SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A
                                (Amendment no. 2)

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

(Mark One)
x     ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF  THE  SECURITIES
      EXCHANGE ACT OF 1934 [FEE REQUIRED]
      For the fiscal year ended December 31, 1996.
                                       OR
o     TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
      EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
      For the transition period from __________ to __________

                       Commission File Number:   0-25590

                            Datastream Systems, Inc.
             (Exact name of registrant as specified in its charter)

      Delaware                                    57-0813674
(State or other jurisdiction of         (I.R.S. Employer Identification No.)
 incorporation or organization)

50 Datastream Plaza, Greenville, South Carolina   29605
(Address of principal executive offices)         (Zip Code)

      Registrant's telephone number, including area code: (864) 422-5001
       Securities registered pursuant to Section 12(b) of the Act:  None
          Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, $.01 par value
                                (Title of Class)

      Indicate by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  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 o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  the  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. o

      Aggregate  market  value of the voting stock held by  non-affiliates  of
the Registrant as of March 31, 1997:  $138,057,651

      Number of shares of Common Stock outstanding as of March 31, 1997:
9,151,095




<PAGE>


                                    PART III.


Item 10.  Directors and Executive Officers of the Registrant.

Director Nominee Biographical Information

      Set forth  below is  certain  biographical  information  furnished  to the
Company by its directors,  including  Kenneth D. Tracy, the director nominee for
the Company's Class I  directorship,  to be elected at the Company's 1997 Annual
Meeting of Stockholders on June 13, 1997, with a term expiring in the year 2000.
Dr. Tracy currently serves as a director of the Company.

KENNETH D. TRACY
Age:  54

      Kenneth D. Tracy has served as a director of the Company  since 1990.  Mr.
Tracy   currently   serves  as  Vice   President-Environmental   Technology  for
Warner-Lambert Company, a position he has held since February 1991. From January
1990 until  February  1991,  he was the  Director of Research for Air Products &
Chemicals, Inc.

Biographical Information Concerning Other Directors

LARRY G. BLACKWELL
Age:  56
Class III Director - Term Expires 1999

      Dr.  Blackwell,  the founder of the  Company,  has served as Chairman of
the Board,  Chief  Executive  Officer and  President  of the Company  from its
inception  in 1986 until the present.  Prior to founding  the Company,  he was
President of the  Datastream  Systems  Division of a  subsidiary  of Wisconsin
Power & Light.  He also  co-founded  and  formerly  served as  Chairman of the
Board  of EDI  Technology  Companies,  an  environmental  process  engineering
consulting company.  Dr. Blackwell holds a B.S. degree in Engineering from the
University  of  Mississippi,  a Master  of  Science  degree  from The  Georgia
Institute of Technology and a Ph.D. in Environmental  Systems Engineering from
Clemson  University.  Dr. Blackwell is a registered  Professional  Engineer in
Illinois,  Pennsylvania and South Carolina and was named Inc.  magazine's 1994
"Entrepreneur of the Year" in the Master  Entrepreneur  category for the State
of South Carolina.

RICHARD T. BROCK
Age:  49
Class II Director - Term Expires 1998

      Mr. Brock has served as a director of the Company  since August 1993. In
1984, Mr. Brock founded Brock International,  Inc. ("Brock International"),  a
publicly-held  provider of sales and marketing automation software,  for which
he has served in various  capacities,  including  Chairman of the Board, Chief
Executive  Officer  and  President,  since 1984.  Currently,  he serves as the
Chairman of the Board of Brock  International.  He also  founded and  formerly
served as Chief  Executive  Officer of Management  Control  Systems,  Inc. Mr.
Brock is a  nationally-recognized  developer,  author  and  speaker  on sales,
marketing and service automation and business development strategy.

IRA D. COHEN
Age:  45
Class II Director - Term Expires 1998

      Mr. Cohen has been a director of the Company since February 1995.  Since
1988, Mr. Cohen has served as the Managing Director of Updata Group,  Inc., an
investment   banking  firm  focused  on  mergers  and   acquisitions   in  the
information technology industry. Mr. Cohen founded Updata Software,  Inc., and
from 1986 to 1988 served as that Company's Chief Financial Officer.  Mr. Cohen
is also a director of Computer Learning Centers, Inc.

JOHN M. STERLING, JR.
Age:  59
Class III Director - Term Expires 1999

      Mr.  Sterling  has served as a director  of the Company  since  February
1986.  He has also served as the Chairman of the Board of Directors  and Chief
Executive  Officer of Emergent Group, Inc.  ("Emergent  Group") since December
1990 and served as President of Emergent  Group from  December  1990 to August
1996.  Mr.  Sterling  has also served as  President  of Palmetto  Seed Capital
Corp.  from September  1993 to the present and served as a General  Partner of
Reedy River  Ventures  Limited  Partnership  ("Reedy  River")  from 1981 until
August 1995.  Reedy River provided  venture  capital  financing to the Company
to fund its  early  development,  and Mr.  Sterling  originally  served on the
Board  of  Directors  of  the  Company  pursuant  to  this  relationship.  Mr.
Sterling is the father of John M. Sterling,  III, an executive officer of the
company.

<PAGE>


Additional Information Concerning The Board Of Directors

      The Company's  Board of Directors held seven meetings  during fiscal 1996.
During  fiscal  1996,  the  Board  had an  Audit  Committee  and a  Compensation
Committee,  but did not have a Nominating  Committee.  No director attended less
than 75% of the aggregate  number of meetings of the Board and the committees of
the Board on which he served that were held during his term as a director of the
Company.

      Committees  of the Board of  Directors.  In  connection  with its  initial
public offering in March 1995, the Company  established an Audit Committee and a
Compensation  Committee.  The Audit  Committee is responsible  for reviewing and
making  recommendations   regarding  the  Company's  employment  of  independent
auditors,  the  annual  audit  of the  Company's  financial  statements  and the
Company's  internal  accounting  practices and policies.  It consists of Messrs.
Cohen  (Chairman),  Sterling and Tracy. In fiscal 1996, the Audit Committee held
one meeting.

      The Compensation  Committee is responsible for making  recommendations  to
the Board of Directors regarding compensation arrangements for senior management
of the Company (including annual bonus compensation), recommendations concerning
the  adoption  of any  compensation  plans in which  management  is  eligible to
participate  and grants of stock options or other benefits under such plans.  It
consists of Messrs.  Brock  (Chairman),  Sterling  and Tracy.  The  Compensation
Committee held two meetings in fiscal 1996.

      Compensation  of Directors.  The Company's Board of Directors is comprised
of five members.  In fiscal 1996,  non-management  directors  received an annual
retainer  of $6,000 and a fee of $1,000  for each day on which  they  attended a
board or committee  meeting.  All directors are reimbursed for expenses incurred
in  connection  with  attendance  at  meetings  of the  Board  of  Directors  or
committees  thereof.  The  Company  also has  adopted  a Stock  Option  Plan for
Directors,  which  provides for automatic  grants of options to purchase  Common
Stock to non-management directors.

Executive Officers

      The  executive  officers of the Company  serve at the  discretion of the
Board of Directors  and  presently  include Mr.  Blackwell,  John Fury Christ,
Daniel H. Christie and John M. Sterling,  III. See "Biographical Information
Concerning Other Directors" for information about Mr. Blackwell.

JOHN FURY CHRIST
Age:  41

      Dr.  Christ  served as Manager of  Development  of the Company  from May
1992 to  December  1994,  and  has held  the  position  of Vice  President  of
Development since December 1994.  In January 1997 Dr. Christ was named Chief
Technology Officer of the Company.  Prior to joining the Company on a full-time
basis,  Dr. Christ served as President of Positech,  Inc. from January 1990 to
May  1992.  During  this  period,   Positech  was  awarded  a  Small  Business
Innovative Research  Contract  for the  application  of  neural networks  in
support of the U.S.  Government's  Strategic Defense Initiative.  From 1988 to
1990, Dr. Christ provided contract software development services to the Company.
Dr. Christ holds B.S. and Master of Science degrees in  Electrical and Computer
Engineering,  and a Ph. D. in Computer Science, all from Clemson University.

DANIEL H. CHRISTIE
Age:  44

      Mr.  Christie  served as  Controller  of the  Company  from July 1993 to
December  1994,  and has held the position of Chief  Financial  Officer  since
December 1994.  Prior to joining the Company,  from 1991 to 1993, Mr. Christie
served as Group Finance Manager for Digital Equipment  Corporation.  From 1989
to 1991, Mr.  Christie also served as Digital  Equipment's  PWB Group Cost and
Budgets  Manager  and the Plant  Controller  for Digital  Equipment's  Printed
Wiring Board Advanced  Technology  Center in Greenville,  South  Carolina.  He
presently  serves  as a  director  and  as  the  President  and  Treasurer  of
Vaughn-Russell Candy Co.  Mr.  Christie holds an A.B. degree in Economics from
Colgate  University  and an M.B.A.  in  Accounting/International  Finance from
Cornell University.



<PAGE>


JOHN M. STERLING, III
Age:  35

     From February 1997 to the present, Mr. Sterling has served as the Company's
Managing  Director  of  European  Operations,  overseeing the operations of  SQL
Systems Group, B.V., a wholly-owned subsidiary of Datastream Systems, Inc. based
in Rotterdam, Holland.  Mr. Sterling also served as the Company's Vice President
of Sales from 1989 to January 1997 and held the  position of Director of Sales
and  Marketing from 1986 to 1989.  Prior to joining  Datastream,  Mr.  Sterling
was a Regional  Sales Manager for Silicon  Valley  Products.  Mr. Sterling holds
a B.S. degree in Political Science from The Citadel.  Mr. Sterling is the son of
John M. Sterling,  Jr., one of the Company's directors.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

      Section 16(a) of the Securities  Exchange Act of 1934 (the "Exchange Act")
requires  the  Company's  directors,  executive  officers  and  persons  who own
beneficially  more than 10% of the  Company's  Common  Stock to file  reports of
ownership  and  changes  in  ownership  of such stock  with the  Securities  and
Exchange  Commission  (the "SEC") and the  National  Association  of  Securities
Dealers,  Inc.  Directors,  executive officers and greater than 10% stockholders
are required by SEC  regulations  to furnish the Company with copies of all such
forms they file.  To the  Company's  knowledge,  based solely on a review of the
copies of such reports furnished to the Company and written representations that
no other reports were required,  its directors,  executive  officers and greater
than 10%  stockholders  complied during fiscal 1996 with all applicable  Section
16(a)  filing  requirements,  except  for  Forms 5 for 1996 for  Messrs.  Brock,
Sterling (Jr.) and Tracy, which, due to an administrative  oversight, were filed
shortly  after the  prescribed  deadline  for the filing of such form.  The only
transactions  reportable  on such  Forms 5 were  automatic  grants of options on
January 1, 1996 to purchase 500 shares of Common Stock of the Company to each of
Messrs.  Brock,  Sterling,(Jr.)  and Tracy pursuant to the Company's Amended and
Restated Stock Option Plan for Directors.



<PAGE>


Item 11.  Executive Compensation.


Compensation Committee Interlocks and Insider Participation

     The  Compensation  Committee  of the Board of  Directors  is  comprised  of
Messrs.  Brock,  Sterling (Jr.) and Tracy.  During fiscal 1996, the Compensation
Committee  did not include any member of the Board of Directors who at that time
served as an officer or employee of the Company.  The Company's  Chief Executive
Officer,  Mr.  Blackwell,  is not a member of the  Compensation  Committee,  but
typically  participates in its  deliberations by making  recommendations  to the
Committee  concerning the  performance of  theCompany's  executive  officers and
recommendations  concerning proposed  adjustments to their compensation.  During
fiscal 1996, no executive officer of the Company served as a member of the board
of  directors  of  anyentity  which had  executive  officers  who  served on the
Company's Board of Directors during that year.

Executive Compensation Tables

                      Table I - Summary Compensation Table

      The  following  table  presents  certain  information  required by the SEC
relating to various forms of  compensation  awarded to, earned by or paid to the
Company's Chief Executive Officer during fiscal 1996. No other executive officer
earned more than $100,000 during fiscal 1996.




                                                           Long-Term
                                                           Compensation
                                                           ------------
                         Annual Compensation               Securities
                  ---------------------------------------
                                                           Underlying
Name and                                                   Options       All
Principal                                     Other Annual  (# of       Other
Position(s)       Year   Salary       Bonus   Compensation  Shares) Compensation
-----------       ----   ------       -----   ------------  ------- ------------

Larry G. Blackwell
Chairman,         1996   $167,024(1)      --        --          --     $4,750(2)
President, and    1995   $168,000(3)   $24,000      --       57,000    $5,544(2)
Chief Executive   1994   $162,120(3)   $15,000   $26,000(4)     --     $4,620(2)
Officer


(1) Includes $9,500 deferred at the election of Mr. Blackwell pursuant to the
    Company's 401(k) Retirement Plan ("401(k)"). Mr. Blackwell's current
    salary is $175,700.
(2) Reflects matching contributions to the Company's 401(k) paid by the
    Company on behalf of Mr. Blackwell.
(3) Includes $9,240 deferred at the election of Mr. Blackwell pursuant to the
    Company's 401(k).
(4) Includes   certain   personal   benefits,   including  (i)   forgiveness  of
    indebtedness otherwise payable to the Company by Mr. Blackwell in the amount
    of $16,120 and (ii) $9,880  representing  the amount of taxes related to the
    foregoing transaction for which the Company reimbursed Mr. Blackwell.


<PAGE>


Table II- Option/SAR Grants in Fiscal 1996

     The Company did not grant any options or stock  appreciation  rights to Mr.
Blackwell in 1996.


Table III- Option Exercises in Fiscal 1996 and Fiscal 1996 Year-End Option
           Values

      Mr. Blackwell did not exercise any stock options during Fiscal 1996.

      The following  table shows the number of shares of Common Stock subject to
exercisable  and  unexercisable  stock  options  held  by  the  Company's  Chief
Executive Officer as of December 31, 1996. The table also reflects the values of
such options  based on the positive  spread  between the exercise  price of such
options and $18.00, which was the closing sales price of a share of Common Stock
reported on the Nasdaq  National  Market on December  31, 1996 (the last trading
day prior to the end of the Company's fiscal year).


                                Number of Securities     Value of Unexercised
         Shares                Underlying Unexercised    In-the-Money Options
         Acquired    Value      Options at Year-End         at Year-End(1)
         on Exercise Realized          (#)                       ($)
Name        (#)       ($)    Exercisable Unexercisable Exercisable Unexercisable
----     ----------- -------- ----------- ------------ ----------- -------------


Mr. Blackwell   --      --      11,771       45,229      $105,000     $420,000


(1) The value of  unexercised  in-the-money  options  at  December  31,  1996 is
    calculated as follows: [(Per Share Closing Sales Price on December 31, 1996)
    (Per  Share  Exercise  Price)]  x Number of Shares  Subject  to  Unexercised
    Options.  The closing sales price reported by the Nasdaq  National Market of
    the Company's Common Stock for December 31, 1996 was $18.00 per share.



<PAGE>



Item 12.  Security Ownership of Certain Beneficial Owners and Management

      The following  table sets forth  information  concerning (i) those persons
known by  management  of the  Company  to own  beneficially  more than 5% of the
Company's outstanding Common Stock, (ii) the directors of the Company, (iii) the
executive  officer named in the Summary  Compensation  Table included  elsewhere
herein and (iv) all directors and executive  officers of the Company as a group.
Except as otherwise  indicated  in the  footnotes  below,  such  information  is
provided as of April 28, 1997.  According to rules  adopted by the SEC, a person
is the "beneficial  owner" of securities if he or she has or shares the power to
vote them or to direct their  investment or has the right to acquire  beneficial
ownership of such  securities  within 60 days through the exercise of an option,
warrant or right, the conversion of a security or otherwise. Except as otherwise
noted,  the indicated  owners have sole voting and investment power with respect
to shares  beneficially  owned.  An  asterisk  in the  percent  of class  column
indicates beneficial ownership of less than 1% of the outstanding Common Stock.


===============================================================================
                                               Amount and Nature    Percent
          Name of Beneficial Owner                     of           of Class
                                                  Beneficial
                                                   Ownership
===============================================================================
Executive Officers and Directors
Larry G. Blackwell..........................   1,725,345(1)           18.8%
John M. Sterling, Jr........................      54,006(2)              *
Richard T. Brock............................       7,000(2)              *
Kenneth D. Tracy............................       6,000(3)              *
Ira D. Cohen................................         500(4)              *
All current directors and
 executive officers as a
 group (8 persons)..........................   2,059,839(5)           22.3%

Other Stockholders
Pilgrim Baxter & Associates(6)..............     544,600               6.1%


(1) Includes 21,771 shares of Common Stock subject to options  exercisable on or
    within 60 days after April 28, 1997.
(2) Includes  5,000 shares of Common Stock subject to options  exercisable on or
    within 60 days after April 28, 1997.
(3) Includes  5,000 shares of Common Stock subject to options  exercisable on or
    within 60 days after April 28, 1997;  includes  1,000 shares of Common Stock
    to which Mr. Tracy shares voting and investment power with his spouse.
(4) Represents  500 shares of Common Stock subject to options  exercisable on or
    within 60 days after April 28, 1997.
(5) Includes 100,602 shares of Common Stock subject to options exercisable on or
    within 60 days after April 28, 1997.
(6) The business  address of Pilgrim  Baxter & Associates is 1255 Drummers Lane,
    Suite 300, Wayne, Pennsylvania 19087. The numbers reported were derived from
    a Schedule 13G executed by Pilgrim  Baxter & Associates on February 14, 1997
    and filed with the  Securities  and Exchange  Commission  on March 19, 1997.
    According to the Schedule 13G, the power to vote such shares is shared among
    the following: Pilgrim Baxter & Associates, Harold J. Baxter and Gary L.
    Pilgrim.





Item 13.  Certain Relationships and Related Transactions.

      None.

<PAGE>

SIGNATURES

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

                                             Datastream Systems, Inc.

Date: April 30, 1997                         By: /s/ Daniel H. Christie
                                                -----------------------
                                                  Daniel H. Christie
                                                  Chief Financial Officer