SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                   FORM 10-Q/A

(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, 1998

                                       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: 000-25590

 
                            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, 1998    19,011,886 shares, $0.01 par value.

<PAGE>
         AMENDED FILING OF FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998
     RESTATEMENT OF FINANCIAL STATEMENTS AND CHANGES TO CERTAIN INFORMATION

After  methodology  changes  were set forth by the Staff at the  Securities
and Exchange  Commission ( the "Staff") in its letter dated  September  15,
1998  to  the  American   Institute  of   Certified   Public   Accountants,
Datastream  Systems,  Inc.  (the  "Company"  or  "Datastream")  voluntarily
adjusted  the  allocation  of the purchase  price  related to its March 31,
1998  acquisition  of  Insta   Instandhaltung   Technischer   Anlagen  GmbH
("Insta")  and its  June  16,  1998  acquistion  of  Strategic  Information
Systems PTE. Ltd., a Singapore  corporation  ("SIS").  Although the Company
believes that its original  accounting  treatment  was in  accordance  with
generally accepted  accounting  principles,  it has made the adjustments to
be  consistent  with  the new  methodology  set  forth by the  Staff.  This
amended filing contains  related  financial  information and disclosures as
of  and  for  the  six  months  ended  June  30,  1998.  See  Note 1 to the
Consolidated Financial Statements.



                         Datastream Systems, Inc.

                               FORM 10-Q/A

                       Quarter ended June 30, 1998

                                  Index

                                                                       Page No.

Part I.    Consolidated Financial Information

Item 1.    Consolidated Financial Statements (unaudited)

           Consolidated Balance Sheet-
               December 31, 1997 and June 30, 1998
                Assets                                                     3
                Liabilities and Owners Equity                              4

           Consolidated Income Statement -
                for the Three Months ended June 30,  1997 and 1998         5

           Consolidated Income Statement -
                for the Six Months ended June 30, 1997 and 1998
6
 
           Consolidated Statement of Changes in Stockholders Equity -
                for the Six Months ended June 30, 1998                     7

           Consolidated Statement of Cash Flows -
                for the Six Months ended June 30, 1997 and 1998
8

           Notes to the Consolidated Financial Statements                  9

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

Item 3.    Quantitative and Qualitative Disclosures About                  15
           Market Risk


Part II.   Other Information                                               16


Signature                                                                  17
<PAGE>
PART I.  CONSOLIDATED FINANCIAL INFORMATION

ITEM 1.  Consolidated Financial Statements

                  Datastream Systems, Inc. and Subsidiaries

                         Consolidated Balance Sheets

                                   Assets
 
                                                   December 31,       March 31,
                                                     1997               1998
                                                     ----               ----
                                                                 (unaudited and
                                                                      restated)

Current assets:
   Cash and cash equivalents                        $2,409,387       $3,904,016
   Accounts receivable, net of allowance 
      for doubtful accounts of $1,589,910 
      and $1,811,937, respectively                  21,968,539       26,797,342
   Unbilled receivables                              2,271,375        2,736,213
   Investments                                       9,735,585              160
   Prepaid expenses                                    614,447        2,201,798
   Inventories                                         369,486          281,821
   Deferred income taxes                               796,000          796,000
   Other assets                                        619,448        1,143,881
                                                    ----------       ----------
        Total current assets                        38,784,267       37,861,231

Investments                                          6,637,286        7,525,569
Property and equipment, net                         10,166,101       13,055,477
Goodwill                                             6,545,747       16,712,865
Capitalized software development costs, 
   net of accumulated amortization of 
   $1,197,177 and $3,032,336, respectively           2,963,842        4,745,723
                                                   -----------      -----------
        Total assets                               $65,097,243      $79,900,865
                                                   ===========      ===========

See notes to Consolidated Financial Statements
<PAGE>




                  Datastream Systems, Inc. and Subsidiaries

                   Consolidated Balance Sheets (Continued)

                    Liabilities and Stockholders' Equity
 
                                                   December 31,       March 31,
                                                     1997               1998
                                                     ----               ----
                                                                 (unaudited and
                                                                      restated)
Current liabilities:
   Accounts payable                                 $2,696,240       $4,265,993
   Other accrued liabilities                         4,135,258        5,085,377
   Income taxes payable                              2,816,800        4,270,681
   Current portion of long-term debt                   346,197          297,079
   Unearned revenue                                  6,499,953        8,547,331
                                                    ----------       ----------
        Total current liabilities                   16,494,448       22,466,461

Long-term debt, less current portion                   603,098          829,855
Deferred income taxes                                  892,000          892,000
                                                    ----------       ----------
        Total liabilities                           17,989,546       24,188,316

Stockholders' equity:
   Preferred stock, $1 par value,
     1,000,000 shares authorized;
     none outstanding                                        -                -
   Common stock, $.01 par value, 
     40,000,000 shares authorized;                     
     18,585,518 share issued and 
     outstanding at December 31, 1997,
     19,011,886 shares issued and 
     outstanding at June 30, 1998                      185,855          190,119
   Additional paid-in capital                       58,049,212       63,876,556
   Accumulated deficit                             (11,375,601)      (8,412,239)
   Other accumulated comprehensive income              248,231           58,113
                                                    ----------       ----------
 
        Total stockholders' equity                  47,107,697       55,712,549

        Total liabilities and stockholders' equity $65,097,243      $79,900,865
                                                   ===========      ===========

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

                           Statements of Income
                               (unaudited)
                 Three months ended June 30, 1997 and 1998

                                                     June 30,         June 30,
                                                       1997             1998
                                                       ----             ----
                                                                     (restated)
Revenues:
   Product                                        $  6,851,481     $  9,332,113
   Professional service                              6,906,989        9,831,906
   Support                                           3,055,072        4,278,451
                                                     ---------        ---------
      Total revenues                                16,813,542       23,442,470
 
Cost of revenues:
   Cost of product revenues                            695,018          771,630
   Cost of professional service revenues             3,711,625        5,220,774
   Cost of support revenues                          1,090,255        1,214,502
                                                     ---------        ---------
      Total cost of revenues                         5,496,898        7,206,906
 
      Gross profit                                  11,316,644       16,235,564
 
Operating expenses:
   Sales and marketing                               4,693,891        6,491,694
   Product development                               1,036,163        1,961,458
   General and administrative                        1,772,657        2,015,087
   Write off of in-process research and development
       and other acquisition charges                         -        1,360,000
                                                    ----------       ----------
      Total operating expenses                       7,502,711       11,828,239

      Operating income                               3,813,933        4,407,325

Other income (expense):
   Interest income                                     246,350          146,498
   Interest expense                                    (35,713)         (31,246)
   Other                                                71,343           87,978
                                                       -------          -------
      Net other income                                 281,980          203,230

      Income before income taxes                     4,095,913        4,610,555

Income taxes                                         1,495,026        2,358,455
                                                     ---------        ---------
Net income                                         $ 2,600,887      $ 2,252,100
                                                   ===========      ===========

   Basic net income per share                      $       .14      $       .12
                                                   -----------      -----------
   Diluted net income per share                    $       .14      $       .11
                                                   -----------      -----------

   Basic weighted average number of common and
      common equivalent shares outstanding          18,325,308       18,870,916
                                                    ==========       ==========
   Diluted weighted average number of common and
      common equivalent shares outstanding          18,753,784       20,595,098
                                                    ==========       ==========

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

                           Statements of Income
                               (unaudited)
                 Six months ended June 30, 1997 and 1998

                                                     June 30,         June 30,
                                                       1997             1998
                                                       ----             ----
                                                                     (restated)

Revenues:
   Product                                         $12,999,496      $16,697,210
   Professional service                             12,690,712       18,787,430
   Support                                           5,805,747        8,086,490
                                                    ----------       ----------
      Total revenues                                31,495,955       43,571,130

Cost of revenues:
   Cost of product revenues                          1,538,982        1,547,769
   Cost of professional service revenues             7,241,598        9,365,706
   Cost of support revenues                          1,777,527        2,144,331
   Write off of capitalized software costs                   -          597,944
                                                    ----------       ----------
      Total cost of revenues                        10,558,107       13,655,750
 
      Gross profit                                  20,937,848       29,915,380
 
Operating expenses:
   Sales and marketing                               8,967,363       12,041,054
   Product development                               1,870,211        3,483,212
   General and administrative                        4,007,697        4,044,874
   Write off of in-process research and development
       and other acquisition charges                         -        3,417,008
                                                    ----------       ---------- 
      Total operating expenses                      14,845,271       22,986,148

      Operating income                               6,092,577        6,929,232

Other income (expense):
   Interest income                                     508,860          352,288
   Interest expense                                   (138,162)         (59,513)
   Other                                               118,623          163,966
                                                       -------          -------
      Net other income                                 489,321          456,741

      Income before income taxes                     6,581,898        7,385,973

Income taxes                                         2,002,812        4,422,611
                                                     ---------        ---------
Net income                                         $ 4,579,086      $ 2,963,362
                                                   ===========      ===========

   Basic net income per share                      $       .25      $       .16
                                                   -----------      -----------
   Diluted net income per share                    $       .24      $       .15
                                                   -----------      -----------

   Basic weighted average number of common and
      common equivalent shares outstanding          18,294,079       18,755,519
                                                    ==========       ==========
   Diluted weighted average number of common and
      common equivalent shares outstanding          18,760,876       20,420,971
                                                    ==========       ==========

See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>

                    Datastream Systems, Inc. and Subsidiaries

            Consolidated Statement of Changes in Stockholders' Equity
                            (unaudited and restated)

                      For the six months ended June 30, 1998
<CAPTION>

                                                                          Other
                                             Additional   Accumulated   Accumulated      Total
                                  Common      Paid-In      Earnings    Comprehensive  Stockholders'
                                   Stock      Capital      (Deficit)      Income        Equity
                                   -----      -------      ---------      ------        ------
<S>                                 <C>         <C>          <C>             <C>         <C>

Balance at December 31, 1997     $185,855   $58,049,212  $(11,375,601)   $248,231    $47,107,697

   Net income                           -             -     2,963,362           -      2,963,362

   Stock options exercised          1,968     1,201,911             -           -      1,203,879

   Shares issued for Employee
      Stock Purchase Plan             105        74,443             -           -         74,548

   Shares issued for acquisitions   2,191     4,550,990             -           -      4,553,181

   Other accumulated
      comprehensive income              -             -             -    (190,118)      (190,118)
     

Balance at June 30, 1998         $190,119   $63,876,556  $ (8,412,239)   $ 58,113    $55,712,549
                                 ========   ===========  ============    ========    ===========

<FN>
See Notes to Consolidated Financial Statements
</FN>
</TABLE>
<PAGE>

                             Datastream Systems, Inc. and Subsidiaries

                                      Statements of Cash Flows
                                            (unaudited)

                          Six months ended June 30, 1997 and June 30, 1998

                                                     June 30,         June 30,
                                                       1997             1998
                                                       ----             ----
                                                                     (restated)
Cash flows from operating activities:
   Net income                                      $ 4,579,086      $ 2,963,362
   Adjustments to reconcile net income to net cash
    provided by operating activities:
      Depreciation                                     986,630        1,456,146
      Amortization of capitalized software
       development costs                               581,345          547,251
      Amortization of goodwill                         545,500          767,009
      Other accumulated comprehensive income           397,411         (267,465)
      Provision for doubtful accounts                        -           85,411
      Write-off of in-process research and development       -        3,417,008
      Write-off of capitalized software costs                -          597,944
      Changes in operating assets and liabilities:
       Accounts receivable                          (3,818,418)      (4,690,979)
       Accrued interest receivable                     (24,839)           5,178
       Prepaid expenses                               (352,271)      (1,525,005)
       Inventories                                     (57,433)         345,623
       Other assets                                 (1,170,427)        (818,477)
       Accounts payable                               (996,474)       1,386,412
       Other accrued liabilities                    (4,278,673)      (3,362,101)
       Income taxes payable                            618,656        1,449,799
       Unearned revenue                              1,534,707        2,047,378
                                                     ---------        ---------
       Net cash provided by (used in) 
          operating activities                      (1,455,200)       4,404,494

Cash flows from investing activities:
   Proceeds from investments                         1,681,341        9,459,618
   Additions to property and equipment              (1,877,354)      (1,768,622)
   Capitalized software development costs             (842,056)      (1,694,081)
   Cash paid for acquisition, net of cash acquired           -      (10,054,691)
                                                   -----------      ----------- 
       Net cash used in investing activities        (1,038,069)      (4,057,776)

Cash flows from financing activities:
   Proceeds from exercise of stock options             416,675        1,203,879
   Proceeds from issuance of shares under employee
       stock purchase plan                                   -           74,547
   Proceeds from line of credit                        600,000                -
   Principal payments on long-term debt             (3,245,268)        (130,515)
                                                    ----------        --------- 
       Net cash provided by (used in) 
          financing activities                      (2,228,593)       1,147,911

Net increase (decrease) in cash and cash equivalents(4,721,862)       1,494,629
Cash and cash equivalents at beginning of period     6,315,719        2,409,387
                                                     ---------        ---------
Cash and cash equivalents at end of period         $ 1,593,857      $ 3,904,016
                                                   ===========      ===========

See Notes to Consolidated Financial Statement
<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's 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 Canada,
the United Kingdom, The Netherlands,  France, Germany,  Denmark, Sweden, Norway,
Portugal,  Mexico,  Brazil,  Argentina,  Venezuela,  Peru, Malaysia,  Australia,
Singapore, China 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.

On  March  31,  1998,  the  Company   acquired   Insta,  a  German   corporation
headquartered  in  Munich,  Germany.  On June 16,  1998,  the  Company  acquired
Strategic  Information Systems PTE. Ltd., a Singapore  corporation  ("SIS"). The
acquisitions  have been accounted for using the purchase  method.  In accordance
with  Accounting  Principles  Board  ("APB")  Opinion  No. 16,  "Accounting  for
Business Combinations," the purchase price for each acquisition was allocated to
the  tangible  and  intangible  assets  purchased  and the  liabilities  assumed
(including  in-process  research and development) based on the fair values using
valuation methods appropriate at the time.  Subsequently,  the Staff set forth a
new  methodology  for  calculating  in-process  research and  development in its
letter dated  September 15, 1998 to the American  Institute of Certified  Public
Accountants.   Although  the  Company  believes  that  its  original  accounting
treatment was in accordance with generally accepted  accounting  principles,  it
has made the  adjustments to be consistent with the new methodology set forth by
the Staff.  This  resulted in a reduction in the amount  allocated to in-process
research and development from $2,531,078 to $2,057,008 for the Insta acquisition
and from $2,700,000 to $1,110,000 for SIS. The reduction in the amount allocated
to in-process  research and development  resulted in an increase in goodwill and
related  amortization  expense.  This  restatement  does not  affect  previously
reported net cash flows for the period.  The effect of this  reallocation on the
previously reported  consolidated  financial  statements as of and for the three
and six months ended June 30, 1998 is as follows (unaudited):
<TABLE>

                                                  Three Months Ended               Six Months Ended
                                                     June 30, 1998                   June 30, 1998
                                                     -------------                   -------------
<CAPTION>
Consolidated Statement of Income:            As Reported    As Restated     As Reported     As Restated
                                             -----------    -----------     -----------     -----------
<S>                                               <C>            <C>            <C>            <C>
General and administrative expenses            1,998,156      2,015,087       4,027,943       4,044,874
Write off of in process research and 
   development and other acquisition charges   2,950,000      1,360,000       5,481,078       3,417,008
Operating income                               2,834,256      4,407,325       4,882,093       6,929,232
Income before income taxes                     3,037,486      4,610,555       5,338,834       7,385,973
Net income                                       672,331      2,252,100         909,523       2,963,362

Basic net income per share                    $      .04     $      .12      $      .05      $      .16
Diluted net income per share                  $      .03     $      .11      $      .04      $      .15
</TABLE>

                                                  
                                                     June 30, 1998
                                                     -------------
Balance Sheet:                               As Reported    As Restated
                                             -----------    -----------

Goodwill                                      14,665,727     16,712,865
Total Assets                                  77,853,727     79,900,865
Income taxes payable                           4,277,382      4,270,681
Total Liabilities                             24,195,017     24,188,316
Accumulated deficit                          (10,466,078)    (8,412,239)
Total stockholders' equity                    53,658,710     55,712,549
Total Liabilities and stockholders' equity    77,853,727     79,900,865
<PAGE>

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 March 31, 1998. Other
than as  indicated  herein,  there  have been no  significant  changes  from the
financial data published in those  reports.  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

Revenue Recognition

On January 1, 1998, the Company  adopted  Statement of Position 97-2,  "Software
Revenue   Recognition"   ("SOP  97-2").   The  adoption  of  SOP  97-2  did  not
significantly affect the Company's results of operations.

Net income per share

The Company  calculates  earnings  per share in  accordance  with  Statement  of
Financial  Accounting  Standards No. 128, "Earnings Per Share." Basic net income
(loss) per share is  computed  by  dividing  net income  (loss) by the  weighted
average number of common shares outstanding. Diluted net income (loss) per share
is computed by dividing  net income  (loss) by the  weighted  average  number of
common and potential common shares outstanding.  Diluted weighted average common
and potential  common shares  include  common shares and stock options using the
treasury stock method.  The reconciliation of basic and diluted income per share
is as follows:

For the three months ended June 30, 1998 and 1997:
                                                                      Per Share
                                                  Income     Shares     Amount
                                                  ------     ------     ------
    Three months ended June 30, 1998:
        Basic income per share               $ 2,252,100   18,870,916     .12
                                                                          ===
        Effect of dilutive securities:
           Stock options                               -    1,724,182
                                             -----------   ----------
        Diluted income per share             $ 2,252,100   20,595,098     .11
                                             ===========   ==========     ===

    Three months ended June 30, 1997:
        Basic income per share               $ 2,600,887   18,325,308     .14
                                                                          === 
        Effect of dilutive securities:
           Stock options                               -      428,476
                                             -----------   ----------
        Diluted income per share             $ 2,600,887   18,753,784     .14
                                             ===========   ==========     ===

For the six months ended June 30, 1998 and 1997:
                                                                      Per Share
                                                  Income     Shares     Amount
                                                  ------     ------     ------

    Six months ended June 30, 1998:
        Basic income per share               $ 2,963,362   18,755,519     .16
                                                                          === 
        Effect of dilutive securities:
           Stock options                               -    1,665,452
                                             -----------   ----------
        Diluted income per share             $ 2,963,362   20,420,971     .15
                                             ===========   ==========     ===

    Six months ended June 30, 1997:
        Basic income per share               $ 4,579,086   18,294,079     .25
                                                                          ===
        Effect of dilutive securities:
           Stock options                               -      466,797
                                             -----------   ----------
        Diluted income per share             $ 4,579,086   18,760,876     .24
                                             ===========   ==========     ===

On March 31,  1998,  the  Company  issued  130,435  shares  of stock as  partial
consideration  in the Insta  acquisition.  On June 16, 1998,  the Company issued
88,652  shares of stock as partial  consideration  in the SIS  acquisition.  See
Liquidity and Capital Resources.
<PAGE>
Comprehensive Income

On January 1, 1998, the Company adopted Financial  Accounting Standards No. 130,
"Reporting  Comprehensive  Income." As required  by the  Statement,  the Company
displays the accumulated balance of other  comprehensive  income separately from
retained  earnings and additional  paid-in  capital in the equity section of the
Consolidated  Balance Sheet. Items considered to be other  comprehensive  income
include  adjustments made for foreign currency  translation (under Statement 52)
and unrealized holding gains and losses on available-for-sale  securities (under
Statement  115).  Comprehensive  income for the periods  ended June 30, 1998 and
1997 is as follows:

                                                     June 30,         June 30,
 For the three months ended June 30, 1997 and 1998:    1997             1998
                                                       ----             ----
     Net income                                    $ 2,600,887        2,252,100
     Foreign currency translation adjustment           (28,691)          45,601
                                                       -------           ------
     Comprehensive income                          $ 2,572,196        2,297,701
                                                   ===========        =========


                                                     June 30,         June 30,
 For the six months ended June 30, 1997 and 1998:      1997             1998
                                                       ----             ----

     Net income                                    $ 4,579,086        2,963,362
     Foreign currency translation adjustment           343,981         (159,162)
     Unrealized loss on securities available-for-sale        -          (30,956)
                                                       -------          ------- 
     Comprehensive income                          $ 4,923,067        2,773,244
                                                   ===========        =========


C.  Stock Split

Effective  January  30,  1998,  the  Company's  Board of  Directors  declared  a
two-for-one stock split effected in the form of a stock dividend. All share, per
share and conversion  amounts  relating to the common stock,  warrants and stock
options included in the accompany financial statements reflect the stock split.

D. Recent Accounting Pronouncements

In June 1998, the FASB issued  Statement of Financial  Accounting  Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities"  ("Statement
No.  133").  Statement  No.  133  requires  that  an  enterprise  recognize  all
derivatives  as either  assets or  liabilities  in the  statement  of  financial
position  and measure  those  instruments  at fair value.  Statement  No. 133 is
effective for all fiscal  quarters and all fiscal years beginning after June 15,
1999. The Company is currently assessing the effects of Statement No. 133 on its
financial position.

<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 complete  family of  "computerized  maintenance  management
systems"  ("CMMS") /  "enterprise  asset  management  software"  ("EAMS") to the
maintenance,  repair and operations  ("MRO") industry.  Generally these products
consists of 5 major categories based on price and functionality.  Maintainit and
Maintainit  Pro are  off-the-shelf,  entry-level  solutions  for small to medium
businesses.  MP2 Professional is a full-featured  integrated  maintenance system
for small to mid-size  companies.  MP2  Enterprise  combines  the benefits of PC
servers  and PC  networks  with a  Windows  graphical  user  interface  and  SQL
relational  database.  MP5 (formally R5 CAMMS) is a high-end  client-server EAMS
product.   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.

On  March  31,  1998,  the  Company  completed  the  acquisition  of  all of the
outstanding  shares of Insta, a German based CMMS provider and on June 16, 1998,
the Company completed the acquisition of all of the outstanding shares of SIS, a
Singapore based CMMS provider. The acquisitions were accounted for as a purchase
in accordance with APB Opinion No. 16,  "Accounting for Business  Combinations."
Under the purchase method of accounting,  the purchase price is allocated to the
assets acquired and the liabilities  assumed based on their estimated fair value
at the date of the acquisition.  Using the valuation methods  appropriate at the
time, the purchase price allocation included in-process research and development
of $2,531,078  for INSTA and  $2,700,000  for SIS.  Subsequently,  the Staff set
forth a new methodology for calculating  in-process  research and development in
its letter  dated  September  15, 1998 to the  American  Institute  of Certified
Public  Accountants.  Although the Company believes that its original accounting
treatment was in accordance with generally accepted  accounting  principles,  it
has made the  adjustments to be consistent with the new methodology set forth by
the Staff. As a result, Datastream has decreased the amounts previously expensed
as in-process  research and  development  to $2,057,008 for Insta and $1,110,000
for SIS.
 
Results of Operations

     Total Revenues. The Company reported higher revenues for the second quarter
of 1998.  Total  revenues  increased 39% to $23,442,470 in the second quarter of
1998 from  $16,813,542  in the second  quarter of 1997,  due  principally to 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.  The second quarter of 1998 includes
$1,853,324 of revenue from the newly  acquired  entities of Insta and SIS. Total
revenues  increased 38% to $43,571,130  during the first six months of 1998 from
$31,495,955 in the first six months of 1997.

     Product revenues increased 36% to $9,332,113 (40% of total revenues) in the
second  quarter of 1998 from  $6,851,481  (41% of total  revenues) in the second
quarter of 1997,  as a result of the growth in new product  sales  including MP2
Enterprise and MP2 Professional - Access, and the growth in international sales.
Product  revenues  increased 28% to $16,697,210  (38% of total  revenues) in the
first six  months  from  $12,999,496  (41% of total  revenues)  in the first six
months of 1997.

     Professional  service  revenues  increased 42% to $9,831,906  (42% of total
revenues) in the second quarter of 1998 from  $6,906,989 (41% of total revenues)
in the second  quarter of 1997.  The  increase  resulted  from the  addition  of
professional  service personnel to service expansion of the Company's  installed
base of systems. Professional service revenues increased 48% to $18,787,430 (43%
of total  revenues)  in the first six  months of 1998 from  $12,690,712  (40% of
total revenues) in the first six months of 1997.

     Technical  support  services  revenues  for  the  second  quarter  of  1998
increased 40% to $4,278,451  (18% of total  revenues)  from  $3,055,072  (18% of
total revenues) in the second quarter of 1997, primarily due to the expansion of
the Company's  installed base of systems.  Technical  support services  revenues
increased 39% to $8,086,490  (19% of total  revenues) in the first six months of
1998 from $5,805,747 (18% of total revenues) in the first six months of 1997.
<PAGE>
     Cost of Revenues.  Cost of revenues  increased  31% to  $7,206,906  (31% of
total revenues) in the second quarter of 1998, as compared to $5,496,898 (33% of
total revenues) in the comparable  quarter of 1997. The decrease as a percentage
of  total   revenues  was  due  to  increased   efficiencies   realized  in  the
restructuring  of the  European  operations  during 1997 and higher  utilization
rates of consulting personnel.

     Cost of  revenues  increased  29% to  $13,655,750  (31% of total  revenues)
during the first six months of 1998 from  $10,558,107 (34% of total revenues) in
the first six months of 1997.

     Cost of product  revenues was 3% of total revenues in the second quarter of
1998, and 4% of total revenues during the same period of 1997. The decrease as a
percent  of  total  revenues  is due  to  lower  rate  of  capitalized  software
amortization and decreased costs of shipping and packaging related items.

     Cost of professional  service revenues was 22% of total revenues during the
second  quarter of 1998,  and 22% of total  revenues  during the same  period in
1997.

     Cost of technical  support service revenues was 5% of total revenues during
the second  quarter of 1998 and 6% of total  revenues  during the same period in
1997.  The  decrease as a  percentage  of total  revenues  was due to  increased
efficiencies  realized in the restructuring of the SQL support operations during
1997.

     Sales and Marketing Expenses. Sales and marketing expenses increased 38% to
$6,491,694  (28% of total  revenues)  during  the  second  quarter  of 1998 from
$4,693,891  (28% of total  revenues)  during  the second  quarter of 1997,  as a
result of an increased number of sales personnel and commissions associated with
the increase in sales revenue,  and increased marketing expenses associated with
new  product  introductions.  Sales  and  marketing  expenses  increased  34% to
$12,041,054  (28% of total  revenues)  in the  first  six  months  of 1998  from
$8,967,363 (29% of total revenues) in the first six months of 1997.

     Product  Development  Expenses.   Total  product  development  expenditures
increased 80% to $2,848,702 (12% of total revenues) during the second quarter of
1998 from $1,586,143 (9% of total revenues)  during the same period in 1997. The
capitalized  portion of these amounts were $887,245 and $549,980,  respectively.
Giving effect to amounts capitalized,  net product development expense increased
89% to  $1,961,458  (8% of total  revenues)  in the second  quarter of 1998 from
$1,036,163 (6% of total  revenues)  during the same period in 1997. The increase
in total product  development  expense  resulted from  increasing  the number of
development personnel to support continued development of MP5, the increased use
of outside  contractors for development work,  foreign language  development and
other new products.

     Total product development  expenditures increased 91% to $5,177,293 (12% of
total  revenues)  during  the first  half of 1998 from  $2,712,226  (9% of total
revenues)  during  the same  period in 1997.  The  capitalized  portion of these
amounts were  $1,694,081  and $842,055,  respectively.  Giving effect to amounts
capitalized,  net product development expense increased 86% to $3,483,212 (8% of
total revenues) in the first half of 1998 from $1,870,211 (6% of total revenues)
during the same period in 1997.

     General and Administrative  Expenses.  General and administrative  expenses
increased 14% to $2,015,087 (9% of total revenues)  during the second quarter of
1998 from  $1,772,657  (10% of total  revenues)  in the second  quarter of 1997,
primarily  due to increased  salaries.  The  decrease as a  percentage  of total
revenues is due to the  restructuring  of the European  operations  during 1997.
General and  administrative  expenses  increased 1% to  $4,044,874  (9% of total
revenues)  during the first half of 1998 from $4,007,697 (13% of total revenues)
in the first half of 1997.

     Write-off  of  in-process  research  and  development  costs.  The  Company
expensed  $1,110,000,  as  restated,  of  in-process  research  and  development
acquired as part of the acquisition of SIS.

     Miscellaneous  Income.  Miscellaneous  income  increased  to $87,978 in the
second quarter of 1998 from $71,343 in the second quarter of 1997. Miscellaneous
income  increased  to  $163,966  in the first half of 1998 from  $118,623 in the
first half of 1997.  The increase was due to increased  rental income  generated
from leasing a greater  portion of the Company's  building in Greenville,  South
Carolina.

     Interest  Income/(Expense).  Interest  income  decreased to $146,498 in the
second quarter of 1998 from $246,350 in the second quarter of 1997, due to lower
investment balances realized upon completion of various  acquisitions.  Interest
expense  decreased to $31,246 in the second  quarter of 1998 from $35,713 in the
second  quarter  of  1997.  The  decrease  in  interest  expense  is due to debt
repayments in 1997.  Interest income  decreased to $352,288 in the first half of
1998 from  $508,860 in the first half of 1997.  Interest  expense  decreased  to
$59,513 in the first half of 1998 from $138,162 in the first half of 1997.
<PAGE>
     Tax Rate.  The Company's tax rate per the income  statement was 51% for the
second  quarter  of 1998 but due to  non-deductible  items  associated  with the
acquisitions,  the  Company's  effective tax rate was 39.5% as compared to 36.5%
for the second quarter of 1997. The Company's tax rate per the income  statement
was 60% for the first half of 1998 but due to  non-deductible  items  associated
with the acquisitions, the Company's effective tax rate was 38.8% as compared to
31% in the first half of 1997.

     Net Income.  Net income decreased 13% to $2,252,100 (10% of total revenues)
in the second  quarter of 1998 from  $2,600,887  (15% of total  revenues) in the
second  quarter of 1997.  Net income  decreased 35% to  $2,963,362  (7% of total
revenues) in the first half of 1998 from  $4,579,086  (15% of total revenues) in
the first half of 1997.  These decreases are directly  attributed to the charges
for the acquisition of INSTA on March 31, 1998 and SIS on June 16,1998.  Without
the  acquisition  related charges second quarter net income would have increased
39% to $3,622,331  (16% of total  revenues) and net income for the first half of
the year would have increased 53% to $6,985,545 (16% of total revenues).


Liquidity and Capital Resources

The  Company  has  funded  its  activities  entirely  from cash  generated  from
operations. The Company ended its second quarter of 1998 with $3,904,016 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,  consisting of $17 million
in cash and $14 million in common  stock  (751,381  shares)  issued  pursuant to
Regulation S. In connection  with the  acquisition,  the Company also  deposited
into escrow an  additional  $3 million  (300,522  shares) in common  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.

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  acquisition  of Insta  was  completed  on March  31,  1998 for $7  million,
consisting of $4,375,000 in cash and $2,625,000 (130,435 shares) in common stock
issued pursuant to Regulation S. In connection with the acquisition, the Company
deposited  into escrow  34,783 shares of common  stock,  and assumed  certain of
Insta's outstanding liabilities.

The  acquisition  of SIS was  completed  on June  16,  1998  for  $6.5  million,
consisting of $4,575,000 in cash and $1,925,000  (88,652 shares) in common stock
issued pursuant to Regulation S. In connection with the acquisition, the Company
deposited  into escrow  29,566 shares of common  stock,  and assumed  certain of
SIS's outstanding liabilities.

The Company's principal  commitments as of June 30, 1998, consisted primarily of
long term debt  assumed in the  acquisition  of SQL,  and there were no material
commitments for capital expenditures. The Company believes that its current cash
balances,  availability under its line of credit,  cash flow from operations and
available for sale  investments  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


Pursuant  to the  general  instructions  to  Rule  305 to  SEC  Regulation  S-K,
quantitative and qualitative  disclosures called for by this Item 7A and by Rule
305 of SEC Regulation S-K are inapplicable to the Company at this time.

<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 June 12,  1997 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 2001.

                                       Shares              Shares
                                         FOR              WITHHOLD
Class II:
      Richard T. Brock            17,103,980 (98.9%)     183,275 (1.1%)
      Ira D. Cohen                17,102,280 (98.9%)     184,975 (1.1%)


2.  The stockholders approved the Company's 1998 Stock Option Plan.

                         Shares              Shares              Shares
                          FOR                AGAINST             ABSTAIN

                   16,388,135 (94.8%)      709,185 (4.1%)      179,035 (1.1%)

Item 5.   Other Information

          Not Applicable

Item 6.   Exhibits and Reports on Form 8-K

          (a)      Exhibits

          27   Financial Data Schedule

(b)   Reports on Form 8-K

The Company  filed a Current  Report on Form 8-K on April 14, 1998 to report the
Company's  acquisition of all of the captial stock and equity interests of Insta
on March 31, 1998.

The  Company  filed a Current  Report on Form 8-K on June 26, 1998 to report the
Company's acquisition of all of the capital stock and equity interests of SIS on
June 16, 1998.

The  Company  filed a Current  Report on Form 8-K on July 23, 1998 to report the
Company's acquisition of certain assets of Datastream (Pacific) PTY Ltd. on July
13, 1998.
<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:   02/26/99               ______________________
                               Daniel H. Christie
                               Chief Financial Officer (principal
                                financial and accounting officer)
<PAGE>

                                  EXHIBIT INDEX



Exhibit Number                 Description

27                             Financial Data Schedule


<PAGE>