U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                 --------------
                                  FORM 10-KSB

(Mark One)

[X] ANNUAL  REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
1934.

For the fiscal year ended          May 31, 2000
                          ---------------------

                                       OR

[ ] 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)

Securities registered under Section 12(b) of the Exchange Act:

                                                Name of Each Exchange
Title of Each Class                             on Which Registered

         Securities registered under Section 12(g) of the Exchange Act:
                         Common Stock, $.001 par value

                                (Title of Class)

                                (Title of Class)

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

Yes        X               No

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

     The issuer's revenues for year ended May 31, 2000 was $18,597,321.

     The aggregate market value of the voting and non-voting  common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of August
23, 2000 was $1,122,467.

                   ISSUERS 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  REGISTRANTS

     The number of shares  outstanding of each of the issuer's classes of common
equity, as of August 23, 2000 was 2,506,475.

           Transitional Small Business Disclosure Format (check one):

Yes                 No      X

                       DOCUMENTS INCORPORATED BY REFERENCE
           None.



<PAGE>

                                   PART I

ITEM 1 - DESCRIPTION OF BUSINESS

FORWARD-LOOKING STATEMENTS

     Certain  information  contained  in this Annual  Report on Form 10-KSB (the
"Form 10-KSB") includes  "forward-looking  statements" within the meaning of the
Private  Securities  Litigation  Reform Act of 1995,  and is subject to the safe
harbor created by that act. Sandata,  Inc. (the "Company") cautions readers that
certain  important  factors may affect the  Company's  actual  results and could
cause such  results to differ  materially  from any  forward-looking  statements
which may be deemed to have been made in this Form 10-KSB or which are otherwise
made by or on behalf of the Company.  For this purpose, any statements contained
in this Form 10-KSB that are not statements of historical  fact may be deemed to
be forward-looking statements. Without limiting the generality of the foregoing,
words  such as  "may",  "will",  "expect",  "believe",  "anticipate",  "intend",
"could",  "estimate",  or  "continue"  or the  negative  variations  thereof  or
comparable  terminology  are  intended to identify  forward-looking  statements.
Factors which may affect the Company's results include,  but are not limited to,
the risks and  uncertainties  associated  with matters  discussed under Item 1 -
"Description of Business", Item 3 - "Legal Proceedings",  Item 6 - "Management's
Discussion   and  Analysis  or  Plan  of  Operation"  and  Item  12  -  "Certain
Relationships and Related Transactions" of this Form 10-KSB.

BUSINESS DEVELOPMENT

                  GENERAL

                  The Company, through its wholly owned subsidiaries, is engaged
in providing  technology  services to its customers.  These  services  either a)
utilize software products  developed,  acquired or licensed by the Company or b)
leverage the  technology-based  core competencies that the Company has developed
in formulating and delivering its software services.

                  Applications of the Company's  software include:  an automated
payroll  processing and billing  service  delivered via leased lines or over the
Internet,  computerized preparation of management reports,  telephone based data
collection services,  automated database driven outbound telephone notification,
and biometric  verification  systems involving the use of both voice recognition
and fingerprint technologies.

                  Services  that leverage the Company's  core  competencies  are
driven by the Company's  Information  Technology  ("IT") support  services.  The
services  currently  offered  include:  facilities  outsourcing for database and
operating system support, technology consulting, custom software development and
support,  resale and  implementation  of  software  written and  distributed  by
others,  web site  development  and hosting,  help desk  services,  and hardware
maintenance and related administrative services.

                  The  Company's  software  is written in a variety of  software
languages including JAVA, C++, Oracle, PL/SQL, CGI, Perl, VB, Foxpro, Access and
COBOL.

                  The Company was incorporated in the State of New York in June,
1978 and reincorporated in the State of Delaware in December 1986, at which time
it also assumed its present name.

BUSINESS OF ISSUER

                  PRINCIPAL PRODUCTS AND SERVICES

     COMPUTERIZED  INFORMATION  PROCESSING  SERVICES.  The Company,  through its
wholly owned subsidiary,  Sandsport Data Services, Inc. ("Sandsport"),  provides
computer  services  to the home health care  industry,  principally  through its
SHARP (Sandsport Home Attendant Reporting Program) offering.

                  The primary  customers are vendor agencies which,  pursuant to
contracts  with the Human  Resources  Administration  ("HRA") of the City of New
York,  provide  home  attendant  services  to the elderly and infirm in New York
City. The Federal Government offers this program (the "Home Attendant  Program")
to participating  states and  municipalities as an optional part of its Medicaid
program.  The Federal Government funds a substantial  portion of the program and
in New York City, the State Department of Social Services and New York City fund
the balance of the  program.  In New York City,  the Home  Attendant  Program is
administered by HRA, which  sub-contracts  with  proprietary and  not-for-profit
agencies  ("Vendor  Agencies")  to provide home  attendant  services to those in
need. HRA refers patients to Vendor Agencies that, in turn, send home attendants
to patients' homes to assist in homemaking chores.  Vendor Agencies also provide
periodic nurse's visits to patients.

                  Sandsport processes payroll,  preparing  paychecks  indicating
year-to-date earnings and deductions,  payroll journals and payroll earnings and
deduction summaries.  Sandsport provides computerized  information which permits
Vendor Agencies to prepare their  Employers  Quarterly  Federal Tax Return,  New
York State  unemployment  insurance returns,  deposits for Federal  unemployment
insurance and all required New York City tax returns and deposits.

                  Annually,  Sandsport  prepares for each Vendor Agency employee
Transmittal of Income and Tax Statements,  reconciliation  of state tax withheld
and Federal Unemployment  Insurance Returns.  Sandsport also furnishes to Vendor
Agencies  employee-earning  ledgers  that  enable  them to review a full  year's
earnings history for each of their employees.

                  Generally, in providing software-related services, the Company
receives data from its customers,  processes the data on the Company's equipment
at its premises, and generates reports based on such data.

                  These services are primarily  provided  through SHARP.  Vendor
Agencies  enlist  Sandsport's  computer  services to provide weekly time sheets,
billing,  payroll processing and management reports.  For the fiscal years ended
May 31, 2000 and 1999,  approximately  $5,224,000 or 28% and  $4,573,000 or 32%,
respectively,  of the  Company's  total  operating  revenues  were  derived from
services rendered to Vendor Agencies.

     The Company's  strategy is to diversify and expand its health care customer
base. Its wholly-owned  subsidiary,  Pro-Health  Systems,  Inc.,  ("Pro-Health")
intends to utilize newly  acquired and enhanced  software to provide  additional
payroll and billing  functionality for SHARP users and, by expanding its billing
capabilities,  to make the product  relevant to home  healthcare  agencies  that
cannot use SHARP in its current form.

     Pro-Health  offers  a  system  which  is  designed  to be  delivered  as an
Application  Service  Providers  ("ASP")  solution.  The software  consists of a
comprehensive  suite of on-line  interactive  modules that are  integrated  with
other  Company  applications  such as  Santrax(R)  (see below).  The  Pro-Health
systems'  modular and flexible design makes it adaptable to the changeable needs
of a wide spectrum of health care  entities.

     In  October   1998,   the  Company  and  Provider   Solutions   Corporation
("Provider")  entered into an agreement  (the  "Agreement")  whereby the parties
contemplated  the  formation  of a joint  venture to  operate a data  processing
service  bureau in New York to supply  services to the domestic home health care
industry.  The Company provides such services through  Pro-Health.  Pursuant to
the Agreement,  Provider conveyed certain software to the Company. The Agreement
provides for a purchase price of $500,000,  payable in certain  installments  as
provided  in  the  Agreement.   As  of  May  31,  2000,  the  Company  has  paid
approximately  $350,000 to Provider on account of the purchase price. In October
1999, the Company and Pro-Health  commenced an action against  Provider,  et al.
and  Provider  soon  thereafter  commenced  an action  against  the  Company and
Pro-Health (See Item 3 - "Legal Proceedings").

     For the fiscal years ended May 31, 2000 and 1999, approximately $405,000 or
2% and $0 or 0%,  respectively,  of the Company's total operating  revenues were
derived from services rendered to customers using the Pro-Health System.

                  TELEPHONE-BASED  DATA  COLLECTION  SERVICES.  The  Company has
developed an automated  electronic  system known as Sandata(R)  SANTRAX(R)  that
allows the use of Automated Number  Identification  ("ANI") technology and voice
recognition  technology to assist in capturing  data via  telephone.  The system
incorporates  telephone  technologies  into the data  reporting  process  and is
currently  designed  to monitor  the  arrival  and  departure  times of off-site
workers who simply call a unique  toll-free  number to record their  arrival and
departure.  The system  automatically and immediately confirms that the assigned
person  is at the  expected  place at the  expected  time for the  approved  and
scheduled  duration,  and  produces  real-time  exception  reports to enable its
clients to manage their off-site staff.

                  In addition to collecting  the arrival and departure  times of
off-site  workers  from the visit  site,  SANTRAX is also able to collect a wide
range of additional  information.  By collecting  additional  data,  SANTRAX can
increase   operational   efficiencies  and  enable  its  customers  to  generate
administrative  savings.  Some of the information  provided by SANTRAX  includes
expense-related data such as mileage and supplies, as well as tasks performed by
the  off-site  worker.  This  data is  used to  produce  weekly  payroll  and to
automatically  prepare reimbursement  submissions.  Reports are generated to the
customer based upon its specific requirements.

                  The  Company  is an ASP that  allows its  customers  to access
certain of its software over the Internet  without  their needing  sophisticated
hardware at their site to house the software or store the data.  This allows the
Company's  customers to have access to software  programs via low-cost  hardware
and on a fee per  transaction  basis,  and enables them to utilize the Company's
software services without a substantial upfront investment in either hardware or
software.  The Company receives an aggregate of approximately  620,000 calls per
week or 32 million calls per year. The service is currently utilized principally
by the Company's home health care clients,  and  approximately  seventy per cent
(70%) of current SANTRAX calls are Vendor Agencies using the SHARP program.

                  Effective June 1, 1998, the Company and MCI Telecommunications
Corporation  ("MCI") entered into a License Agreement (the "License  Agreement")
pursuant  to which the Company  was  granted a license,  under  certain of MCI's
patents (each  individually a "Patent" and  collectively  the "Patents"),  which
enables it to use and sell its SANTRAX time and attendance  verification product
non-exclusively  nationwide and  exclusively in the home health care  industries
for the five New York boroughs.  The License  Agreement  remains in effect until
October  19,  2010 or until the  expiration  date of the last to expire  Patent,
whichever is the latter to occur. Pursuant to the License Agreement, the Company
pays MCI certain royalties on a per call basis.

                  For  the   fiscal   years   ended  May  31,   2000  and  1999,
approximately  $7,366,000  or 40% and  $5,978,000 or 42%,  respectively,  of the
Company's total operating  revenues were derived from services rendered relating
to SANTRAX.

                  Although no assurances can be given,  it is  anticipated  that
the SANTRAX product can be utilized by other industry applications.  The Company
is  developing  the product so that it can be sold into the  general  commercial
market,  and the service is currently being modified to meet the needs of a wide
range of businesses wishing to monitor or collect data from off-site employees.

                  TECHNOLOGY   INFRASTRUCTURE  AND  OUTSOURCING  SERVICES.   The
Company supports  specialized system  applications for businesses based upon its
analysis of a client's particular need and specialized system applications.

                  The Company  provides data processing  services and technology
infrastructure  consulting  services on an outsourced  basis to National Medical
Health Card Systems,  Inc.  ("Health  Card"),  a public company  (NASDAQ:  NMHC)
engaged in the pharmacy prescription  benefits management business.  Health Card
is an affiliate of the Company of which Mr.  Brodsky is Chairman of the Board of
Directors and a principal shareholder (See Item 6 - "Management's Discussion and
Analysis  or Plan  of  Operation  -  Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations - Liquidity and Capital Resources"
and Item 12 - "Certain Relationships and Related Transactions").

                  In  addition,  the  Company  offers  managed  services  in the
security  arena  such as  security  audits,  enterprise  firewalls  and  network
monitoring.  It also develops and hosts web sites, runs e-commerce  applications
and resells  telephone  services,  leveraging the favorable rates it receives by
virtue of the  substantial  call volume driven by SANTRAX.  While these services
are  currently  provided to an affiliate,  the Company plans to diversify  these
offerings and resell them to  businesses  throughout  the New York  metropolitan
area.

                  For  the   fiscal   years   ended  May  31,   2000  and  1999,
approximately  $2,635,000  or 14% and  $1,765,020 or 12%,  respectively,  of the
Company's  total  operating  revenues  were derived from  services  rendered for
outsourcing services.

         INFORMATION TECHNOLOGY SERVICES. The Company, through its SandataNet(R)
division,  provides IT consulting services for businesses and the public sector.
It  delivers  computer,   communications  and  networking  sales  and  services,
including training, maintenance and repair services, to companies and government
and professional services organizations.

                  SandataNet(R)  manages a help desk for the Company's  internal
operations and also provides help desk services to Health Card and several other
affiliates,  covering approximately 275 employees. This help desk is responsible
for  desk  side  support  services,   including   software   support,   hardware
support/break-fix, LAN administration and configuration services.

                  The Company has installed critical software  applications at a
local municipal government office and is in the process of delivering a solution
to a government office at the county level. It also provides custom programming,
software development and installation services to this sector. In addition,  the
Company is in the process of establishing a strategic  alliance with a developer
of  specialized  municipal  government  software  that is expected to assist the
Company in expanding  its base of municipal  government  customers.  The Company
cannot  assure that such an alliance  will be reached.  Furthermore,  if such an
alliance is reached, the Company cannot predict if it would be successful.

                  For the fiscal years ended May 31, 2000 and 1999 approximately
$2,367,000 or 13% and  $1,564,000 or 11%,  respectively  of the Company's  total
operating   revenues   were  derived   from   services   rendered   relating  to
SandataNet(R).

                  SEASONALITY

                  The   Company's   revenues   are  not   subject  to   seasonal
fluctuations.

                  MARKETING AND DISTRIBUTION

                  The Company provides its computerized  information  processing
services  to a  variety  of  users,  although  principally  to the  health  care
industry.  Many of the Company's software programs are adaptable to customers in
related fields of  enterprise.  Thus, the components of the SHARP system for the
Home Attendant  Program - Medicaid  reimbursable  billing,  management  reports,
payroll  processing,  tax reports - are being developed for utilization in other
settings, such as nursing homes, skilled nursing facilities,  and rehabilitation
facilities.

                  The Company's  telephone-based  data  collection  services are
currently  principally  used to monitor  off-site workers in the home healthcare
industry.  The SANTRAX  proprietary  software could be used to monitor  off-site
workers  in  other   industries,   and  the  Company  is   currently   exploring
opportunities in the temporary staffing, security guard and building maintenance
industries.

                  Technology   infrastructure   and  outsourcing   services  are
currently utilized in-house and within affiliate companies.  The Company intends
to take the core  competencies  that it has developed in supporting  its service
offerings  and  resell  them  into  the  business  community  in  the  New  York
metropolitan  area.  The  Company  cannot  assure  its  ability  to resell  such
services.

     The Company believes it can leverage its in-house capabilities to develop a
new IT services  business,  and intends  that such IT services  will be marketed
primarily to businesses in the New York metropolitan  area, where it believes it
can support  professional  services with on-site  technical help. In the future,
the Company believes it will have the capability of rolling out such IT services
to a wider  geographical  audience.  The  Company  cannot  assure its ability to
develop a new IT service  business and cannot predict that such services will be
successful.

     The Company markets its products and services through  telemarketing  and a
combination of inside and outside sales  representatives,  all directly employed
by the Company.

                  COMPETITION

                  The Company competes with different  companies for the sale of
its  different  products.  In the sale of its  software  products,  the  Company
competes for customers on the basis of the range,  functionality  and quality of
its software and on its ability to develop  programs  tailored to its customers'
requirements.  Many of its competitors  are companies with directly  competitive
software products,  and a number have substantially  greater financial resources
and substantially larger marketing, technical and field organizations.

                  With respect to the Company's SHARP  business,  there has been
an increase in competitive pressure and uncertainty in recent years, partly as a
result of the City of New York  requiring  all  contracts  with City agencies to
undergo  competitive  bidding.  Although the Company has been awarded  contracts
based on its bids,  there can be no assurance  that its bids will be accepted in
the future.

                  The computer services industry is characterized by competition
in the areas of service, quality, price and technical expertise.  Competitors in
this segment vary from the small,  local companies to  multinational  consulting
and accounting firms.

                  CUSTOMERS

                  The Company's customer base is primarily drawn from the health
care  industry.  During the  fiscal  years 2000 and 1999,  the  Company  derived
revenues from the Vendor Agencies who are all funded by one governmental agency,
amounting to  approximately  $10,623,000  or 57% and  $9,460,000 or 67% of total
operating revenues,  respectively. The Company was owed approximately $1,362,000
and 1,394,000 from these customers at May 31, 2000 and 1999,  respectively.  The
Company  also  derived  approximately  1,753,000  or 9% and  $1,765,000  or 12%,
respectively,  of revenue  from Health Card for database  and  operating  system
support, hardware leasing, maintenance and related administrative services. (See
Item  6  -  "Management's  Discussion  and  Analysis  or  Plan  of  Operation  -
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations - Liquidity and Capital Resources").

                  PROPRIETARY RIGHTS

                  The Company filed a United States Trademark  application which
renames its voice recognition  timekeeping system to SANTRAX.  The trademark was
registered on September 16, 1997.

                  On March 3, 1997 the  Company  filed an  application  with the
United  States  Patent  and  Trademark  Office  to  register  its  SandataNet(R)
trademark. The trademark was registered on February 24, 1998.

                  On March 30, 1999, the Company filed an  application  with the
United States Patent and  Trademark  Office to register its PRO-TRAX  trademark.
Such application is currently pending.

                  On April 28, 1999, the Company filed an  application  with the
United States Patent and Trademark Office to register its RXTRAX trademark. Such
application is currently pending.

                  The Company has not applied for Federal copyright registration
for its computer software systems now in existence or being developed.  However,
the Company believes that its systems are trade secrets and that they,  together
with the documentation, manuals, training aids, instructions and other materials
supplied  to users,  are  subject to the  proprietary  rights of the Company and
protected by applicable trade secret laws. The Company generally seeks to obtain
trade  secret  protection   pursuant  to  non-disclosure   and   confidentiality
agreements with its employees. Although the Company's customers are advised that
the Company  retains title to all of its  products,  and they agree to safeguard
against  unauthorized  use of such systems,  there can be no assurance  that the
Company  will be able to protect  against  misappropriation  of its  proprietary
rights and trade secrets.

                  RESEARCH AND DEVELOPMENT

                  The  Company  incurred  approximately  $122,000  and  $192,000
during  the  fiscal  years  2000  and  1999,   respectively,   on  research  and
development.  The Company  incorporates  its research and  development  into its
on-going business  activities.  The Company's employees may develop new software
programs and expand or modify existing ones.  After  determining  that a program
has reached  technological  feasibility,  the subsequent  development  costs are
capitalized. All other costs are expensed.

                  EMPLOYEES

                  As of May 31, 2000, the Company and its subsidiaries  employed
146 employees,  including 139 full-time and 7 part-time  employees.  The Company
believes  that  its  success  will  depend  in part on its  ability  in a highly
competitive   environment  to  attract  and  retain  highly  skilled  technical,
marketing and management personnel.

                  The  Company   considers   its   employee   relations   to  be
satisfactory. The Company is not a party to any collective bargaining agreement.


<PAGE>


ITEM 2 - DESCRIPTION OF PROPERTY

                  The   Company   and   its   subsidiaries    currently   occupy
approximately  28,000  square  feet of office  space  located at 26 Harbor  Park
Drive, Port Washington,  New York 11050 (the "Facility").  The Company subleases
the  Facility  from BFS Realty,  LLC, an affiliate  of the  Company's  Directors
("BFS").  BFS leases the Facility from the Nassau County Industrial  Development
Agency (the "NCIDA"),  pursuant to a lease (the "Lease"),  which was assigned by
the Company to BFS in November,  1996,  and which expires in December  2005. BFS
has the right to become the owner of the Facility upon  expiration of the Lease.
The Company  currently pays rent to BFS in the amount of $59,567 per month.  BFS
also receives rent from other  companies,  which includes  companies  affiliated
with the Company's Chairman,  which occupy space in the Facility.  The Company's
facilities  are  adequate  for  current  purposes  (See  Item  6  -  "Management
Discussion  and  Analysis or Plan of  Operation -  Management's  Discussion  and
Analysis of Financial  Condition and Results of Operations - IDA/SBA  Financing"
for a discussion of the NCIDA and U.S. Small Business  Administration  financing
transactions).

ITEM 3 - LEGAL PROCEEDINGS

     In October 1998,  the Company and Provider  entered into an agreement  (the
"Agreement")  whereby the parties  contemplated the formation of a joint venture
to operate a data  processing  service bureau in New York to supply  services to
the domestic  home health care  industry.  The Company  provides  such  services
through  Pro-Health.  Pursuant  to  the  Agreement,  Provider  conveyed  certain
software  to the  Company.  The  Agreement  provides  for a  purchase  price  of
$500,000,  payable in certain  installments as provided in the Agreement.  As of
May 31, 2000, the Company has paid approximately $350,000 to Provider on account
of the purchase price.

     On October 19, 1999, the Company and its wholly-owned subsidiary Pro-Health
brought an action,  Sandata,  Inc.  and  Pro-Health  Systems,  Inc. v.  Provider
Solutions  Corporation,  Michael Milvain and Charlotte Fritchie,  Supreme Court,
New York County,  Index No.  99-26033,  based on breach of contract,  fraudulent
misrepresentation and other causes of action, demanding damages of approximately
$10,000,000 (the "State Action").

     On October 22, 1999, Provider brought a Federal Action in the United States
District Court,  Eastern District (the "Federal Action"),  seeking to enjoin the
Company and Provider from (i) hiring  certain named  employee  defendants;  (ii)
soliciting any present or former employees of Provider; and (iii) using, without
Providers  permission,   any  trade  secret  or  other  proprietary  information
belonging to Provider.  The Federal  Action also sought to (i) enjoin  employees
from  divulging to the Company,  Pro-Health or any other third party,  any trade
secret or other proprietary information;  and (ii) accepting employment from the
Company, Pro-Health or any other customer or competitor of Provider. The amended
complaint  ultimately  served on the  Company and  Pro-Health  on March 31, 2000
demanded  judgment  against  defendants  of a permanent  injunction  and damages
against the Company and Pro-Health for total amounts ranging from $10,000,000 to
$15,000,000.  The State  Action was  removed and  consolidated  into the Federal
Action.

     Sandata  and  Pro-Health  asserted  multiple  counterclaims  in the Federal
Action  demanding  damages  of  $10,000,000  based  upon  claim  of  Declaratory
Judgment,   Imposition  of  Constructive  Trust,  Breach  of  Contract,   Unfair
Competition,  Interference  with Business  Relations and Economic  Advantage and
Injunction. The State Action was removed and later consolidated into the Federal
Action.
                  To  date,   substantial  discovery  has  taken  place  and  is
continuing.  Discovery  is  expected  to be  completed  by January 2, 2001.  The
Company  has  asserted  claims and  defenses  against  Provider  and  intends to
continue its prosecution of its claims and vigorously  defend all claims against
it.

                  Notwithstanding the foregoing, because of the uncertainties of
litigation,  no assurances can be given as to the outcome of this litigation. In
the event that the Company were not to prevail in this  litigation,  the Company
could be required to pay  significant  damages to Provider and could be enjoined
from taking those certain  actions  specified  above. A negative  outcome in the
Provider  litigation  could  have a  material  adverse  affect  on the  Company,
including, but not limited to, its business operations and financial condition.

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

                  Not applicable.

<PAGE>

                                     PART II

ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

                  The  Company's  Common  Stock is  traded  in  over-the-counter
market under the symbol "SAND" on the National Association of Securities Dealers
Automated  Quotation System ("NASDAQ").  The table below sets forth high and low
bid prices of the Common Stock, as furnished by NASDAQ. The quotations set forth
below reflect  interdealer prices without retail markup,  markdown or commission
and may not necessarily represent actual transactions.

                                             BID PRICES
                                     HIGH              LOW

FISCAL YEAR ENDED
MAY 31, 2000

First Quarter                        $1.75         $1.06
Second Quarter                        1.44           .97
Third Quarter                         4.34           .75
Fourth Quarter                        3.94          1.34

FISCAL YEAR ENDED
MAY 31, 1999

First Quarter                        $4.50         $2.16
Second Quarter                        2.72          1.13
Third Quarter                         2.50          1.13
Fourth Quarter                        3.38          1.38

HOLDERS

                  Management  has been  advised  by its  transfer  agent  (North
American  Transfer Co.) that the approximate  number of holders of record of the
Company's Common Stock, as of August 23, 2000 was 1,016.

DIVIDENDS

                  No cash  dividends have been paid by the Company on its Common
Stock and no such payment is anticipated in the foreseeable future.

                  Dividends are restricted  pursuant to the terms of a revolving
credit and term loan agreement between the Company and a bank.


<PAGE>


ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

                  ANALYSIS OF OPERATIONS

                  Fiscal Years ended May 31, 2000 compared with May 31, 1999

                  Service  fee  revenues  for fiscal 2000 were $  17,987,646  as
compared to $14,155,092  for the previous fiscal year, an increase of $3,832,554
or 27%. The increase is primarily  attributable to revenues derived from SANTRAX
and SANDATANET offset by decreases in revenue from Health Card.

                  Other  income for the year ended May 31, 2000 was  $432,279 as
compared  to  $437,575  for  the  year  ended  May 31,  1999.  The  decrease  is
attributable to a decrease in income recognized on sales/leaseback transactions.

                  Expenses Related to Services

                  Operating expenses were $11,419,625 for the year ended May 31,
2000, as compared to $8,909,704  for the year ended May 31, 1999, an increase of
$2,509,921 or 28%. Costs  associated with SANTRAX and its operations,  including
payroll  expenses,  in addition to increases in costs associated with SANDATANET
and its  operations,  were the primary  factors for the  increases  in operating
expenses.

     Selling,  general and  administrative  expenses  for the year ended May 31,
2000 were $4,346,757  compared to $3,428,584 for the year ended May 31, 1999, an
increase of $918,173 or 27%. The  increases  were  primarily due to increases in
consulting,  payroll and commission  expenses  relative to increased  efforts to
increase sales in the SANTRAX and SANDATANET product lines.

                  Depreciation and amortization expenses were $2,384,045 for the
year ended May 31, 2000,  as compared to  $2,015,390  for the year ended May 31,
1999, an increase of $368,655 or 18%. The increase was primarily attributable to
fixed asset additions,  including computer hardware and software  capitalization
costs, in connection with ongoing computer systems upgrades.

                  Interest  expense for the year ended May 31, 2000 was $243,637
as compared to $97,170 for the year ended May 31, 1999,  an increase of $146,267
or 151%.  The  increase was a result of increased  borrowings  on the  Company's
Credit Agreement.

                  Income Tax Expenses

                  Income tax expense was  $189,158  and $171,177 for fiscal 2000
and 1999,  respectively.  The increase in income tax expense is due to different
recognition of software  development  costs,  depreciation  and amortization and
revenues  from  sale/leaseback  transactions  on a book and tax basis  offset by
lower  pretax  income and  additional  net  operating  loss  carryforwards.  The
effective tax rates for fiscal 2000 and 1999 were 93.1% and 60.1%, respectively.

                  IDA/SBA FINANCING

                  On June 1, 1994, BFS Sibling Realty,  Inc.  ("BSRI")  formerly
known as Brodsky Sibling Realty,  Inc., a company affiliated with certain of 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.

                  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%.

                  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 other
income in the financial statements in fiscal 1997.

                  LIQUIDITY AND CAPITAL RESOURCES

                  The Company's  working capital increased as of May 31, 2000 to
$1,432,966 as compared with $235,599 at May 31, 1999.

                  The Company has spent approximately  $5,700,000 in fixed asset
additions,  including software  capitalization  costs in connection with revenue
growth and new  product  development.  The Company  expects a  reduction  in the
levels of capital expenditures in the future.

                  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.  The  Company  has
received  interest  payments on such notes in the amount of $120,658  during the
fiscal year ending May 31, 2000. As of May 31, 2000, the outstanding  balance on
such notes, including principal and accrued but unpaid interest, was $1,746,145.

                  On April 18, 1997,  the  Company's  wholly  owned  subsidiary,
Sandsport,  entered into a revolving credit  agreement (the "Credit  Agreement")
with a bank  (the  "Bank")  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  required  Sandsport to pay a commitment
fee in the  amount of $30,000  and 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 which expired on March
1, 2000 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"). 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 the  Company's  Chairman.  All of the Group's  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.  At May
31, 1999, the Group failed to meet these net worth and financial ratios, and the
Bank granted the Group a waiver. As of May 31, 2000, the outstanding  balance on
the Credit Agreement with the Bank was $2,250,000.

                  The Company is a party to various sale/leaseback  transactions
involving certain fixed assets.  Gains on these  transactions have been deferred
and are being  recognized  over the lives of the related  leases,  ranging  from
thirty-six (36) to sixty (60) months. Approximately $401,000 and $216,000 of the
deferred gains were recognized in fiscal 2000 and 1999,  respectively.  Included
in these  amounts are the effects of  sale/leaseback  transactions  entered into
fiscal 2000 and 1999, as follows:

                  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  $62,000 and $62,000 of the deferred gain
was recognized for fiscal 2000 and 1999, respectively.

                  In January 1999, 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  $830,000,  were
sold for $1,100,000.  The resulting gain of approximately  $270,000 was recorded
as deferred income and is being recognized over the life of the lease,  which is
thirty-six (36) months.  Approximately  $90,000 and $30,000 of deferred gain was
recognized for fiscal 2000 and 1999,  respectively.  An unaffiliated third party
purchased the residual rights in such lease.

                  In May 1999,  the Company  entered  into a  sale/leaseback  of
certain fixed assets  (principally  computer hardware and equipment).  The fixed
assets,  which  had a net book  value of  approximately  $896,000  were sold for
$1,100,000.  The  resulting  gain of  approximately  $204,000  was  recorded  as
deferred  income and is being  recognized  over the life of the lease,  which is
thirty-six (36) months.  The sale proceeds,  which are shown as Other receivable
in the financial statements,  were received in June 1999.  Approximately $68,000
of deferred gain was  recognized  for fiscal 2000. An  unaffiliated  third party
purchased the residual rights in such lease.

                  In October 1999, 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  $895,000,  were
sold for $1,115,000.  The resulting gain of approximately  $220,000 was recorded
as deferred income and is being recognized over the life of the lease,  which is
thirty-six  (36)  months.   Approximately  $49,000  of  the  deferred  gain  was
recognized for fiscal 2000. An  unaffiliated  third party purchased the residual
rights in such lease.

                  In January 2000, 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  $442,000,  were
sold for $561,000.  The resulting gain of approximately $119,000 was recorded as
deferred  income and is being  recognized  over the life of the lease,  which is
thirty-six  (36) months.  Approximately  $13,000 of deferred gain was recognized
for fiscal 2000. An  unaffiliated  third party  purchased the residual rights in
such lease.

                  In February 2000, the Company entered into a sale/leaseback of
certain fixed assets  (principally  computer hardware and equipment).  The fixed
assets,  which  had a net book  value of  approximately  $237,000  were sold for
$277,000.  The resulting gain of approximately  $40,000 was recorded as deferred
income and is being  recognized over the life of the lease,  which is thirty-six
(36) months.  Approximately  $3,000 of deferred gain was  recognized  for fiscal
2000. An unaffiliated third party purchased the residual rights in such lease.

                  The  Company has been  providing  services  to  Federation  of
Puerto   Rican   Organizations,   and/or  its   affiliates   (individually   and
collectively,  the "Federation"),  an HRA Vendor Agency,  since 1995. On October
31, 1997 and  November  30,  1997,  respectively,  the  Company  acquired a loan
receivable  for an aggregate of $300,000  from a third party (a portion of which
was  acquired  from an  affiliate  of the  Company's  Chairman),  due  from  the
Federation.  Such  loan  receivable  was  supposed  to be  secured  by  accounts
receivable due to the Federation. Shortly following the Company's acquiring such
receivable,  the Federation and its affiliates filed for bankruptcy  protection.
While  the  bankruptcy  case is  still  pending,  no plan of  reorganization  or
distribution  has been  proposed.  The  Company has filed,  among other  things,
claims  representing monies owed to the Company with respect to the loan and the
receivables. At May 31, 2000, the Company had written off the $300,000 principal
loan receivable in addition to $47,296 for services rendered by the Company owed
by the  Federation  against  a  reserve  established  in prior  years  for these
amounts.

     As of June 1, 1998,  Health Card, a company  affiliated  with the Company's
Chairman  of the Board,  hired 11  employees  of  Sandsport  in order to provide
development,  enhancement,  modification  and maintenance  services,  previously
provided  by  Sandsport.   Sandsport  was  paid  $208,000  in  consideration  of
Sandsport's  waiving  certain rights  relative to such  employees.  In addition,
Sandsport began leasing certain computer equipment to Health Card for $2,000 per
month as well as computer  hardware for its data processing  center at a monthly
cost of $20,000 from  Sandsport  pursuant to a verbal  agreement.  Currently the
Company is leasing computer equipment to Health Card at a monthly cost to Health
Card of  $39,800.  Sandsport  is  expected to continue to provide to Health Card
consulting services related to Health Card's information  systems. As of May 31,
2000, the Company owed Health Card $500,000 pursuant to a promissory note, dated
May 31,  2000,  made  payable by the  Company to the order of Health Card in the
original  principal  amount of  $500,000  plus  interest  at the rate of 9-1/2%;
interest on such note is payable quarterly and such note is due on June 1, 2001.
(See Item 12 - "Certain Relationships and Related Transactions").

                  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.

                  PROSPECTS FOR THE FUTURE, TRENDS AND OTHER EVENTS

                  There  has  been  an  increase  in  competitive  pressure  and
uncertainty  in the  Company's  SHARP  business in recent  years,  partly as the
result of the City of New York  requiring  all  contracts  with City agencies to
undergo  competitive  bidding.  Furthermore,  the Company notes that, to a major
extent,  the  success  of its SHARP  business  rests  with a key  officer of the
Company,  who has  established  various  relationships  with the Company's SHARP
customers over the years.

                  Except as discussed above, the Company has no knowledge of any
specific  prospects,  industry,  or other trends,  events or uncertainties  that
might  have a  material  impact  on the  Company's  net  sales  or  income  from
continuing  operations,  or that would  increase  the value of the shares in the
long-term or the short-term.

                  The Company  believes that inflation and changing  prices have
not had a material impact on the Company's operations.

ITEM 7 - FINANCIAL STATEMENTS

                           (BEGINS ON PAGE F-1 BELOW)

ITEM 8 -  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

                  Not applicable.

<PAGE>

                                    PART III

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

                  The following persons are the Directors and executive officers
of the Company.

      =========================== ========= ====================================
                                                   Positions and Offices
                                                    Presently Held with
                 Name             Age                  the Company
      --------------------------- --------- ------------------------------------
      --------------------------- --------- ------------------------------------
      Bert E. Brodsky             57        Chairman of the Board and Treasurer
      --------------------------- --------- ------------------------------------
      --------------------------- --------- ------------------------------------
      Stephen Davies              49        President

      --------------------------- --------- ------------------------------------
      --------------------------- --------- ------------------------------------
      Hugh Freund                 62        Executive Vice President, Secretary
                                            and Director
      --------------------------- --------- ------------------------------------
      --------------------------- --------- ------------------------------------
      Gary Stoller                47        Executive Vice President and
                                            Director
      --------------------------- --------- ------------------------------------
      --------------------------- --------- ------------------------------------
      Paul J. Konigsberg          64        Director
      --------------------------- --------- ------------------------------------
      --------------------------- --------- ------------------------------------
      Ronald L. Fish              59        Director
      =========================== ========= ====================================


                Bert E. Brodsky has been  Chairman of the Board and Treasurer of
the Company since June 1, 1983 and President from December 1989 through  January
2000. From August 1983 through November 1984, from December 1988 through January
1991,  from February  1998 to June 1998 and from  December 1998 to present,  Mr.
Brodsky  served  as  Chairman  of the  Board of  Health  Card and from June 1998
through  December  1998 served as President  of Health  Card.  From October 1983
through  December  1993,  Mr.  Brodsky  served  as  Chairman  of  the  Board  of
Compuflight,  a provider of computerized flight planning services.  Since August
1980,  Mr.  Brodsky  has  served  as  Chairman  of the  Board  of  P.W.  Medical
Management,   Inc.,  which  provides   financial  and  consulting   services  to
physicians. Since 1979, Mr. Brodsky has also served as President of Bert Brodsky
Associates, Inc., which provides consulting services.

                Stephen Davies has been President of the Company since February,
2000. Mr. Davies is the sole owner of Edge  Initiatives,  LLC, a consulting firm
specializing  in internet  marketing  and  development.  From 1986 to 1999,  Mr.
Davies was the founder  and served as  President  and CEO of US  Computer  Group
Inc., a provider of on-site computer services where Mr. Davies was the winner of
the Ernst &  Young/Inc  Magazine  Entrepreneur  of the Year  award in 1995.  Mr.
Davies  served on the Board of  Directors  of the  Independent  Service  Network
International  (ISNI)  from  1996 to 1999.  Mr.  Davies,  a  graduate  of Oxford
University,  is a published  author in journals and  magazines,  including  Long
Island Business News, AFSM Journal and Systems Magazine.

     Hugh Freund,  a founder of the Company,  was the Company's  President  from
1978 to November  1986,  and a Director of the Company  since its  formation  in
1978.  Since November 1986, Mr. Freund has served as an Executive Vice President
of the Company  and  Secretary  since  1995.  Mr.  Freund is also  President  of
Sandsport,  the Company's  wholly-owned health care data processing  subsidiary.
Additionally,  Mr.  Freund  has been  serving  as the  President  of  Pro-Health
Systems,  Inc.  since  March 9, 1999.  In addition  to  managing  the  Company's
operations,  Mr. Freund has been  responsible  for the marketing  efforts of the
Company.

                Gary Stoller  joined the Company at the time of its formation in
1978 as its  Senior  Programmer  and  Analyst  and has  been an  Executive  Vice
President and a Director of the Company since January 1983. Mr. Stoller has been
responsible  for computer  design,  programming and operations of the Company as
its Chief  Technology  Officer  and is the  architect  of the SHARP and  SanTrax
systems.

     Paul J. Konigsberg  served as a Director of the Company since January 1998.
Mr.  Konigsberg  previously  served on the  Company's  Board of  Directors  from
November  1987  through  August  1995.  Mr.  Konigsberg  is a  certified  public
accountant and has been a senior  partner in the  accounting  firm of Konigsberg
Wolf & Co., P.C. since 1970. Mr.  Konigsberg  also serves on the Company's Audit
Committee.

     Ronald L. Fish  served as a Director of the Company  since  January,  1998.
Since  1975,  Mr.  Fish  served as  Administrator,  Treasurer  and  Director  of
Unlimited  Care Inc.,  a nursing  services  firm.  Mr.  Fish also  serves on the
Company's Audit Committee.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     To the Company's knowledge,  based solely on a review of copies of Forms 3,
4 and 5 furnished to it and written  representations  that no other reports were
required,  during the fiscal year ended May 31, 2000,  the  Company's  officers,
Directors  and  10%   shareholders   complied  with  all  Section  16(a)  filing
requirements applicable to them except: Mr. Brodsky failed to file three reports
relative to five transactions.  Mr. Davies failed to file one report relative to
one   transaction  and  failed  to  timely  file  one  report  relative  to  one
transaction.  Mr. Freund failed to file one report relative to one  transaction.
Mr. Stoller failed to file one report relative to one transaction.

ITEM 10 - EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

     The  following  table sets forth certain  information  for the fiscal years
ending  May 31,  2000,  1999 and 1998  concerning  the  compensation  of Bert E.
Brodsky, the Chairman and Chief Executive Officer of the Company,  Gary Stoller,
Executive  Vice  President  of the  Company,  James  Poulos,  Vice  President of
Information  Systems of the Company until May 12, 2000 and J.P. Clejan,  Project
Manager of the Company.  No other executive officer had a total salary and bonus
in excess of $100,000 for the fiscal year ended May 31, 2000:
<TABLE>
<S>
<C>                          <C>      <C>          <C>       <C>          <C>         <C>         <C>        <C>
=========================== ======= ======================================== =============================== ===========
                                             Annual Compensation                 Long-Term Compensation

--------------------------- ------- ---------------------------------------- ------------------------------- -----------
--------------------------- ------- ------------ ---------- ------------- ------------------------ --------- -----------
                                                                                  Awards           Payouts
--------------------------- ------- ------------ ---------- ------------- ------------------------ --------- -----------
--------------------------- ------- ------------ ---------- ------------- ----------- ------------ --------- -----------
                                                               Other      Restricted  Securities             All Other
                                                               Annual     Stock       Underlying   LTIP      Com-pensation
                                      Salary       Bonus     Compensa-      Awards     Options/    Payouts      ($)
    Name and Principal       Year       ($)         ($)         Tion         ($)       SARs (#)      ($)
         Position                                               ($)

--------------------------- ------- ------------ ---------- ------------- ----------- ------------ --------- -----------
--------------------------- ------- ------------ ---------- ------------- ----------- ------------ --------- -----------
Bert E. Brodsky, Chairman    2000   200,000 (2)  31,650      14,013 (4)      -0-        350,000      -0-     28,564 (5)
       of the Board                                 (3)


--------------------------- ------- ------------ ---------- ------------- ----------- ------------ --------- -----------
--------------------------- ------- ------------ ---------- ------------- ----------- ------------ --------- -----------
                             1999   200,000 (2)     -0-      22,049 (4)      -0-        310,000      -0-     16,678 (5)
--------------------------- ------- ------------ ---------- ------------- ----------- ------------ --------- -----------
--------------------------- ------- ------------ ---------- ------------- ----------- ------------ --------- -----------
                             1998   200,000 (2)     -0-      13,374 (4)      -0-          -0-        -0-     20,401 (5)
                                                                                                             30,000 (6)

--------------------------- ------- ------------ ---------- ------------- ----------- ------------ --------- -----------
--------------------------- ------- ------------ ---------- ------------- ----------- ------------ --------- -----------
 Gary Stoller, Executive     2000     150,000       -0-      22,391 (4)      -0-          -0-        -0-     16,040 (5)
      Vice President


--------------------------- ------- ------------ ---------- ------------- ----------- ------------ --------- -----------
--------------------------- ------- ------------ ---------- ------------- ----------- ------------ --------- -----------
                             1999     119,039       -0-      22,391 (4)      -0-        73,500       -0-     16,040 (5)
--------------------------- ------- ------------ ---------- ------------- ----------- ------------ --------- -----------
--------------------------- ------- ------------ ---------- ------------- ----------- ------------ --------- -----------
                             1998     115,000       -0-      22,391 (4)      -0-          -0-        -0-     16,040 (5)
--------------------------- ------- ------------ ---------- ------------- ----------- ------------ --------- -----------
--------------------------- ------- ------------ ---------- ------------- ----------- ------------ --------- -----------
     James Poulos(1)         2000     120,087       -0-         -0-          -0-         4,700       -0-        -0-
--------------------------- ------- ------------ ---------- ------------- ----------- ------------ --------- -----------
--------------------------- ------- ------------ ---------- ------------- ----------- ------------ --------- -----------
                             1999     103,265       -0-         -0-          -0-         1,600       -0-        -0-
--------------------------- ------- ------------ ---------- ------------- ----------- ------------ --------- -----------
--------------------------- ------- ------------ ---------- ------------- ----------- ------------ --------- -----------
       J.P. Clejan           2000     130,433       -0-         -0-          -0-         6,600       -0-        -0-
=========================== ======= ============ ========== ============= =========== ============ ========= ===========
</TABLE>
(1)  As of May 12, 2000 Mr. Poulos was no longer employed by the Company.

(2)  In each of  1998,  1999 and 2000 Mr.  Brodsky  signed a waiver  wherein  he
     agreed to waive his rights to an additional $300,000 of compensation due to
     be paid to him for the  fiscal  years  ended May 31,  1998,  1999 and 2000,
     respectively,  pursuant  to the terms of the Brodsky  Employment  Agreement
     with the Company discussed below.

(3)  Represents 25,000 shares of Common Stock granted to Mr. Brodsky on February
     4, 2000.

(4)  Includes   personal   benefits   relating  to  the  use  of  Company-leased
     automobiles  provided  for  business  purposes  from  an  affiliate  of the
     Company's Chairman.

(5)  Represents  insurance premiums paid by the Company on behalf of Mr. Brodsky
     and Mr. Stoller for life insurance policies on their lives, the benefits of
     which are payable to their spouses.

(6)  Represents  insurance premiums paid by the Company on behalf of Mr. Brodsky
     for life insurance  policies on his life, the benefits of which are payable
     to an insurance trust, of which Mrs. Brodsky is a co-Trustee.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

     The following table sets forth certain  information  concerning  individual
grants of stock options during the fiscal year ending May 31, 2000:

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

                                Individual Grants

----------------------------------------------------------------------------------------------------------------------
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
                                                       Percent of Total
                                                        Options/SARs
                                Number of               Granted to
                               Securities               Employees in            Exercise or
                               Underlying               Fiscal Year             Base Price             Expiration
          Name            Options/SARs Granted             (%)                   ($/Sh)                  Date
                                   (#)
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
------------------------- ---------------------- ----------------------- ---------------------- ----------------------

Bert E. Brodsky                350,000 (1)               53.9                    1.31                  2/3/05

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

James Poulos                    1,600 (2)                  *                     3.00                  3/1/04 (4)


------------------------- ---------------------- ----------------------- ---------------------- ----------------------
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
J.P. Clejan                     6,600 (3)                  *                     3.00                  4/12/04

------------------------- ---------------------- ----------------------- ---------------------- ----------------------
</TABLE>
(1)  Exercisable  over a five  year  period to the  extent  of 75,500  shares of
     Common Stock in each of 2000,  2001, 2002, 2003 and 48,000 shares of Common
     Stock in 2004.

(2)  Exercisable  over a five year  period to the extent of 540 shares of Common
     Stock in 2000 and 530 shares of Common Stock in each of 2001 and 2002.

(3)  Exercisable over a five year period to the extent of 2,200 shares of Common
     Stock in each of 2000, 2001 and 2002.

(4)  Pursuant to the terms of that certain Option Agreement  between the Company
     and Mr.  Poulos,  the option to purchase up to 1,600 shares of Common Stock
     granted to Mr. Poulos expired on May 12, 2000, the date his employment with
     the Company terminated.

*        Less than 1%.

AGGREGATED OPTION/SAR EXERCISE IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUE TABLE

     The following table sets forth certain information  concerning the value of
unexercised options and warrants for the fiscal year ended May 31, 2000:

<TABLE>
<S>
<C>                     <C>                    <C>              <C>                        <C>
===================== ======================= ================= ========================== ==========================
                                                                  Number of Securities       Value of Unexercised
                                                                 Underlying Unexercised    in-the-Money Options and
                                                                 Options and Warrants at      Warrants at May 31,
        Name            Shares Acquired on     Value Realized        May 31, 2000(#)                2000($)
                           Exercise(#)              ($)         Exercisable/Unexercisable  Exercisable/Unexercisable
--------------------- ----------------------- ----------------- -------------------------- --------------------------
--------------------- ----------------------- ----------------- -------------------------- --------------------------
  Bert E. Brodsky              -0-                  -0-              385,500/274,500             5,285/19,215
--------------------- ----------------------- ----------------- -------------------------- --------------------------
--------------------- ----------------------- ----------------- -------------------------- --------------------------
    Gary Stoller               -0-                  -0-                 143,500/0                     0/0
--------------------- ----------------------- ----------------- -------------------------- --------------------------
--------------------- ----------------------- ----------------- -------------------------- --------------------------
    James Poulos               -0-                  -0-                    0/0                        0/0
--------------------- ----------------------- ----------------- -------------------------- --------------------------
--------------------- ----------------------- ----------------- -------------------------- --------------------------
    J.P. Clejan                -0-                  -0-                2,200/4,400                    0/0
===================== ======================= ================= ========================== ==========================
</TABLE>

COMPENSATION OF DIRECTORS

                  During  the  fiscal  year  ended  May 31,  2000  non-statutory
options to purchase up to 36,000 shares of Common Stock, at an exercise price of
$3.00  per  share,  were  issued to each of  Messrs.  Konigsberg  and  Fish.  In
addition, during the fiscal year ended May 31, 2000, the Company paid $12,000 in
Director's fees.

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS

                  In May  1992,  Mr.  Brodsky  and the  Company  entered  into a
deferred  compensation  agreement  pursuant to which the Company will pay (i) to
Mr.  Brodsky a lump sum  ranging  from  $75,000 to  $255,000  if he  voluntarily
terminates  his employment  with the Company after  attaining 55 years of age or
(ii) to Mr.  Brodsky's  beneficiary a lump sum ranging from $200,000 to $450,000
in the event of Mr.  Brodsky's  death during the term of his employment with the
Company.  The amount of the payment is dependent  upon the age of Mr. Brodsky at
the time of  termination  of  employment  or death.  The  Company  has  obtained
insurance  on Mr.  Brodsky's  life to  fund  its  obligations  under  the  above
agreement.

                  On  February  1,  1997  the  Company  and its  Chairman  ("Mr.
Brodsky")  entered  into an  employment  agreement  for a five  year  term  (the
"Brodsky  Employment  Agreement").  Among other things,  the Brodsky  Employment
Agreement  provides  compensation  at the annual  rate of  $500,000  or a lesser
amount if mutually agreed.  The Brodsky  Employment  Agreement also provides for
payment of an annual bonus at the sole discretion of the Board of Directors. Mr.
Brodsky agreed to accept a reduction in compensation  for the fiscal years ended
May 31, 2000 and 1999 and has signed  waivers  evidencing  his agreement to such
reductions.

ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                The following table sets forth the beneficial share ownership of
(i) each person who is known by the Company to be the  beneficial  owner of more
than five (5%) percent of the Company's Common Stock; (ii) each of the Company's
current  Directors (iii) each person listed in the Summary  Compensation  Table;
and (iv) all of the Company's  executive  officers and Directors as a group. The
ownership  percentages  indicated are calculated,  on a fully-diluted  basis, in
accordance with Rule 13d-3 promulgated  pursuant to the Securities  Exchange Act
of 1934, as amended,  which attributes  beneficial  ownership of securities to a
person or entity who holds options or warrants to purchase such securities.



<TABLE>
<S>
<C>                                             <C>                                               <C>
                                                                                                  APPROXIMATE PERCENTAGE
   NAME OF MANAGEMENT PERSON AND NAME AND                 NUMBER OF SHARES                        OF OUTSTANDING SHARES
        ADDRESS OF BENEFICIAL OWNER
--------------------------------------------- ----------------------------------------- ------------------------------------------
Bert E. Brodsky
26 Harbor Park Drive
Port Washington, NY                                        1,906,584 (1)                                    65.9%
--------------------------------------------- ----------------------------------------- ------------------------------------------
Hugh Freund

                                                             137,000 (2)                                     5.2% (2)
--------------------------------------------- ----------------------------------------- ------------------------------------------
Gary Stoller
26 Harbor Park Drive
Port Washington, NY                                          164,500 (3)                                     6.2%
--------------------------------------------- ----------------------------------------- ------------------------------------------
James Poulos                                                       0                                           0%
--------------------------------------------- ----------------------------------------- ------------------------------------------
J.P. Clejan                                                    2,200 (4)                                       *
--------------------------------------------- ----------------------------------------- ------------------------------------------
Paul J. Konigsberg
Konigsberg Wolf & Co.
440 Park Avenue South                                        24,000  (5)                                       *
New York, NY 10016
--------------------------------------------- ----------------------------------------- ------------------------------------------
Ronald L. Fish
Unlimited Care Inc.
245 Main Street                                              16,000  (5)                                       *
White Plains, NY 10601
--------------------------------------------- ----------------------------------------- ------------------------------------------
All executive officers and Directors as a
group (6 persons)                               2,248,084(1)(2)(3)(5)(6)                                    70.2%
============================================= ========================================= ==========================================
</TABLE>

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

(1)  Includes  79,834 shares of the  Company's  Common Stock owned by the trusts
     established for the benefit of Mr. Brodsky's four children; includes 20,500
     shares of the Company's Common Stock owned by Mr. Brodsky's wife;  includes
     100,686  shares of Common  Stock  owned by Mr.  Brodsky's  adult  daughter;
     includes  an  aggregate  of  109,292  shares of Common  Stock  owned by Mr.
     Brodsky's adult sons.  Includes 200,000 shares of Common Stock owned by the
     Bert E. Brodsky Revocable Trust.  Includes presently exercisable options to
     purchase  310,000  shares of Common Stock at $1.41 per share under the 1995
     Stock  Option  Plan;  includes  presently  exercisable  options to purchase
     75,500  shares of common  stock at $1.31  per  share  under the 1998  Stock
     Option Plan.

(2)  Includes presently exercisable options to purchase 137,000 shares of Common
     Stock at $1.41 per share  under the 1995 Plan.  Excludes  47,464  shares of
     Common Stock owned by Mr. Freund's adult children. Mr. Freund disclaims any
     beneficial interest in, or voting or dispositive control over, such shares.

(3)  Includes presently  exercisable options to purchase 20,000 shares of Common
     Stock  at  $2.34  per  share  under  the  1995  Plan;   includes  presently
     exercisable  options to purchase 50,000 shares of Common Stock at $2.61 per
     share  under the 1995  Plan;  includes  presently  exercisable  options  to
     purchase  73,500  shares of Common  Stock at $1.41 per share under the 1995
     Plan.  Includes  21,000 shares of Common Stock owned by trusts  established
     for the  benefit  of Mr.  Stoller's  children  of which  Mr.  Stoller  is a
     trustee.

(4)  Includes persently  exercisable  options to purchase 2,200 shares of Common
     Stock at $3.00 per share under the 1998 Plan.

(5)  Includes presently  exercisable options to purchase 10,000 shares of Common
     Stock  at  $3.00  per  share  under  the  1998  Plan;   includes  presently
     exercisable  options to purchase  6,000 shares of Common Stock at $3.00 per
     share under the 1998 Plan.

(6)  Does not include  100,000 shares of Common Stock issuable upon the exercise
     of currently unexercisable stock options issued to Mr. Davies.

*    Less than one percent (1%)


ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                  IDA/SBA FINANCING

                  Reference is hereby made to Item 6 - "Management's  Discussion
and  Analysis or Plan of  Operation -  Management's  Discussion  and Analysis of
Financial  Condition  and  Results  of  Operations  - IDA/SBA  Financing"  for a
discussion  of  an  industrial   development  revenue  bond  and  SBA  financing
transactions  among the Company,  BSRI, BFS (as successor to BSRI's  interest in
such transactions), the NCIDA, the SBA and the Bank.

                  ADVANCES AND LOANS TO AFFILIATES

     At May 31, 1998, the Company was owed approximately $120,000 from a company
affiliated  with the  officers of the  Company,  pursuant to a  promissory  note
payable in 24 monthly  payments  of  principal  and  interest  at 8%  commencing
September 1, 1997. The Company deferred  principal  payments from April, 1998 to
October,  1998, at which time principal and interest payments resumed. At May 31
1999, the Company was owed  approximately  $42,000 on such note which was repaid
within the year ended May 31, 2000.

                  During the fiscal year ended May 31, 2000 the Company  paid an
aggregate of $36,404 on behalf of certain officers to companies  affiliated with
the Company's Chairman for payment of automobile leases.

                  NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.

As of May 31,  2000,  the Company  derived  revenue  from Health Card, a company
affiliated with the Company's  Chairman of the Board,  principally for data base
and  operating  system  support,  hardware  leasing,   maintenance  and  related
administrative  services.  The revenues  generated  from Health Card amounted to
approximately  $1,753,000  and  $1,765,000  for the years ended May 31, 2000 and
1999,  respectively.  Included  in the current  year  revenues  are  billings of
approximately  $540,000  for  quality  assurance  testing of  software  programs
developed  by  Health  Card and  network  support  and  $302,000  for help  desk
services. In addition the Company resells its telephone services to Health Card.
As of May 31,  2000,  the  billings  for such  telephone  services  amounted  to
approximately $151,000 for the fiscal year ended May 31, 2000. Subsequent to May
31, 2000, the Company received  approximately  $191,000 from Health Card in full
payment of amounts due as of that date.  (See "Item 6 - Management's  Discussion
and  Analysis or Plan of  Operation -  Management's  Discussion  and Analysis of
Financial   Condition   and  Results  of  Operations  -  Liquidity  and  Capital
Resources").

     As of May 31,  2000,  the Company owed Health Card  $500,000  pursuant to a
promissory note, dated May 31, 2000, made payable by the Company to the order of
Health Card in the original  principal  amount of $500,000  plus interest at the
rate of 9 1/2%;  interest on such note is payable quarterly and such note is due
on June 1, 2001.

                  EQUIPMENT LEASES

     The Company  makes  various  lease  payments to affiliates of the Company's
Chairman.  The  payments  are for:  equipment  rental,  which was  $393,903  and
$387,346 in fiscal 2000 and 1999, respectively

                  MEDICAL ARTS OFFICE SERVICES, INC.

                  Medical Arts Office Services,  Inc. ("MAOS"),  a company which
the Company's Chairman of the Board is the sole shareholder provided the Company
with accounting,  bookkeeping and paralegal services. For the fiscal years ended
May 31,  2000 and 1999 the  total  payments  made by the  Company  to MAOS  were
$399,592 and $193,934 respectively.

                  FEDERATION OF PUERTO RICAN ORGANIZATIONS

                  The  Company has been  providing  services  to  Federation  of
Puerto   Rican   Organizations,   and/or  its   affiliates   (individually   and
collectively,  the "Federation"),  an HRA Vendor Agency,  since 1995. On October
31, 1997 and  November  30,  1997,  respectively,  the  Company  acquired a loan
receivable  for an aggregate of $300,000  from a third party (a portion of which
was  acquired  from an  affiliate  of the  Company's  Chairman),  due  from  the
Federation.  Such  loan  receivable  was  supposed  to be  secured  by  accounts
receivable due to the Federation. Shortly following the Company's acquiring such
receivable,  the Federation and its affiliates filed for bankruptcy  protection.
While  the  bankruptcy  case is  still  pending,  no plan or  reorganization  or
distribution  has been  proposed.  The  Company has filed,  among other  things,
claims  representing monies owed to the Company with respect to the loan and the
receivables.  At May 31,  2000,  the Company had written off the  $300,000  loan
receivable  in addition to $47,296 for services  rendered by the Company owed by
the Federation against a reserve established in prior years for these amounts.


<PAGE>


ITEM 13 - EXHIBITS, LISTS AND REPORTS ON FORM 8-K

(a)     Exhibits

3(A)(i)  Certificate  of   Incorporation   and  Amendments   thereto   including
     Certificate  of  Ownership  and  Merger  (DE)  and  Agreement  and  Plan of
     Merger(1)

3(A)(ii) Certificate of Amendment to Certificate of Incorporation filed July 27,
     1993 (1)

3(A)(iii) Certificate of Amendment to Certificate of Incorporation filed May 26,
     1995 (1)

3(B)    By-Laws (1)

4.1  Nassau County Industrial  Development Agency Industrial Development Revenue
     Bonds (1994 Brodsky Sibling Realty Inc. Project) dated June 1, 1994 (1)

4.2  Revolving  Credit  Agreement  dated  as of  April  20,  1995  by and  among
     Sandsport Data Services, Inc. and Marine Midland Bank (1)

4.3  Nassau County Industrial  Development Agency Industrial Development Revenue
     Bonds (1994 Brodsky Sibling Realty Inc.  Project)  Assumption and Amendment
     of Certain Agreements dated July 1, 1995 (1)

4.4  Loan Agreement dated August 11, 1995 between Sandata,  Inc. and Long Island
     Development Corporation (1)

4.5  "504"  Note  dated  August  11,  1995  from  the  Long  Island  Development
     Corporation to Sandata, Inc. (1)

4.6  Nassau County Industrial  Development Agency Industrial Development Revenue
     Bonds (1994 Brodsky Sibling Realty Inc.  Project)  Assumption and Amendment
     of Certain Agreements dated November 1, 1996 (3)

4.7  Revolving  Credit  Agreement  dated  as of  April  18,  1997  by and  among
     Sandsport Data Services, Inc. and Marine Midland Bank (3)

4.8  Second  Amendment  dated  as of  February  14,  2000  to  Revolving  Credit
     Agreement by and among Sandsport Data Services, Inc. and HSBC Bank USA

10.1Software License  Agreement and Distribution  Agreement between Sandata Home
     Health Systems, Inc. and Fastrack Healthcare Systems, Inc. dated as of June
     15, 1995 (1)

10.2 Employees' Incentive Stock Option Plan (1)

10.3 First Amendment to Incentive Stock Option Plan dated April 4, 1989 (1)

10.4 Second Amendment to Incentive Stock Option Plan dated December 18, 1990 (1)

10.5 1986 Non-statutory Stock Option Plan (1)

10.6 Amendment to 1986 Non-statutory Stock Option Plan dated April 4, 1989 (1)

10.7 1995 Stock Option Plan (1)

10.8 1998 Stock Option Plan (5)

10.9 Common Stock Purchase Warrants as issued to Bert E. Brodsky (1)

10.10Deferred  Compensation  Plan dated May 1, 1992 between the  Registrant  and
     Bert E. Brodsky (1)

10.11Form of agreement between  Sandsport Data Services,  Inc. and vendor agency
     (2)

10.12Form of agreement between  Sandsport Data Services,  Inc. and vendor agency
     (2)

10.13 Form of Subscription Agreement dated December 23, 1996 (2)

10.14 Form of Subscription Agreement dated September 12, 1996 (2)

10.15 Form of Common Stock Purchase Warrant ($5.00 Exercise Price) (2)

10.16 Form of Common Stock Purchase Warrant ($7.00 Exercise Price) (2)

10.17 Form of Redeemable Common Stock Purchase Warrant (2)

10.18Employment Agreement dated February 1, 1997 between the Registrant and Bert
     E. Brodsky (3)

10.19 Form of Pledge Agreement (4)

10.20 Form of Non-Negotiable Promissory Note (4)

10.21Stock Option Agreement dated December, 1998 between the Registrant and Bert
     E. Brodsky

10.22Stock Option  Agreement  dated  February 3, 2000 between the Registrant and
     Bert E. Brodsky

10.23Stock  Option  Agreement  dated April 15, 2000 between the  Registrant  and
     Stephen Davies

10.24Promissory  Note dated May 31, 2000 between  National  Medical  Health Card
     Systems, Inc. and the Registrant

16   Letter re Change in Certifying Accountant (1)

21   Subsidiaries of Registrant

23   Consent of Accountants

27   Financial Data Schedule (for electronic filing)

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

(1)      The Company hereby  incorporates the footnoted  Exhibit by reference in
         accordance with Rule 12b-32, as such Exhibit was originally filed as an
         Exhibit to the  Company's  Report on Form  10-KSB  for the fiscal  year
         ended May 31, 1995.

(2)      The Company hereby  incorporates the footnoted  Exhibit by reference in
         accordance with Rule 12b-32, as such Exhibit was originally filed as an
         Exhibit to Amendment No. 1 to Form S-3 Registration  Statement as filed
         with the Securities and Exchange Commission on May 27, 1997.

(3)      The Company hereby  incorporates the footnoted  Exhibit by reference in
         accordance with Rule 12b-32, as such Exhibit was originally filed as an
         Exhibit to the  Company's  Report on Form  10-KSB  for the fiscal  year
         ended May 31, 1997.

(4)      The Company hereby  incorporates the footnoted  Exhibit by reference in
         accordance with Rule 12b-32, as such Exhibit was originally filed as an
         Exhibit to the  Company's  Report on Form  10-KSB  for the fiscal  year
         ended May 31, 1998.

(5)      The Company hereby  incorporates the footnoted  Exhibit by reference in
         accordance with Rule 12b-32, as such Exhibit was originally filed as an
         Exhibit to the  Company's  Report on Form  10-KSB  for the fiscal  year
         ended May 31, 1999.

         (b)      Reports on Form 8-K

                  None.


<PAGE>

                                  SANDATA, INC.

                     FINANCIAL STATEMENTS COMPRISING ITEM 7
                            OF REPORT ON FORM 10-KSB
                      TO SECURITIES AND EXCHANGE COMMISSION
                             YEAR ENDED MAY 31, 2000

                        SANDATA, INC. AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                        Page

Report of Independent Public Accountants                                F-2

Financial Statements

         Consolidated Balance Sheets as of May 31, 2000 and 1999        F-3-F4

         Consolidated Statements of Income for the years ended
                  May 31, 2000 and 1999                                 F-5

         Consolidated Statements of Shareholders' Equity for the years
         ended May 31, 2000 and 1999                                    F-6

         Consolidated Statements of Cash Flows for the years ended
                  May 31, 2000 and 1999                                 F-7

         Notes to Consolidated Financial Statements                     F-8-F26




<PAGE>



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

Board of Directors and Shareholders
of Sandata, Inc. and Subsidiaries

We have audited the accompanying  consolidated  balance sheets of Sandata,  Inc.
and  Subsidiaries  as of May 31,  2000 and 1999,  and the  related  consolidated
statements  of  income,  shareholders'  equity and cash flows for the years then
ended.  These  consolidated  financial  statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.  We believe our audits  provide a reasonable
basis for our opinion.

As more fully described in the Notes to the consolidated  financial  statements,
the  Company  had  certain  transactions  with  companies  affiliated  with  the
Company's Officers and Chairman of the Board.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Sandata, Inc. and Subsidiaries as of May 31, 2000 and 1999, and the consolidated
results  of their  operations  and their  cash flows for the years then ended in
conformity with generally accepted accounting principles.

Marcum & Kliegman LLP

/s/ Marcum & Kliegman LLP

Woodbury, New York
August 24, 2000



                         SANDATA, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                     May 31,
<TABLE>
<S>                                                                                     <C>                    <C>
                               ASSETS                                                       2000                     1999
                                                                                            ----                     ----

CURRENT ASSETS
       Cash and cash equivalents                                                        $ 1,229,718            $  1,533,576
       Accounts receivable, net of allowance for doubtful accounts
           of $448,000 and $533,000 at 2000 and 1999, respectively                        2,308,901               2,034,248
       Receivables from affiliates                                                          405,732                 924,426
       Other receivable                                                                         ---               1,100,000
       Inventories                                                                           17,165                  29,307
       Prepaid expenses and other current assets                                            413,119                 485,455
                                                                                        -----------             -----------

                  Total Current Assets                                                    4,374,635               6,107,012

FIXED ASSETS, NET                                                                         8,911,655               7,169,002

OTHER ASSETS

       Notes receivable                                                                     126,221                 169,608

       Cash surrender value of officer's life insurance, security
           deposits and other                                                               832,988                 775,557
                                                                                       ------------            ------------

                  Total Assets

                                                                                        $14,245,499             $14,221,179

                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

</TABLE>
<PAGE>


                         SANDATA, INC. AND SUBSIDIARIES

                    CONSOLIDATED BALANCE SHEETS (Continued)

                                     May 31,
<TABLE>
<S>                                                                                  <C>                     <C>

                  LIABILITIES AND SHAREHOLDERS' EQUITY                                      2000                     1999
                                                                                            ----                     ----

CURRENT LIABILITIES
       Accounts payable and accrued expenses                                         $    2,580,143          $    3,022,395
       Current portion of long-term debt                                                        ---               2,500,000
       Deferred/unearned revenue                                                             38,848                  13,633
       Deferred income                                                                      322,678                 335,385
                                                                                      -------------             -----------

                  Total Current Liabilities                                              2, 941,669               5,871,413

LONG-TERM DEBT                                                                            2,750,000                     ---

DEFERRED INCOME                                                                             315,253                 324,096

DEFERRED INCOME TAXES                                                                      702,158                  535,000
                                                                                       -----------            -------------

                  Total Liabilities                                                       6,709,080               6,730,509
                                                                                      -------------           -------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
       Common stock;  par value $.001;  authorized  6,000,000 shares in 2000 and
          1999, 2,506,475 and 2,481,481 shares issued
          and outstanding in 2000 and 1999, respectively;                                     2,506                 2,481

       Additional paid in capital                                                         5,803,704               5,772,079
       Retained earnings                                                                  3,249,868               3,235,769
       Notes receivable - officers                                                       (1,519,659)             (1,519,659)
                                                                                         ----------              -----------

                  Total Shareholders' Equity                                              7,536,419               7,490,670
                                                                                          ---------               ---------

                  Total Liabilities and Shareholders' Equity                          $  14,245,499           $  14,221,179
                                                                                      =============           =============


                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

</TABLE>

<PAGE>



                         SANDATA, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

                               Years ended May 31,
<TABLE>
<S>                                                                                   <C>                     <C>
                                                                                            2000                     1999

                                                                                            ----                     ----

REVENUES:
       Service fees                                                                    $ 17,987,646            $ 14,155,092
       Other income                                                                         432,279                 437,575
       Interest income                                                                      177,396                 143,200
                                                                                        -----------            ------------
                                                                                         18,597,321              14,735,867
                                                                                         ----------              ----------
COSTS AND EXPENSES:
           Operating                                                                     11,419,625               8,909,704
           Selling, general and administrative                                            4,346,757               3,428,584
           Depreciation and amortization                                                  2,384,045               2,015,390
           Interest expense                                                                 243,637                  97,170
                                                                                         ----------              ----------

TOTAL COSTS AND EXPENSES                                                                 18,394,064              14,450,848
                                                                                         ----------              ----------

Earnings from operations before income taxes                                                203,257                 285,019

       Income tax expense                                                                   189,158                 171,177
                                                                                        -----------              ----------

NET EARNINGS                                                                           $     14,099            $    113,843
                                                                                       ============            ============

BASIC EARNINGS PER SHARE                                                               $        .01            $        .05
                                                                                        -------------         -------------

DILUTED EARNINGS PER SHARE                                                             $          .01          $        .04
                                                                                       --------------          ------------

                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

</TABLE>
<PAGE>


                         SANDATA, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                       Years ended May 31, 2000 and 1999
<TABLE>
<S>                      <C>          <C>            <C>               <C>              <C>                 <C>

                                Common Stock         Additional                             Notes
                                                       Paid-In          Retained          Receivable
                          Shares      Amount           Capital          Earnings          Officers            Total
                          ------      ------           -------          --------          --------            -----
Balance at
June 1, 1998              1,560,149  $ 1,560        $4,173,091        $3,121,927            ---            $7,296,578

Exercise of
common stock
purchase warrants            400,000      400           551,600               ---          (551,448)               552

Exercise of
common
stock
options                      521,332      521         1,047,388               ---          (968,211)            79,698

Net earnings                     ---      ---               ---           113,842               ---            113,842
                      --------------  -------        ----------          --------          ---------      ------------
Balance at
May 31, 1999               2,481,481    2,481         5,772,079         3,235,769        (1,519,659)         7,490,670

Effect of
fractional shares
paid out in cash                  (6)     ---               ---               ---               ---                ---


Stock Based
Compensation                  25,000       25            31,625               ---               ---             31,650
                              ------       --            ------                                                 ------

Net Earnings                                                               14,099                               14,099
                      --------------  -------        ----------           -------             ------      -------------

Balance at
May 31, 2000               2,506,475  $ 2,506        $5,803,704        $3,249,868       $(1,519,659)        $7,536,419
                           =========  =======        ==========        ==========       ============        ==========


                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

</TABLE>
<PAGE>



                         SANDATA, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                               Years ended May 31,
<TABLE>
<S>                                                                                  <C>                       <C>
                                                                                           2000                   1999
                                                                                           ----                   ----
Cash flows from operating activities:

    Net earnings                                                                        $14,099                $  113,842
    Adjustments to reconcile net earnings to net cash
      provided by operating activities:
         Depreciation and amortization                                                2,384,045                 2,015,390
         (Gain) on disposal of fixed assets                                            (379,290)                 (473,532)
         Provision for losses on accounts receivable                                    (85,093)                   89,718
         (Decrease) in deferred income                                                 (400,840)                 (216,353)
         Recognition of deferred revenue                                               (340,389)                 (125,122)
         Stock based compensation                                                        31,650                       ---
         Deferred tax provision                                                         167,158                   153,000
           (Increase) decrease in operating assets
                Accounts receivable                                                    (189,560)                 (512,509)
                Receivables from affiliates                                             518,694                  (304,739)
                Other receivable                                                      1,100,000                (1,100,000)
                Inventories                                                              12,142                    (2,304)
                Prepaid expenses and other current assets                                72,336                  (344,582)
                Other assets                                                            (57,431)                 (250,276)
         (Decrease) Increase in operating liabilities
                Accounts payable and accrued expenses                                  (442,252)                  506,401
                Deferred revenue                                                        365,604                   115,344
                Deferred income                                                         379,290                   473,532
                                                                                        -------                   -------
           Net cash provided by operating activities                                  3,150,163                   137,810

Cash flows from investing activities:
         Purchases of fixed assets                                                   (5,700,662)               (5,096,479)
         Proceeds from sale/leaseback transactions                                    1,953,254                 2,200,000
         Collection on note receivable                                                   43,387                    17,985
                                                                                        -------                   -------
            Net cash used in investing activities                                    (3,704,021)               (2,878,494)
                                                                                     -----------                ----------

Cash flows from financing activities:
         Proceeds from stock transactions                                                   ---                     1,609
         Principal payments on term loans                                                   ---                   (22,296)
         Proceeds from note payable                                                     500,000                       ---
         Proceeds from line of credit                                                 2,400,000                 4,500,000
         Principal payments on line of credit                                        (2,650,000)               (2,000,000)
                                                                                     -----------               -----------
           Net cash provided by financing activities                                    250,000                 2,479,313
                                                                                     -----------
Decrease in cash and cash equivalents                                                  (303,858)                 (261,371)
Cash and cash equivalents at beginning of year                                        1,533,576                 1,794,947
                                                                                     -----------                ---------
Cash and cash equivalents at end of year                                             $1,229,718                $1,533,576
                                                                                     ==========                ==========
Supplemental Disclosure of Noncash Investing and Financing Activities:

In February 2000, the Company  granted 25,000 shares of Common Stock with a fair
market value of $31,650 as a bonus to the Chairman of the Board of Directors for
services to the Company.

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

</TABLE>

<PAGE>

                         SANDATA, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Nature of Business and Economic Dependency

         Sandata, Inc. and Subsidiaries (the "Company") are primarily engaged in
         the business of providing  computerized  data  processing  services and
         custom software and programming  services using  Company-developed  and
         licensed software principally to the healthcare  industry.  The Company
         primarily  operates in the New York  metropolitan  area.  During fiscal
         years 2000 and 1999,  the  Company  received  revenues  from a group of
         customers who are all funded by one governmental  agency,  amounting to
         approximately $10,623,000 and $9,460,000, respectively. The Company was
         owed approximately $1,362,000 and 1,394,000 from these customers at May
         31, 2000 and 1999, respectively.

         Principles of Consolidation

               The  consolidated  financial  statements  include the accounts of
          Sandata,  Inc.  and its  wholly  owned  subsidiaries:  Sandsport  Data
          Services,  Inc., Sandata Home Health Systems,  Inc., Sandata Spectrum,
          Inc., SANTRAX Systems, Inc., SANTRAX Productivity, Inc. and Pro-Health
          Systems,  Inc.  (formerly  known as  Sandata  Inteck,  Inc.).  SANTRAX
          Productivity,   Inc.  is  an  inactive  subsidiary.   All  significant
          intercompany   accounts  and  transactions  have  been  eliminated  in
          consolidation.

         Fixed Assets

         Fixed assets are recorded at cost.  Depreciation  and  amortization are
         computed principally by the straight-line method over the lesser of the
         estimated useful lives or lease terms of the related assets.

         Income Taxes

         The Company uses the liability  method to account for income taxes. The
         primary  objectives of accounting for income taxes are to (a) recognize
         the amount of income tax payable for the current year and (b) recognize
         the amount of deferred  tax  liability  or asset based on  management's
         assessment of the tax  consequences  of events that have been reflected
         in the Company's financial statements or tax returns.

         Software Costs

         The Company  capitalizes  software  development costs from the point in
         time where  technological  feasibility has been  established  until the
         computer  software  product  is  available  to be sold.  The  Company's
         amortization  is  computed  on a  straight  line basis over a five year
         period, which represents the estimated useful life of the software. The
         Company  matches  its  software  amortization  against  its  respective
         product revenue, which is reported on a product by product basis.

         Research and Development

         Research and development costs are charged to expense as incurred.

         Inventories

         Inventories,  consisting of computer  hardware and peripherals held for
         resale,  are stated at the lower of cost or market;  cost is determined
         using the specific identification method.

         Net Earnings Per Common Share

         In 1997, the Financial  Accounting  Standards Board issued Standard No.
         128 ("SFAS No. 128"),  "Earnings per Share".  SFAS No. 128 replaced the
         calculation of primary and fully diluted  earnings per share with basic
         and  diluted  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 plus  outstanding
         stock options.

         Basic  earnings per share are based on the  weighted-average  number of
         shares of common  stock  outstanding,  which were  2,489,562 at May 31,
         2000 and  2,372,941  at May 31,  1999.  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: 2,682,784 at May 31, 2000
         and 2,569,209 at May 31, 1999.

         Revenue Recognition

         The Company  recognizes  revenues and direct  costs as the  contractual
         service is rendered  and the expense  associated  with such  service is
         incurred. Revenues from hardware and software maintenance contracts are
         deferred and recognized over the life of the contracts.

         Cash and Cash Equivalents

         The  Company  considers  all  short-term  investments  with an original
         maturity of three months or less to be cash equivalents.

         Concentration of Credit Risk

         The  Company  may be subject  to a  concentration  of credit  risk with
         respect to its trade receivables.  The Company performs on-going credit
         evaluations of its customers and generally does not require collateral.
         The Company  maintains  allowances  to cover  potential or  anticipated
         losses for uncollectible accounts.

         The Company has cash balances in banks in excess of the maximum  amount
         insured by the FDIC as of May 31, 2000.

         Statements of Cash Flows

         The Company paid income taxes of approximately  $21,000 and $22,000 and
         interest of approximately  $231,000 and $87,000 for the years ended May
         31, 2000 and 1999, respectively.

         Use of Estimates in the Financial Statements

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

         Fair Value of Financial Instruments

         The Company's  financial  instruments include cash, accounts receivable
         and  accounts   payable.   Due  to  the  short-term   nature  of  these
         instruments,  the fair  value of these  instruments  approximate  their
         recorded  value.  The Company has long-term debt  instruments  which it
         believes are stated at estimated fair market value.

         Stock Options and Similar Equity Instruments

         The Company  accounts for stock options and similar equity  instruments
         (collectively   "Options")   issued  to  employees   and  directors  in
         accordance  with  Accounting  Principles  Board ("APB") Opinion No. 25,
         "Accounting for Stock Issued to Employees,"  rather than the fair value
         based  method  of  accounting  prescribed  by  Statement  of  Financial
         Accounting  Standards  ("SFAS") No. 123,  "Accounting  for  Stock-Based
         Compensation."  The exercise  price for Options issued to employees and
         directors  equals or exceeds  the fair  market  value of the  Company's
         Common  Stock at the date of grant and,  accordingly,  no  compensation
         expense is recorded.  Equity  instruments  issued to acquire  goods and
         services from  non-employees  are accounted for based on the fair value
         of  the  consideration  received  or  the  fair  value  of  the  equity
         instruments issued, whichever is more readily determinable.

         Comprehensive Income

         In  1998,  the  Company  adopted  Statement  of  Financial   Accounting
         Standards No. 130 ("SFAS No. 130"),  "Reporting  Comprehensive Income".
         SFAS No.  130  establishes  standards  for  reporting  and  display  of
         comprehensive   income,   its  components  and  accumulated   balances.
         Comprehensive income is defined to include all changes in equity except
         those resulting from investments by owners and distributions to owners.
         Among other disclosures,  SFAS No. 130 requires that all items that are
         required  to  be  recognized  under  current  accounting  standards  as
         components of comprehensive income be reported in a financial statement
         that  is  displayed  with  the  same   prominence  as  other  financial
         statements.

         Business Segments

         In  1998,  the  Company  adopted  Statement  of  Financial   Accounting
         Standards No. 131 ("SFAS No. 131"),  "Disclosures  About Segments of an
         Enterprise  and  Related  Information",  which  supercedes  SFAS No 14,
         "Financial  Reporting for Segments of a Business  Enterprise." SFAS No.
         131 establishes  standards for the way that public  enterprises  report
         information about operating segments in annual financial statements and
         requires reporting of selected  information about operating segments in
         interim   financial   statements   regarding   products  and  services,
         geographical areas and major customers.  SFAS No. 131 defines operating
         segments as components of an enterprise about which separate  financial
         information  is  available  that is  evaluated  regularly  by the chief
         operating  decision maker in deciding how to allocate  resources and in
         assessing  performance.  The Company has determined that its operations
         are in one segment,  computer services to the health care industry. The
         Company's  customers and operations  are primarily  within the New York
         metropolitan area.

         New Accounting Pronouncements

         In June 1998, the FASB issued SFAS No. 133,  "Accounting for Derivative
         Instruments  and Hedging  Activities",  which has been deferred to June
         30,  2000 by  publishing  of SFAS No.  137,  and is  effective  for the
         Company beginning June 1, 2000. SFAS No. 133 establishes accounting and
         reporting  standards  for  derivative  instruments,  including  certain
         derivative  instruments  embedded  in  other  contracts   (collectively
         referred to as derivatives), and for hedging activities. This Statement
         requires that an entity  recognize all  derivatives as either assets or
         liabilities  in the statement of financial  condition and measure those
         instruments at fair value. The accounting for changes in the fair value
         of a  derivative  instrument  depends  on  its  intended  use  and  the
         resulting  designation.  The Company does not expect that this standard
         will have a material impact on its financial statements.


<PAGE>


NOTE 2 - FIXED ASSETS

         Fixed assets consist of the following:
<TABLE>
<S>                                                          <C>                     <C>                <C>

                                                                Useful                           May 31,
                                                                                                 -------
                                                                 Life                      2000         1999
                                                                ------                     ----         ----

         Computer equipment                                      5 years             $ 2,901,023        $2,697,149
         Software costs                                          5 years              13,167,965         9,657,699
         Furniture, fixtures and automobiles                   4-7 years                 327,465           269,337
         Leasehold improvements                                 10 years               2,781,728         2,615,741
                                                                                        ---------       -----------
                                                                                      19,178,181        15,239,926

         Less accumulated depreciation and amortization                               10,266,526         8,070,924
                                                                                       ----------      -----------
                                                                                     $ 8,911,655        $7,169,002
                                                                                      ===========       ==========
</TABLE>

         Depreciation and  amortization  expense relating to fixed assets (other
         than software costs) amounted to approximately $561,000 and $693,000 in
         2000 and 1999, respectively.

         Unamortized  software  costs amounted to  approximately  $6,755,000 and
         $4,946,000 at May 31, 2000 and 1999, respectively. Amortization expense
         for these costs totaled approximately $1,823,000 and $1,322,000 in 2000
         and 1999, respectively.

         Research and development  expenses  amounted to approximately  $122,000
         and $192,000 in 2000 and 1999, respectively.

NOTE 3 - DEBT

         Credit Agreement

         On April 18, 1997,  the Company's  wholly owned  subsidiary,  Sandsport
         Data  Services,  Inc.  ("Sandsport"),  entered into a revolving  credit
         agreement  (the  "Credit  Agreement")  with a bank (the  "Bank")  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 required Sandsport to pay a commitment
         fee in the amount of $30,000 and 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 which expired on March 1, 2000 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").  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 the
         Company's  Chairman.  All of the Group's assets are pledged to the Bank
         as collateral for the amounts due 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,  1999,  the  Group  failed to meet  these  net worth and  financial
         ratios,  and the Bank  granted the Group a waiver.  As of May 31, 2000,
         the  outstanding  balance  on the  Credit  Agreement  with the Bank was
         $2,250,000

         Long Term Debt

         Long-term debt at May 31, 2000 and 1999 was as follows:
<TABLE>
<S>                                                                        <C>                    <C>
                                                                              2000                    1999
                                                                              ----                    ----

         Note payable to affiliate, due 2001                               $   500,000               $      ---

         Variable Rate Term Loan under Credit Agreement                      2,250,000             -  2,500,000
                                                                           -----------            -------------
                                                                             2,750,000                2,500,000
         Less: current portion of long-term debt                                   -0-                2,500,000
                                                                           -----------            --------------
         Long-term debt                                                     $2,750,000              $       -0-
                                                                            ==========            ==============

</TABLE>

          As of May 31, 2000,  the Company  owed  National  Medical  Health Card
          Systems,  Inc. ("Health Card") a company affiliated with the Company's
          Chairman of the Board,  $500,000  pursuant to a promissory note, dated
          May 31, 2000,  made payable by the Company to the order of Health Card
          in the original principal amount of $500,000 plus interest at the rate
          of 9 1/2%; interest on such note is payable quarterly and such note is
          due on June 1, 2001. (See Note 6.)

         Maturities of long term debt at May 31, 2000 are as follows:

                2001     $        ---
                2002          500,000
                2003        2,250,000
                           ----------
                           $2,750,000

NOTE 4 - INCOME TAXES

         The income tax expense is comprised of the following:
<TABLE>
<S>                                                                          <C>          <C>
                                                                                 Year ended May 31,
                                                                                 2000              1999
                                                                                 ----              ----
         Current

                  Federal                                                    $    ---          $    ---
                  State                                                        22,000            18,177

         Deferred - Federal and state                                         167,158           153,000
                                                                              -------           -------
                                                                             $189,158          $171,177

</TABLE>

         The Company's effective income tax rate differs from the statutory U.S.
         Federal income tax rate as a result of the following:

<TABLE>
<S>                                                                            <C>                <C>
                                                                                 Year ended May 31,
                                                                                 2000              1999
                                                                                 ----              ----

         Statutory U.S. federal tax rate                                         34.0%             34.0%
         State taxes                                                             10.8               4.7
         Net operating loss carryforwards                                      (318.3)            (97.4)

         Impact of changes in items giving rise to deferred taxes:

             Depreciation and amortization                                      369.0             151.2
             Deferred revenue                                                     4.3              (2.9)
             Other                                                              (6.70)             (7.9)
                                                                                ------            ------
                                                                                 93.1%             60.1%
                                                                                ======            ======

</TABLE>
         As of May 31, 2000 and 1999  depreciation and amortization gave rise to
         deferred tax  liabilities of $2,380,000 and  $1,630,000,  respectively.
         Allowance for doubtful  accounts,  employee benefit accruals,  deferred
         gains, net operating loss  carryforwards  and  contribution  carryovers
         gave  rise to  deferred  tax  assets  of,  $1,677,842  and  $1,095,000,
         respectively.  These  amounts  are  presented  net in the  consolidated
         balance sheet as of May 31, 2000 and 1999, as a noncurrent deferred tax
         liability.

         At May 31, 2000, the Company had net operating loss  carryforwards  for
         tax purposes of $2,645,305, expiring at various dates through 2020.

NOTE 5- COMMITMENTS AND CONTINGENCIES

         Lease Agreements

          The  Company  leases  office  space  at 26  Harbor  Park  Drive,  Port
          Washington,  New York  11050  ("the  Facility")  from BFS  Realty  LLC
          ("BFS"),  an affiliate of the  Company's  Directors  (see Note 6). The
          Company  paid rent in the amount of $694,943  and  $661,860 to BFS for
          the years ended May 31, 2000 and May 31, 1999, respectively.

          The Company has  obligations to pay rental expense in connection  with
          six  sale/leaseback  transactions.  The rental  expenses  amounted  to
          approximately  $1,956,200  and  $1,000,800 for the years ended May 31,
          2000 and 1999 respectively. (See Note 8)

          Total office space and  equipment  rental  expense under all operating
          leases  amounted to  approximate  $3,669,000  and $2,492,000 in fiscal
          2000 and 1999, respectively.

          Future minimum lease payments for all non cancellable operating leases
          at May 31, 2000 are as follows:

                                                                      Amount
                  Year ending May 31,
                           2001                                      $2,975,274
                           2002                                       2,331,945
                           2003                                       1,266,541
                           2004                                         714,798
                           2005                                         238,266
                           Thereafter                                       ---
                                                                     ----------

                                                                     $7,526,824

         Litigation

         On  December   21,  1998,   the  Company  and  MCI   Telecommunications
         Corporation  ("MCI") settled a patent  infringement  lawsuit brought by
         MCI  against the Company in the United  States  District  Court for the
         Eastern  District  of  New  York,   captioned  MCI   Telecommunications
         Corporation  v.  Sandata,  Inc. The  settlement  provides,  among other
         things,  that the Company is granted a license  under  certain of MCI's
         patents  which  permits  the Company to continue to market and sell its
         SANTRAX  time  and  attendance   verification  product  non-exclusively
         nationwide and  exclusively in the home health care  industries for the
         five  New York  boroughs  and that  the  Company  will pay MCI  certain
         royalties.

         In  October  1998,  the  Company  and  Provider  Solutions  Corporation
         ("Provider")  entered into an agreement (the  "Agreement")  whereby the
         parties contemplated the formation of a joint venture to operate a data
         processing  service  bureau  in New  York  to  supply  services  to the
         domestic home health care industry.  The Company provides such services
         through  its  wholly-owned   subsidiary,   Pro-Health   Systems,   Inc.
         ("Pro-Health").  Pursuant to the Agreement,  Provider  conveyed certain
         software to the Company. The Agreement provides for a purchase price of
         $500,000, payable in certain installments as provided in the Agreement.
         As of May 31,  2000,  the  Company has paid  approximately  $350,000 to
         Provider on account of the purchase price.

          On October 19,  1999,  the Company and  Pro-Health  brought an action,
          Sandata,  Inc. and  Pro-Health  Systems,  Inc. v.  Provider  Solutions
          Corporation, Michael Milvain and Charlotte Fritchie, in Supreme Court,
          New York  County,  Index No.  99-26033,  based on breach of  contract,
          fraudulent  misrepresentation  and other  causes of action,  demanding
          damages of approximately $10,000,000 (the "State Action").

          On October 22, 1999,  Provider  brought a Federal Action in the United
          States  District  Court,  Eastern  District  (the  "Federal  Action"),
          seeking to enjoin the Company  and  Provider  from (i) hiring  certain
          named  employee  defendants;  (ii)  soliciting  any  present or former
          employees of Provider;  and (iii) using, without Providers permission,
          any  trade  secret  or  other  proprietary  information  belonging  to
          Provider.  The Federal Action also sought to (i) enjoin employees from
          divulging to the Company, Provider or any other third party, any trade
          secret or other proprietary information; and (ii) accepting employment
          from the  Company,  Provider or any other  customer or  competitor  of
          Provider.  The amended complaint  ultimately served on the Company and
          Provider on March 31, 2000 demanded  judgment against  defendants of a
          permanent  injunction and damages against the Company and Provider for
          total  amounts  ranging from  $10,000,000  to  $15,000,000.  The State
          Action was removed and consolidated into the Federal Action.

          Sandata and Pro-Health  asserted various  counterclaims in the Federal
          Action   demanding   damages  of  $10,000,000   based  upon  claim  of
          Declaratory  Judgment,  Imposition of  Constructive  Trust,  Breach of
          Contract, Unfair Competition, Interference with Business Relations and
          Economic  Advantage and  Injunction.  The State Action was removed and
          later consolidated into the Federal Action.

         To date,  substantial  discovery  has taken  place  and is  continuing.
         Discovery is expected to be  completed by January 2, 2001.  The Company
         has  asserted  claims and  defenses  against  Provider  and  intends to
         continue its prosecution of its claims and vigorously defend all claims
         against it. Notwithstanding the foregoing, because of the uncertainties
         of  litigation,  no  assurances  can be given as to the outcome of this
         litigation.  In the event that the Company  were not to prevail in this
         litigation, the Company could be required to pay significant damages to
         Provider  and could be  enjoined  from  taking  those  certain  actions
         specified  above. A negative  outcome in the Provider  litigation could
         have a  material  adverse  affect on the  Company,  including,  but not
         limited to, its business operations and financial condition.

         Employment and Deferred Compensation Agreements

         On  February  1, 1997 the  Company  and its  Chairman  ("Mr.  Brodsky")
         entered into an employment agreement for a five year term (the "Brodsky
         Employment  Agreement").  Among other  things,  the Brodsky  Employment
         Agreement  provides  compensation  at the annual  rate of $500,000 or a
         lesser amount if mutually agreed. The Brodsky Employment Agreement also
         provides for payment of an annual bonus at the sole  discretion  of the
         Board of  Directors.  Mr.  Brodsky  agreed  to  accept a  reduction  in
         compensation  for the fiscal  years ended May 31, 2000 and 1999 and has
         signed waivers evidencing his agreement to such reductions.

         The Company also has a deferred compensation agreement with Mr. Brodsky
         pursuant  to which the Company  will pay (i) to Mr.  Brodsky a lump sum
         ranging  from  $75,000 to $255,000  if he  voluntarily  terminates  his
         employment with the Company after attaining 55 years of age (ii) to Mr.
         Brodsky's  beneficiary  a lump sum ranging from $200,000 to $450,000 in
         the event of Mr. Brodsky's death during the term of his employment with
         the Company. The amount of the payment is dependent upon the age of Mr.
         Brodsky at the time of termination  or death.  The Company has obtained
         insurance on Mr. Brodsky's life to fund its obligations under the above
         agreement.

NOTE 6 - RELATED PARTY TRANSACTIONS

         a. On June 1, 1994, BFS Sibling Realty, Inc. ("BSRI") formerly known as
         Brodsky Sibling Realty,  Inc., a company affiliated with certain of 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
         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,  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%.

         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 other income in the financial statements in
          fiscal 1997.

               b.TheCompany  derives  revenue from Health Card for data base and
          operating system support,  hardware  leasing,  maintenance and related
          administrative  services.  The  revenues  generated  from Health Card,
          amounted to  approximately  $1,753,000  and  $1,765,000  for the years
          ended  May 31,  2000 and  1999,  respectively.  At May 31,  2000,  the
          Company was owed approximately  $191,000 by such affiliate,  which was
          received in full subsequent to May 31, 2000.

         As of June 1, 1998,  Health Card hired 11  employees  of  Sandsport  in
         order to provide development, enhancement, modification and maintenance
         services, previously provided by Sandsport. Sandsport was paid $208,000
         in consideration of Sandsport's waiving certain rights relative to such
         employees.  In  addition,  Sandsport  began  leasing  certain  computer
         equipment  to Health  Card for  $2,000  per  month as well as  computer
         hardware  for its data  processing  center at a monthly cost of $20,000
         from Sandsport pursuant to a verbal agreement. Currently the Company is
         leasing  computer  equipment to Health Card at a monthly cost to Health
         Card of $39,800. Sandsport is expected to continue to provide to Health
         Card consulting services related to Health Card's information systems.

          The Company is also  indebted  under a note payable to Health Card, as
          discussed in Note 3.

         c. The  Company  makes  various  lease  payments to  affiliates  of the
         Company's Chairman.  The payments are for: equipment rental,  which was
         $393,903 and $387,346 in fiscal 2000 and 1999,  respectively,  and rent
         for the  Facility  which was  $694,943  and $661,860 in fiscal 2000 and
         1999, respectively.

         d. Medical Arts Office  Services,  Inc.  ("MAOS"),  a company which the
         Company's  Chairman of the Board is the sole shareholder,  provided the
         Company with accounting,  bookkeeping and paralegal  services.  For the
         fiscal years ended May 31, 2000 and 1999 the total payments made by the
         Company to MAOS were $399,592 and $193,934, respectively.

         e. At May 31, 1998, the Company was owed approximately  $120,000 from a
         company affiliated with the officers of the Company which was converted
         to a  promissory  note for the balance  due.  The note is payable in 24
         monthly payments with interest at 8% commencing  September 1, 1997. The
         Company deferred principal payments from April, 1998 to October,  1998,
         at which time principal and interest payments resumed.  At May 31 1999,
         the  Company  was owed  approximately  $42,000,  on such note which was
         fully repaid within the year ended May 31, 2000.

         f. The Company has been  providing  services  to  Federation  of Puerto
         Rican   Organizations,   and/or  its   affiliates   (individually   and
         collectively,  the "Federation"),  an HRA Vendor Agency, since 1995. On
         October 31,  1997 and  November  30,  1997,  respectively,  the Company
         acquired a loan  receivable  for an aggregate of $300,000  from a third
         party (a  portion  of  which  was  acquired  from an  affiliate  of the
         Company's Chairman),  due from the Federation.  Such loan receivable is
         secured by accounts receivable due to the Federation. Shortly following
         the Company's  acquiring  such  receivable,  the  Federation  filed for
         bankruptcy protection.  The bankruptcy was subsequently dismissed.  The
         Company has filed, among other things,  claims representing monies owed
         to the Company with respect to the loan and the receivables. At May 31,
         2000,  the  Company had written off the  $300,000  loan  receivable  in
         addition to $47,296 for  services  rendered by the Company  owed by the
         Federation  against  a  reserve  established  in prior  years for these
         amounts.

          g. During the fiscal year ended May 31, 2000 and 1999 the Company paid
          an aggregate of $36,404 and $44,440, respectively on behalf of certain
          officers to  companies  affiliated  with the  Company's  Chairman  for
          payment of automobile leases.

NOTE 7 - SHAREHOLDERS' EQUITY

         a.   Common Stock Purchase Warrants

         At May 31, 1998, there were outstanding and exercisable  400,000 common
         stock  purchase  warrants  issued to the Company's  Chairman.  For each
         warrant,  the  Chairman may purchase one share of common stock at $1.38
         per share,  which  represented  the fair market value of the  Company's
         common stock at the date of issuance of the  warrants,  which expire in
         2001. The warrants were exercised on July 14, 1998.

         b.   Stock Based Compensation

         On February 4, 2000, the Company  granted 25,000 shares of Common Stock
         with a fair  market  value of $31,650 to the  Company's  Chairman  as a
         bonus for services to the Company.  As such, the Company has recorded a
         change to its  operation  for this  amount  for the year  ended May 31,
         2000.

        c.   Stock Options

          The Company has stock  options  outstanding  under three stock  option
          plans.

         At May 31, 2000,  there were 2,536 options granted at an exercise price
         of $1.88  outstanding  under an incentive  stock option plan adopted in
         October 1984 and subsequently amended.  Options granted under this plan
         were granted at exercise  prices not less than fair market value on the
         date of grant.  Options  outstanding under this plan expire in 2001. No
         additional options may be granted under this plan.

         At May 31, 2000, there were no options outstanding under a nonqualified
         stock option plan adopted in November,  1986 and subsequently  amended.
         No additional options may be granted under this plan.

         At May 31, 2000, there were also 590,500 incentive options  outstanding
         under a stock option plan adopted in January 1995,  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
         options  be granted at  exercise  prices not less than the fair  market
         value  at the  date of  grant,  over a  ten-year  period.  All  options
         outstanding  under this plan are  exercisable at May 31, 2000 at prices
         ranging  from $1.41 to $2.61 per share over a period of five years from
         date of grant.

         Summary information with respect to the stock option plans follows:
<TABLE>
<S>           <C>                                    <C>                        <C>              <C>

                                                       Range of                 Outstanding      Outstanding
                                                       exercise                     options          options
                                                       prices ($)                   granted       exercisable
                                                     -------------              ---------------  ------------
              Balance, May 31, 1998                  1.38 - 2.61                    593,870          593,870
              Granted                                1.41 - 3.00                    914,250          640,810
              Cancelled                                                             (28,540)         (28,540)
              Exercised                              1.38 - 2.61                   (521,334)        (521,334)
                                                                                   ---------        ---------
              Balance, May 31, 1999                  1.41 - 3.00                    958,246          684,806
              Granted                                1.31 - 3.00                    682,977          177,965
              Cancelled                                                            (117,321)         (12,900)
                                                                                   ---------         --------
              Balance                                1.31 - 3.00                  1,523,902          849,871
                                                                                  =========          =======
</TABLE>
         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 stock option plans.

         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.  The Company
         has received  interest payments on such notes in the amount of $120,658
         during the fiscal year ending May 31,  2000.  As of May 31,  2000,  the
         outstanding balance on such notes,  including principal and accrued but
         unpaid interest, was $1,746,145.

         In October  1998,  the Board of Directors  approved an amendment to the
         Company's  Certificate  of  Incorporation  to  increase  the  number of
         authorized common shares from 3,000,000 to 6,000,000.

         In October  1998,  the Company  adopted a stock option plan,  reserving
         1,000,000  shares of  common  stock  for  grant  under the plan.  Stock
         options   granted   under   the  plan  may  be  either   statutory   or
         non-statutory.  As of May 31, 2000,  an aggregate of 930,860  statutory
         stock  options  were  granted  under  the plan and vest  over  three to
         six-year  periods.  Additionally,  in October 1998, the Company granted
         certain  directors  of  the  Company  non-statutory  stock  options  to
         purchase an aggregate of 20,000 shares of the Company's common stock 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 a stock  option plan adopted in
         January  1995 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 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-statutory  stock  options to purchase an aggregate of 72,000 shares
         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 at an exercise price
         of  $3.00.  These  options  vest  over a  three  year  period  and  are
         exercisable over a seven year period.

         Pro forma  information  regarding  net income and earnings per share is
         required  by SFAS 123,  and has been  determined  as if the Company had
         accounted  for its  employee  stock  option  plans under the fair value
         method of SFAS  123.  The fair  market  value  for  these  options  was
         estimated  at the date of grant  using a  Black-Scholes  option-pricing
         model  with the  following  weighted-average  assumptions  for 2000 and
         1999.

         ASSUMPTION
        <TABLE>
        <S>                                                      <C>         <C>
                                                                         May 31,
                                                                   2000               1999
                                                                   ----               ----
         Risk free rate                                       5.790 - 6.440%     4.33% - 6.74%
         Dividend yield                                                  .00               .00
         Volatility factor of the expected market price of the        1.1537              .809
                  Company's common stock

         Average life                                                5 years           5 years
</TABLE>

         The  Black-Scholes  option  valuation  model was  developed  for use in
         estimating  the fair  market  value of  traded  options  which  have no
         vesting  restrictions and are fully transferable.  In addition,  option
         valuation  models  require the input of highly  subjective  assumptions
         including the expected  stock price  volatility.  Because the Company's
         employee stock options have characteristics  significantly  differently
         from those of traded  options,  and because  changes in the  subjective
         input assumptions can materially affect the fair market value estimate,
         in management's opinion, the existing models do not necessarily provide
         a reliable  single  measure of the fair  market  value of its  employee
         stock options.

         For purposes of pro forma disclosures,  the estimated fair market value
         of the options is amortized  to expense over the vesting  period of the
         options. The Company's pro forma income (loss) is as follows:

                                                          Years ended May 31,
                                                          2000           1999
                                                          ----           ----

         Pro forma net (loss) income                   $($92,036)       $40,535
         Pro forma net (loss) income per share         $    (.04)       $   .02

         The  weighted  average fair value of options  granted  during the years
         ended May 31,  2000 and 1999 were  $1.29  and $.94,  respectively,  for
         shares granted.  The weighted  average  remaining  contractual  life of
         options  exercisable at May 31, 2000 is 5 years. The exercisable prices
         range from 1.31 to $3.00 for options outstanding as of May 31, 2000.

NOTE 8 - SALE/LEASEBACK TRANSACTIONS

         The Company is a party to various sale/leaseback transactions involving
         certain fixed assets.  Gains on these  transactions  have been deferred
         and are being recognized over the lives of the related leases,  ranging
         from thirty-six (36) to sixty (60) months.  Approximately  $401,000 and
         $216,000 of the deferred gains were recognized in fiscal 2000 and 1999,
         respectively.   Included   in  these   amounts   are  the   effects  of
         sale/leaseback  transactions  entered  into  fiscal  2000 and 1999,  as
         follows:

         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  $62,000
         and $62,000 of the  deferred  gain was  recognized  for fiscal 2000 and
         1999, respectively.

         In January 1999, 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 $830,000,
         were sold for $1,100,000.  The resulting gain of approximately $270,000
         was recorded as deferred  income and is being  recognized over the life
         of the lease,  which is thirty-six (36) months.  Approximately  $90,000
         and $30,000 of deferred gain was  recognized  for fiscal 2000 and 1999,
         respectively. An unaffiliated third party purchased the residual rights
         in such lease.

         In May 1999, the Company entered into a sale/leaseback of certain fixed
         assets (principally computer hardware and equipment). The fixed assets,
         which  had a net book  value of  approximately  $896,000  were sold for
         $1,100,000.  The resulting gain of approximately  $204,000 was recorded
         as deferred income and is being  recognized over the life of the lease,
         which is thirty-six (36) months. The sale proceeds,  which are shown as
         Other  receivable  in the financial  statements,  were received in June
         1999.  Approximately $68,000 of deferred gain was recognized for fiscal
         2000. An unaffiliated third party purchased the residual rights in such
         lease.

         In October 1999, 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 $895,000,
         were sold for $1,115,000.  The resulting gain of approximately $220,000
         was recorded as deferred  income and is being  recognized over the life
         of the lease, which is thirty-six (36) months. Approximately $49,000 of
         the deferred gain was recognized for fiscal 2000. An unaffiliated third
         party purchased the residual rights in such lease.

         In January 2000, 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 $442,000,
         were sold for $561,000.  The resulting gain of  approximately  $119,000
         was recorded as deferred  income and is being  recognized over the life
         of the lease, which is thirty-six (36) months. Approximately $13,000 of
         deferred gain was  recognized  for fiscal 2000. An  unaffiliated  third
         party purchased the residual rights in such lease.

         In February 2000, the Company entered into a sale/leaseback  of certain
         fixed assets (principally  computer hardware and equipment).  The fixed
         assets, which had a net book value of approximately  $237,000 were sold
         for $277,000.  The resulting gain of approximately $40,000 was recorded
         as deferred income and is being  recognized over the life of the lease,
         which is thirty-six (36) months.  Approximately $3,000 of deferred gain
         was recognized for fiscal 2000. An  unaffiliated  third party purchased
         the residual rights in such lease.

NOTE 9 - RETIREMENT PLAN

         The Company has a 401(k)  savings plan covering all eligible  employees
         in which the Company matches a portion of the employees'  contribution.
         The amount of this match was $31,296  and $23,259 in fiscal  years 2000
         and 1999, respectively.


<PAGE>


<PAGE>


                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) 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)

By   /s/ Bert E. Brodsky
         Bert E. Brodsky, Chairman of the Board
         (Principal Executive Officer and
         Principal Financial and Accounting Officer)

Date: August 25, 2000

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.

By   /s/ Bert E. Brodsky
         Bert E. Brodsky, Chairman, Treasurer, Director

Date: August 25, 2000

By   /s/ Hugh Freund
         Hugh Freund, Executive Vice President, Secretary, Director

Date: August 25, 2000


By   /s/ Gary Stoller
         Gary Stoller, Executive Vice President, Director

Date: August 25, 2000


By   /s/ Paul J. Konigsberg
         Paul J. Konigsberg, Director

Date: August 25, 2000


By   /s/ Ronald L. Fish
         Ronald L. Fish, Director

Date: August 25, 2000