SECURITIES AND EXCHANGE COMMISSION
                          Washington, DC 20549


                               FORM 10-Q

(Mark One)
__X__    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                    SECURITIES EXCHANGE ACT OF 1934

              For the quarterly period ended JUNE 30, 1997

                                   OR

_____   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                    SECURITIES EXCHANGE ACT OF 1934

   For the transition period from ________________to_________________


                    COMMISSION FILE NUMBER:   0-25590


                        DATASTREAM SYSTEMS, INC.

       Incorporated pursuant to the laws of the State of Delaware
               -------------------------------------------

   Internal Revenue Service  -- Employer Identification No. 57-0813674

                50 DATASTREAM PLAZA, GREENVILLE, SC 29605

                             (864) 422-5001
               -------------------------------------------

                             NOT APPLICABLE
       (Former Name, Former Address, if changed since last report)


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 ___

APPLICABLE ONLY TO CORPORATE ISSUERS:  Indicate the number of shares
outstanding of the issuer's common stock as of the latest practicable
date:   JUNE 30, 1997    9,175,317 shares, $0.01 par value.

<PAGE>


                         Datastream Systems, Inc.

                                FORM 10-Q

                       Quarter ended June 30, 1997

                                  Index

                                                                        Page No.

Part I.    Consolidated Financial Information

Item 1.    Consolidated Financial Statements (unaudited)

           Consolidated Balance Sheet-  June 30, 1997
                Assets                                                3
                Liabilities and Owners Equity                         4

           Consolidated Income Statement -
                for the Three Months ended June 30,  1996 and 1997    5

           Consolidated Income Statement -
                for the Six Months ended June 30, 1996 and 1997       6

           Consolidated Statement of Changes in Stockholders Equity -
                for the Six Months ended June 30, 1997                7

           Consolidated Statement of Cash Flows -
                for the Six Months ended June 30, 1996 and 1997       8

           Notes to the Consolidated Financial Statements             9

Item 2.    Management's Discussion and Analysis of
           Financial Condition and Results of Operations              11

Item 3.    Quantitative and Qualitative Disclosures About             14
           Market Risk


Part II.   Other Information                                          15


Signature                                                             17

<PAGE>
PART I.  CONSOLIDATED FINANCIAL INFORMATION

ITEM 1.  Consolidated Financial Statements

                  Datastream Systems, Inc. and Subsidiaries

                           Consolidated Balance Sheets

                                     Assets

                                                     December 31,      June 30,
                                                        1996             1997
                                                                     (unaudited)
Current assets:
   Cash and cash equivalents                          $6,315,719     $1,593,857
   Accounts receivable, net of allowance for
      doubtful accountsof $835,000 and $835,000,
       respectively                                   11,725,928     15,544,346
   Investments held to maturity                       13,011,856     11,344,010
   Accrued interest receivable                           221,827        246,665
   Prepaid expenses                                      586,647        938,918
   Inventories                                           324,018        381,451
   Deferred income taxes                                 395,000        395,000
   Other assets                                        1,961,496      3,131,922
                                                       ---------      ---------
        Total current assets                          34,542,491     33,576,169

Investments held to maturity                           4,547,220      4,549,625

Property and equipment
   Land                                                  465,981        467,081
   Building                                            4,371,113      4,512,344
   Computer equipment                                  4,719,340      6,174,798
   Furniture and fixtures                                930,226      1,148,819
                                                         -------      ---------
                                                      10,486,660     12,303,042
   Less accumulated depreciation                       1,794,337      2,735,369
                                                       ---------      ---------
        Net property and equipment                     8,692,323      9,567,673

Goodwill                                               7,636,748      7,091,510

Capitalized software development costs,
   net of accumulated amortization of
   $1,197,177 and $1,832,742, respectively             2,158,436      2,364,926
                                                       ---------      ---------

        Total assets                                 $57,577,218    $57,149,903
                                                     ===========    ===========

See notes to Consolidated Financial Statements
<PAGE>
                  Datastream Systems, Inc. and Subsidiaries

                     Consolidated Balance Sheets (Continued)

                      Liabilities and Stockholders' Equity

                                                     December 31,      June 30,
                                                        1996             1997
                                                                     (unaudited)
Current liabilities:
   Accounts payable                                   $4,403,205     $3,406,731
   Other accrued liabilities                           9,139,078      4,860,400
   Income taxes payable                                  743,707      1,362,364
   Current portion of long-term debt                   1,507,274        877,154
   Unearned revenue                                    5,116,007      6,650,713
                                                       ---------      ---------
        Total current liabilities                     20,909,271     17,157,362

Long-term debt, less current portion                   2,892,743        877,595
Deferred income taxes                                    650,000        650,000
                                                         -------        -------
        Total liabilities                             24,452,014     18,684,957

Stockholders' equity:
   Preferred stock, $1 par value, 1,000,000 shares
     authorized; none outstanding                            -             -

   Common stock, $.01 par value,  15,000,000 shares authorized;  9,126,789 share
     issued and outstanding at December 31, 1996, 9,175,317 shares issued and
     outstanding at June 30, 1997                         91,268         91,753

   Additional paid-in capital                         55,832,034     56,248,224
   Foreign currency translation adjustment                   -          386,784
   Retained earnings                                 (22,798,098)   (18,261,815)
                                                     -----------    -----------
        Total stockholders' equity                    33,125,204     38,464,946
                                                      ----------     ----------
        Total liabilities and stockholders' equity   $57,577,218    $57,149,903
                                                     ===========    ===========

See Notes to Consolidated Financial Statements

<PAGE>
                Datastream Systems, Inc. and Subsidiaries

                           Statements of Income
                               (unaudited)
                 Three months ended June 30, 1996 and 1997

                                                       June 30,       June 30,
                                                        1996           1997

Revenues:
   Product                                        $   3,259,003   $   6,851,481
   Professional service                               2,813,422       6,906,989
   Support                                            1,631,996       3,055,072
                                                      ---------       ---------
      Total revenues                                  7,704,421      16,813,542

Cost of revenues:
   Cost of product revenues                             492,366         695,018
   Cost of professional service revenues              1,441,690       3,711,625
   Cost of support revenues                             261,290       1,090,255
                                                        -------       ---------
      Total cost of revenues                          2,195,346       5,496,898
                                                      ---------       ---------
      Gross profit                                    5,509,075      11,316,644

Operating expenses:
   Sales and marketing                                2,234,022       4,693,891
   Product development                                  301,334       1,036,163
   General and administrative                           866,965       1,772,657
                                                        -------       ---------
      Total operating expenses                        3,402,321       7,502,711
                                                      ---------       ---------
      Operating income                                2,106,754       3,813,933

Other income (expense):
   Interest income                                      571,117         246,350
   Interest expense                                      (1,860)        (35,713)
   Other                                                 11,359          71,343
                                                         ------          ------
      Net other income                                  580,616         281,980
                                                        -------         -------
      Income before income taxes                      2,687,370       4,095,913

Income taxes                                          1,036,500       1,495,026
                                                      ---------       ---------
Net income                                          $ 1,650,870     $ 2,600,887
                                                    ===========     ===========

Per share data:
   Net income                                       $       .19     $       .28
                                                    ===========     ===========
   Weighted average number of common and
      common equivalent shares outstanding            8,908,755       9,376,892
                                                      =========       =========

See Notes to Consolidated Financial Statements

<PAGE>
                Datastream Systems, Inc. and Subsidiaries

                           Statements of Income
                               (unaudited)
                 Six months ended June 30, 1996 and 1997

                                                       June 30,       June 30,
                                                        1996           1997

Revenues:
   Product                                        $   6,331,712  $   12,999,496
   Professional service                               5,302,065      12,690,712
   Support                                            2,972,086       5,805,747
                                                      ---------       ---------
      Total revenues                                 14,605,863      31,495,955

Cost of revenues:
   Cost of product revenues                             854,829       1,538,982
   Cost of professional service revenues              2,617,721       7,241,598
   Cost of support revenues                             525,773       1,777,527
                                                        -------       ---------
      Total cost of revenues                          3,998,323      10,558,107
                                                      ---------      ----------
      Gross profit                                   10,607,540      20,937,848

Operating expenses:
   Sales and marketing                                4,361,737       8,967,363
   Product development                                  718,406       1,870,211
   General and administrative                         1,494,685       4,007,697
                                                      ---------       ---------
      Total operating expenses                        6,574,828      14,845,271
                                                      ---------      ----------
      Operating income                                4,032,712       6,092,577

Other income (expense):
   Interest income                                     1,147,255        508,860
   Interest expense                                       (2,755)      (138,162)
   Other                                                  12,074        118,623
                                                          ------        -------
      Net other income                                 1,156,574        489,321
                                                       ---------        -------

      Income before income taxes                       5,189,286      6,581,898

Income taxes                                           1,999,500      2,002,812
                                                       ---------      ---------
Net income                                           $ 3,189,786    $ 4,579,086
                                                     ===========    ===========

Per share data:
   Net income                                        $       .36    $       .49
                                                     ===========    ===========
  Weighted average number of common and
      common equivalent shares outstanding             8,816,379      9,380,438
                                                       =========      =========

See Notes to Consolidated Financial Statements

<PAGE>
                Datastream Systems, Inc. and Subsidiaries

               Statement of Changes in Stockholders' Equity
                               (unaudited)


                    For the period ended June 30, 1997


                                                        Foreign
                               Additional              Currency        Total
                       Common   Paid-In  Retained   Translations   Stockholders'
                        Stock   Capital  Earnings     Adjustment       Equity


Balance at
 December 31, 1996  $ 91,268 $55,832,034  $(22,798,098) $    -       $33,125,204

Net income               -         -         4,579,086       -         4,579,086

Stock options
 exercised               430     331,437          -          -           331,867

Shares issued for
 Employee Stock
 Purchase Plan            55      84,753          -          -            84,808

Foreign currency
 translations             -        -           (42,803)   386,784        343,981


Balance at
 June 30, 1997      $ 91,753 $56,248,224  $(18,261,815)  $386,784    $38,464,946
                     ======== ===========  ============  ========    ===========

See Notes to Consolidated Financial Statements

<PAGE>
                Datastream Systems, Inc. and Subsidiaries

                         Statements of Cash Flows
                               (unaudited)

             Six months ended June 30, 1996 and June 30, 1997

                                                      June 30,       June 30,
                                                        1996           1997

Cash flows from operating activities:
   Net income                                     $   3,189,786  $    4,579,086
   Adjustments to reconcile net income to net cash
    provided by operating activities:
      Depreciation                                      277,720         986,630
      Amortization of capitalized software
       development costs                                225,737         581,345
      Amortization of goodwill                              -           545,500
      Foreign currency translation adjustment               -          343,981
      Loss on disposal of fixed assets                      -           53,430
      Provision for doubtful accounts                    86,525             -
      Changes in operating assets and liabilities:
       Accounts receivable                           (1,246,770)     (3,818,418)
       Accrued interest receivable                      (94,642)        (24,839)
       Prepaid expenses                                (184,279)       (352,271)
       Inventories                                      (70,146)        (57,433)
       Other assets                                     (32,058)     (1,170,427)
       Accounts payable                                 311,243        (996,474)
       Other accrued liabilities                       (102,983)     (4,278,673)
       Income taxes payable                            (142,333)        618,656
       Unearned revenue                                 797,847       1,534,707
                                                        -------       ---------
       Net cash provided by (used in)
          operating activities                         3,015,647     (1,455,200)
                                                       ---------     ----------
Cash flows from investing activities:
   Proceeds from investments                             736,887      1,681,341
   Additions to property and equipment                (2,384,803)    (1,877,354)
   Capitalized software development costs               (900,616)      (842,056)
                                                        --------       --------
       Net cash used in investing activities          (2,548,532)    (1,038,069)
                                                      ----------     ----------
Cash flows from financing activities:
   Proceeds from exercise of stock options               825,705        416,675
   Proceeds from line of credit                               -        600,000
   Principal payments on long-term debt                   (8,333)    (3,245,268)
                                                          ------     ----------
       Net cash provided by (used in)
          financing activities                           817,372     (2,228,593)
                                                         -------     ----------
Net increase (decrease) in cash and
     cash equivalents                                  1,284,487     (4,721,862)
Cash and cash equivalents at
     beginning of period                               1,184,092      6,315,719
                                                       ---------      ---------

Cash and cash equivalents at end of period          $  2,468,579   $  1,593,857
                                                    ============   ============
See Notes to Consolidated Financial Statements

<PAGE>

               Datastream Systems, Inc. and Subsidiaries

              Notes to Consolidated Financial Statements


1)  Summary of significant Accounting Policies

A. Organization and Basis of Presentation

Datastream  Systems,  Inc. (the "Company" or  "Datastream")  develops,  markets,
sells  and  supports  Microsoft  and  Oracle  based  software  products  for the
industrial  automation  market.  These products serve the desktop,  file server,
client-server and enterprise-wide networking environments.  Datastream- software
enables users to schedule preventive  maintenance,  record equipment maintenance
histories, organize and control spare parts inventories,  schedule equipment and
parts inventory purchases and deploy maintenance  personnel.  In addition to its
U.S.  operations,  the Company has direct sales or  distribution  offices in the
United Kingdom, Latin America, Malaysia, Australia and South Africa.

On December  31,  1996,  the  Company  acquired  SQL Group,  B.V.  ("SQL").  The
acquisition has been accounted for using the purchase method. The purchase price
has been  allocated to the  tangible and  intangible  assets  purchased  and the
liabilities assumed based on the fair values on the date of acquisition.

The  interim  financial  information  included  herein  is  unaudited.   Certain
information  and  footnote   disclosures  normally  included  in  the  financial
statements have been condensed or omitted  pursuant to the rules and regulations
of the Securities and Exchange  Commission (SEC),  although the Company believes
that the  disclosures  made are adequate to make the  information  presented not
misleading.   These  consolidated   financial   statements  should  be  read  in
conjunction  with  the  consolidated  financial  statements  and  related  notes
contained in the Company's Form 10-K filed with the SEC on April 15, 1997. Other
than as  indicated  herein,  there  have been no  significant  changes  from the
financial  data  published in that report.  In the opinion of  management,  such
unaudited  information  reflects  all  adjustments,  consisting  only of  normal
recurring  accruals and other adjustments as disclosed  herein,  necessary for a
fair presentation of the unaudited information.

Results for interim periods are not necessarily  indicative of results  expected
for the full year.


B.  Accounting Policies

Net income per share

Net income per share is computed by dividing net income by the weighted  average
number of common and common  equivalent  shares  outstanding.  Weighted  average
common and common equivalent  shares include common shares,  stock options using
the treasury stock method,  and the assumed  exercise  price of the  outstanding
warrants to purchase common stock.


C.  Public Offering of Common Stock

On April 5, 1995, the Company  closed its initial  public  offering of 1,633,000
shares of common stock (633,000 of which were sold by existing shareholders) for
$15.00 per share  before  giving  effect to
<PAGE>  
the two for one stock  split referred to in the following paragraph. The Company
invested the net proceeds of approximately $13.95 million from the offering in 
U.S. Government securities.

Effective  September 12, 1995,  the Company  completed a two for one stock split
effected in the form of a stock  dividend.  All  references in the  accompanying
consolidated financial statements to the number of shares have been presented to
reflect this stock split.

On  October  3, 1995,  the  Company  closed its  secondary  public  offering  of
2,000,000  shares of common stock for $22.25 per share (1,085,670 of such shares
were sold by existing  shareholders).  The Company  invested the net proceeds of
approximately $19.12 million from the offering in U.S. Government securities. In
conjunction with the secondary offering, on October 17, 1995, the Company closed
on the  over-allotment  option of 300,000  shares of common  stock.  The Company
invested the net proceeds of approximately $6.28 million from the over-allotment
option in U.S. Government securities.



<PAGE>
ITEM 2.  Management's Discussion and Analysis of Financial Condition
and Results of Operations

    This report contains certain forward-looking  statements with respect to the
Company's  operations,   industry,  financial  condition  and  liquidity.  These
statements   reflect  the  Company's   assessment  of  a  number  of  risks  and
uncertainties.  The Company's  actual results could differ  materially  from the
results anticipated in these  forward-looking  statements as a result of certain
factors set forth in this report.

Overview

    The Company offers a family of "computerized maintenance management systems"
("CMMS") to the maintenance,  repair and operations ("MRO") industry,  including
MP2 Pro, MP2 Enterprise, Maintainit, Maintainit Pro and R5 CAMMS. These products
serve the desktop,  client-server and enterprise-wide  networking  environments.
Datastream  supports  its  software  products  through  professional   services,
including  installation,   consulting,   integration,   custom  programming  and
training.  Ongoing technical support services are supplied pursuant to renewable
annual technical support contracts.

    Financial information for 1997 includes the operations of Datastream and its
European subsidiary,  SQL Group, B. V. ("SQL"),  which was acquired December 31,
1996. SQL's financial results from 1996 are not included. The acquisition of SQL
has  resulted in the mix of products  and costs of  providing  professional  and
support  services  to change.  These  changes  are most  evident in product  and
services gross profit margins.

Results of Operations

    Total Revenues.  The Company reported higher revenues for the second quarter
of 1997.  Total revenues  increased 118% to $16,813,542 in the second quarter of
1997 from  $7,704,421  in the second  quarter of 1996,  due  principally  to the
acquisition  of SQL, the continued  acceptance of the Company's  products in the
industrial   automation  market  and  the  expansion  of  the  Company's  sales,
professional service and technical support service organizations. Total revenues
increased  116% to  $31,495,955  during  the  first  six  months  of  1997  from
$14,605,863 in the first six months of 1996.

    Product revenues increased 110% to $6,851,481 (41% of total revenues) in the
second  quarter of 1997 from  $3,259,003  (42% of total  revenues) in the second
quarter of 1996,  as a result of the growth in new product  sales  including MP2
Enterprise and Maintainit Pro, the growth in international  sales and the impact
of the SQL acquisition.  Product revenues  increased 105% to $12,999,496 (41% of
total  revenues) in the first six months from $6,331,712 (43% of total revenues)
in the first six months of 1996.

    Professional  service  revenues  increased 146% to $6,906,989  (41% of total
revenues) in the second quarter of 1997 from  $2,813,422 (37% of total revenues)
in the  second  quarter  1996.  The  increase  resulted  from  the  addition  of
professional  service personnel to service expansion of the Company's  installed
base of  systems  and the  acquisition  of SQL.  Professional  service  revenues
increased 139% to $12,690,712 (40% of total revenues) in the first six months of
1997 from $5,302,065 (37% of total revenues) in the first six months of 1996.

    Technical  support  services  revenues for the second quarter 1997 increased
87% to  $3,055,072  (18% of  total  revenues)  from  $1,631,996  (21%  of  total
revenues) in the second  quarter of 1996,  primarily due to the expansion of the
Company's  installed  base of  systems  and the  acquisition  of SQL.  Technical
support services revenues increased 95% to $5,805,747 (18% of total revenues) in
the first six  months of 1997 from  $2,972,086  (20% of total  revenues)  in the
first six months of 1996.

    Cost of Revenues.  Cost of revenues  increased  150% to  $5,496,898  (33% of
total revenues) in the second quarter of 1997, as compared to $2,195,346 (29% of
total  revenues)  in the  comparable  quarter of 1996.  The  increase in cost of
revenues as a percentage  of sales is  attributed  to the one time impact of the
cost of the company's  annual users  conference,  the shipment of updates
<PAGE> 
for MP2 Pro and R5 CAMMS,  and increased  expenses  incurred in the Applications
Engineering and Support  Departments related to salaries and customer reimbursed
travel.

    Cost of  revenues  increased  164% to  $10,558,107  (34% of total  revenues)
during the first six months of 1997 from  $3,998,323  (27% of total revenues) in
the first six months of 1996.

    Cost of product  revenues was 4% of total  revenues in the second quarter of
1997, and 6% of total revenues  during the same period of 1996. The decrease was
due to decreased costs of packaging related items.

    Cost of professional  service  revenues was 22% of total revenues during the
second  quarter of 1997,  and 19% of total  revenues  during the same  period in
1996.  The  increase as a percentage  of total  revenues was due to the one time
impact  of the cost of the  annual  technical  users  conference  and  increased
personnel and customer reimbursed travel costs.

    Cost of technical  support service  revenues was 6% of total revenues during
the second  quarter of 1997 and 3% of total  revenues  during the same period in
1996.  The  increase as  percentage  of total  revenue was due to  increases  in
support personnel to support the company's expanded installed base, salaries and
the acquisition of SQL.

    Sales and Marketing Expenses. Sales and marketing expenses increased 110% to
$4,693,891  (28% of total  revenues)  during  the  second  quarter  of 1997 from
$2,234,022  (29% of total  revenues)  during  the second  quarter in 1996,  as a
result of an increased number of sales personnel and commissions associated with
the increase in sales revenue,  increased marketing expenses associated with new
product  introductions and the acquisition of SQL. Sales and marketing  expenses
increased 106% to $8,967,363  (29% of total revenues) in the first six months of
1997 from $4,361,737 (30% of total revenues) in the first six months of 1996.

    Product  Development  Expenses.   Total  product  development   expenditures
increased 82% to $1,586,143 (9% of total revenues)  during the second quarter of
1997 from $869,592 (11% of total  revenues)  during the same period in 1996. The
capitalized  portion of these amounts were $549,980 and $568,258,  respectively.
Giving effect to amounts capitalized, product development expense increased 244%
to $1,036,163 (6% of total revenues) in the second quarter of 1997 from $301,334
(4% of total  revenues)  during the same period in 1996.  The  increase in total
product  development  expense resulted from increasing the number of development
personnel  to  support  continued  development  of R5  CAMMS,  foreign  language
development and other new products

    Total product  development  expenditures  increased 68% to $2,712,226 (9% of
total  revenues)  during  the first half of 1997 from  $1,619,011  (11% of total
revenues)  during  the same  period in 1996.  The  capitalized  portion of these
amounts  were  $842,055 and  $900,605,  respectively.  Giving  effect to amounts
capitalized,  product  development  expense  increased 244% to $1,870,211 (6% of
total  revenues) in the first half of 1997 from $718,406 (5% of total  revenues)
during the same period in 1996.

    General and Administrative  Expenses.  General and  administrative  expenses
increased 104% to $1,772,657 (10% of total  revenues)  during the second quarter
of 1997 from  $866,965  (11% of total  revenues) in the second  quarter of 1996,
primarily  due to  increased  salaries  and related  costs  attributable  to the
acquisition  of SQL.  General  and  administrative  expenses  increased  168% to
$4,007,697 (13% of total revenues) during the first half of 1997 from $1,494,685
(10% of total revenues) in the first half of 1996 due to the acquisition of SQL.

    Miscellaneous  Income.  Miscellaneous  income  increased  to  $71,343 in the
second  quarter of 1997 from $11,359 in the second quarter of 1996. The increase
was due to  rental  income  generated  from  leasing  a  portion  of the
<PAGE>
Company's building in Greenville,  South Carolina in the second quarter of 1997.
Miscellaneous  income  increased  to  $118,623  in the  first  half of 1997 from
$12,074 in the first half of 1996.

    Interest  Income/(Expense).  Interest  income  decreased  to $246,350 in the
second quarter of 1997 from $571,117 in the second quarter of 1996, due to lower
investment  balances realized upon completion of the SQL acquisition in December
1996.  Interest expense  increased to $35,713 in the second quarter of 1997 from
$1,860  in  the  second  quarter  of  1996,  due to  debt  assumed  in  the  SQL
acquisition.  Interest  income  decreased  to $508,860 in the first half of 1997
from  $1,147,255  in the  first  half of 1996.  Interest  expense  increased  to
$138,162 in the first half of 1997 from $2,755 in the first half of 1996.

    Tax Rate. The Company's  effective tax rate was 36.5% for the second quarter
of 1997 as  compared  to 38.5% for the  second  quarter of 1996.  The  Company's
effective tax rate was 31% in the first half of 1997 as compared to 38.5% in the
first half of 1996.

    Net Income.  Net income  increased 58% to $2,600,887 (16% of total revenues)
in the second  quarter of 1997 from  $1,650,870  (21% of total  revenues) in the
second  quarter of 1996.  Net income  increased 44% to $4,579,086  (15% of total
revenues) in the first half of 1997 from  $3,189,786  (22% of total revenues) in
the first half of 1996.

Liquidity and Capital Resources

    The Company has funded its  activities  entirely  from cash  generated  from
operations.  The Company  ended its second  quarter of 1997 with $ 1,593,857  in
cash and cash equivalents  defined as securities  maturing in less than 90 days.
The Company  intends to  re-invest  the  proceeds of  maturing  U.S.  Government
securities in similar U.S. Government securities.

    The Company completed renovating and assumed occupancy of its new offices at
50 Datastream Plaza, Greenville, SC 29605 during April 1996.

    The  acquisition  of SQL was completed for $31 million,  $17 million in cash
and $14 million in stock issued pursuant to Regulation S. In connection with the
acquisition,  the Company also deposited into escrow an additional $3 million in
stock,  and assumed  certain of SQL's  outstanding  liabilities.  Following  the
acquisition, SQL's long-term debt totaling approximately $2.7 million was repaid
by the Company and additional  working capital  infusions of approximately  $2.5
million were required to sustain SQL's  operations and pay current  liabilities.
Approximately   $1.7  million  of  SQL's   long-term  debt  remains,   of  which
approximately $800,000 is scheduled to be repaid by the end of 1997.

      In July 1997,  the Company  made a $2 million  investment  in  Distinction
Software,  Inc.  ("Distinction") This investment represents less than 20% of the
outstanding equity interests of
Distinction.

      The  Company's  principal  commitments  as of  June  30,  1997,  consisted
primarily of long term debt assumed in the acquisition of SQL, and there were no
material commitments for capital expenditures. The Company completed its initial
public offering in April 1995, raising proceeds,  net of underwriting  discounts
and   commission   (but  before  payment  of  other  expenses  of  $389,787)  of
$13,950,000.  Proceeds  from  the  offering  were  invested  in U.S.  Government
securities. The Company completed its secondary public offering in October 1995,
raising  proceeds,  net of  underwriting  discounts and  commission  (but before
payment  of other  expenses  of  $255,064)  of  $25,400,000.  Proceeds  from the
offering were invested in U.S. Government securities.  The Company believes that
its current cash balances, availability under its line of credit, cash flow from
operations and the proceeds of the Company's most recent public offering will be
sufficient  to meet its working  capital and  capital  expenditure  needs for at
least the next 12 months.


<PAGE>

ITEM 3.  Quantitative and Qualitative Disclosures about Market Risk


           Not Applicable


<PAGE>
PART II.     OTHER INFORMATION

Item 1.    Legal Proceedings

           Not Applicable

Item 2.    Changes in Securities

           Not Applicable

Item 3.    Defaults Upon Senior Securities

           Not Applicable

Item 4.    Submission of Matters to a Vote of Stockholders

      The Annual Meeting of Stockholders  was held on May 23, 1996 at which time
certain matters were submitted to such stockholders for a vote. Below is a brief
description  of each such matter as well as the number of shares  represented at
the meeting and  entitled to vote and voting for,  against or  abstaining  as to
each matter.

1.   The following class of directors was elected to serve on a
three-year term expiring in 2000.

                                       Shares              Shares
                                         FOR              WITHHOLD
Class I:
      Kenneth D. Tracy             7,295,776              16,667

2.  The stockholders approved the Company's Amended and Restated 1995
Stock Option Plan.

                                       Shares    Shares    Shares
                                         FOR     AGAINST   ABSTAIN

                                      5,141,079  454,938   21,117

Item 5.         Other Information

           Not Applicable

Item 6.         Exhibits and Reports on Form 8-K

              (a)     Exhibits

           10        Preferred Stock Purchase Agreement between
Distinction and Datastream
           27        Financial Data Schedule

           (b)  Reports on Form 8-K
<PAGE>
b)    Form 8-K:

The Company  filed a Current  Report on Form 8-K on January 10, 1997, as amended
by Amendment  No. 1 on Form 8-K/A filed March 18, 1997,  to report the Company's
acquisition of all of the capital stock and equity  interests of SQL on December
31, 1996.

      1)    Financial Statements of Businesses Acquired

      The  following  financial  statements of SQL were filed with the Company's
      Current Report on Form 8-K:

            SQL Systems Group Annual Report

            Director's Report

            Consolidated balance sheet as of December 31, 1996

            Consolidated statement of earnings for the year  ended
            December 31, 1996 and 1995

            Notes to the consolidated Balance sheet and statement of
            earnings

            Parent company balance sheet as of December 31, 1996

            Parent company statement of operations for 1996

            Notes to the parent company balance sheet

            Allocation of result

            Report of Deloitte & Touche, Registered Accountants

            United States Generally Accepted Accounting Principles
            (US GAAP)reconciliation

      2)    Pro Forma Financial Information:

      The following pro forma financial information was filed with the Company's
      Current Report on 8-K:

            Pro Forma Combined Balance Sheet as of September 30, 1996

            Pro Forma Combined Statement of Operations for the year
            ended December 31, 1995

            Pro Forma Combined Statement of Operations for nine months
            ended September 30, 1996

            Notes to Pro Forma Combined Financial Statements

<PAGE>

SIGNATURES



Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



                               Datastream Systems, Inc.


                             /s/ Daniel H. Christie
Date:   08/14/97                    ______________________
                               Daniel H. Christie
                               Chief Financial Officer (principal
                                financial and accounting officer)