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          August 31, 2001
                               ----------------------------------------

[  ] 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
--------------------------------------------------------------------------------
  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 October ____, 2000 was _________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                    3
                  SHEETS as of August 31, 2001 (Unaudited)
                  and May 31, 2001 (Audited)

                  UNAUDITED CONSOLIDATED CONDENSED                  5
                  STATEMENTS OF OPERATIONS for the three
                  months ended August 31, 2001 and  August 31, 2000

                  UNAUDITED CONSOLIDATED CONDENSED                  6
                  STATEMENTS OF CASH FLOWS for the three
                  months ended August 31, 2001 and August 31, 2000

                  NOTES TO CONSOLIDATED CONDENSED                   7
                  FINANCIAL STATEMENTS

Item 2        -   MANAGEMENT'S DISCUSSION AND                      14
                  ANALYSIS OR PLAN OF OPERATION

PART II       -   OTHER INFORMATION                                17

Item 1        -   LEGAL PROCEEDINGS                                17

Item 2        -   CHANGES IN SECURITIES                            17

Item 3        -   DEFAULTS UPON SENIOR SECURITIES                  17

Item 4        -   SUBMISSION OF MATTERS TO A VOTE OF SECURITY
                  HOLDERS                                          17

Item 5        -   OTHER INFORMATION                                17

Item 6        -   EXHIBITS AND REPORTS ON FORM 8-K                 17



<PAGE>





                         SANDATA, INC. AND SUBSIDIARIES


                      CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<S>                                                                             <C>                      <C>

                                                                                UNAUDITED                 AUDITED
                                                                                August 31,                May 31,
                                                                                     2001                     2001
                                                                                     ----                     ----
ASSETS:
CURRENT ASSETS
       Cash and cash equivalents                                                $2,003,796              $   475,578
       Accounts receivable, net of allowance for doubtful
           accounts of $364,000 at August 31, 2001 and
           $347,000 at May 31, 2001                                               2,080,071               2,160,675
       Receivables from affiliates                                                  669,265                 802,787
       Inventories                                                                   49,999                  35,993
       Prepaid expenses and other current assets                                    244,697                 416,056

       Deferred Income Taxes                                                        279,101                 274,470
                                                                                    -------                 -------

TOTAL CURRENT ASSETS                                                              5,326,929               4,165,559

FIXED ASSETS, NET                                                                 6,372,401               6,036,203

DEFERRED INCOME TAXES                                                               501,326                 335,773

OTHER ASSETS
       Notes receivable                                                             115,883                 117,262
       Cash surrender value of officer's life insurance,
           security deposits and other                                              870,460                 866,774
                                                                                ------------             ----------

TOTAL ASSETS                                                                    $13,186,999             $11,521,571
                                                                                ===========             ===========

            See notes to consolidated condensed financial statements
</TABLE>

<PAGE>
                         SANDATA, INC. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<S>                                                                             <C>                       <C>
                                                                                UNAUDITED                 AUDITED
                                                                                August 31,                May 31,
                                                                                     2001                   2001
                                                                                     ----                   ----


LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES
       Accounts payable and accrued expenses                                    $ 3,179,643          $ 1,881,269
       Deferred/unearned revenue                                                     54,712               31,069
       Deferred income                                                              257,100              296,560
                                                                                    -------          -----------

TOTAL CURRENT LIABILITIES                                                         3,491,455            2,208,898

LONG TERM DEBT                                                                    4,450,000            3,850,000
DEFERRED INCOME                                                                      82,221              124,401
                                                                                   --------              -------

TOTAL LIABILITIES                                                                 8,023,676            6,183,299
                                                                                  ---------            ---------

COMMITMENTS AND CONTINGENCIES:

SHAREHOLDERS' EQUITY
       Common stock                                                                   2,506                2,506
       Additional paid in capital                                                 5,803,704            5,803,704
       Retained earnings                                                            876,772            1,051,721
       Notes receivable - officers                                               (1,519,659)          (1,519,659)
                                                                                ------------         ------------

TOTAL SHAREHOLDERS' EQUITY                                                        5,163,323            5,338,272
                                                                                  ---------         ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                      $13,186,999          $11,521,571
                                                                                ===========          ===========

            See notes to consolidated condensed financial statements
</TABLE>

<PAGE>
                         SANDATA, INC. AND SUBSIDIARIES
            UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<S>                                                                             <C>                             <C>


                                                                                              THREE MONTHS ENDED
                                                                                                 AUGUST 31,
                                                                                            2001                 2000
                                                                                            ----                 ----

REVENUES:
       Service fees                                                                      $4,392,328          $4,429,140
       Other income                                                                          98,742              93,668
       Interest income                                                                       33,596              48,608
                                                                                          4,524,666           4,571,416
                                                                                         ----------          ----------
COSTS AND EXPENSES:
       Operating                                                                          2,714,083           2,617,400
       Selling, general and administrative                                                1,650,170           1,178,530
       Depreciation and amortization                                                        427,862             663,955
       Interest expense                                                                      77,679              51,265
                                                                                      -------------       --------------

TOTAL COSTS AND EXPENSES                                                                  4,869,794           4,511,150
                                                                                          ---------           ---------

(LOSS) EARNINGS FROM OPERATIONS BEFORE INCOME TAXES                                        (345,128)             60,266

       Income tax (benefit) expense                                                        (170,179)             50,998
                                                                                            --------        -----------

NET (LOSS) EARNINGS                                                                      $( 174,949)      $       9,268
                                                                                         ===========      =============

BASIC AND DILUTED (LOSS) EARNINGS PER SHARE                                              $     (.07)      $         .00
</TABLE>

            See notes to consolidated condensed financial statements

<PAGE>


                         SANDATA, INC. AND SUBSIDIARIES


            UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<S>                                                                             <C>                   <C>

                                                                                         THREE MONTHS ENDED
                                                                                             AUGUST 31,
                                                                                      2001                    2000
                                                                                      ----                    ----
Cash flows from operating activities:
Net (loss) earnings                                                             $ (174,949)                $      9,268
Adjustments to reconcile net (loss) earnings to net cash
    provided by (used in) operating activities:
       Depreciation and amortization                                               427,862                      663,955
         Deferred income taxes                                                    (170,179)                      45,490
         (Loss) gain on the disposal of fixed assets                                (4,309)                       3,893
       Increase in allowance for doubtful accounts                                  17,101                       13,000
       Decrease in deferred income                                                 (81,640)                      (7,199)
       Increase (decrease) of deferred revenue                                      23,643                      (88,957)
Decrease in operating assets                                                       218,544                      381,830
Increase (decrease) in operating liabilities                                     1,298,374                     (407,576)
                                                                                  ---------                    ---------

Net cash provided by operating activities                                        1,554,447                      613,704
                                                                                  ---------                   ---------

Cash flows from investing activities:
       Purchases of fixed assets                                                  (759,751)                    (915,048)
       Proceeds from note payable                                                  500,000                          ---
         Principal payments on note payable                                       (500,000)                         ---
       Decrease (Increase) in receivables from affiliates                          133,522                     (322,485)
                                                                                   -------                  ------------

Net cash (used in) investing activities                                           (626,229)                  (1,237,533)
                                                                                  ---------                   ----------

Cash flows from financing activities:
       Proceeds from note payable                                                      ---                      100,000
       Proceeds from line of credit                                              1,450,000
       Principal payments on line of credit                                       (850,000)                    (100,000)
                                                                                  --------                  -----------

Net cash provided by financing activities                                          600,000                          ---
                                                                                   -------                  -----------

       Increase (Decrease) in cash and cash equivalents                          1,528,218                     (623,829)
       Cash and cash equivalents at beginning of period                            475,578                    1,229,718
                                                                                   -------                 ------------
       Cash and cash equivalents at end of period                               $2,003,796                 $    605,889
                                                                                ==========                 ============


            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  August  31,  2001,  the
Consolidated Condensed Statements of Operations for the three month period ended
August 31, 2001 and 2000 and the Consolidated Condensed Statements of Cash Flows
for the three month period ended August 31, 2001 and 2000 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 August 31, 2001 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, 2001.  Results of Operations  for the period ended August 31, 2001
are not necessarily  indicative of the operating  results  expected for the full
year.

2.       RELATED PARTY TRANSACTIONS

     a. Pursuant to an agreement (the "Agreement") involving the Company, Nassau
County  Industrial   Development   Agency  ("NCIDA"),   BFS  Realty,   LLC  (the
"Affiliate") HSBC Bank USA (successor to Marine Midland Bank) and the U.S. Small
Business Administration ("SBA"), the Affiliate borrowed $3,350,000 in Industrial
Development  Revenue  Bonds (the  "Bonds")  to finance  the  acquisition  of the
Company's facility (the "Facility").

     Under the terms of the  Agreement,  the Company is jointly  and  separately
liable to the NCIDA for all obligations owed by the Affiliate to the NCIDA under
the lease  agreement  between NCIDA, as landlord,  and the Affiliate,  as Tenant
(the "Lease");  however,  the Affiliate has indemnified the Company with respect
to certain  obligations  relative  to the Lease and the  Agreement.  The Company
subleases  space  from the  Affiliate  (see  below).  The Bonds  currently  bear
interest at the rate of 9%, and the  outstanding  balance due on the Bonds as of
August 31, 2001 was $1,574,445.

     The Company has also entered into a $750,000 loan  agreement  with the Long
Island Development Corporation ("LIDC"),  under a guarantee by the SBA (the "SBA
Loan").  The SBA Loan was assigned to the Affiliate in November  1996;  however,
repayment of the SBA Loan is guaranteed by the Company and various  subsidiaries
of the Company.  The SBA Loan is payable in 240 monthly  installments of $6,255,
which  includes  principal and interest at a rate of 7.015%.  The balance of the
SBA loan as of August 31, 2001 was $619,271.

     b. The Company derived  revenue from National  Medical Health Card Systems,
Inc.  ("Health  Card")  a  company  affiliated  with  the  Company's   Chairman,
principally  for data  base and  operating  system  support,  hardware  leasing,
maintenance and related  administrative  services.  The revenues  generated from
Health Card amounted to approximately $367,000 and $597,000 for the three months
ended August 31, 2001 and 2000, respectively,  for various services. In addition
the Company resells its telephone services to Health Card. The billings for such
telephone  services amounted to approximately  $61,000 and $18,000 for the three
months  ended  August  31,  2001 and 2000  respectively  and are  recorded  as a
reduction of operating  expense.  The Company was owed $400,892 from Health Card
at August  31,  2001.  Subsequent  to August  31,  2001,  the  Company  received
approximately $185,500 from Health Card.

     c. The Company makes lease and rent payments to affiliates of the Company's
Chairman.  The payments for leased equipment were made to P.W. Capital Corp. and
P.W. Medical Management, Inc., and were $95,186 and $98,590 for the three months
ended August 31, 2001 and 2000, respectively. The payments for the Facility were
made to the Affiliate, and were $142,943 and $140,900 for the three months ended
August 31, 2001 and 2000, respectively.

     d. Medical Arts Office  Services,  Inc.  ("MAOS"),  of which the  Company's
Chairman  is  the  sole  shareholder,  provided  the  Company  with  accounting,
bookkeeping and paralegal  services.  For the three months ended August 31, 2001
and 2000 the  total  payments  made by the  Company  to MAOS  were  $89,270  and
$59,434, respectively.

     e. During the three  months ended August 31, 2001 and 2000 the Company paid
an aggregate of $12,626 and $16,364,  respectively on behalf of certain officers
to companies  affiliated  with the Company's  Chairman for payment of automobile
leases.

3.       DEBT NOTE

     Pursuant  to the  revolving  credit  agreement  dated  April 18,  1997,  as
amended,  between  Sandsport,  Inc.,  a wholly owned  subsidiary  of the Company
("Sandsport"),  and  HSBC  Bank  USA  (the  "Credit  Agreement"),  the  Company,
Sandsport and its sister subsidiaries  (collectively,  the "Group") are required
to maintain  certain  levels of net worth and meet certain  financial  ratios in
addition to various  other  affirmative  and negative  covenants.  At August 31,
2001, the Group failed to meet one of the financial ratios, and the Bank granted
the Group a waiver.  There can be no  assurance  that the Bank will  continue to
grant waivers if the Group fails to meet the net worth and  financial  ratios in
the future.  If such waivers are not granted,  any loans  outstanding  under the
Credit Agreement become  immediately due and payable,  which may have an adverse
effect on the  Company's  business,  operations  or financial  condition.  As of
August 31, 2001, the outstanding balance on the Credit Agreement was $4,450,000.

4.       NET EARNINGS PER COMMON SHARE

     The Company  computes  earnings per share in accordance  with  Statement of
Financial  Accounting Standards No. 128 "Earnings per Share". Basic earnings per
share has been computed  using the weighted  average  number of shares of common
stock outstanding.  Diluted earnings per share has been computed using the basic
weighted  average shares of common stock issued adjusted for the dilutive effect
of outstanding stock options.

     Basic earnings per share are based on the weighted-average number of shares
of common stock  outstanding,  which was  2,506,475 at August 31, 2001 and 2000.
Diluted earnings per share are based on the weighted-average number of shares of
common  stock  adjusted  for the  effects of  assumed  exercise  of options  and
warrants  under the treasury stock method,  which were as follows:  2,506,475 at
August 31, 2001 and 2,707,617 at August 31, 2000.

     Options  and  warrants to purchase  1,721,773  shares of common  stock were
outstanding  at August 31,  2001 and 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. At
August 31,  2001,  201,142  options and  warrants  were  included in the diluted
earnings per share calculation.

5.       SHAREHOLDERS' EQUITY

Stock Options

     The Company maintains the following stock option plans:

         1995 Stock Option Plan

     At August 31, 2001, there were 590,500 incentive options  outstanding under
a stock option plan adopted in January 1995 (the "1995  Plan"),  which  provides
for both incentive and nonqualified  stock options and reserves 1,000,000 shares
of common stock for grant under the plan. Of these options,  520,500 are held by
officers of the Company.  The plan requires that incentive options be granted at
exercise  prices not less than the fair market  value at the date of grant,  and
terminates  in  January  2005.  All  options  outstanding  under  this  plan are
exercisable  at August 31, 2001 at prices  ranging from $1.41 to $2.61 per share
over a period of five years from date of grant.

     On July 14, 1997,  the Company filed a  Registration  Statement on Form S-8
relative to  reofferings  of shares of Common Stock of the Company  which may be
acquired pursuant to the 1995 Plan.

         1998 Stock Option Plan

     At August 31, 2001 there were 901,779  incentive stock options  outstanding
under a stock  option plan  adopted in October  1998,  (the "1998  Plan")  which
provides  for  both  incentive  and  nonqualified  stock  options  and  reserves
1,000,000  shares of common  stock for grant under the plan.  The plan  requires
that  incentive  options be granted  at  exercise  prices not less than the fair
market value at the date of grant and  terminates in August 2008. Of the options
outstanding at August 31, 2001,  473,155 were exercisable at prices ranging from
$1.31 to $3.00 over three to five years from the date of grant.

         2000 Stock Option Plan

     In October  2000 the Board of  Directors  approved  the adoption of a stock
option  plan (the  "2000  Plan").  The 2000  Plan was  subsequently  adopted  by
Shareholders at the Company's Annual Meeting on November 20, 2000. At August 31,
2001, there were 155,500  incentive  options  outstanding  under the plan, which
provides  for  both  incentive  and  nonqualified  stock  options  and  reserves
1,500,000  shares of common stock for issuance in connection with option grants.
The 2000 Plan terminates in September 2010.  Options  outstanding under the plan
vest over a seven-year period  commencing  December 31, 2000 and ending December
31, 2007 and are  exercisable at $3.00 per share over a period of ten years from
the date of grant.  At August 31,  2001,  there were  33,333  options  currently
exercisable.

     On July 14, 1998, the Chairman,  certain officers,  directors and, a former
director  and the  spouse  of an  officer  and an  employee  of  Sandsport  Data
Services, Inc. ("Sandsport'),  the Company's wholly owned subsidiary,  exercised
their respective options and warrants to purchase an aggregate of 921,334 shares
of Common Stock at exercise  prices ranging from $1.38 to $2.61 per share for an
aggregate cost of $1,608,861. Payment for such shares was made to the Company in
the amount of $921  representing  the par value of the shares,  and a portion in
the form of  non-recourse  promissory  notes due in July 2001,  with interest at
eight and one-half percent (8-1/2%) per annum, payable annually,  and secured by
the number of shares  acquired.  On July 14, 2001,  the Company agreed to extend
the due dates of such notes for one hundred twenty days until November 11, 2001.
As of August 31, 2001 and 2000, the outstanding balance on such notes, including
principal  and accrued  but unpaid  interest,  was  $1,619,396  and  $1,618,948,
respectively.

     In October  1998,  the Company  granted  certain  directors  of the Company
non-qualified  stock  options to purchase an aggregate  of 20,000  shares of the
Company's common stock under the 1998 Plan at an exercise price of $3.00.  These
options vest immediately and are exercisable over a five-year period.

     In December 1998, the Company granted 520,500  incentive options to certain
officers  of the Company  under the 1995 Plan at an exercise  price of $1.41 per
share.  These  options vest  immediately  and are  exercisable  over a five-year
period.

     In February 2000, the Company granted its Chairman  incentive stock options
to purchase an  aggregate  of 350,000  shares under the 1998 Plan at an exercise
price of $1.31. These options vest and are exercisable over a five year period.

     In April  2000,  the  Company  granted  certain  directors  of the  Company
non-qualified  stock options to purchase an aggregate of 72,000 shares under the
1998 Plan at an exercise price of $3.00.  These options vest and are exercisable
over a six year period.

     In April 2000, the Company granted its President incentive stock options to
purchase an aggregate of 100,000 shares under the 1998 Plan at an exercise price
of $3.00.  In October 2000, the Company  granted its President  incentive  stock
options to purchase  150,000 shares under the 2000 plan, at an exercise price of
$3.00 per share.  The  employment of the Company's  President was  terminated on
August 6, 2001, at which date the  President  became  entitled to exercise,  for
ninety days, those options which had already vested.  Those options consisted of
33,340 shares under the 1998 Plan, and 33,333 under the 2000 Plan.

     In November  2000,  the Company  granted  certain  directors of the Company
non-qualified  stock  options to purchase an aggregate  of 20,000  shares of the
Company's common stock under the 1998 Plan at an exercise price of $3.00.  These
options  vest over a  three-year  period and are  exercisable  over a  five-year
period.

         Restricted Stock Grant Plan

     On September  1, 2000 the Board of  Directors  approved the adoption of the
Company's 2000 Restricted  Stock Grant Plan (the "Stock Grant Plan").  The Stock
Grant Plan was subsequently  adopted by the Shareholders at the Company's Annual
Meeting on November 20, 2000.  The Stock Grant Plan provides for the issuance of
shares that are subject to both standard restrictions on the sale or transfer of
such shares  (e.g.,  the standard  seven year vesting  schedule set forth in the
Stock  Grant  Plan)  and/or  restrictions  that the  Board may  impose,  such as
restrictions  relating to length of  service,  corporate  performance,  or other
restrictions.  As of August  31,  2001,  no grants had been made under the Stock
Grant Plan and,  therefore,  no shares had vested  under it.  There are  700,000
shares of Common  Stock  reserved for  issuance in  connection  with grants made
under the Stock Grant Plan.

6.       COMMITMENTS AND CONTINGENCIES

     On April 2, 2001,  the Company was served  with a First  Amended  Complaint
filed by Dataline,  Inc.  against MCI WorldCom and the Company for alleged trade
libel and related  counts,  in the United States  District Court of the Southern
District of New York,  Civil Action No.  00-CV-1578.  On September 27, 2001, the
Court dismissed the case with prejudice.

     In August of 1999,  the Company's  wholly-owned  subsidiary,  Sandsport was
named as a defendant in Greater Bright Light Home Care Services,  Inc. et al. v.
Joseph Jeffries-El, El Equity Corporation,  Sandsport Data Services, Inc. et al.
(Supreme Court of the State of New York, Kings County).  Sandsport's contractual
obligation  to  Greater   Bright  Light   involved  the  depositing  of  certain
government-issued  checks into a specific bank account.  Upon receiving  written
notification  from the agency issuing the checks to stop depositing them in that
account,  Sandsport  ceased  depositing  them. The plaintiff  brought the action
against Joseph Jeffries-El and El Equity, and El Equity  counterclaimed  against
the plaintiff,  each basing its claims on the financing  agreement between them.
El  Equity  also  cross-claimed  against  Sandsport,  asserting  that  Sandsport
converted the  government-issued  checks to its own use.  Although  Sandsport is
named  as a  defendant,  the  Complaint  seeks  no  affirmative  relief  against
Sandsport.  Co-defendant  Citibank has asserted  indemnification  claims against
Sandsport and all of the other  defendants.  Sandsport  disputes all  liability.
However,  the  Company is unable to  predict  the  outcome  of these  claims and
accordingly,  no  adjustments  have  been  made  in the  consolidated  financial
statements in response to these claims.

     An action has been  commenced  against  the  Company  and Health  Card by a
former executive of Health Card, Mary Casale, who alleges that employees of both
Health Card and the Company engaged in sex  discrimination as to Ms. Casale, and
thus,  violated  Title  VII of the  Civil  Rights  Act of 1964.  The  matter  is
presently   pending  before  New  York  City  office  of  the  Equal  Employment
Opportunity  Commission  (`EEOC").  The  EEOC  has  made no  findings  or  other
determinations as to the merits of the parties' claims or defenses.  The Company
is being  defended  pursuant  to an  employment  practices  liability  insurance
policy,  the  coverage  of which is subject to various  terms,  conditions,  and
exclusions.  In the  opinion of the  Company's  management,  this  complaint  is
entirely  without  merit as against the  Company and is very  unlikely to have a
material adverse effect on the financial condition of the Company.

7.       REVENUE BY PRODUCT LINE

     The Company derives its revenue from several product lines that are similar
in nature. The following table provides the service fee revenues for the product
lines earned for the quarters ended August 31, 2001 and 2000:

                                        For the three months ended August 31,
                                                 2001              2000
                                                 ----              ----
Computerized information processing        $1,522,247        $1,474,230
Telephone-based data collection             1,892,151         1,934,342
Technology infrastructure and outsourcing     402,292           516,534
Information technology                        564,075           503,481
Other                                          11,563               533
                                          -----------     -------------

                                           $4,392,328        $4,429,140

8.       ECONOMIC DEPENDENCE

     A  significant  number of the  Company's  customers  (both  for-profit  and
not-for-profit  companies) receive some or all of their funding from Federal and
State  agencies.  These  customers'  contracts  with the  Company are subject to
review and approval by a New York City governmental agency.  During the quarters
ended  August  31,  2001 and 2000,  the  Company  received  revenues  from these
customers  amounting to approximately  $2,667,000 and $2,754,000,  respectively.
The Company was owed approximately  $1,364,000 and $1,103,000 from the customers
at August 31, 2001 and 2000, respectively.
<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  $4,524,666  for the three  months  ended August 31, 2001 as
compared to $4,571,416 for the three months ended August 31, 2000, a decrease of
$46,750 or 1.02%.

     Service  fee  revenue  for the  three  months  ended  August  31,  2001 was
$4,392,328 as compared to $4,429,140 for the three months ended August 31, 2000,
a decrease of $36,812 or .83%.  The  decrease  is  primarily  attributable  to a
reduction  in  revenues  derived  from Sharp of $2,510,  Santrax of $42,191  and
outsourcing of $103,262,  offset with the increases in SandataNET of $60,624 and
Pro Health of $50,527.

     Other income for the three  months  ended  August 31, 2001 was $98,742,  as
compared to $93,668 for the three months ended August 31, 2000.  The increase is
attributable  to the increase in fees to  affiliates  of $1,300 and an insurance
settlement  of $7,700  offset  slightly  by a decrease in income  recognized  on
sales/leaseback transactions of $11,474.

Expenses Related to Services

     Operating  expenses were  $2,714,083  for the three months ended August 31,
2001 as compared to  $2,617,400  for the three months ended August 31, 2000,  an
increase of $96,683 or 3.69%. Costs associated with payroll and related expenses
of $15,306 and equipment purchases of $96,766 increased this quarter offset by a
decrease in equipment rental payments of $15,389.

     Selling,  general and administrative expenses were $1,650,170 for the three
months  ended August 31, 2001,  as compared to  $1,178,530  for the three months
ended  August 31,  2000,  an  increase  of $471,640  or 40%.  The  increase  was
primarily due to increases in legal  expenses of $62,640  consulting of $32,000,
in addition to payroll and related expenses of $356,000 and commission  expenses
of $21,000  relative to increased  efforts to increase  sales in the SanTrax and
SandataNET product lines.

     Depreciation and amortization  expense  decreased  $236,093 to $427,862 for
the three  months  ended  August 31, 2001 as compared to $663,955  for the three
months ended August 31, 2000.  The decrease was  primarily  attributable  to the
reduction in the assets base due to the  impairment  of developed  software that
occurred in the year ended May 31, 2001.

     Interest  expense was $77,677 for the three months ended August 31, 2001 as
compared to $51,265 for the three months ended August 31, 2000. The increase was
a result of increased borrowings on the Company's Credit Agreement.

     On  August  9,  2001  the  Company  announced  that it had  terminated  the
employment  of  Stephen  Davies  as  President  of the  Company,  and  would  be
terminating  approximately  30 other  employees.  Under the terms of Mr. Davies'
Employment  Agreement,  he is entitled to a severance  payment  equal to six (6)
months' base salary,  or $100,000,  and has 90 days from the date of termination
to exercise the 66,673 options that were vested on that date. The elimination of
approximately  30  positions  from within the Company  and its  subsidiaries  is
expected to generate between $1.7 million and $2 million in reduced expenses. In
addition,  the Company  paid  approximately  $47,000 in  severance  payments for
approximately 30 terminated employees.

Income Tax (Benefit) Expenses

     Income tax benefit for the three  months ended August 31, 2001 was $170,179
as compared to income tax expense of $50,998 for the three  months  ended August
31, 2000. The decrease in income tax expense is due to lower pretax income,  the
recognition of a deferred tax asset for net operating loss carryforwards,  and a
reduction of a deferred tax liability associated with the different  recognition
of software development costs for tax and financial statement purposes.

Liquidity and Capital Resources

     The  Company's   working  capital  decreased  as  of  August  31,  2001  to
$1,835,474, as compared with $1,956,661 at May 31, 2001. The primary factor that
contributed  to the decrease was an increase in accounts  payable of $1,298,374,
decreases in accounts  receivable  of $63,604,  receivable  from  affiliates  of
$133,522  and  prepaid  expenses of  $171,354,  offset by an increase in cash of
$1,528,218.

     For the three months ended August 31, 2001, the Company spent approximately
$760,000  in  fixed  asset  additions,   of  which  $675,000  was  for  software
capitalization   costs  in  connection  with  revenue  growth  and  new  product
development.  The Company expects the current levels of capital  expenditures to
continue.

     On July 14, 1998, the Chairman,  certain officers,  directors and, a former
director  and the  spouse  of an  officer  and an  employee  of  Sandsport  Data
Services, Inc. ("Sandsport'),  the Company's wholly owned subsidiary,  exercised
their respective options and warrants to purchase an aggregate of 921,334 shares
of Common Stock at exercise  prices ranging from $1.38 to $2.61 per share for an
aggregate cost of $1,608,861. Payment for such shares was made to the Company in
the amount of $921  representing  the par value of the shares,  and a portion in
the form of  non-recourse  promissory  notes due in July 2001,  with interest at
eight and one-half percent (8-1/2%) per annum, payable annually,  and secured by
the number of shares  exercised.  On July 14, 2001, the Company agreed to extend
the due dates of such notes for one hundred twenty days until November 11, 2001.
As of August 31, 2001 and 2000, the outstanding balance on such notes, including
principal  and accrued  but unpaid  interest,  was  $1,619,396  and  $1,618,948,
respectively.

     On April 18,  1997,  the  Company's  wholly  owned  subsidiary,  Sandsport,
entered into a revolving  credit  agreement (the "Credit  Agreement")  with HSBC
Bank USA, which allows  Sandsport to 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 requires Sandsport to pay a fee equal to 1/4% 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 has been amended by the
Bank to permit  Sandsport to borrow amounts up to $4,500,000  until February 14,
2003.  Interest accrues at the same rate as the original Credit  Agreement.  The
indebtedness  under the  Credit  Agreement  is  guaranteed  by the  Company  and
Sandsport's  sister  subsidiaries  (the "Group").  All of the Group's assets are
pledged to the Bank as  collateral  for amounts due under the Credit  Agreement,
which pledge is secured by 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 the Company's Chairman.  The Group's guaranty to the Bank
was  modified to include  all  indebtedness  incurred  by the Company  under 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.  At May 31, 2001,
the Group  failed to meet  these net worth and  financial  ratios,  and the Bank
granted the Group a waiver.  As of August 24, 2001,  Sandsport,  the Company and
the other members of the Group,  and the Bank,  entered into the Third Amendment
and Waiver  (the "Third  Amendment")  to the Credit  Agreement.  Pursuant to the
Third  Amendment,  Sandsport's  covenants  to the Bank to maintain a certain net
worth and to maintain certain financial ratios were revised,  on a going-forward
basis, and the noncompliance with the existing covenants was waived by the Bank.
In addition,  in connection with the Third Amendment,  Sandsport and each member
of the  Group  executed  and  delivered  to the Bank a  Collective  Amended  and
Restated Security Agreement,  pursuant to which the Bank's security interest was
extended  to include a security  interest  in all of the  personal  and  fixture
property of Sandsport,  the Company and the members of the Group.  At August 31,
2001, the Group failed to meet one of the financial ratios, and the Bank granted
the Group a waiver.  There can be no  assurance  that the Bank will  continue to
grant waivers if the Group fails to meet the net worth and  financial  ratios in
the future.  If such waivers are not granted,  any loans  outstanding  under the
Credit Agreement become  immediately due and payable,  which may have an adverse
effect on the  Company's  business,  operations  or financial  condition.  As of
August 31, 2001, the outstanding  balance on the Credit  Agreement with the Bank
was $4,450,000.

     The Company believes the results of its continued operations, together with
the  available  credit line,  should be adequate to fund  presently  foreseeable
working capital requirements.

     One June 9, 2001,  the Company gave a promissory  note to National  Medical
Health  Card  Systems,  Inc.  ("Health  Card"),  a company  affiliated  with the
Company's  Chairman  of the Board,  in the  principal  amount of  $500,000  with
interest at the rate of 7%, which was due on June 8, 2002. This note was paid in
full on August 15, 2001.
<PAGE>

                         SANDATA, INC. AND SUBSIDIARIES

                           PART II - OTHER INFORMATION


Item 1 - LEGAL PROCEEDINGS:

     Reference is made to Note 6 to the Financial Statements  comprising Part I,
Item 1 of this Form 10-QSB.

Item 2 - CHANGES IN SECURITIES:

None

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:



(a)      Exhibits - None.
(b)      Reports on Form 8-K
         The Company filed a report on Form 8-K for events dated August
         6 and 8 relating to the termination of the employment of the
         Company's President and the elimination of approximately 30
         positions.
<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:    October 12, 2001         By:  /s/ Bert E. Brodsky
         ----------------              -----------------------------------------
                                           Bert E. Brodsky
                                           Chairman of the Board,
                                           Chief Executive Officer,
                                           Chief Financial Officer