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 MARCH 31, 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: MARCH 31, 1998    18,822,594 shares, $0.01 par value.

<PAGE>     
    AMENDED FILING OF FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 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").  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  three  months
ended  March  31,  1998.   See  Note  1  to  the   Consolidated   Financial
Statements.


                         Datastream Systems, Inc.

                               FORM 10-Q/A

                       Quarter ended March 31, 1998

                                  Index

                                                                      Page No.

Part I.    Consolidated Financial Information

Item 1.    Consolidated Financial Statements (unaudited)

           Consolidated Balance Sheets - December 31, 1997 and
                March 31, 1998
                Assets                                                     3
                Liabilities and Stockholders' Equity                       4

           Consolidated Statements of Income -
                for the Three Months ended March 31, 1997 and 1998         5

           Consolidated Statement of Changes in Stockholders' Equity -
                for the Three Months ended March 31, 1998                  6

           Consolidated Statement of Cash Flows -
                for the Three Months ended March 31, 1997 and 1998         7

           Notes to the Consolidated Financial Statements                  8

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                                                                  16
<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       $4,448,095
   Accounts receivable, net of allowance for 
      doubtful accounts of $1,589,910 and 
      $1,755,529, respectively                      21,968,539       23,676,930
   Unbilled receivables                              2,271,375        3,043,344
   Investments                                       9,735,585        5,670,266
   Prepaid expenses                                    614,447        1,208,650
   Inventories                                         369,486          385,684
   Deferred income taxes                               796,000          796,000
   Other assets                                        619,448        1,151,053
                                                    ----------       ----------
        Total current assets                        38,784,267       40,380,022

Investments                                          6,637,286        6,587,975
Property and equipment, net                         10,166,101       12,056,294
Goodwill                                             6,545,747       12,523,263
Capitalized software development costs, 
   net of accumulated amortization of 
   $1,197,177 and $2,239,941, respectively           2,963,842        3,160,596
                                                   -----------      -----------
        Total assets                               $65,097,243      $74,708,150
                                                   ===========      ===========

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       $3,355,963
   Other accrued liabilities                         4,135,258        5,502,627
   Income taxes payable                              2,816,800        3,799,901
   Current portion of long-term debt                   346,197          266,894
   Unearned revenue                                  6,499,953        8,784,831
                                                    ----------       ----------
        Total current liabilities                   16,494,448       21,710,216

Long-term debt, less current portion                   603,098        1,334,041
Deferred income taxes                                  892,000          892,000
                                                    ----------       ----------
        Total liabilities                           17,989,546       23,936,257

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,
      18,822,594 shares issued and 
      outstanding at March 31, 1998                    185,855          188,226
   Additional paid-in capital                       58,049,212       61,235,493
   Accumulated deficit                             (11,375,601)     (10,664,338)
   Other accumulated comprehensive income              248,231           12,512
                                                    ----------       ---------- 
        Total stockholders' equity                  47,107,697       50,771,893

        Total liabilities and stockholders' equity $65,097,243      $74,708,150
                                                   ===========      ===========

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

                    Consolidated Statements of Income
                               (unaudited)
                Three months ended March 31, 1997 and 1998

                                                     March 31,        March 31,
                                                       1997             1998
                                                       ----             ----
                                                                     (restated)

Revenues:
   Product                                         $ 6,148,014      $ 7,365,099
   Professional service                              5,783,723        8,955,524
   Support                                           2,750,674        3,808,038
                                                    ----------       ----------
      Total revenues                                14,682,411       20,128,661
 
Cost of revenues:
   Cost of product revenues                            843,963          776,139
   Cost of professional service revenues             3,529,973        4,144,932
   Cost of support revenues                            687,272          929,829
   Write off of capitalized software costs                   -          597,944
                                                     ---------        ---------
      Total cost of revenues                         5,061,208        6,448,844
 
      Gross profit                                   9,621,203       13,679,817
 
Operating expenses:
   Sales and marketing                               4,273,471        5,549,360
   Product development                                 834,048        1,521,755
   General and administrative                        2,235,040        2,029,787
   Write off of in process research and development          -        2,057,008
                                                    ----------       ----------
      Total operating expenses                       7,342,559       11,157,910

      Operating income                               2,278,644        2,521,907

Other income (expense):
   Interest income                                     262,510          205,790
   Interest expense                                   (102,449)         (28,266)
   Other                                                47,279           75,988
                                                       -------          -------
      Net other income                                 207,340          253,512

      Income before income taxes                     2,485,984        2,775,419

Income taxes                                           507,787        2,064,156
                                                   -----------       ----------
Net income                                         $ 1,978,197       $  711,263
                                                   ===========       ==========

   Basic net income per share                      $       .11       $      .04
                                                   -----------       ----------
   Diluted net income per share                    $       .11       $      .03
                                                   -----------       ----------

   Basic weighted average number of common and
      common equivalent shares outstanding          18,262,850       18,640,122
                                                    ==========       ==========
   Diluted weighted average number of common and
      common equivalent shares outstanding          18,767,970       20,246,844
                                                    ==========       ==========

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 three months ended March 31, 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                            -             -        711,263           -         711,263

  Stock options exercised             962       488,142              -           -         489,104

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

  Shares issued for acquisition     1,304     2,623,696              -           -       2,625,000

  Other accumulated
  comprehensive income                  -             -              -    (235,719)       (235,719)


Balance at March 31, 1998        $188,226   $61,235,493   $(10,664,338)    $12,512     $50,771,893
                                 ========   ===========   =============    =======     ===========
<FN>
See Notes to Consolidated Financial Statements
</FN>
</TABLE>
<PAGE>
                Datastream Systems, Inc. and Subsidiaries

                               Consolidated Statements of Cash Flows
                                            (unaudited)

                        Three months ended March 31, 1997 and March 31, 1998

                                                    March 31,        March 31,
                                                       1997             1998
                                                       ----             ----
                                                                     (restated)
Cash flows from operating activities:
   Net income                                     $  1,978,198       $  711,263
   Adjustments to reconcile net income to net cash
    provided by operating activities:
      Depreciation                                     458,577          683,900
      Amortization of capitalized software
       development costs                               275,203          195,133
      Amortization of goodwill                         272,750          272,750
      Other accumulated comprehensive income           373,672         (323,882)
      Loss on disposal of fixed assets                  53,420                -
      Provision for doubtful accounts                        -          282,377
      Write-off of in-process research and development       -        2,057,008
      Write-off of capitalized software costs                -          597,944
      Changes in operating assets and liabilities:
       Accounts receivable                          (2,918,021)      (1,837,672)
       Accrued interest receivable                     135,867          (24,194)
       Prepaid expenses                               (248,611)        (582,338)
       Inventories                                      54,665          112,782
       Other assets                                   (584,689)      (1,209,510)
       Accounts payable                             (1,120,244)         659,629
       Other accrued liabilities                    (2,511,796)         694,499
       Income taxes payable                            233,467          983,101
       Unearned revenue                              2,060,701        2,284,878
                                                    ----------       ----------
       Net cash provided by (used in) 
          operating activities                      (1,486,841)       5,557,668
Cash flows from investing activities:
   Net proceeds from investments                     2,045,000        4,420,854
   Additions to property and equipment                (832,569)      (1,212,368)
   Proceeds from the sale of equipment                       -                -
   Capitalized software development costs             (292,076)        (806,836)
   Cash paid for acquisition, net of cash acquired           -       (6,467,189)
                                                    ----------       ---------- 
       Net cash used in investing activities           920,355       (4,065,539)

Cash flows from financing activities:
   Proceeds from exercise of stock options             112,627          473,699
   Proceeds from issuance of shares under employee
       stock purchase plan                                   -           74,547
   Principal payments on long-term debt             (2,907,269)          (1,667)
                                                    ----------           ------ 
       Net cash provided by (used in) 
          financing activities                      (2,794,642)         546,579

Net increase (decrease) in cash and 
     cash equivalents                               (3,361,128)       2,038,708
Cash and cash equivalents at beginning of period     6,315,719        2,409,387
                                                  ------------     ------------

Cash and cash equivalents at end of period        $  2,954,591     $  4,448,095
                                                  ============     ============

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  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 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.  The acquisition has been accounted for using
the purchase  method.  In accordance  with Accounting  Principles  Board ("APB")
Opinion No. 16,  "Accounting for Business  Combinations," the purchase price 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.  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 months ended March 31, 1998 is as follows (unaudited):

                                                       Three Months Ended
                                                    March 31,        March 31,
                                                       1997             1998
                                                       ----             ----
Consolidated Statement of Income:                 As Reported       As Restated
                                                  -----------       -----------

Write off of in process research and developmen      2,531,078        2,057,008
Operating income                                     2,047,837        2,521,907
Income before income taxes                           2,301,349        2,775,419
Net income                                             237,193          711,263

Basic net income per share                        $        .01      $       .04
Diluted net income per share                      $        .01      $       .03


                                                         March 31, 1998
Balance Sheet:                                    As Reported       As Restated
                                                  -----------       -----------

Goodwill                                            12,049,193       12,523,263
Total Assets                                        74,234,080       74,708,150
Accumulated deficit                                (11,138,408)     (10,664,338)
Total stockholders' equity                          50,297,823       50,771,893
Total liabilities and stockholders' equity          74,234,080       74,708,150


 
<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: 
                                                                      Per Share
                                                  Income     Shares     Amount
                                                  ------     ------     ------
    March 31, 1998:
        Basic income per share               $   711,263   18,640,122     .04
                                                                          ===
        Effect of dilutive securities:
           Stock options                               -    1,606,722
                                             -----------   ----------
        Diluted income per share             $   711,263   20,246,844     .03
                                             ===========   ==========     ===

    March 31, 1997:
        Basic income per share               $ 1,978,197   18,262,850     .11
                                                                          ===
        Effect of dilutive securities:
           Stock options                               -      505,120
                                             -----------   ----------
        Diluted income per share             $ 1,978,197   18,767,970     .11
                                             ===========   ==========     ===

On March 31,  1998,  the  Company  issued  130,435  shares  of stock as  partial
consideration in the Insta acquisition. See Liquidity and Capital Resources.

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 three months ended March 31, 1998
and 1997 is as follows:

    March 31, 1998:
     Net income                                        $   711,263
     Foreign currency translation adjustment              (204,763)
     Unrealized loss on securities available-for-sale      (30,956)
                                                       ----------- 
     Comprehensive income                              $   475,544
                                                       ===========

    March 31, 1997:
     Net income                                        $ 1,978,197
     Foreign currency translation adjustment               372,672
                                                       -----------
     Comprehensive income                              $ 2,350,869
                                                       ===========
<PAGE>
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  have been restated to
reflect this stock split.
<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.  The acquisition was
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 liabilities assumed based
on their  estimated fair value at the date of the  acquisition.  Using valuation
methods  appropriate  at  the  time,  the  purchase  price  allocation  included
in-process research and development of $2,531,078.  Subsequently,  the Staff set
forth a new  methodology  to be used 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 adjustment to be consistent with the new methodology
set forth by the Staff. As a result,  Datastream has  voluntarily  decreased the
amount previously expensed as in-process research and development to $2,057,008.

Results of Operations

     Total Revenues.  The Company reported higher revenues for the first quarter
of 1998.  Total  revenues  increased 37% to  $20,128,661 in the first quarter of
1998  from  $14,682,411  in the  first  quarter  of  1997  due 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.

     Product revenues increased 20% to $7,365,099 (37% of total revenues) in the
first  quarter  of 1998 from  $6,148,014  (42% of total  revenues)  in the first
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.

     Professional  service  revenues  increased 55% to $8,955,524  (45% of total
revenues) in the first quarter of 1998 from  $5,783,723  (39% of total revenues)
in  the  first  quarter  1997.  The  increase  resulted  from  the  addition  of
professional  service personnel to service expansion of the Company's  installed
base of systems.

     Technical  support  services  revenues for the first quarter 1998 increased
38% to  $3,808,038  (19% of  total  revenues)  from  $2,750,674  (19%  of  total
revenues) in the first  quarter of 1997,  primarily  due to the expansion of the
Company's installed base of systems.

     Cost of Revenues.  Cost of revenues  increased  27% to  $6,448,844  (32% of
total  revenues) in the first quarter of 1998, as compared to $5,061,208 (34% of
total  revenues)  in the  comparable  quarter of 1997.  The  increase in cost of
revenues is  attributed  to  increased  expenses  incurred  in the  Professional
Services and Support  Departments  related to salaries  and customer  reimbursed
travel and the write off of capitalized  software rendered obsolete or redundant
by the acquisition of Insta on March 31, 1998.

     Cost of product  revenues was 4% of total  revenues in the first quarter of
1998, and 6% 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 21% of total revenues during the
first quarter of 1998, and 24% 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 European  operations during 1997 and higher
utilization rates of consulting personnel.
<PAGE>
     Cost of technical  support service revenues was 5% of total revenues during
the first  quarter of 1998 and 5% of total  revenues  during the same  period in
1997.

     Cost of revenue includes a $597,944  write-off of capitalized  software (3%
of total  revenues)  which  became  obsolete as a result of the  acquisition  of
Insta.

     Sales and Marketing Expenses. Sales and marketing expenses increased 30% to
$5,549,360  (28% of total  revenues)  during  the  first  quarter  of 1998  from
$4,273,471 (29% of total revenues) during the first quarter in 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 and one time charges for the Plant Engineering trade show.

     Product  Development  Expenses.   Total  product  development  expenditures
increased 107% to $2,328,591 (12% of total revenues) during the first quarter of
1998 from $1,126,123 (7% of total revenues)  during the same period in 1997. The
capitalized  portion of these amounts were $806,836 and $292,075,  respectively.
Giving effect to amounts capitalized,  product development expense increased 83%
to $1,521,755 (8% of total  revenues) in the first quarter of 1998 from $834,048
(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.

     General and Administrative  Expenses.  General and administrative  expenses
decreased 9% to $2,029,787 (10% of total  revenues)  during the first quarter of
1998 from  $2,235,040  (15% of total  revenues)  in the first  quarter  of 1997,
primarily due to efficiencies  realized during the restructuring of the European
operations.

     Write-off  of  in-process  research  and  development  costs.  The  Company
expensed  $2,057,008,  as  restated,  of  in-process  research  and  development
acquired as part of the acquisition of Insta.

     Miscellaneous  Income.  Miscellaneous  income  increased  to $75,988 in the
first  quarter of 1998 from $47,279 in the first  quarter 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 $205,790 in the
first quarter of 1998 from  $262,510 in the first quarter of 1997,  due to lower
investment  balances realized upon completion of the SQL acquisition in December
1997.  Interest  expense  decreased to $28,266 in the first quarter of 1998 from
$102,449 in the first quarter of 1997, due to lower debt balances in 1998.

     Tax Rate.  The  Company's  effective tax rate before  non-deductible  items
associated  with the  acquisition of INSTA was 38% for the first quarter of 1998
as compared to 20% for the first quarter of 1997.

     Net Income.  Net income decreased 64% to $711,263 (4% of total revenues) in
the first quarter of 1998 from  $1,978,197  (13% of total revenues) in the first
quarter of 1997.  This  decrease is directly  attributed  to the charges for the
acquisition of INSTA on March 31, 1998. Without the acquisition  related charges
net income would have increased 70% to $3,366,215 (17% of total revenues).

Liquidity and Capital Resources

The  Company  has  funded  its  activities  entirely  from cash  generated  from
operations. The Company ended its first quarter of 1998 with $ 4,448,095 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 1997.

The acquisition of SQL was completed for $31 million,  consisting of $17 million
in cash and $14 million in common  stock  issued  pursuant to  Regulation  S. In
connection  with the  acquisition,  the Company  also  deposited  into escrow an
additional $3 million 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
<PAGE>
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 and is included in long term investments on the
balance sheet.

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 Company's principal commitments as of March 31, 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

           Not Applicable.

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 capital stock 
               and equity interests of Insta on March 31, 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>