UNITED STATES
                  SECURITIES AND EXCHANGE COMMISSION
                        Washington, DC   20549
                              FORM 10-QSB

(Mark One)

[x] QUARTERLY REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

For the Quarterly Period Ended September 30, 2001
                               ------------------

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

    For the transition period from ______________ to ______________

    Commission file number        010690
                             ____________________


                           Science Dynamics Corporation
     -------------------------------------------------------------------
      (Exact name of small business issuer as specified in its charter)

                                   Delaware
        ------------------------------------------------------------
       (State or other jurisdiction of incorporation or organization)

                                  22-2011859
                      -------------------------------
                     (IRS Employer Identification No.)


          1919 Springdale Road, Cherry Hill, New Jersey   08003
          -----------------------------------------------------
                (Address of principal executive offices)

                      (    856     )     424-0068
          -----------------------------------------------------
                       (Issuer's telephone number)

                                    N/A
      ---------------------------------------------------------------
     (Former name, former address, and former fiscal year, if changed
     since last report)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.    Yes [x]     No [ ]


            APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
               PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court.   Yes [ ]      No [ ]

                  APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:


          11/14/01  18,239,716 shares of common stock were outstanding.

<PAGE>

            S C I E N C E   D Y N A M I C S   C O R P O R A T I O N

                                   INDEX
                                   -----
                                                                      PAGE NO.
                                                                      --------

PART I.  FINANCIAL INFORMATION

         Item 1. Financial Statements

                 Consolidated Balance Sheets as of
                 September 30, 2001 (unaudited) and December
                 31, 2000 (audited)                                     1

                 Consolidated Statements of (Loss) Income for
                 the nine months and three months ended
                 September 30, 2001 (unaudited) and the nine and
                 three months ended September 30, 2000 (unaudited)      2

                 Consolidated Statements of Cash Flows for nine
                 months ended September 30, 2001 (unaudited) and for
                 the nine months ended September 30, 2000 (unaudited)   3

                 Notes to Consolidated Financial Statements             4

         Item 2. Management's Discussion and Analysis of
                 Financial Condition and Results of Operations          4 - 12

PART II. OTHER INFORMATION

         Item 1. Legal Proceedings                                      13

         Item 2. Changes in Securities                                  13

         Item 3. Defaults upon Senior Securities                        13

         Item 4. Submission of Matters to Vote of Security Holders      13

         Item 5. Other Information                                      13

         Item 6. Exhibits and Reports                                   13

         Item 7. Signatures                                             14

<PAGE>


<TABLE>
                                    SCIENCE DYNAMICS CORPORATION AND SUBSIDIARY
                                            CONSOLIDATED BALANCE SHEETS

<CAPTION>

PART I.   FINANCIAL INFORMATION
          Item 1. Financial Statements:

                                     ASSETS
<S>                                                                              <C>                <C>
                                                                                  September 30,          December 31,
                                                                                      2001               2000
                                                                                   (Unaudited)         (Audited)
                                                                                    ---------          ----------
Current assets:
  Cash and cash equivalents                                                        $  157,953        $  1,351,641
  Accounts receivable - trade                                                          63,628             102,194
  Accounts receivable - other                                                          50,000              51,401
  Inventories                                                                         245,196              87,623
  Other current assets                                                                 86,780              84,566
                                                                                    ---------          ----------
    Total current assets                                                              603,557           1,677,425
                                                                                    ---------          ----------

Property and equipment, net                                                           935,973           1,005,364
Intangible Assets, net of accumulated
amortization of $1,425,000 in 2001 and
$1,200,000 in 2000.                                                                    75,000             300,000
Other assets                                                                           25,363              25,363
                                                                                    ---------          ----------
   Total assets                                                                    $1,639,893        $  3,008,152
                                                                                    =========          ==========


                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

  Line of Credit                                                                       97,741                   -
  Short term capital lease                                                             66,394        $     57,598
  Customer deposits                                                                   420,200                   -
  Accounts payable                                                                    695,172             358,820
  Accrued expenses - payroll related                                                  165,144             118,059
                                                                                    ---------          ----------
   Total current liabilities                                                        1,444,651             534,477
                                                                                    ---------          ----------

Convertible Notes                                                                   1,600,000                   -
Long Term Capital Lease                                                                72,392             128,413
                                                                                    ---------          ----------

   Total liabilities                                                                3,117,043             662,890
                                                                                    ---------          ----------

Commitments

Shareholders' equity -
  Common stock - .01 par value,
   45,000,000 shares authorized,
   17,783,701 issued and 17,657,901 outstanding
   in 2001 and 2000 respectively.                                                     177,837             177,837
   Additional paid-in capital                                                      14,242,021          14,266,787
   (Deficit)                                                                      (14,499,175)        (11,701,529)
                                                                                   ----------          ----------
                                                                                   (1,079,317)          2,743,095

   Common stock held in treasury, at cost                                            (397,833)           (397,833)
                                                                                   ----------          ----------

   Total shareholders' (deficit)/ equity                                           (1,477,150)          2,345,262
                                                                                   ----------          ----------

   Total liabilities and shareholders' equity                                     $ 1,639,893         $ 3,008,152
                                                                                   ==========          ==========

</TABLE>
-1-
<PAGE>
<TABLE>
                                            SCIENCE DYNAMICS CORPORATION AND SUBSIDIARY
                                               CONSOLIDATED STATEMENTS OF OPERATIONS
                                                          (UNAUDITED)
                                                           ---------

PART I.   FINANCIAL INFORMATION
          Item 1. Financial Statements(Continued):
<CAPTION>


                                                             Nine Months Ended September 30    Three Months Ended September 30,

                                                                  2001            2000              2001              2000
                                                                  ----            ----              ----              ----

<S>                                                          <C>             <C>                <C>               <C>
 NET SALES                                                    $  506,134      $5,178,155        $  133,521        $1,630,402
                                                              ----------      ----------        ----------         ---------


Operating costs and expenses:

      Cost of sales                                              381,509       1,807,158            92,983           522,886
      Research and development                                 1,107,916         833,935           353,126           307,402
      Selling, general
          and administrative                                   2,560,369       2,201,692           719,229           792,617
                                                              ----------      ----------        ----------         ---------

                                                               4,049,794       4,842,785         1,165,338         1,622,905
                                                              ----------      ----------        ----------         ---------

Operating (loss)/income                                       (3,543,660)        335,370        (1,031,817)            7,497

Other income/expenses:

   Interest income                                                     -          22,044                 -            13,606
   Interest expense                                             (253,986)         (2,902)          (28,100)           (2,902)
                                                              ----------      ----------        ----------         ---------


Net(loss)/income                                            $(3,797,646)     $  354,512       $(1,059,917)        $  18,201
                                                              ==========      ==========        ==========         =========


Net income(loss) per common share                            $    (0.21)     $     0.02       $    (0.06)         $    0.00
                                                              ==========      ==========        ==========         =========


</TABLE>
-2-
<PAGE>
<TABLE>
                          SCIENCE DYNAMICS CORPORATION AND SUBSIDIARY
                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                         (UNAUDITED)
                                          ---------
<CAPTION>
PART I.   FINANCIAL INFORMATION
          Item 1. Financial Statements(Continued):


                                                            Nine Months Ended September 30,
                                                                   2001           2000
                                                                   ----           ----

<S>                                                           <C>           <C>
Cash flows from operating activities:
 Net (loss)Income                                              $(3,797,646)  $  354,512
                                                               -----------   ----------

Adjustments to reconcile net (loss)income to
 net cash used for
 operating activities:
  Depreciation                                                     189,453       99,518
  Amortization of
  Intangible assets                                                225,000      225,000
  Interest expense - non cash                                      212,524            -
Changes in operating assets
 and liabilities:
 (Increase) decrease in:
  Accounts receivable                                               38,566   (1,643,631)
  Other receivable                                                   1,401      (10,844)
  Inventories                                                     (157,573)    (161,998)
  Other current assets                                              (2,214)     (84,659)
  Other assets                                                           -        6,400
 Increase (decrease) in:
   Deferred revenue                                                420,200            -
  Accounts Payable and
   accrued expenses                                                383,437      (53,152)
                                                               -----------   ----------

Net cash used for operating activities                          (2,486,852)    (944,858)
                                                               -----------   ----------


Cash flows from investing activities:

 Purchase of property and equipment - net                         (120,062)    (543,532)
                                                               -----------   ----------
  Net cash used in investing activities                           (120,062)    (543,532)
                                                               -----------   ----------

Cash flows from financing
 activities:
 Increase (decrease) in
  Issuance of Convertible debt, net                              1,362,710            -
  Payment on capitalized leases                                    (47,225)      (3,862)
  Proceed from line of credit                                       97,741            -
 Issuance of common stock and warrants                                   -    1,724,057
                                                               -----------   ----------


  Net cash provided
   by financing activities                                       1,413,226    1,720,195
                                                               -----------   ----------

Net (decrease) increase in
 cash and cash equivalents                                      (1,193,688)     231,805

Cash and cash equivalents -
 beginning of period                                             1,351,641      674,793
                                                               -----------   ----------

Cash and cash equivalents -
 end of period                                                   $ 157,953   $  906,598
                                                               ===========   ==========


</TABLE>
-3-
<PAGE>


             SCIENCE DYNAMICS CORPORATION AND SUBSIDIARY
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              (unaudited)

PART I
Item 1. (continued)

Basis of Presentation
---------------------

The unaudited financial statements included in the Form 10-QSB have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-QSB and Item 310(b) of Regulation SB.  The
financial information furnished herein reflects all adjustments,
which in the opinion of management are necessary for a fair
presentation of the Company's financial position, the results of
operations and the cash flows for the periods presented.

Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted
accounting principles, have been condensed, or omitted, pursuant to
such rules and regulations.

These interim statements should be read in conjunction with the
audited financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2000.  The Company presumes that users of the interim
financial information herein have read or have access to the
audited financial statements for the preceding fiscal year and that
the adequacy of additional disclosure needed for a fair
presentation may be determined in that context. The results of
operations for any interim period are not necessarily indicative of
the results for the full year.

Income per share
----------------

Per-share data has been computed on the basis of the weighted
average number of shares of common stock outstanding during the
period. Common equivalent shares, including warrants and stock
options, are included in the calculation of diluted earnings per
common and common equivalent shares to the extent that they are
dilutive and excluded to the extent they are anti-dilutive.


Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND
        RESULTS OF OPERATIONS FOR NINE MONTHS ENDED SEPTEMBER 30, 2001
        AND FOR THE THREE MONTHS ENDED SEPTEMBER  30, 2001.

Business Overview
-----------------

In 1998, management made a strategic decision to divert most of our
development efforts towards the IP system.   Advances in public and
private IP-based networks now enable businesses to use the Internet
Protocol (IP) to by-pass the Public Switched Telephone Network
(PSTN) for national and international long distance voice, fax, and
video communications.

The Company continues to gain knowledge and experience in enhancing
the development of the system for IP Telephony.  The Company has
revised its development and implementation of the products
accordingly to the direction of the marketplace.  Management
believes that the penetration of the IP Telephony market along with
renewed interest and development in the Commander II call control
series will provide significant growth potential in 2002.

-4-
<PAGE>

During 2001, the Company changed the structure of its sales force.
The Commander sales team consists of our vice president of sales, a
sales manager, an inside sales representative and a marketing
associate.  The focus on VOIP sales has been shifted to Asia with
the hiring of a vice president of sales-Asia/Pacific.  The Asia
strategy includes both direct and indirect sales via collaboration
with distributors and resellers.  The company expects significant
growth during 2002 from both domestic Commander sales and from our
VOIP and video conferencing products in Asia.  As a result of this
restructuring of the sales group, the sales office in the United
Kingdom was closed to make more resources available for our push
into Asia.  Given typical sales lead times and the current state of
the Telco market, we do not anticipate significant revenues to be
generated by the new team until the first quarter of 2002.

The Company is continuously exploring new niche opportunities,
introducing new product offerings and marketing and sales
initiatives to increase market share and value for our customers.
The focus of our strategy included providing the core technology
needed to deliver a broad range of telephony services; targeting
key growth markets worldwide; promoting strategic relationships
between our customers; delivering added value through customer
support and services; and continuing to actively pursue business
alliance candidates that complement or support the Company's core
competencies.

Management believes that current products and development strategy
teamed with SciDyn's strong telecommunications background will
provide a solid product to meet customer needs and the advancements
required for the packet based telecom revolution.

PRODUCTS
--------

IP Telephony

One of the current impacts of IP Telephony is the way it is driving
the convergence of the IT and telecom markets.  Both of these
traditional markets are now seeing a paradigm shift to IP
Telephony.  IP Telephony is crossing traditional parameters and
amalgamating historically separated disciplines on an IP network.
This means the carriers and companies of the world are starting to
send voice over the packet networks that previously were used only
for data.   This is an opportunity for dynamic companies to take
their experience and expertise and apply it in markets not
traditionally open to them.

By crossing borders, IP Telephony allows companies like Science
Dynamics to diversify from their traditional core technology and
enhance and develop bridges between the existing data and telecom
infrastructures.

The difference between the current circuit-switched PSTN, which
provides a dedicated end-to-end connection, and the packet switched
IP network, which provides a virtual connection, is the enhancement
of bandwidth utilization.  By sharing bandwidth as data networks
do, new operators should have the potential to provide a reduction
in cost as compared to traditional circuit-switched PSTN operators.
The focus in today's market is to integrate these two very
different forms of communication throughout the world.

SciDyn's IP Telephony products aim to enhance the new operators'
abilities to combine the technologies of the new IP-based networks
with the traditional feature-rich circuit networks without
forfeiting the key functionality of IP network-adaptability.

-5-
<PAGE>

The SciDyn system features a modular architecture that permits our
customers to add new product and service features without
significant cost or development time. Based on publicly available
data provided by large telecommunications service providers, we
believe our modular architecture enables the provision of new and
existing communications services at a lower cost than the provision
of communications services by traditional telephone companies.

SciDyn offers its proprietary BubbleLink(R) software architecture
throughout its current IP Telephony Gateway product line. This
includes our high capacity versatile IntegratorC-2308(R), which has
one of the smallest footprints in the industry.

Commander Inmate Telephone Control System (ITCS)

The Commander product lines are built on the Company's unique
BubbleLINK(R) software architecture.  This open system platform is a
combination of integrated Computer Telephony (CTI) hardware and
software, which can handle thousands of call transactions per hour
and provide correctional facility officials with effective tools to
manage and control inmate telephone calls using the Commander
system software.

The Commander I products are designed for the small to mid sized
municipal and county correctional facilities requiring control for
up to 40 inmate telephone lines.  The Commander I base system
provides telephone control for 4 lines and can be expanded in 4
line increments. This modular design provides a cost effective
solution with an abundance of inmate phone control features.

SciDyn has recently introduced its VoIP technology to its Commander
call control system.  This enhancement reduces the hardware and
operation costs of running the SciDyn solution.  The new
configuration allows all of SciDyn's technology to be housed at one
central location reducing the amount of lines that SciDyn clients
will need in order to move the same traffic, moreover, the VoIP
component allows for a reduction in the per minute charges incurred
by our client which enhances profitability.

The Commander I and II call control systems can be configured using
one or more AdminManager workstations. The AdminManager provides
real-time administration of the Commander through an Ethernet Local
Area Network (LAN) or a Wide Area Network (WAN).

In 1999, the company released a new Commander II AdminManager
software module. This new software module provides the Commander II
with a sophisticated Graphical User Interface (GUI) with new inmate
phone control features. These new features were based on
recommendations by several of the Company's customers. The Company
completed the Inmate debit system and GUI interface capability on
Commander in April 2001.  We completed the Commander II live
monitoring and recording during the second quarter 2001. The
Company continues to explore opportunities with the major telephone
companies in providing the Commander II inmate phone control system
with call transaction (price per call) programs.


Video over Frame Relay

In 1997, SciDyn launched its new way to carry video conferencing.
The VFX-250S is a hardware based Frame Relay Access Device (FRAD)
designed to carry video streams through the frame relay network.
As the largest data network protocol in the world, frame relay
seemed an obvious choice for adding video connectivity to its wide
complement of features.

-6-
<PAGE>

Traditionally, video conferencing has been carried via leased lines
or ISDN circuits.  In the US market, due to the proliferation of
ISDN availability, video conferencing has been able to take off
with a relatively high growth curve.  This is not true in the
international markets where leased lines and ISDN circuits are
either not readily available or prove to be rather costly.  Video
conferencing suite manufacturers such as PictureTel, the industry
leader, found markets outside of ISDN enabled networks have proven
to be slow and tedious.

By leveraging the proliferation of frame relay networks throughout
the world, SciDyn intends to market the VFX-250S products in
markets where ISDN and leased line services are not available.
There has been a resurgence in interest for our frame relay video
conferencing solution with strong interest coming from Korea, China
and Mexico.  We expect to see an increase in revenue from this
product throughout 2002.

Error Correction Algorithm

In 1999, the Company acquired the "Error Detection and Correction
System for Use with Address Translation Memory Controller" patent,
in exchange for 172,029 shares of common stock then valued at
$100,000.  Such a patent provides the Company with the ability to
embed in certain technology an error correction method that should
substantially reduce data transmission errors.  This correction
device is designed to reduce costly retransmission and can be
utilized across various data transport mediums.

The patent, which we intend to make available to others on a
royalty basis, can be utilized on virtually any data transmitting
system, from fiber optics to satellite transmission.  Since both
transmitting and receiving stations must utilize the same
algorithm, the Company's primary task is to initially convince new
or redesigned applications to utilize SciDyn's patent for each end
of the application.  As stated in previous quarterly reports SciDyn
continues to pursue a third party to undertake the implementation
of this algorithm.  To date a suitable entity has not been
identified to exploit this new technology in the near term.  Since
SciDyn's near term strategy and capital priorities preclude it from
investing additional time and funds into exploiting this patent
independently, its carrying value of $89,700 has been written off
during 2000.  SciDyn believes that the underlying patent may still
have practical applications and is pursuing the outright sale of
the patent to interested third parties.

The Patent, which has been issued in the United States with
application in many foreign countries, is for a data transmission
system for use in a mass memory system, which includes an EDAC that
corrects all single component errors and detects all double
component errors.  High-speed operation permits use of the EDAC on
address and control lines as well as on data lines.  In memory
systems, which use virtual memory addressing, further efficiency
and economy is achieved by incorporating a partial implementation
of the EDAC encoding in the same virtual memory address translation
unit in which the virtual memory address is calculated.

At the present time there is one issued patent. There are many
upgrades to the patented material that can be patented, which are
now trade secrets. These include both revisions to the algorithm
and implementation approaches.

-7-
<PAGE>

Voice Response System

The Company's Voice Response System (VRS) is an automatic intercept
product designed to provide a cost-effective solution for
implementing announcement capabilities at the central office
location.  This product has reached its mature stage of the product
life cycle and has been discontinued.  A base line revenue stream
will be generated from support of this product.

Future Product Development

The Company's products have primarily been designed and developed
by its internal engineering staff.   The Company considers the
features and performance of its products to be generally
competitive to those of other available applications.

We believe that continual enhancements of our products will be
required to enable the Company to maintain its competitive
position. The Company intends to focus its principal future product
development efforts on developing new, innovative, technical
products and updating existing products in the communications arena
to enable the Company to take advantage of opportunities resulting
from the expected direction of technology.
The Company continues to refine its core BubbleLINK(R) software
architecture.  This software architecture provides the foundation
for hosting applications for various Telephony and transaction
oriented processes.  Currently the BubbleLINK(R) architecture
supports existing Company products such as the Commander family of
inmate products, and the IntegratorC-2000(R) Series of IP Telephony
gateway products.  Management believes that the product design
strategy will keep the Company competitive.


Results of Operations
---------------------

The following table summarizes the basic results of operations for
the periods indicated in the Consolidated Statement of Operations.

Nine Months ended September 30, 2001 (unaudited) compared to the
Nine Months ended September 30, 2000 (unaudited).

                                             Nine Months Ended
                                               September 30,
                                           2001            2000
                                           ----            ----
  Sales                                  506,134       5,178,155

  Net Loss / Income                   (3,797,646)        354,512

  Net Loss / Income Per Share             $(0.21)         $ 0.02

-8-
<PAGE>

                             OPERATING EXPENSES       PERCENT OF SALES

                               2001        2000         2001      2000
                               ----        ----         ----      ----

  Cost of Goods Sold        381,509   1,807,158         75%      35%

  Research & Development  1,107,916     833,935        219%      16%

  Sales, General & Admin. 2,560,369   2,201,692        505%      43%

  Total Operating Costs
  and Expenses           $4,049,794  $4,842,785        799%      94%


Sales for the nine-month period ending September 30, 2001 were
$506,134 a decrease of $4,672,021 from sales of $5,178,155 for the
nine-month period ended September 30, 2000. The Company's revenue
in 2000 was predominantly derived from the Integrator Product Line.
Those results were due to the deployment of the Cascadent Supply
Agreement during 2000.  This Agreement was terminated during the
first quarter of 2001  upon SciDyn receiving official notification
that Cascadent was placed into receivership.  The loss of this
contract is directly related to the decrease in sales for the year.
SciDyn has received word that  Cascadent will not emerge from
receivership.  Our former president, chief executive officer and
chairman of the board, Alan Bashforth, became president of
Cascadent subsequent to his serving as an officer of Science
Dynamics.  Mr. Bashforth continues to serve as a member of our
board of directors.

Cost of Goods sold decreased to $381,509 in the first nine months
of 2001 from $1,807,158 in the corresponding nine-month period of
2000.  The decrease in the cost of goods sold was directly related
to the decrease in sales revenue.  The percentage increase of cost
of goods sold as a percentage of sales was due to the change in mix
of sales between the quarters with high margin integrator equipment
sales in 2000 compared to lower margin legacy products and services
in 2001.

Research & Development expenses increased to $1,107,916 in the
first nine months of 2001 as compared to $833,935 in the comparable
nine-month period of 2000.  The increase in research and
development expenses is related to continued work on adding
additional functionality to our product mix, specifically
introducing VoIP, live monitoring and recording  to our Commander
II series. We believe our success will depend, in part, on our
ability to develop and introduce new products and enhancements to
our existing products.  We continue to work on expanding our
engineering team and intend to continue to make significant
investments in research and development.

Sales, General & Administrative expenses increased to $2,560,369 in
the first nine months of 2001, compared to $2,201,692 in the
corresponding period of 2000.  The increase is related to the
addition of sales and administrative staff during the second half
of 2000 and increased consulting fees during 2001.  As we launch
our sales initiative into Asia we expect to incur substantial
expenditures related to sales and marketing activities, the
recruitment of additional sales and marketing personnel and the
expansion of our domestic and international distribution channels.

Interest Expense increased to 253,986 for the period ended
September 30, 2001 as compared to $2,902 for the same period in 2000.
The Company entered into Convertible Notes totaling $1,600,000,
these Notes contain a beneficial conversion feature  (see the
Liquidity section below for a description of the Note).  Per
Emerging Issues Task Force (EITF) Number 98-5, "Accounting for
Convertible Securities with Beneficial Conversion Features or

-9-
<PAGE>

Contingently Adjustable Conversion Ratios", this beneficial
conversion feature was assigned an intrinsic value of  $212,524, as
calculated under the provisions of the EITF.  This amount was
immediately expensed, as the Notes were convertible into common
shares of the Company at the time of the signing of the Agreement.
The remaining  interest expense is accrued interest on the
Convertible Notes.



Three Months ended September 30, 2001 (unaudited) compared to the
Three Months ended September 30, 2000 (unaudited).

                                            Three Months Ended
                                               September 30,
                                            2001            2000
                                            ----            ----

  Sales                                  133,521       1,630,402

  Net Loss / Income                   (1,059,917)         18,201

  Net Loss / Income Per Share             $(0.06)         $ 0.00


                             OPERATING EXPENSES       PERCENT OF SALES

                               2001        2000         2001      2000
                               ----        ----         ----      ----

  Cost of Goods Sold         92,983     522,886         70%      32%

  Research & Development    353,156     307,402        264%      19%

  Sales, General & Admin    719,229     792,617        539%      49%

  Total Operating Costs
  and Expenses           $1,165,338  $1,622,905        873%     100%


Sales for the three-month period ending September 30, 2001 were
$133,521 a decrease of $1,496,881 from sales of $1,630,402 for the
three-month period ended September 30, 2000. The Company's revenue
in 2001 was predominantly derived from the Integrator Product Line.
The results were due the deployment of the Cascadent Supply
Agreement during 2000.  This Agreement was terminated during the
first quarter of 2001 upon SciDyn receiving official notification
that Cascadent was placed into receivership.  The loss of this
contract is directly related to the decrease in sales for the
third quarter.  SciDyn has received word that Cascadent will not
emerge from receivership.  Our former president, chief executive
officer and chairman of the board, Alan Bashforth, became president
of Cascadent subsequent to his serving as an officer of Science
Dynamics.  Mr. Bashforth continues to serve as a member of our
board of directors.

Cost of Goods sold decreased to $92,983 during the third quarter of
2001 from $522,886 in the corresponding three-month period of 2000.
The decrease in the cost of goods sold was directly related to the
decrease in sales revenue.  The percentage increase of cost of
goods sold as a percentage of sales was due to the change in mix of
sales between the quarters with high margin integrator equipment
sales in 2000 compared to lower margin legacy products and services
in 2001.

Research & Development expenses increased to $353,126 during the
three-month period of 2001 as compared to $307,402 in the
comparable three-month period of 2000.  The increase in research
and development expenses during 2001 is related to continued work
on adding additional functionality to our product mix, specifically
introducing VoIP, live monitoring and recording to our Commander II

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<PAGE>

series. We believe our success will depend, in part, on our ability
to develop and introduce new products and enhancements to our
existing products.  We continue to work on expanding our
engineering team and intend to continue to make significant
investments in research and development.

Sales, General & Administrative expenses decreased to $719,229
during the three-month period of 2001, compared to $792,617 in the
corresponding period of 2000.  The decrease is related to the
reductions in administrative and sales staff during the quarter and
the voluntary salary reductions taken by certain employees to help
preserve cash.. We expect to incur substantial expenditures related
to sales and marketing activities, the recruitment of additional
sales and marketing personnel and the expansion of our domestic and
international distribution channels.

Interest Expense increased to 28,100 for the period ended September
30, 2001 as compared to $2,902 for the same period in 2000. The Company
entered into Convertible Notes totaling $1,600,000 during 2001.
(see the Liquidity section below for a description of the Note).


LIQUIDITY AND CAPITAL RESOURCES:
-------------------------------

Cash and cash equivalents decreased to $157,953 for the period ended
September 30, 2001 from $1,351,641 at December 31, 2000.  Net cash used
for operating activities was $2,486,852 for the nine months period ended
September 30, 2001 compared to $944,858 cash used for operating activities
in the nine month period ended September 30, 2000.  This difference is due
to the loss of the Cascadent Supply Agreement and the resultant loss of
revenue.

Net cash used in investing activities was $120,062 during the nine-month
period of 2001 compared to $543,532 in the corresponding nine-month period
of 2000.

On May 22, 2001, we issued $1,200,000 principal amount of 8% convertible
debentures, due May 22, 2003, to three investors pursuant to a Subscription
Agreement dated May 22, 2001.  Interest only payments are due quarterly
commencing September 30, 2001, and the principal is due in one lump sum on
May 22, 2003, or upon certain events of default.  The conversion price for
the convertible debentures is the lesser of 85% of the average of the three
lowest closing prices for the common stock for the 30 trading days prior to
but not including May 22, 2001, or 85% percent of the average of the three
lowest closing prices for the common stock for the 30 trading days prior
to but not including the conversion date. The maximum number of shares of
common stock that any subscriber or group of affiliated subscribers may
own after conversion at any given time is 4.99%.   The number of shares
of common stock issuable upon conversion of the convertible debentures is
1,470,588, based on a conversion price of $0.816 per share.  We are
required to register 200% of this amount, for a total of 2,941,176 shares.
The actual conversion price will depend on the market price of our common
stock prior to the conversion.  In addition to the convertible debentures,
we also issued warrants to purchase 872,727 shares of common stock.  These
warrants, which expire May 22, 2006, have an exercise price of $1.4339
per share.

On August 15, 2001, we issued $400,000 principal amount of 8% convertible
debentures, due August 15, 2003, to one investor pursuant to a Subscription
Agreement dated August 15, 2001.  Interest only payments are due quarterly
commencing September 30, 2001, and the principal is due in one lump sum
on August 15, 2003, or upon certain events of default.  The conversion price
for the convertible debentures is the lesser of 85% of the average of the
three lowest closing prices for the common stock for the 30 trading days
prior to but not including August 15, 2001, or 85% percent of the average
of the three lowest closing prices for the common stock for the 30 trading
days prior to but not including the conversion date. The maximum number of
shares of common stock that any subscriber or group of affiliated subscribers
may own after conversion at any given time is 4.99%.   The number of shares
of common stock issuable upon conversion of the convertible debentures is
5,000,000, based on a conversion price of $0.08 per share.  We are required
to register 200% of this amount, for a total of 10,000,000 shares.  The
actual conversion price will depend on the market price of our common stock
prior to the conversion.  In addition to the convertible debentures, we also
issued warrants to purchase 290,909 shares of common stock.  These warrants,
which expire August 15, 2006, have an exercise price of 130% of the three
lowest closing prices during the 10 trading days preceding exercise.

Net cash provided by financing activities during the nine-month period ended
September 30, 2001 was $1,413,226 this is related to the convertible debt
described above plus proceed from a line of credit, offset by the payment
on capitalized leases.  Net cash provided by financing for the nine-month
period ended September 30, 2001 was $1,720,195.  This amount is related to
the sale of 200,650 common shares at $8.50 per share which netted
$1,570,149, the finders fee from this transaction included the issuance of
13,115 warrants to purchase common shares.  The remaining increase in financing
activities of $153,908 was related to the exercise of stock options by
employees of the Company.

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<PAGE>


The Company was notified by Nasdaq that it was not in compliance with
Marketplace rules.  A plan outlining how the Company intended to comply with
listing requirements was submitted on June 15, 2001.  On August 23, 2001
Nasdaq informed the Company that its plan to come back into compliance was
not accepted.  As such, the Company was delisted from Nasdaq and currently
trades over the counter under the symbol SIDY.OB.

The sales revenue shortfall in the first nine months has greatly impacted
cash on hand.  The Company's currently anticipated levels of revenue and
cash flow are subject to many uncertainties and cannot be assured.  The amount
of funds required by the Company will depend on many factors, including the
extent and timing of sales, product costs, engineering and customer/technical
support requirements. The Company does not have sufficient cash on hand to
continue its operations without successfully raising additional funds either
through the issuance of debt or equity. The inability to obtain the required
financing and to generate sufficient cash from operations could require the
Company to curtail its operations.  While negotiations are underway to
secure additional funds the Company cannot guarantee that such negotiations
will be successful.


Forward Looking and Cautionary Statements

Except for the historical information and discussions contained
herein, statements contained in this Form 10-QSB may constitute
"forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements involve
a number of risks, uncertainties and other factors that could cause
actual results to differ materially, including the company's
failure to continue to develop and market new and innovative
products and services and to keep pace with technological change;
competitive pressures; failure to obtain or protect intellectual
property rights; issues on the company's business, financial
condition or results of operations; quarterly fluctuations in
revenues and volatility of stock prices; the company's ability to
attract and retain key personnel; currency and customer financing
risks; dependence on certain suppliers; changes in the financial or
business condition of the company's distributors or resellers; the
company's ability to successfully manage acquisitions and
alliances; legal, political and economic changes and other risks,
uncertainties and factors discussed elsewhere in this Form 10-QSB,
in the company's other filings with the Securities and Exchange
Commission or in materials incorporated therein by reference.


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<PAGE>


PART II. OTHER INFORMATION

SCIENCE DYNAMICS CORPORATION AND SUBSIDIARIES
_____________________________________________________

Item 1. Legal Proceedings
        No material developments.

Item 2. Changes in Securities
        None.

Item 3. Defaults Upon Senior Securities
        None.

Item 4. Submission of Matters to a Vote of Security Holders
        None.

Item 5. Other Information
        None.

Item 6. Exhibits and Reports
        (a)	Reports on Form 8-K
        None

Item 7. Signatures

        Pursuant to the requirements of Section 13 or 15(d) of the
        Securities Exchange Act of 1934, registrant has duly caused
        this report to be signed in its behalf by the undersigned
        thereunto duly authorized.


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<PAGE>

SCIENCE DYNAMICS CORPORATION

In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the
capacities and on the date indicated.


      SIGNATURE                TITLE                    DATE
      ---------                -----                    ----

 BY:  /s/ Robert O'Connor      Vice President and       November 14,2001
      ---------------------    Chief Accounting         ---------------
      Robert O'Connor          Officer