ITEM 7 - FINANCIAL STATEMENTS

Sandata, Inc. and Subsidiaries

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Certified Public 
  Accountants

Financial Statements

Consolidated Balance Sheets as of May 31, 1996
  and 1995

Consolidated Statements of Income for the years
  ended May 31, 1996 and 1995

Consolidated Statements of Shareholders' Equity
  for the years ended May 31, 1996 and 1995

Consolidated Statements of Cash Flows for the years
  ended May 31, 1996 and 1995

Notes to Consolidated Financial Statements


REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS


Board of Directors and Shareholders
of Sandata, Inc.

We have audited the accompanying consolidated balance sheets of 
Sandata, Inc. and Subsidiaries as of May 31, 1996 and 1995, and 
the related consolidated statements of income, shareholders' 
equity and cash flows for the years then ended.  These 
consolidtated 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.  As 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 amangement, 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 Notres 4, 5, 7, 8, 9 and 11 to the 
consolidated financial statements, the company has had certain 
transactions with companies affiliated with the Company's 
Oifficers 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, 1996 and 1995, 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

Woodbury, New York
August 16, 1996

<TABLE>
<CAPTION>

CONSOLIDATED BALANCE SHEETS

May 31,

ASSETS (Notes 4 and 8)                     1996         1995
                                           ----         ----
<S>                                      <C>        <C>
CURRENT ASSETS
Cash and cash equivalents                $368,400   $102,613
Accounts receivable, net of allowance
  for doubtful accounts of $350,000 
  and $304,000 at 1996 and 1995, 
  respectively                          1,180,905    784,808
Receivables from affiliates (Note 8)      190,635  1,058,757
Receivable from former affiliate 
  (Note 9)                                 26,258     77,459
Note receivable from former affiliate,
  net of allowance for doubtful accounts
   of $119,000 in 1996 (Note 9)            77,100    240,000
Notes receivable - officers (Notes 8 
  and 13)                                 102,867        -0-
Note receivable - officer (Note 8)            -0-    150,000
Inventories                                27,972     26,222
Income taxes receivable (Note 6)              -0-     66,000
Prepaid expenses and other current assets 172,897     88,153
                                          -------  ---------
     Total Current Assets               2,147,034  2,594,012

FIXED ASSETS, NET (Notes 2, 3, 7 
  and 11)                               9,399,625  3,564,208

OTHER ASSETS
Note receivable from former affiliate,
  net of allowance for doubtful accounts
  of $119,000 in 1995 (Note 9)                -0-     58,199
Advances to affiliates (Note 8)               -0-     61,000
Notes receivable - officers  (Notes 8 
  and 13)                                     -0-    102,867
Cash surrender value of officer's life
 insurance, security deposits and other   410,683    327,766
                                          -------    -------
     Total Assets                     $11,957,342 $6,708,052
                                      ----------- ----------
                                      ----------- ----------
</TABLE>

<TABLE>
<CAPTION>

LIABILITIES AND SHAREHOLDERS' EQUITY       1996        1995
                                           ----        ----
<S>                                     <C>         <C>
CURRENT LIABILITIES
Accounts payable and accrued 
  expenses                              $1,022,058  $601,106
Current portion of long-term debt
  (Note 4)                                 768,354   250,000
Note payable - affiliate (Note 5 )       1,000,000       -0-
Deferred/unearned revenue                    4,299    34,751
Deferred income (Note 11)                  205,252   143,821
                                         --------- ---------
     Total Current Liabilities           2,999,963 1,029,678

LONG-TERM DEBT (Note 4)                  4,322,234 1,679,166
NOTES PAYABLE - AFFILIATES (Note 5 )       462,000       -0-
DEFERRED INCOME (Note 11)                  177,530   205,642
DEFERRED INCOME TAXES (Note 6)              83,000   140,444
                                            ------   -------
     Total Liabilities                   8,044,727 3,054,930
                                         --------- ---------
COMMITMENTS AND CONTINGENCIES 
  (Notes 4, 7, 8 and 14)
SHAREHOLDERS' EQUITY (Note 10)
  Common stock; par value $.001; authorized
  3,000,000 shares in 1996 and 1995, 816,727
  issued; 763,955 shares outstanding           816       816
  Additional paid in capital             1,279,710 1,279,710
  Retained earnings                      2,768,975 2,509,482
                                         --------- ---------
                                         4,049,501 3,790,008
Less Treasury stock - at cost (52,772 
  shares in 1996 and 1995)               (136,886)  (136,886)
                                         ---------  --------
    Total Shareholders' Equity          3,912,615  3,653,122
                                        ---------  ---------
Total Liabilities and Shareholders' 
  Equity                              $11,957,342 $6,708,052
                                      ----------- ----------
                                      ----------- ----------
</TABLE>

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF INCOME
Years ended May 31,
                                          1996          1995
                                          ----          ----
<S>                                   <C>         <C>
REVENUES:
  Service fees (Notes 1, 2 and 8)     $8,964,335  $7,546,454
  Real estate rental income              285,048         ---
  Other income (Note 11)                 277,982      75,523
  Interest income (Notes 8 and 9)         34,858      91,969
                                         -------      ------
                                      $9,562,223  $7,713,946
                                      ----------  ----------
COSTS AND EXPENSES:
  Service Fees:
  Operating (Note 3)                   5,038,472   4,795,157
  Selling, general and administrative  1,988,115   1,958,617
  Depreciation and amortization        1,093,264     680,910
  Interest expense                       216,862     179,809
                                       ---------    --------
                                      $8,336,713  $7,614,493
                                       ---------   ---------
  Real Estate:
  Operating                              472,310         ---
  Depreciation and amortization           88,779         ---
  Interest expense                       289,629         ---
  Real estate taxes                      123,299         ---
                                         -------      ------
                                         974,017         ---
                                         -------      ------
TOTAL COSTS AND EXPENSES              $9,310,730  $7,614,493
                                       ---------   ---------
Earnings from operations before 
  income taxes                           251,493      99,453
Income tax expense (benefit) (Note 6)   (8,000)     74,444
                                         -------      ------
NET EARNINGS                            $259,493     $25,009
                                        --------     -------
                                        --------     -------
EARNINGS PER COMMON SHARE                  $0.16       $0.03
Weighted average common shares 
  outstanding (Note 1)                $1,586,423    $763,955
                                       ---------    --------
                                       ---------    --------
</TABLE>

<TABLE>
<CAPTION>

CONSOLIDATED  STATEMENTS OF SHAREHOLDERS' EQUITY

Years ended May 31, 1996 and 1995

                              Add'l
             Common Stock    paid-in   Retained  Treasury  Total
             Shares Amount   capital   Earnings    Stock
             ------ -----   -------   --------   --------  -----
<S>          <C>     <C>  <C>        <C>        <C>     <C>
Balance at 
June 1, 1994 816,727  816 1,279,710  2,484,473  136,886)3,628,113

Net earnings     ---  ---       ---    25,009     ---      25,009
             ------- ---- --------- --------- --------  ---------
Balance at 
May 31, 1995 816,727  816 1,279,710 2,509,482 (136,886) 3,653,122

Net earnings     ---  ---       ---   259,493      ---    259,493
             ------- ---- --------- --------- --------  ---------

Balance at 
May 31, 1996 816,727 $816 1,279,710$2,768,975$(136,886)$3,912,615
             ------- ---- --------- --------- --------  ---------
             ------- ---- --------- --------- --------  ---------
</TABLE>

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended May 31,
                                          1996        1995
                                          ----        ----
<S>                                    <C>          <C>
Cash flows from operating activities:
  Net earnings                         $259,493     $25,009
  Adjustments to reconcile net 
  earnings to net cash provided by 
  operating activities:
    Depreciation and amortization     1,182,043     680,910
   (Gain) on disposal of fixed assets  (242,552)    353,706)
    Provision for losses on accounts
      receivable                         45,516     192,748
    Recognition of deferred income     (209,233)    (75,522)
    Recognition of deferred revenue     (91,886)    272,977)
    Deferred tax provision (benefit)    (57,444)     95,444
  (Increase) decrease in operating 
      assets
    Accounts receivable                (441,613)    232,886
    Receivables from affiliates         868,122    (567,484)
    Receivable from former affiliate     51,201      (3,227)
    Inventories                          (1,750)     66,288
    Prepaid expenses and other current
      assets                            (84,744)     29,685
    Income taxes receivable              66,000     (41,000)
    Other assets                        (82,917)    (85,273)
  Increase (decrease) in operating 
    liabilities
    Accounts payable and accrued 
      expenses                          420,952    (189,116)
    Deferred revenue                     61,434     211,123
    Deferred income                     242,552     353,706
                                        -------     -------
  Net cash provided by operating
    activities                        1,985,174     299,494
                                      ---------     -------
Cash flows from investing activities:
    Purchases of fixed assets        (3,457,703) (2,992,460)
    Proceeds from sale/leaseback 
      transactions                      825,935     859,334
    Issuance of notes receivable
      - officer, net                         --    (102,867)
    Collection of note receivable
      - officer                         150,000     340,000
    Collection of note receivable
      - former affiliate                221,099     266,822
    Advances to affiliates               61,000     431,529
    Net cash used in investing 
      activities                     (2,199,669) (1,197,642)
                                      ---------   ---------
Cash flows from financing 
  activities:
    Proceeds from term loans            979,166          --
    Proceeds from notes payable
       - affiliates                   1,462,000          --
    Principal payments on term loan  (1,319,718)    (20,834)
    Proceeds from line of credit      1,500,000   2,875,000
    Principal payments on line of
      credit                         (2,141,166) (2,125,000)
                                      ---------   ---------
      Net cash provided by financing
        activities                      480,282     729,166
                                        -------     -------
      INCREASE (DECREASE) IN CASH 
        AND CASH EQUIVALENTS            265,787    (168,982)
Cash and cash equivalents at beginning
  of year                               102,613     271,595
                                        -------     -------
Cash and cash equivalents at end 
  of year                              $368,400    $102,613
                                        -------     -------
                                        -------     -------
<FN>
<F1>
Supplemental Disclosure of Noncash Investing and Financing 
Activities:

The Company assumed $4,143,140 of debt in 1996 as disclosed in 
the Notes to the Consolidated Financial Statements in 
conjunction with the acquisition of a facility.
</FN>
</TABLE>

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. 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 Sandata Inteck, Inc.  Sandata Inteck, 
Inc. is an inactive subsidiary.  All significant intercompany 
accounts and transactions have been eliminated in consolidation.

b. Nature of Business and Economic Dependency

Sandata, Inc. and Subsidiaries (the "Company") are primarily 
engaged in the business of providing computerized data 
processing services using Company-developed and licensed 
software principally to the healthcare industry.  The Company 
primarily operates in the New York metropolitan area.  During 
fiscal 1996 and 1995, the Company received revenues from a 
group of customers who are all funded by one governmental 
agency, amounting to approximately $6,218,000 and $4,662,000, 
respectively.

c. 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.

d. Income Taxes

The primary objectives of accounting for income taxes are to (a) recognize 
the amount of 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.

e. Software Costs

The Company capitalizes expenditures incurred for the development of existing
software which has already reached technological feasibility and expenses all
other costs. Amortization is computed on the straight-line method over the 
estimated useful life of the software.

f. Inventories

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

g. Net Earnings Per Common Share

Net earnings per common share is computed by dividing net 
earnings by the weighted average number of common shares 
outstanding.  Earnings per common share for the fiscal year 
1996 includes the dilutive effect of outstanding stock 
options and warrants.  The number of common stock equivalents 
determined by applying the modified treasury stock method 
included in the calculation of earnings per common share for 
the year ended May 31, 1996 was 822,468.  The effect of stock 
options and warrants on the calculation of earnings per 
common share was antidilutive in fiscal year 1995.

h. Revenue Recognition

The Company recognizes revenues and direct costs as the 
contractual service is rendered and the expense associated with 
such service is incurred.  Included in accounts receivable are 
unbilled amounts approximating $3,000 and $53,000 at May 31, 
1996, and 1995, respectively.  Revenues from hardware and 
software maintenance contracts are deferred and recognized over 
the life of the contracts.

i. Statement of Cash Flows

The Company paid income taxes of approximately $4,000 and 
$35,000 and interest of approximately $506,000 and $180,000 
for the years ended May 31, 1996 and 1995, respectively.

For purposes of the statement of cash flows, the Company 
considers all short-term investments with an original 
maturity of three months or less to be cash equivalents.

j. 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.

NOTE 2 - SALE OF DME SOFTWARE

a. On May 1, 1994, the Company sold its Durable Medical 
Equipment System business ("DME") to an unaffiliated third 
party for $64,690, consisting of $44,000 in cash ($7,000 net 
of expenses of sale) and $20,690 in receivables from the 
purchaser.  As a condition of the sale, the purchaser agreed 
to assume the Company's obligations under the previously 
existing DME software support and maintenance agreements.  
The Company has also retained the right to sell the DME 
software Source Code to certain former DME customers and is 
entitled to receive royalties from the purchaser based upon 
future software sales for which the Company expects to 
recover the related capitalized software costs with a net 
book value of $88,000 and $122,000 as of May 31, 1996, and 
1995, respectively, which are classified as fixed assets in 
the accompanying balance sheets.

b. In September 1994, the agreement between the Company and 
the purchaser was amended to specifically terminate the 
purchaser's right and obligation under the DME software 
support and maintenance agreements for a majority of the DME 
customers at a cost to the Company of $25,000.  In addition, 
the purchaser was required to return to the Company all 
copies of the DME software Source Code and agreed that the 
DME Source Code is confidential and proprietary to the 
Company.

Simultaneously with the amendment to the agreement with the 
purchaser, the Company sold the right and obligation under 
the DME software support and maintenance agreements to an 
unaffiliated third party for $67,850 ($46,425 net of expenses 
of sale).  In addition, the Company also issued an exclusive 
license to sell the DME Source Code throughout the United 
States to the third party.  In consideration for the license, 
the Company is entitled to receive a minimum royalty of 
$50,000, payable at a rate of $2,941 per month commencing 
January 1995.  The Company has received payments through June 
1996.

<TABLE>
<CAPTION>

NOTE 3 - FIXED ASSETS

Fixed assets consist of the following:

                               Useful        May 31,
                                Life     1996       1995
                               ------    ----       ----
<S>                           <C>     <C>        <C>
Computer equipment and 
  software costs              5 years $7,622,391 $5,451,140
Furniture, fixtures and 
  automobiles               4-7 years    289,218    376,428
Leasehold improvements       10 years    726,737    862,804
Building and improvements    39 years  4,085,620        ---
Land                                     791,280        ---
                                       ---------    -------
                                     $13,515,246 $6,690,372
Less accumulated depreciation
  and amortization                     4,115,621  3,126,164
                                      ----------  ---------
                                      $9,399,625 $3,564,208
                                      ---------- ----------

<FN>
<F1>
Depreciation and amortization expense relating to fixed assets (other than 
software costs) amounted to approximately $673,000 and $297,000 in 1996 and 
1995, respectively.

The cost of assets under capital leases and accumulated amortization on these
assets amounted to $4,876,900 and $88,779, respectively, at May 31, 1996.

Unamortized software costs amounted to approximately $1,890,000 and 
$1,399,000 at May 31, 1996 and 1995, respectively.  Amortization expense for 
these costs totaled approximately $509,000 and $384,000 in 1996 and 1995, 
respectively.

Research and development expenses amounted to approximately $201,000 and 
$288,000 in 1996 and 1995, respectively.
</FN>
</TABLE>

NOTE 4 - DEBT

On February 10, 1993, the Company entered into a secured revolving credit 
agreement (the "Credit Agreement") as amended, with a bank (the "Bank") to 
borrow up to $2,000,000 which was payable on February 10, 1995 at 3/4% above 
the prime lending rate.  In June 1994, the Credit Agreement was amended 
restating the Company's requirements to maintain a stated net worth amount 
and a maximum net loss amount, plus specific working capital and liquidity 
ratios, capital expenditure limitations and restrictions on the payment of 
dividends.

On April 20, 1995, the Credit Agreement with the Bank was amended extending 
the due date for a period of two years.  Upon maturity, the Company may, at 
its option, convert the then outstanding principal balance of the advances 
under the Credit Agreement into a five (5) year term loan payable in 
sixty (60) equal monthly principal installments plus interest at 3/4% above 
the Bank's prime rate.  The amended Credit Agreement also revised the 
Company's requirements to maintain a stated net worth amount, a maximum net 
loss amount, plus specific working capital and liquidity ratios, 
capital expenditure limitations and restrictions on the payment of dividends.

Also on April 20, 1995, a two-year term loan (the "Term 
Loan") in the amount of $500,000 was advanced by the Bank to 
the Company.  The proceeds of the Term Loan were used to 
partially repay outstanding advances against the Company's 
Credit Agreement.  The Term Loan is payable in twenty-four 
(24) monthly principal installments of $20,834 plus interest 
at 3/4% above the Bank's prime rate, through April 1997.

Both the Credit Agreement and the Term Loan are 
collateralized by all the assets of the Company.  The Term 
Loan is guaranteed on an unlimited basis by the Company's 
Chairman and the Credit Agreement is guaranteed on a limited 
basis by the Company's Chairman, to a maximum of $1,000,000. 
In addition, the Company has assigned its right to the 
promissory note due from Compuflight, Inc. and its security 
interest in the assets of Compuflight, Inc. to the Bank as 
additional collateral.

At May 31, 1996 and 1995 the Company failed to meet certain 
financial covenants required under the Credit Agreement and 
Term Loan, for which the Bank has granted waivers.

On June 1, 1994, BFS, an affiliate substantially owned by 
the Company's Chairman, borrowed $3,350,000 in the form of 
Industrial Development Revenue Bonds ("Bonds") to finance 
costs incurred in connection with the acquisition, 
renovation and equipping of the Company's new office space 
located at 26 Harbor Park Drive, Port Washington, New York 
(the "Facility" or the "Building") from the NCIDA.  These 
Bonds were subsequently purchased by a bank (the "Bank"). 
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 (at the Company's 
option) to a rate of either prime plus 3/4 of 1%, or the 
applicable fixed rate if offered by the Bank. Commencing 
October 1, 1995, principal, together with interest, is being 
repaid in equal monthly installments based on a 15 year 
amortization, with the balance of unpaid principal due 
September 1, 2005.

On June 21, 1994 (as of June 1, 1994), the Company and its 
Chairman guaranteed the full and prompt payment of principal 
and interest of the bonds and the Company granted the Bank a 
security interest and lien on all the assets of the Company. 

In connection with the issuance and sale of the bonds, the 
Company entered into a lease agreement (the "Sublease") with 
BFS, whereby the Company leased the Facility for the conduct 
of its business and, in consideration therefor, was obligated 
to make lease payments that at least equal amounts due to 
satisfy the underlying Bond obligations.

As of July 31, 1995, by an Assignment and Assumption and 
First Amendment to Lease between the Company and BFS, 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 Building, 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 entire $750,000 proceeds have 
been used to repay a portion of the Bond indebtedness to the 
Bank.  The Company entered into the Assignment Transaction 
primarily to satisfy certain requirements of the SBA.  The 
Term Loan is payable in 240 monthly installments of $6,255, which 
includes principal and interest at a rate of 7.015%.

In connection with the February 1995 sale/leaseback, the 
Company has issued irrevocable letters of credit in the 
amount of $375,000 for the benefit of the lessor.  One 
letter of credit in the amount of $225,000 is cancellable on 
January 31, 1997 if the Company meets certain financial 
targets.  The remaining letter of credit expires upon the 
termination of the lease.

<TABLE>
<CAPTION>

Maturities of long term debt at May 31, 1996 are as follows:

                                               Principal
         Year ending May 31,                   Repayments
                                               ----------
              <C>                               <C>
              1997                              $768,354
              1998                               668,911
              1999                               424,800
              2000                               404,067
              2001                               405,743
        Thereafter                             2,418,713
                                               ---------
                                              $5,090,588
                                               ---------
                                               ---------
</TABLE>

NOTE 5 - NOTES PAYABLE - AFFILIATES

The note payable - affiliates which is evidenced by a note 
represents amounts borrowed from a company affiliated with the 
Company's Chairman. Subsequent to May 31, 1996, $850,000 of the 
demand note, which is non-interest bearing, was repaid.

The notes payable - affiliates represents amounts borrowed from 
two companies affiliated with the Company's Chairman.  The notes 
bear interest at prime plus 3/4% and are due December 2000 and 
May 2001, respectively.

NOTE 6 - INCOME TAXES

The income tax expense (benefit) is comprised of the following:

<TABLE>
<CAPTION>
                                     Year ended May 31,
                                       1996       1995
                                      ------     ------
<S>                                 <C>        <C>
Current
  Federal                           $(98,000)  $(66,000)
  State                                8,000     27,000

Deferred - Federal and state          82,000    113,444
                                     -------    -------
                                     $(8,000)   $74,444
                                     -------    -------
                                     -------    -------
</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>
<CAPTION>
                                     Year ended May 31,
                                      1996        1995
                                      -----       -----
<S>                                   <C>         <C>
Statutory U.S. Federal tax rate       34.0%       34.0%
State taxes                            3.2        17.9
Nondeductible items                   37.4        22.6
Current benefit - tax expense in 
  excess of book                    (110.3)         --
Net change in items giving rise to
  deferred taxes                      32.5         0.4
                                     -----       -----
                                      (3.2)%      74.9%
                                     -----       -----
                                     -----       -----
<FN>
<F1>
As of May 31, 1996 and 1995, depreciation gave rise to 
deferred tax liabilities of approximately $696,000 and 
$407,000, respectively, allowance for doubtful accounts, 
vacation accruals, deferred gains, net operating loss 
carryforwards, credits and contribution carryovers gave rise 
to deferred tax assets of approximately $613,000 and 
$267,000, respectively, net of a valuation allowance of 
$86,000 and $210,000, respectively.  These amounts are 
presented net in the consolidated balance sheet as of May 
31, 1996 and 1995, as a noncurrent deferred tax liability.
</FN>
</TABLE>

NOTE 7- COMMITMENTS AND CONTINGENCIES

The Company leases office space and equipment.  Until July 
31, 1995, the office space was sublet from an affiliate of 
the Company substantially owned by the Company's Chairman 
(the "Affiliate"), under a sublease agreement expiring on 
September 1, 2005.  The sublease agreement provides for 
rental payments to be made to the lessor in an amount equal 
to the principal and interest requirement on the bonds of the 
lessor (see Note 7).  Such amount was $97,200 and $545,382 
for the years ended May 31, 1996 and 1995, respectively, and 
includes all real estate taxes and operating costs.

As of July 31, 1995, by an Assignment and Assumption and 
First Amendment to Lease between the Company and the 
Affiliate, the Company is the beneficial owner of and leases 
the premises from the Nassau County Industrial Development 
Agency ("NCIDA").  The Company currently pays rent for the 
facility to NCIDA in the amount of $48,600 per month for a 
term expiring in September, 2005.  Such amount was $486,000 
for the year ended May 31, 1996.

The equipment is leased on a monthly basis at a rate of 
approximately $31,000 per month from a company owned by a 
shareholder of the Company (See Note 8).

In September 1989, the Company entered into a sale/leaseback 
transaction whereby certain fixed assets, including computer 
hardware and software, were sold for $700,000 and 
concurrently leased back by the Company (See Note 11).  The 
lease was noncancellable for four years and required annual 
minimum rental payments of $230,000 through September 1993.  
In March 1995, these assets were purchased by the Company 
from an affiliated company for $300,000.

In February 1993, the Company entered into two separate 
sale/leaseback transactions whereby certain fixed assets were 
sold in the aggregate, for $492,000 and concurrently leased 
back by the Company (See Note 11). The leases are 
noncancellable for four years and require annual minimum 
rental payments of $144,000 through 1997.  Rental expense in 
connection with these operating leases amounted to 
approximately $144,000 in fiscal 1996 and 1995, respectively.

In December 1994, the Company entered into a sale/leaseback 
transaction whereby certain fixed assets were sold for 
$300,000 and concurrently leased back by the Company (See 
Note 11).  The lease is noncancellable for three years and 
requires annual minimum rental payments of $81,156 through 
1997.

In February 1995, the Company entered into two separate 
sale/leaseback transactions whereby certain fixed assets were 
sold, in the aggregate, for approximately $559,000 and 
concurrently leased back by the Company (See Note 11).  The 
leases are noncancellable for three years and require annual 
minimum rental payments of $173,520 through 1998. 

Rental expense in connection with these December 1994 and 
February 1995 sale/leaseback operating leases amounted to 
approximately $254,700 and $105,000 in fiscal 1996 and 1995, 
respectively.
 
In June 1995, the Company entered into a sale/leaseback 
transaction whereby certain fixed assets were sold for 
$500,000 and concurrently leased back by the Company (See 
Note 11). The lease is noncancellable for thirty-eight (38) 
months and requires annual minimum rental payments of 
$149,280 through 1998.
 
In September 1995, the Company entered into a sale/leaseback 
transaction whereby certain fixed assets were sold for 
approximately $326,000 and concurrently leased back by the 
Company (See Note 110). The lease is noncancellable for five 
years and requires annual minimum rental payments of $66,216 
through 2000.

Rental expense in connection with these June 1995 and 
September 1995 sale/leaseback operating leases amounted to 
approximately $204,000 in fiscal 1996.
 
Total office space and equipment rental expense amounted to 
approximately $1,163,000 and $1,180,000 in fiscal 1996 and 
1995, respectively.

Future minimum lease payments for all noncancellable 
operating leases at May 31, 1996 are as follows:

<TABLE>
<CAPTION>
                                          Amount
                                          ------
                <C>                     <C>          
                Year ending May 31,
                1997                    $1,306,936
                1998                     1,078,144
                1999                       774,536
                2000                       748,074
                2001                       657,170
             Thereafter                  2,529,066
                                        ----------
                                        $7,093,926
                                        ----------
                                        ----------

<FN>
<F1>
The Company is involved in litigation through the normal 
course of business. The Company believes that the resolution 
of these matters will not have a material adverse effect on 
the financial position of the Company. 
</FN>
</TABLE>

NOTE 8 - RELATED PARTY TRANSACTIONS

a. The Company derives revenue from a company affiliated 
with the Company's Chairman of the Board for data processing 
services and computer software design. The revenues 
generated from this company, which are included in operating 
revenue, amounted to $1,883,000 and $1,869,000 for the years 
ended May 31, 1996 and 1995, respectively. At May 31, 1996, 
the Company was owed approximately $192,000 by such 
affiliate, of which $100,000 was received subsequent to May 
31, 1996.

b. On July 1, 1992, the Company loaned $1,000,000 to the 
Company's Chairman, bearing interest at the prime rate plus 
1-1/4% and was due July 1, 1995. On September 1, 1993, the 
Company was issued a new note for the then outstanding 
balance of $490,000, bearing interest at prime plus 1-1/4% 
and being due April 30, 1994. On May 1, 1994, the Company 
extended the due date of the note to the earlier of April 
30, 1995 or as the Company may demand at any time after the 
effective date of the then proposed privatization transaction. 
The Chairman paid $340,000 of the outstanding loan to the 
Company during the year ended May 31, 1995. On May 1, 1995, 
the Company extended the due date of the note to October 31, 1995. 
On July 31, 1995, the Chairman, as a result of the assignment of 
the lease with the Nassau County Industrial Development Agency 
("NCIDA") from BFS Sibling Realty Inc., formerly known as Brodsky 
Sibling Realty Inc. ("BFS"), an affiliate substantially owned 
by the Company's Chairman, to Sandata, Inc., repaid $129,000.  
The remaining balance of the note receivable was repaid by the Chairman 
during the quarter ended February 29, 1996.

c. On June 1, 1994, BFS, an affiliate substantially owned by 
the Company's Chairman, borrowed $3,350,000 in the form of 
Industrial Development Revenue Bonds ("Bonds") to finance 
costs incurred in connection with the acquisition, 
renovation and equipping of the Company's new office space 
located at 26 Harbor Park Drive, Port Washington, New York 
(the "Facility" or the "Building") from the NCIDA.  These 
Bonds were subsequently purchased by a bank (the "Bank").  
The aggregate cost incurred by BFS in conjunction with such 
acquisition, renovation and equipping was approximately 
$4,377,000.  In addition, the Company incurred approximately 
$500,000 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 (at the Company's 
option) to a rate of either prime plus 3/4 of 1%, or the 
applicable fixed rate if offered by the Bank. Commencing 
October 1, 1995, principal, together with interest, is being 
repaid in equal monthly installments based on a 15 year 
amortization, with the balance of unpaid principal due 
September 1, 2005.

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

As of July 31, 1995, by an Assignment and Assumption and 
First Amendment to Lease between the Company and BFS, the 
Company became the beneficial owner of and leases the 
Facility from the NCIDA (collectively the "Assignment 
Transaction"). In connection with the Assignment 
Transaction, the Sublease was terminated.  The Company 
currently pays 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, among other things, 
for a term expiring in September, 2005. The expiration of 
the lease term coincides with the maturity date of the 
existing Bond financing through the NCIDA. Upon the 
expiration of such term, the Company currently intends to 
exercise its rights to become record owner of the Facility. 
In connection with the Assignment Transaction, 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 Building, 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 entire $750,000 proceeds have 
been used to repay a portion of the Bond indebtedness to the 
Bank.  The Company entered into the Assignment Transaction 
primarily to satisfy certain requirements of the SBA. The 
Term Loan is payable in 240 monthly installments of $6,255, 
which includes principal and interest at a rate of 7.015%.

e. During fiscal 1995, the Company advanced $60,000 to an 
affiliate substantially owned by several officers of the 
Company.  These advances, which were non-interest bearing, 
were paid back to the Company by May 31, 1996.

f. Due from Officers in the amount of $102,867, which is 
evidenced by notes, represents the amount advanced by the 
Company to pay certain fees arising from the proposed 
privatization.  These notes bear interest at prime plus 1% 
and are due January 1, 1997.

g. The Company makes various lease payments to certain 
affiliated companies.  The payments are for:  equipment 
rental, which was $381,113 and $385,206 in fiscal 1996 and 
1995, respectively, consulting services which was -0- in 
fiscal 1996 and $199,800 in fiscal 1995, respectively, and 
building rent which was $97,200 and $545,382 in fiscal 1996 
and 1995, respectively.

h. In September 1989, the Company entered into a 
sale/leaseback transaction whereby certain fixed assets 
including computer hardware and software were sold for 
$700,000 and concurrently leased back by the Company.  In 
March 1995, these assets were purchased by the Company from 
an affiliated company for $300,000.

NOTE 9 - NOTE RECEIVABLE FROM FORMER AFFILIATE

On July 31, 1993, the Company received a promissory note 
from Compuflight, Inc. ("Compuflight"), a former affiliate 
(the Company's Chairman was a principal stockholder and 
Chairman of Compuflight through December 1, 1993) to 
evidence the Company's accounts receivable from Compuflight. 

The note was payable in increments of $20,000 per month 
including interest at the rate of one percent above prime on 
the unpaid balance and was due April 1, 1994.  On November 
1, 1993, the note was amended.  The amended note is payable 
in minimum increments of $20,000 per month with interest at 
ten percent (10%) per annum and contains provisions for 
accelerated payments based upon Compuflight achieving 
certain results. Payments commenced on February 28, 1994 and 
are to continue until such time as the indebtedness and any 
accrued interest are paid in full.  In connection with the 
promissory note, the Company received a security interest in 
substantially all the then existing assets of Compuflight, 
which has been assigned to the Bank as collateral for the 
Company's Credit Agreement with the Bank.  At the present 
time, Compuflight is indebted to the Company in the amount 
of $222,139, of which $195,881 represents the balance due on 
the note and $26,258 represents accounts receivable.

NOTE 10 - SHAREHOLDERS' EQUITY

a. Common Stock Purchase Warrants

In February 1991, the Company issued 400,000 common stock 
purchase warrants to the Company's Chairman. The warrants 
are exercisable in equal annual amounts over a ten-year 
period. For each warrant, the Chairman may purchase one 
share of  common stock at an exercise price of $2.64 per 
share, representing the fair market value of such stock on 
the date the warrants were issued. On January 25, 1995, the 
Chairman exchanged these warrants (which were previously 
exchanged on August 10, 1992 at an exchange price of $1.79 
per share) for warrants to purchase one share of common 
stock at an exchange price of $1.38 per share, representing 
the fair market value of such stock at January 24, 1995.

b. Changes in Authorized Shares

In May 1995, the Company's Certificate of Incorporation was 
amended, pursuant to stockholder vote, to decrease the 
number of authorized shares of Common Stock of the Company 
from 10,000,000 to 3,000,000 and eliminate all authorized 
shares of Preferred Stock.

c. Stock Options

In October 1984, the Company adopted an incentive stock 
option plan which reserved 161,444 shares of common stock. 
The plan requires that all options be granted at exercise 
prices not less than the fair market value at the date of 
grant. In April 1989, the Company amended its incentive 
stock option plan to reflect revisions necessitated by the 
Tax Reform Act of 1986 and to increase the number of shares 
subject to the plan from 161,444 to 278,110. In December 
1990, the Company's Incentive Plan was amended pursuant to 
stockholder vote by increasing the number of shares 
available for options to 416,667.

In November 1986, the Company adopted a nonqualified stock 
option plan which reserved 111,111 shares of common stock 
that may be granted to employees, officers and directors. In 
April 1989, the Company amended its nonqualified stock 
option plan by increasing the number of shares from 111,111 
shares to 227,778 shares.

In January 1995, the Company adopted a stock option plan 
providing for both incentive and nonqualified stock options, 
which reserves 1,000,000 shares of common stock for grant 
under the plan. The plan requires that all options be 
granted at exercise prices not less than the fair market 
value at the date of grant, over a ten-year period.  In 
addition, the Company granted officers of the Company 
incentive options to purchase 82,000 shares of the Company's 
common stock at an exercise price of $1.51 per share.  These 
options are exercisable over a five-year period.  In March 
1996, the Company granted officers of the Company incentive 
options to purchase 100,000 shares of the Company's common 
stock at an exercise price of $2.34.  These options are 
exercisable over a five-year period.

Summary information with respect to the stock option plans 
follows:

<TABLE>
<CAPTION>
                       Range of   Outstanding  Outstanding
                       exercise     options      options
                        prices     granted    exercisable
                       --------   ----------- -----------
<S>                   <C>            <C>         <C>
Balance, June 1, 1994 1.79 - 1.875   276,593     276,593
Granted               1.38 - 1.753    58,334     233,334
Canceled              1.79 - 1.875   (33,890)    (33,890)
Balance, May 31, 1995 1.38 - 1.875   601,037     476,037
Granted               2.34           100,000     100,000
Canceled              1.75 - 1.875  (125,778)       (778)
Balance, May 31, 1996 1.38 - 2.34    575,259     575,259

</TABLE>

NOTE 11 - SALE/LEASEBACK TRANSACTIONS

In September 1989, the Company consummated a sale/leaseback of 
certain fixed assets (principally furniture, fixtures, computer 
hardware and software and equipment). The fixed assets, which 
had a net book value of approximately $440,000 were sold for 
$700,000. The resulting gain of $260,000 was recorded as 
deferred income and is being recognized over the life of the 
lease.  In March 1995, these assets were purchased by the 
Company from an affiliated company for $300,000.

In February 1993, the Company entered into two separate 
sale/leaseback transactions of certain fixed assets 
(principally computer hardware and software). The fixed 
assets, which had a net book value of approximately $389,000, 
were sold for $492,000. The resulting gain on the sale of 
$103,000 was recorded as deferred income and is being 
recognized over the lives of the leases. Approximately 
$26,000 of the deferred gain was recognized for fiscal 1996 
and 1995, respectively.

In December 1994, the Company entered into a sale/leaseback 
of certain fixed assets (principally computer hardware and 
software). The fixed assets, which had a net book value of 
approximately $115,000 were sold for $300,000. The resulting 
gain of approximately $185,000 was recorded as deferred 
income and is being recognized over the life of the lease. 
Approximately $62,000 and $31,000 of the deferred gain was 
recognized for fiscal 1996 and 1995, respectively.

In February 1995, the Company entered into two separate 
sale/leaseback transactions of certain fixed assets 
(principally leasehold improvements and equipment). The fixed 
assets, which had a net book value of approximately $391,000, 
were sold for approximately $559,000. The resulting gain on 
the sale of approximately $168,000 was recorded as deferred 
income and is being recognized over the lives of  the leases. 
Approximately $56,000 and $19,000 of the deferred gain was 
recognized for fiscal 1996 and 1995, respectively.

In June 1995, the Company entered into a sale/leaseback 
transaction of certain fixed assets (principally furniture, 
fixtures, computer hardware and software and equipment). The 
fixed assets, which had a net book value of approximately 
$332,000 were sold for $500,000. The resulting gain of 
$168,000 was recorded as deferred income and is being 
recognized over the life of the lease, which is thirty-eight 
(38) months.  Approximately $52,900 of the deferred gain was 
recognized for fiscal 1996.

In September 1995, the Company entered into a sale/leaseback 
transaction of certain fixed assets (principally computer 
hardware). The fixed assets, which had a net book value of 
approximately $251,000, were sold for approximately $326,000. 
The resulting gain of approximately $75,000 was recorded as 
deferred income and is being recognized over the life of the 
lease, which is sixty (60) months. Approximately $12,500 of 
the deferred gain was recognized for fiscal 1996.

NOTE 12 - LITIGATION SETTLEMENT

The Company was a plaintiff in an action seeking payment of 
past due accounts receivable in the amount of approximately 
$262,000. The defendant interposed a counterclaim seeking 
damages in the aggregate of $12,000,000 alleging false 
billings, improper maintenance and the insertion by the 
Company of a so-called "time bomb" into computer systems 
sold by the Company to the defendant. The action was settled 
in fiscal 1995 whereby the Company received $169,000 in 
settlement of the outstanding accounts receivable. The 
remaining balance was written off to the allowance account.

NOTE 13 - PROPOSED PRIVATIZATION OF THE COMPANY 

The Company filed a Form 8-K with the Securities and 
Exchange Commission, announcing the acceptance by the Board 
of Directors of the Company of a proposal by Bert E. 
Brodsky, Hugh Freund, Gary Stoller, Leland H. Freund and 
Emily B. Freund (collectively the "Proponents") to take the 
Company "private" for purposes of Federal securities law. At 
that time the Board of Directors also appointed two of its 
members to a committee of independent directors for the 
purpose of reviewing the proposed transaction to consider 
the fairness of the transaction with respect to the 
stockholders of the Company and to make recommendations to 
the Board. The offer proposed to all outside stockholders of 
the Company was $2.50 for each of their shares, which 
approximated 229,800 shares in the aggregate.

In December 1994, the Board of Directors of the Company was 
informed by the Proponents that they had withdrawn their 
proposal to take the Company "private".  In notifying the 
Company of their decision to withdraw their proposal, the 
Proponents informed the Board of Directors that their 
decision had been based on several factors, including the 
substantial delays created by the need to comply with legal 
and regulatory requirements, the costs associated with such 
compliance and such delays and the uncertainty regarding the 
timing of the possible consummation of the proposed 
transaction.  The Company advanced certain fees on behalf of 
the Proponents arising from the proposed transaction, which 
are payable in  January 1997 (See Note 8).

NOTE 14 - 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 
$14,409 and $14,736 in fiscal 1996 and 1995, respectively.