTHER INFORMATION
Item
1. Legal Proceedings
We are
not a party to any legal proceedings.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
On June
10, 2009, Anthony Stafford purchased 500,000 shares of our common stock at a
price of $0.10 per share for a total cash consideration of $50,000.
Item
3. Defaults upon Senior Securities
Not
Applicable.
Item
4. Submissions of Matters to a Vote of Security Holders
Not
Applicable.
Item
5. Other Information
Not
Applicable.
Item
6. Exhibits
(a)
|
Exhibits
|
31.1
|
Certification
of the Chief Executive Officer and Chief Accounting
Officer
|
32.1
|
Certification
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
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SIGNATURES
Pursuant
to the requirements of the Securities and Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
NATIONAL DATACOMPUTER, INC. | |||
February
25, 2010
|
By:
|
/s/ Bruna Bucacci | |
Bruna
Bucacci
President
and Chief Executive Officer (principal executive officer)
Chief
Accounting Officer (principal financial and accounting
officer)
|
|||
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EXHIBIT
INDEX
Exhibit
No. Title
31.1
|
Certification
of the Chief Executive Officer and Chief Accounting
Officer
|
32.1
|
Certification
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
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