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

                                   FORM 10-QSB

(Mark One)

[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934

For the quarterly period ended         February 28, 1998

[ ] Transition  report under Section 13 or 15(d) of the Securities  Exchange Act
of 1934

For the transition period from                        to

Commission file number              0-14401

                                  SANDATA, INC.
                 (Name of Small Business Issuer in Its Charter)

Delaware                              11-2841799
(State or Other Jurisdiction of      (IRS Employer
Incorporation or Organization)      Identification No.)

26 Harbor Park Drive, Port Washington, NY 11050
(Address of Principal Executive Offices) (Zip Code)

                                  516-484-9060

                (Issuer's Telephone Number, Including Area Code)


(Former  Name,  Former  Address and Former  Fiscal Year,  if Changed  Since Last
Report)

Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

Yes        X               No


        APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS
                           DURING THE PAST FIVE YEARS

Check  whether the issuer has filed all  documents  and  reports  required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court.

Yes                        No

                      APPLICABLE ONLY TO CORPORATE ISSUERS

The  number of shares  outstanding  of each of the  issuer's  classes  of common
equity,  as of April 7, 1998 was 1,560,177 shares.  Transitional  Small Business
Disclosure Format (check one): Yes No X

<PAGE>
                                                   
                                      INDEX


                                                                       Page

PART I    FINANCIAL INFORMATION                                     

Item 1    FINANCIAL STATEMENTS:

          CONSOLIDATED CONDENSED BALANCE
          SHEETS as of February 28, 1998 (unaudited)
          and May 31, 1997                                               3

          UNAUDITED CONSOLIDATED CONDENSED
          STATEMENTS OF OPERATIONS for the three and nine
          months ended February 28, 1998 and  February 28, 1997          5

          UNAUDITED CONSOLIDATED CONDENSED
          STATEMENTS OF CASH FLOWS for the nine
          months ended February 28, 1998 and February 28, 1997           6

          NOTES TO CONSOLIDATED CONDENSED
          FINANCIAL STATEMENTS                                           7

Item 2    MANAGEMENT'S DISCUSSION AND
          ANALYSIS OR PLAN OF OPERATION                                 11

PART II   OTHER INFORMATION                                             17

Item 1    LEGAL PROCEEDINGS                                             17

Item 2    CHANGES IN SECURITIES                                         18

Item 3    DEFAULTS UPON SENIOR SECURITIES                               18

Item 4    SUBMISSION OF MATTERS TO A VOTE OF SECURITY
          HOLDERS                                                       18

Item 5    OTHER INFORMATION                                             18

Item 6    EXHIBITS AND REPORTS ON FORM 8-K                              18



<PAGE>

<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>


                                                  SANDATA, INC.

                                                 AND SUBSIDIARIES


                                       CONSOLIDATED CONDENSED BALANCE SHEETS

                                                                               UNAUDITED                 AUDITED
                                                                              February 28,                May 31,
                                                                                 1998                      1997
ASSETS:
CURRENT ASSETS
       Cash and cash equivalents                                              $1,389,497              $1,200,014
       Accounts receivable - net of allowance for
           doubtful accounts of $236,400 at February 28, 1998
           and $331,000 at May 31, 1997                                        1,482,648               1,254,589
       Receivables from affiliates                                               604,596                 949,906
       Receivable from former affiliate                                              711                  12,074
       Notes receivable - officers                                                    --                 102,867
       Inventories                                                                83,518                  16,335
       Prepaid expenses and other current assets                                 493,733                 212,114

TOTAL CURRENT ASSETS                                                           4,054,703               3,747,899

FIXED ASSETS, NET                                                              5,500,050               5,279,512

OTHER ASSETS
       Note receivable                                                           100,000                 100,000
       Cash surrender value of officers' life insurance,
           security deposits and other                                           464,865                 411,137

TOTAL ASSETS                                                                 $10,119,618              $9,538,548






            See notes to consolidated condensed financial statements
<PAGE>


                                                   SANDATA, INC.

                                                 AND SUBSIDIARIES

                                       CONSOLIDATED CONDENSED BALANCE SHEETS

                                                                               UNAUDITED                 AUDITED
                                                                            February 28,                May 31,
                                                                               1998                      1997

LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES
       Accounts payable and accrued expenses                                $1,637,007                $1,691,456
       Current portion of long-term debt                                        89,262                   267,864
       Deferred/unearned revenue                                                17,005                     2,733
       Deferred income                                                         199,586                   237,202

TOTAL CURRENT LIABILITIES                                                    1,942,860                 2,199,255

LONG-TERM DEBT                                                                      --                 1,034,201
DEFERRED INCOME                                                                260,329                   243,305
DEFERRED INCOME TAXES                                                          530,484                   370,000

TOTAL LIABILITIES                                                            2,733,673                 3,846,761

SHAREHOLDERS' EQUITY
       Common stock                                                              1,560                     1,216
       Additional paid in capital                                            4,126,868                 2,795,801
       Retained earnings                                                     3,257,517                 3,031,656
                                                                             7,385,945                 5,828,673
       Less Treasury stock                                                          --                  (136,886)

TOTAL SHAREHOLDERS' EQUITY                                                   7,385,945                 5,691,787

TOTAL LIABILITIES AND SHAREHOLDERS'
           EQUITY                                                          $10,119,618                $9,538,548



            See notes to consolidated condensed financial statements

<PAGE>

                                                   SANDATA, INC.

                                                 AND SUBSIDIARIES

                             UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

                                                            THREE MONTHS ENDED                   NINE MONTHS ENDED
                                                          FEB. 28,         FEB.28,             FEB. 28,      FEB. 28,
                                                            1998            1997                 1998          1997
REVENUES:
       Service fees                                      $3,155,692       $2,810,319     $9,103,123      $7,921,193
       Real estate rental income                                 --               --             --         134,700
       Other income                                          61,831           69,703        205,264         238,260
       Interest income                                       14,411            6,475         60,748          11,454
                                                          3,231,934        2,886,497      9,369,135       8,305,607
COSTS AND EXPENSES:
       Service Fees:
              Operating                                   2,077,541        1,738,617      5,928,295       4,708,979
              Selling, general and administrative           728,559          604,070      1,970,007       1,620,253
              Depreciation and amortization                 347,377          331,282      1,024,022         928,283
              Interest expense                               10,294           55,923         46,456         160,860
                                                          3,163,771        2,729,892      8,968,780       7,418,375
       Real Estate:
              Operating                                          --               --             --         246,894
              Depreciation and amortization                      --               --             --          47,302
              Interest expense                                   --               --             --         133,918
              Real estate taxes                                  --               --             --          71,012
                                                                 --               --             --         499,126

TOTAL COSTS AND EXPENSES                                  3,163,771        2,729,892      8,968,780       7,917,501

Earnings from operations before income taxes                 68,163          156,605        400,355         388,106

       Income tax expense                                    30,285           69,125        174,494         171,310

NET EARNINGS                                            $    37,878      $    87,480     $  225,861     $   216,796

BASIC EARNINGS PER SHARE                                $       .03      $       .10     $      .16     $       .26

DILUTED EARNINGS PER SHARE                              $       .02      $       .05     $      .11     $       .13


            See notes to consolidated condensed financial statements
<PAGE>
                                                   SANDATA, INC.

                                                 AND SUBSIDIARIES

                             UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

                                                                                    NINE MONTHS ENDED
                                                                               FEBRUARY 28,            FEBRUARY 28,
                                                                                  1998                    1997
Cash flows from operating activities:
Net earnings                                                                $  225,861                    $216,796
Adjustments to reconcile net earnings to net cash
    provided by (used in) operating activities:
       Depreciation and amortization                                         1,024,022                     975,585
       (Gain) on disposal of fixed assets                                     (184,642)                   (268,340)
       (Gain) on transfer of facility                                               --                     (15,586)
       (Decrease) in allowance for doubtful accounts receivable                (94,600)                    (23,060)
       (Decrease) in deferred income                                           (20,592)                   (209,113)
       Increase (decrease) in deferred revenue                                  14,272                     (15,750)
       (Increase) in operating assets                                         (535,989)                   (732,586)
       (Decrease) increase in operating liabilities                             (1,351)                    420,342

Net cash provided by operating activities                                     $426,981                     348,288

Cash flows from investing activities:
       Collection of note receivable - officer                                 102,867                          --
       Purchases of fixed assets                                            (1,759,918)                 (1,430,729)
       Decreases in receivables from affiliates                                345,310                          --
       Collections of note receivable-former affiliates                         11,363                      77,100
       Proceeds from sale/leaseback transaction                                700,000                     925,000

Net cash (used in) investing activities                                       (600,378)                   (428,629)

Cash flows from financing activities:
       Proceeds from stock transactions                                      1,575,683                          --
       Proceeds from private placement offering                                     --                   1,532,061
       Principal payments on term loan                                        (212,803)                   (459,352)
       Proceeds from line of credit                                                 --                   2,750,000
       Principal payments on line of credit                                 (1,000,000)                 (3,613,000)
       Proceeds from notes payable - affiliates                                     --                   3,010,000
       Principal payments on notes payable - affiliates                             --                  (3,175,000)

Net cash provided by financing activities                                      362,880                      44,709

       Increase (decrease) in cash and cash equivalents                        189,483                     (35,632)
       Cash and cash equivalents at beginning of period                      1,200,014                     368,400
       Cash and cash equivalents at end of period                        $   1,389,497                  $  322,578

Note:  As of July 31,  1995  the  Company  assumed  lease  obligations  totaling
$4,143,140  as disclosed in the Notes to the  Consolidated  Condensed  Financial
Statements in conjunction with the acquisition of a facility.  As of November 1,
1996 a company  affiliated  with the  Directors of the Company  assumed  certain
lease  obligations  relative  to the  transfer  of a  facility  in the amount of
$3,140,884  as disclosed in the Notes to the  Consolidated  Condensed  Financial
Statements.

            See notes to consolidated condensed financial statements
</TABLE>
<PAGE>
                                  SANDATA, INC.

                                AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

1.       CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

The  Consolidated   Condensed  Balance  Sheet  as  of   February 28, 1998,   the
Consolidated  Condensed  Statements of Operations  for the three and  nine-month
periods  ended  February 28, 1998  and  February 28, 1997  and the  Consolidated
Condensed   Statement   of  Cash  Flows  for  the   nine-month   periods   ended
February 28, 1998 and February 28, 1997  have been prepared by Sandata, Inc. and
Subsidiaries  (the "Company")  without audit. In the opinion of Management,  all
adjustments  (which  include only normal,  recurring  adjustments)  necessary to
present  fairly  the  financial  position  as of  February 28, 1998  and for all
periods presented have been made.

For  information  concerning  the  Company's  significant  accounting  policies,
reference  is made to the  Company's  Annual  Report on Form 10-KSB for the year
ended May 31, 1997. Results of Operations for the period ended February 28, 1998
are not necessarily  indicative of the operating  results  expected for the full
year.

2.       RELATED PARTY TRANSACTIONS

On June 1, 1994, BFS Sibling  Realty,  Inc.  ("BSRI")  formerly known as Brodsky
Sibling  Realty,  Inc.,  a  company  affiliated  with the  Company's  Directors,
borrowed  $3,350,000  in  the  form  of  Industrial  Development  Revenue  Bonds
("Bonds") to finance costs  incurred in connection  with the  acquisition of the
Company's  facility  ("Facility") from the Nassau County Industrial  Development
Agency  ("NCIDA"),  and for renovating  and equipping the Facility.  These Bonds
were subsequently  purchased by a bank (the "Bank"). The aggregate cost incurred
by BSRI in  conjunction  with such  acquisition,  renovation  and  equipping was
approximately  $4,377,000.  In  addition,  the  Company  incurred  approximately
$500,000  of  indebtedness  to  affiliates  of Mr.  Brodsky in  connection  with
additional capital improvements. The Bonds bore interest at prime plus 3/4 of 1%
until August 11, 1995,  at which time the interest rate became fixed at 9% for a
five-year  term through  September 1, 2000. At that time, the interest rate will
be adjusted to a rate of either  prime plus 3/4 of 1%, or the  applicable  fixed
rate if offered by the Bank.  As a condition to the  issuance of the Bonds,  the
NCIDA obtained title to the Facility which it then leased to BSRI.

On June 21, 1994 (as of June 1, 1994),  the Company and its Chairman  guaranteed
the full and  prompt  payment of  principal  and  interest  of the Bonds and the
Company  granted the Bank a security  interest and lien on all the assets of the
Company.  In  connection  with the issuance  and sale of the Bonds,  the Company
entered into a sublease  agreement (the "First Sublease") with BSRI, whereby the
<PAGE>
Company, as sublessee,  leased the Facility for the conduct of its business and,
in  consideration  therefor,  was  obligated to make lease  payments in at least
equal amounts due to satisfy the underlying Bond obligations.

On July 31, 1995, by an Assignment and  Assumption and First  Amendment to Lease
between the Company and BSRI, the Company  assumed the obligations of BSRI under
the lease and became the direct tenant and the beneficial  owner of the Facility
(collectively  the "First  Amendment").  In connection with the First Amendment,
the First Sublease was terminated. During the period commencing July 1, 1995 and
ending  October 31, 1996  the Company paid rent for the Facility to the NCIDA in
the amount of  $48,600  per month,  subject  to  adjustment  based upon the then
effective interest rate of the Bonds, among other things. In connection with the
First  Amendment,  the Company  obtained the right to acquire the Facility  upon
expiration of the Lease with the NCIDA and became  directly  liable to the NCIDA
for amounts due thereunder. Furthermore, in connection with the First Amendment,
the Company  assumed  certain  indebtedness  owed to affiliates of the Company's
Chairman as follows:  (i) the $364,570 remaining balance of a 48-month term loan
bearing interest at 8.7% per annum, and (ii) the $428,570 remaining balance of a
42-month term loan bearing  interest at 8.91%.  Each of the foregoing loans were
incurred in connection  with the  construction  of improvements to the Facility,
are  collateralized  by the assets of the primary  obligor and are guaranteed by
the Company's Chairman.

On August 11, 1995, the Company  entered into a $750,000 loan agreement with the
Long Island  Development  Corporation  ("LIDC"),  under a guarantee  by the U.S.
Small  Business  Administration  ("SBA") (the "SBA Loan").  The entire  $750,000
proceeds were used to repay a portion of the Bonds. The Company entered into the
First Amendment  primarily to satisfy  certain  requirements of the SBA. The SBA
Loan is payable in 240 monthly  installments of $6,255, which includes principal
and interest at a rate of 7.015%.

As of November 1, 1996,  the Company  entered into a Second  Amendment  with BFS
Realty, LLC ("BFS") (which succeeded to the interest of BSRI with respect to the
Second  Amendment),  the NCIDA  and the  Bank.  In  connection  with the  Second
Amendment, (i) BFS assumed all of the Company's obligations under the Lease with
the NCIDA and entered into the Second  Sublease with the Company,  as sublessee,
for the Facility;  and (ii) the Company  conveyed to BFS the right to become the
owner of the Facility upon expiration of the Lease. In addition, pursuant to the
Second Sublease,  the Company has assumed certain obligations owed by BFS to the
NCIDA under the Lease.  BFS has  indemnified the Company with respect to certain
obligations relative to the Lease and the Second Amendment.

As a result of the Second  Amendment and related  transactions  discussed above,
the  Company  reduced  its  fixed  assets,  consisting  of  land,  building  and
improvement  costs,  by the  amount  of the  cost  thereof,  net of  accumulated
depreciation,  in the amount of  $3,125,298  and  reduced  its long term debt by
$3,140,884,  which was assumed by BFS; the net  difference was recorded as other
income in the financial statements. Amounts owed to affiliates of the Company in
connection with the construction  and improvements  were not assumed by BFS. The
Company and its Chairman  have  guaranteed  the above  obligation to the SBA and
NCIDA in connection with the foregoing.
<PAGE>
3.       EARNINGS PER SHARE

In February  1997, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"),  "Earnings
per Share" which establishes standards for computing and presenting earnings per
share. The new standard  replaces the presentation of primary earnings per share
prescribed  by  Accounting  Principles  Board  Option  No.  15 ("APB  No.  15"),
"Earnings per Share" with a  presentation  of basic  earnings per share and also
requires dual  presentation of basic and diluted  earnings per share on the face
of the statement of operations for all entities with complex capital structures.
Basic  earnings per share excludes  dilution and is computed by dividing  income
available to common stockholders by the weighted-average number of common shares
outstanding for the period.  Diluted earnings per share is computed similarly to
fully diluted  earnings per share  pursuant to APB 15. The Company  adopted SFAS
No. 128 in the third  quarter of fiscal 1998 and has restated all prior  periods
in its financial statements.

Basic earnings per share are based on the  weighted-average  number of shares of
common stock outstanding,  which were 1,450,884 at February 28, 1998 and 841,733
at  February   28,   1997.   Diluted   earnings  per  share  are  based  on  the
weighted-average  number of shares of common stock and common stock  equivalents
outstanding, which were as follows: 2,132,904 at February 28, 1998 and 1,687,213
at February 28, 1997.  Options to purchase 74,000 shares of common stock in 1998
were  outstanding at February 28, 1998 but were not included in the  computation
of diluted  earnings  per share  because the  exercise  price of the options was
greater than the average  market  price of the common  stock for the  respective
period.

4.       SALE/LEASEBACK TRANSACTION

In January,  1998,  the Company  consummated a  Sale/Leaseback  of certain fixed
assets  (principally  computer  hardware,  software  and  equipment).  The fixed
assets,  which had a net book  value of  approximately  $515,000,  were sold for
$700,000.  The resulting gain of approximately $185,000 was recorded as deferred
income and is being recognized over the life of the lease,  which is thirty- six
(36) months. Approximately $10,300 of deferred gain was recognized for the three
and nine months ended February 28, 1998. An  unaffiliated  third party purchased
the residual rights in such lease.

<PAGE>
5.       STOCKHOLDERS' EQUITY

In October,  1996, the Company commenced a private offering,  on a "best efforts
-all or none"  basis,  to raise  $1,500,000  by issuing an  aggregate of 300,000
shares of Common Stock and five year warrants for the purchase of 150,000 shares
of Common Stock,  at an exercise price of $7.00 per share. In February 1997, the
Company completed such private offering. The net proceeds received in connection
with the sale of  300,000  shares of its  common  stock  were  $1,256,415  after
payment  of  expenses  related  to  the  offering.  Contemporaneously  with  the
execution  and  delivery  by the  Company of the letter of intent with regard to
such private offering, certain assignees of the placement agent acquired 100,000
shares of the Company's Common Stock at a purchase price of $3.00 per share; the
net proceeds from the sale of such 100,000 shares were $260,076.

In  connection  with the closing of such private  offering,  an affiliate of the
placement agent entered into a financial  consulting agreement with the Company,
pursuant to which,  among other things,  such affiliate  will receive  aggregate
annual  payments of $36,000 and certain  assignees  of such  affiliate  received
warrants to purchase an aggregate of 200,000 shares of Common Stock  exercisable
as follows:  100,000  shares at $5.00 per share and 100,000  shares at $7.00 per
share,  such warrants were to be  exercisable  for one year (with respect to the
warrants  exercisable  at $5.00 per  share) and two years  (with  respect to the
warrants  exercisable at $7.00 per share). In September 1997 the warrants issued
to  affiliates  of the  placement  agent  were  modified  so that  they  will be
redeemable  upon notice from the Company  without  regard to the market price of
the Company's  common stock. The Company has extended the expiration date of the
$5.00 warrants until April 21, 1998.

In August 1997 the Board of Directors of the Company  authorized  the redemption
of certain  warrants.  Prior to  redemption,  48,500  warrants were exercised at
$7.00 per share generating proceeds of $339,500.

Pursuant to the terms of the Company's incentive stock option plan, on August 8,
1997,  certain officers of the Company  exercised 206,667 options at an exercise
price of $1.79 per share and 23,333  options at an exercise  price of $1.875 per
share. The total proceeds generated from option exercises were $413,683.

During the three months ended November 30, 1997, 117,500 warrants were exercised
at $7.00 per share  generating  proceeds of $822,500.  Treasury  stock of 52,772
shares were utilized for stock issuances pursuant to the warrant exercise.
<PAGE>
                                  SANDATA, INC.

                                AND SUBSIDIARIES

       Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

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

Results of Operations

Revenues  were  $3,231,934  and  $9,369,135  for the three and nine months ended
February 28, 1998  as compared to $2,886,497  and  $8,305,607  for the three and
nine  months  ended  February 28, 1997,   increasing  $345,437  and  $1,063,528,
respectively.

Service fee revenue for the three and nine months  ended  February 28, 1998  was
$3,155,692 and  $9,103,123,  an increase of $345,373 and $1,181,930 for the same
periods of the prior  fiscal  year.  The  increase is  attributable  to revenues
derived from custom software programming and the SanTrax product.

Real  estate  rental  income  was  $-0- for the  three  and  nine  months  ended
February 28, 1998 as compared to $-0- and $134,700 for the three and nine months
ended February 28, 1997.

The  decreases  in  expenses  relating  to rental  income for the three and nine
months  ended  February 28, 1998   resulted  from  the  Company's  becoming  the
beneficial  owner and Lessee of the Facility as of July 31,  1995 in addition to
the effect of the subsequent Second Amendment transaction as of November 1, 1996
(as described below), whereby the Company became the Sublessee of the Facility.

Other income for the three and  nine-month  period ended  February 28, 1998  was
$61,831 and $205,264,  respectively  as compared to $69,703 and $238,260 for the
three and nine month  period  ending  February 28, 1997,  decreasing  $7,872 and
$32,996, respectively.

Expenses Related to Services

Operating  expenses were $2,077,541 and $5,928,295 for the three and nine months
ended  February 28, 1998  as compared to $1,738,617 and $4,708,979 for the three
and nine months ended February 28, 1997, increasing $338,924 and $1,219,316, 
respectively.

Programming  and  payroll  costs  relating to  existing  applications  and costs
associated  with SanTrax and its operations,  including  telephone and equipment
rental, were the primary factors for the increase in operating expenses.

<PAGE>
                                  SANDATA, INC.

                                AND SUBSIDIARIES

       Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION


Selling,  general and  administrative  expenses were $728,559 and $1,970,007 for
the three and nine months ended  February 28, 1998,  as compared to $604,070 and
$1,620,253 for the three and nine months ended February 28, 1997, an increase of
$124,489  and  $349,754,  respectively.  The  increase  is  primarily  due to an
increase in payroll costs  associated with SanTrax and an increase in legal fees
relative to discovery proceedings in the MCI litigation referred to in "Part II,
Item 1 - Legal Proceedings" and professional and administrative costs related to
SanTrax and existing product lines.

Depreciation  and  amortization  expenses were $347,377 and  $1,024,022  for the
three and nine months  ended  February  28,  1998 as  compared  to $331,282  and
$928,283 for the three and nine months ended  February 28, 1997,  an increase of
$16,095 and $95,739,  respectively.  The increase was primarily  attributable to
fixed asset additions, including software capitalization costs.

Interest  expense was  $10,294  and $46,456 for the three and nine months  ended
February 28, 1998  as compared to $55,923  and  $160,860  for the three and nine
months ended February 28, 1997, a decrease of $45,629 and $114,404 respectively.
The decreases are primarily due to less outstanding debt.

Expenses Related to Real Estate Operations

Expenses  relating  to real  estate  operations  were $0 for the  three and nine
months  ended  February  28, 1998 as compared to $-0- and $499,126 for the three
and nine months ended February 28, 1997.

The  decreases in expenses  relating to the  operation of the Facility  resulted
from the Company  becoming the beneficial owner and lessee of the Facility as of
July 31,  1995 in  addition  to the effect of the  subsequent  Second  Amendment
transaction  as of November 1, 1996 (as  described  below),  whereby the Company
became the sublessee of the Facility.

The Company has reported real estate operating  expenses only through the period
ended  November 1, 1996.  The Company  does not expect to incur any costs in the
future that relate to real estate operations.

Income Tax Expenses

Income tax  expenses  were  $30,285 and  $174,494  for the three and nine months
ended  February 28, 1998  as compared to $69,125 and  $171,310 for the three and
nine months  ended  February 28, 1997,  a decrease of $38,840 and an increase of
$3,184, respectively.
<PAGE>
Liquidity and Capital Resources

The Company's working capital was $2,111,873 as of February 28, 1998 as compared
to $1,548,644 as of May 31, 1997, an increase of $563,229.

The  Company  has  spent  approximately  $1,760,000  in fixed  asset  additions,
including  software  capitalization  costs in connection with revenue growth and
new  product  development.  The Company  expects  the current  levels of capital
expenditures to continue.

In October,  1996, the Company commenced a private offering,  on a "best efforts
-all or none"  basis,  to raise  $1,500,000  by issuing an  aggregate of 300,000
shares of Common Stock and five year warrants for the purchase of 150,000 shares
of Common Stock,  at an exercise price of $7.00 per share. In February 1997, the
Company completed such private offering. The net proceeds received in connection
with the sale of  300,000  shares of its  common  stock  were  $1,256,415  after
payment  of  expenses  related  to  the  offering.  Contemporaneously  with  the
execution  and  delivery  by the  Company of the letter of intent with regard to
such private offering, certain assignees of the placement agent acquired 100,000
shares of the Company's Common Stock at a purchase price of $3.00 per share; the
net proceeds from the sale of such 100,000 shares were $260,076.

In  connection  with the closing of such private  offering,  an affiliate of the
placement agent entered into a financial  consulting agreement with the Company,
pursuant to which,  among other things,  such affiliate  will receive  aggregate
annual  payments of $36,000 and certain  assignees  of such  affiliate  received
warrants to purchase an aggregate of 200,000 shares of Common Stock  exercisable
as follows:  100,000  shares at $5.00 per share and 100,000  shares at $7.00 per
share,  such warrants were to be  exercisable  for one year (with respect to the
warrants  exercisable  at $5.00 per  share) and two years  (with  respect to the
warrants  exercisable at $7.00 per share). In September 1997 the warrants issued
to  affiliates  of the  placement  agent  were  modified  so that  they  will be
redeemable  upon notice from the Company  without  regard to the market price of
the Company's  common stock. The Company has extended the expiration date of the
$5.00 warrants until April 21, 1998.

In August 1997 the Board of Directors of the Company  authorized  the redemption
of certain  warrants.  Prior to  redemption,  48,500  warrants were exercised at
$7.00 per share, generating proceeds of $339,500.

Pursuant to the terms of the Company's incentive stock option plan, on August 8,
1997,  certain officers of the Company  exercised 206,667 options at an exercise
price of $1.79 per share and 23,333  options at an exercise  price of $1.875 per
share. The total proceeds generated from option exercises were $413,683.

During the three months ended November 30, 1997, 117,500 warrants were exercised
at $7.00 per share,  generating  proceeds of $822,500.  Treasury stock of 52,772
shares were utilized for stock issuances pursuant to the warrant exercises.
<PAGE>
As discussed above in Note 2 to the Consolidated Condensed Financial Statements,
in November 1996, in connection  with the Second  Amendment of the Lease for the
Company's  Facility,  the Company assumed certain obligations of BFS and BFS has
indemnified the Company with respect to such assumed obligations.

On April 18, 1997, the Company's  wholly owned  subsidiary,  Sandsport,  entered
into the Credit  Agreement  with the Bank which  allows  Sandsport to borrow and
re-borrow  amounts up to  $3,000,000.  Interest  accrues on amounts  outstanding
under the Credit Agreement at a rate equal to the London Interbank  Offered Rate
plus 2% and  will be paid  quarterly  in  arrears  or,  at  Sandsport's  option,
interest  may accrue at the Bank's  prime rate.  The Credit  Agreement  required
Sandsport  to pay a  commitment  fee in the amount of $30,000 and a fee equal to
3/4% per annum payable on the unused  average daily balance of amounts under the
Credit  Agreement.  In addition,  there are other fees and charges imposed based
upon  Sandsport's  failure to  maintain  certain  minimum  balances.  The Credit
Agreement  will  expire on March 1,  2000.  The  indebtedness  under the  Credit
Agreement is guaranteed by the Company and Sandsport's sister  subsidiaries (the
"Group"). The collateral for the facility is a first lien on all equipment owned
by members of the Group,  as well as a collateral  assignment  of  $2,000,000 of
life insurance  payable on the life of Mr. Brodsky.  All of the Group assets are
pledged  to the  Bank as  collateral  for  the  amounts  due  under  the  Credit
Agreement. The Group's guaranty to the Bank was modified to conform covenants to
comply with those in the Credit Agreement.

In addition, pursuant to the Credit Agreement, the Group is required to maintain
certain  levels of net worth and meet  certain  financial  ratios in addition to
various other  affirmative and negative  covenants.  The Group has, in the past,
under  prior  agreements  with the  Bank,  failed  to meet  these  net worth and
financial ratios,  and the Bank has granted the Group waivers.  No assurance can
be given  that the Group  will be able to meet  these  net  worth and  financial
requirements  in the future,  and/or that the Bank will continue to grant to the
Group  waivers.  Although  in the past the Bank  has  renewed  its  loans to the
Company when they matured, there can be no assurance that it will continue to do
so or that the  Company,  if the Bank does not  renew the loan,  will be able to
arrange alternative financing on terms satisfactory to it.

As of February 28, 1998, the  outstanding  balance on the Credit  Agreement with
the Bank was $0.

The Company believes the results of its continued operations,  together with the
available  Credit Line and  proceeds  from the recent  private  offering and the
option and warrant  exercises  should be adequate to fund presently  foreseeable
working capital requirements.

IDA/SBA Financing

On June 1, 1994, BFS Sibling  Realty,  Inc.  ("BSRI")  formerly known as Brodsky
Sibling  Realty,  Inc.,  a  company  affiliated  with the  Company's  Directors,
borrowed  $3,350,000  in  the  form  of  Industrial  Development  Revenue  Bonds
("Bonds") to finance costs  incurred in connection  with the  acquisition of the
Company's  Facility  from  the  NCIDA,  and for  renovating  and  equipping  the
Facility.  These Bonds were subsequently  purchased by a bank (the "Bank").  The
aggregate cost incurred by BSRI in conjunction with such acquisition, renovation
and equipping was approximately  $4,377,000.  In addition,  the Company incurred
approximately   $500,000  of  indebtedness  to  affiliates  of  Mr.  Brodsky  in
connection  with  additional  capital  improvements.  The Bonds bore interest at
prime plus 3/4 of 1% until  August 11,  1995,  at which time the  interest  rate
became fixed at 9% for a five-year term through September 1, 2000. At that time,
the interest  rate will be adjusted to a rate of either prime plus 3/4 of 1%, or
the applicable fixed rate if offered by the Bank. As a condition to the issuance
of the Bonds,  the NCIDA  obtained title to the Facility which it then leased to
BSRI.
<PAGE>
On June 21, 1994 (as of June 1, 1994),  the Company and its Chairman  guaranteed
the full and  prompt  payment of  principal  and  interest  of the Bonds and the
Company  granted the Bank a security  interest and lien on all the assets of the
Company.  In connection with the issuance and sale of the Bonds, the Company, as
sublessee,  entered into a sublease  agreement (the "First Sublease") with BSRI,
whereby the Company  leased the Facility for the conduct of its business and, in
consideration  therefor,  was obligated to make lease payments in at least equal
amounts due to satisfy the underlying Bond obligations.

On July 31, 1995, by an Assignment and  Assumption and First  Amendment to Lease
between the Company and BSRI, the Company  assumed the obligations of BSRI under
the lease and became the direct tenant and the beneficial  owner of the Facility
(collectively  the "First  Amendment").  In connection with the First Amendment,
the First Sublease was terminated. During the period commencing July 1, 1995 and
ending  October 31, 1996  the Company paid rent for the Facility to the NCIDA in
the amount of  $48,600  per month,  subject  to  adjustment  based upon the then
effective interest rate of the Bonds, among other things. In connection with the
First  Amendment,  the Company  obtained the right to acquire the Facility  upon
expiration of the Lease with the NCIDA and became  directly  liable to the NCIDA
for amounts due thereunder. Furthermore, in connection with the First Amendment,
the Company  assumed  certain  indebtedness  owed to affiliates of the Company's
Chairman as follows:  (i) the $364,570 remaining balance of a 48-month term loan
bearing interest at 8.7% per annum, and (ii) the $428,570 remaining balance of a
42-month term loan bearing  interest at 8.91%.  Each of the foregoing loans were
incurred in connection  with the  construction  of improvements to the Facility,
are  collateralized  by the assets of the primary  obligor and are guaranteed by
the Company's Chairman.

On August 11, 1995, the Company  entered into a $750,000 loan agreement with the
Long Island  Development  Corporation  ("LIDC"),  under a guarantee  by the U.S.
Small  Business  Administration  ("SBA") (the "SBA Loan").  The entire  $750,000
proceeds were used to repay a portion of the Bonds. The Company entered into the
First Amendment  primarily to satisfy  certain  requirements of the SBA. The SBA
Loan is payable in 240 monthly  installments of $6,255, which includes principal
and interest at a rate of 7.015%
<PAGE>
As of November 1, 1996, the Company  entered into the Second  Amendment with BFS
(which succeeded to the interest of BSRI with respect to the Second  Amendment),
the NCIDA and the Bank. In connection with the Second Amendment, (i) BFS assumed
all of the Company's obligations under the Lease with the NCIDA and entered into
the Second Sublease with the Company, as sublessee,  for the Facility;  and (ii)
the Company  conveyed to BFS the right to become the owner of the Facility  upon
expiration  of the Lease.  In  addition,  pursuant to the Second  Sublease,  the
Company  has  assumed  certain  obligations  owed by BFS to the NCIDA  under the
Lease.  BFS has  indemnified  the Company  with  respect to certain  obligations
relative to the Lease and the Second Amendment.

As a result of the Second  Amendment and related  transactions  discussed above,
the  Company  reduced  its  fixed  assets,  consisting  of  land,  building  and
improvement  costs,  by the  amount  of the  cost  thereof,  net of  accumulated
depreciation,  in the amount of  $3,125,298  and  reduced  its long term debt by
$3,140,884,  which was assumed by BFS; the net difference was recorded as income
in the  financial  statements.  Amounts  owed to  affiliates  of the  Company in
connection with the construction  and improvements  were not assumed by BFS. The
Company and its Chairman  have  guaranteed  the above  obligation to the SBA and
NCIDA in connection with the foregoing.

Termination of Negotiations with National Medical Health Card Systems, Inc.

On June 19, 1997, the Company announced that it had commenced negotiations for a
potential business  combination with National Medical Health Card Systems,  Inc.
("Health Card"), a company  affiliated with the Company's Chairman of the Board.
In January 1998 the Company terminated such negotiations with Health Card.


<PAGE>

                                  SANDATA, INC.

                                AND SUBSIDIARIES


                           PART II - OTHER INFORMATION


Item 1  - LEGAL PROCEEDINGS:

MCI  Telecommunications  Corporation  v.  Sandata,  Inc. On April 10, 1997,  the
Company  received  notice  that MCI had  commenced  an action  against it in the
United States District Court for the Eastern  District of New York alleging that
the Company's  SanTrax time and  attendance  system  infringes on certain patent
rights allegedly owned by plaintiff. The complaint seeks compensatory and treble
damages with interest and injunctive  relief.  The Company intends to vigorously
defend this action.  On May 13, 1997, the Company filed its Answer.  Among other
things,  pursuant to the Answer,  the Company denies that its product  infringes
MCI's patent rights and asserts certain affirmative defenses.  In addition,  the
Answer contains a counterclaim  challenging the validity of MCI's alleged patent
rights.

Notwithstanding  the foregoing,  because of the uncertainties of litigation,  no
assurances  can be given as to the outcome of the MCI  litigation.  In the event
that the Company  were not to prevail in this  litigation  the Company  could be
required to pay  significant  damages to MCI and could be enjoined  from further
use of the SanTrax system as it presently exists. Although a negative outcome in
the  MCI  litigation  would  have a  material  adverse  affect  on the  Company,
including,  but not limited to, its  operations  and  financial  condition,  the
Company  believes that, if it is held that the Company's  system infringes MCI's
patent rights,  the Company would attempt to design a system to replace  SanTrax
or would  attempt to  negotiate  with MCI to utilize  its  system,  although  no
assurances can be given that the Company would be successful in these  attempts.
At the present time, the Company cannot assess the possible cost of implementing
a new system or obtaining rights from MCI.

Since late 1993, the Company has been engaged from time to time in  negotiations
relating to the use of MCI's  telephone  services in connection with the SanTrax
system. In late 1996, MCI and the Company  discussed,  among other things,  that
the Company  could pay a lesser per call charge for such services if the Company
and MCI  agreed  that the  Company's  technology  did not  violate  U.S.  Patent
5,255,183 (the "Katz Patent"),  which is the subject of the MCI  litigation.  No
such agreement was ever reached.

For the fiscal year ended May 31, 1997 and three months ended February 28, 1998,
approximately 33% and 37% of the Company's revenues,  respectively, were derived
from fees associated with the SanTrax product.

The Company  has been  advised  that MCI owns a second Katz patent (the  "Second
Patent")  which  issued last year,  and is related to the Katz  Patent.  MCI has
charged the Company with infringement of the Second Patent, but the Company does
not believe that it violates  the Second  Patent.  In addition,  the Company has
been advised  that MCI owns a pending  patent  application  relating to the Katz
Patent.  The Second Patent or the pending  application  could be amended by MCI.
There can be no assurances that the pending patent application will not issue as
a patent with claims that cover the SanTrax  system,  or that the Second  Patent
will not be amended to have claims that cover the SanTrax system.

Other than as described above, the Company is not involved in any material legal
proceeding,  other  than  that  which  is  nonmaterial  and  routine  litigation
incidental to its business.
<PAGE>
Item 2  - CHANGES IN SECURITIES:

Reference is made to "Part I, Item 2 -  Management's  Discussion and Analysis or
Plan  of  Operation"  for a  discussion  of a  private  offering  to  accredited
investors.

Item 3  - DEFAULTS UPON SENIOR SECURITIES:

None

Item 4  - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:

None

Item 5  - OTHER INFORMATION:

None

Item 6  - EXHIBITS AND REPORTS ON FORM 8-K:

Exhibit 27 - Financial Data Schedule (Electronic Filing Only)
<PAGE>
                                                  
                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



                                         SANDATA, INC.
                                         (Registrant)



Date:    April 14, 1998            By:   /s/ Bert E. Brodsky
                                         Bert E. Brodsky
                                         Chairman of the Board
                                         President, Chief Executive Officer,
                                         Chief Financial Officer


<PAGE>
 April 14, 1998



Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C.  20549

Re: Sandata, Inc., File No. 0-14401

Dear Sir or Madam,

Transmitted  herewith  through the EDGAR system is Form 10-QSB for the quarter
ending February 28, 1998 for Sandata Inc. If you have any questions or comments,
please contact me at (516)484-4400, extension 215.

                                                  Very truly yours, 
                                                  Linda Scarpantonio
                                                  Legal Coordinator