UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

/ X /       QUARTERLY  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934 (FEE REQUIRED)

                  For the quarterly period ended: July 31, 1999

/  /        TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934 (NO FEE REQUIRED)


                        Commission file number: 000-20688

                              Datatec Systems, Inc.
                              ---------------------
             (Exact name of Registrant as specified in its charter)

            Delaware                                       94-2914253
            --------                                       ----------
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                         Identification No.)


20C Commerce Way, Totowa, NJ                                 07512-1154
----------------------------                                 ----------
(Address of principal executive                              (Zip Code)
offices)

                                 (973) 890-4800
--------------------------------------------------------------------------------
               Registrant's telephone number, including area code


Check whether the Registrant  (1) has filed all reports  required to be filed by
Section 12 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 12
months (or for such shorter period that the Registrant was required to file such
reports) and (2) has been subjected to such filing  requirements for the past 90
days. Yes /X/ No / /.

The number of shares of Registrant's  Common Stock  outstanding on July 31, 1999
was 31,160,389.


<PAGE>
                              DATATEC SYSTEMS, INC.
                                    FORM 10-Q
                        THREE MONTHS ENDED JULY 31, 1999


                                      INDEX




PART I:     FINANCIAL INFORMATION

                                                                            Page
            Item 1:  Consolidated Financial Statements

                     Balance Sheets at April 30, 1999 and
                     July 31, 1999                                            3

                     Statements of Operations for the three months ended
                     July 31, 1998 and 1999                                   4

                     Statements of Comprehensive Income for the
                     three months ended July 31, 1998 and 1999                5

                     Statements of Cash Flows for the three months ended
                     July 31, 1998 and 1999                                   6

                     Notes to Unaudited Consolidated Financial Statements     7

            Item 2:  Management's Discussion and Analysis of Financial
                     Condition and Results of Operations                      8


PART II:    OTHER INFORMATION

            Item 4:  Submission of Matters to a Vote of Security Holders     10

            Item 6:  Exhibits and Reports of Form 8-K                        11


                                       2
<PAGE>
                              DATATEC SYSTEMS, INC.
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                            July 31, 1999
                                                                 April 30, 1999               (unaudited)
                                                                 --------------             -------------

ASSETS

CURRENT ASSETS:

<S>                                                              <C>                        <C>
   Cash and cash equivalents                                     $    234,000               $    124,000
   Accounts receivable, net                                        20,661,000                 23,506,000
   Inventory                                                        3,252,000                  3,482,000
   Prepaid expenses and other current assets                        2,970,000                  2,423,000
   Net assets from discontinued operations                            447,000                       --
                                                                 ------------               ------------

               Total current assets                                27,564,000                 29,535,000

Property and equipment, net                                         5,200,000                  5,105,000
Goodwill, net                                                       3,539,000                  3,429,000
                                                                 ------------               ------------
Other assets                                                        4,300,000                  4,930,000
                                                                 ============               ============

               Total assets                                        40,603,000                 42,999,000
                                                                 ============               ============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIaBILITIES:

   Short-term borrowings                                         $  8,623,000               $ 11,942,000
   Current portion of long-term debt                                1,783,000                  1,306,000
   Accounts payable                                                 9,943,000                  9,288,000
   Accrued and other liabilities                                    3,866,000                  3,228,000
                                                                 ------------               ------------
   Due to related parties                                           1,052,000                  1,052,000
                                                                 ------------               ------------

               Total current liabilities                           25,267,000                 26,816,000
                                                                 ------------               ------------
Long-term debt                                                        607,000                    494,000
                                                                 ------------               ------------

Commitments and contingencies

Shareholders' equity:

   Preferred stock                                                       --                         --
   Common stock                                                        30,000                     31,000
   Additional paid-in capital                                      34,317,000                 34,433,000
   Accumulated deficit                                            (19,275,000)               (18,431,000)
   Accumulated other comprehensive loss                              (343,000)                  (344,000)
                                                                 ------------               ------------

      Total shareholders' equity                                   14,729,000                 15,689,000
                                                                 ------------               ------------

       Total liabilities and shareholders' equity                $ 40,603,000               $ 42,999,000
                                                                 ============               ============
</TABLE>


      The accompanying notes to unaudited consolidated financial statements
             are an integral part of these consolidated statements.


<PAGE>
                              DATATEC SYSTEMS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)

<TABLE>
<CAPTION>

                                                               For the Three Months Ended
                                                                        July 31,
                                                    -------------------------------------------------
                                                             1998                        1999
                                                     ---------------------       ---------------------


<S>                                                        <C>                         <C>
Revenues                                                   $   25,143,000              $   25,556,000

Cost of revenues                                               16,151,000                  15,814,000
                                                     ---------------------       ---------------------

Gross profit                                                    8,992,000                   9,742,000

Selling, general and administrative expenses                    8,039,000                   8,462,000
                                                     ---------------------       ---------------------

Operating income                                                  953,000                   1,280,000

Interest expense                                                  493,000                     436,000
                                                     ---------------------       ---------------------
 Income before provision (benefit) for income
  taxes                                                           460,000                     844,000

Provision (benefit) for income taxes                                   --                          --
                                                     ---------------------       ---------------------

 Net income                                              $        460,000                     844,000
                                                     =====================       =====================

 Income per share (Note 3):
 Basic and diluted:

 Net income                                              $             .02         $              .03
                                                     =====================       =====================



 WEIGHTED AVERAGE COMMON SHARES - BASIC                        29,054,000                  30,686,000
                                                     =====================       =====================
  WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT
    SHARES  - DILUTED                                          30,561,000                  31,418,000
                                                     =====================       =====================
</TABLE>

      The accompanying notes to unaudited consolidated financial statements
             are an integral part of these consolidated statements.

                                       4
<PAGE>
                              DATATEC SYSTEMS, INC.
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                   (unaudited)
<TABLE>
<CAPTION>

                                                                                     For the Three Months Ended
                                                                                              July 31,
                                                                       --------------------------------------------------------
                                                                                1998                           1999
                                                                       ------------------------      --------------------------

<S>                                                                           <C>                            <C>
       Net Income                                                             $        460,000               $         844,000

       Other comprehensive income(loss)-
          Foreign currency translation adjustment                                        3,000                         (1,000)
                                                                       ------------------------      --------------------------

       Comprehensive income                                                   $        463,000                $        843,000
                                                                       ========================      ==========================
</TABLE>


      The accompanying notes to unaudited consolidated financial statements
             are an integral part of these consolidated statements.


<PAGE>
                              DATATEC SYSTEMS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)

<TABLE>
<CAPTION>

                                                                                    For the Three Months Ended
                                                                                             July 31,
                                                                       -------------------------------------------------------
                                                                                1998                          1999
                                                                       ------------------------     --------------------------
<S>                                                                       <C>                                       <C>
   Cash Flows From Operating Activities

  Net income                                                              $           460,000          $            844,000

    Adjustments to reconcile net income to net cash used in
    operating activities --

       Depreciation and amortization                                                  746,000                       786,000

       Changes in operating assets and liabilities:

           Increase in accounts receivable                                           (231,000)                   (2,845,000)

           Increase in inventory                                                     (642,000)                     (230,000)

           Increase in prepaid expenses and other assets                             (340,000)                     (234,000)

           (Increase) decrease in assets held for sale or disposition                (284,000)                      447,000

           Increase (decrease) in accounts payable, accrued and
           other liabilities                                                           49,000                    (1,293,000)
                                                                       ------------------------     --------------------------

       Net cash used in operating activities                                         (242,000)                   (2,525,000)
                                                                       ------------------------     --------------------------

Cash flows from investing activities:

       Purchases of property and equipment                                           (256,000)                     (430,000)
                                                                                                    --------------------------
                                                                       ------------------------

       Net cash used in investing activities                                         (256,000)                     (430,000)
                                                                       ------------------------     --------------------------

Cash flows from financing activities:

        Net (payments) borrowings of short-term borrowings                         (1,929,000)                    3,319,000

        Net payments of indebtedness                                                 (288,000)                     (590,000)

        Net proceeds from common stock/warrant issuances                            2,532,000                       117,000
                                                                       ------------------------
                                                                                                    --------------------------

              Net cash provided by financing activities                               315,000                     2,846,000
                                                                       ------------------------
                                                                                                    --------------------------

              Net effect on foreign currency translation on cash                        3,000                        (1,000)
                                                                       ------------------------     --------------------------

              Net decrease in cash                                                   (180,000)                     (110,000)

Cash and cash equivalents at beginning of period                                      317,000                       234,000
                                                                       ========================     ==========================

Cash and cash equivalents at end of period                                $           137,000                       124,000
                                                                       ========================     ==========================
</TABLE>

      The accompanying notes to unaudited consolidated financial statements
             are an integral part of these consolidated statements.


                                       6
<PAGE>
                              DATATEC SYSTEMS, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1)      Business

         Datatec Systems, Inc. and its subsidiaries (the "Company" or "Datatec")
are in the  business  of  providing  rapid and  accurate  technology  deployment
services and licensing software tools to support  enterprises in the delivery of
complex IT solutions.

(2)      Basis of Presentation

         The  consolidated  financial  statements  include  the  accounts of the
Company and its  subsidiaries.  All intercompany  accounts and transactions have
been eliminated.

         The accompanying  unaudited consolidated financial statements have been
prepared in conformity with generally accepted accounting  principles consistent
with those  applied  in, and should be read in  conjunction  with,  the  audited
financial  statements for the year ended April 30, 1999.  The interim  financial
information is unaudited,  but reflects all normal  recurring  adjustments  that
are, in the opinion of management, necessary for a fair statement of results for
the interim periods  presented.  The results for the three months ended July 31,
1999 are not necessarily  indicative of the results expected for the full fiscal
year.

(3)      Earnings per share

         Basic  earnings  per share is  calculated  using the  weighted  average
number of shares  outstanding for the three months ended July 31, 1998 and 1999.
Diluted  earnings per share is calculated  using the weighted  average number of
shares  outstanding  plus the  incremental  shares from assumed  conversions  of
options,  debt and preferred  stock for the three months ended July 31, 1998 and
1999.

(4)      Supplemental Disclosure of Cash Flows

         Cash paid during the three months ended July 31:

                                          1998                     1999
                                      ------------              ---------
              Interest Paid           $ 429,000                 $ 351,000

(5)      Statement of Position 98-5

         On  April  9,  1998,  the  American   Institute  of  Certified   Public
Accountants  ("AICPA")  issued  Statement of Position ("SOP") 98-5 "Reporting on
the Costs of Start-Up  Activities".  The new standard amends  previous  guidance
from the AICPA  that  permitted  capitalization  of  start-up  costs in  certain
industries and requires that all non-governmental  entities expense the costs of
start-up  activities  as those  costs  are  incurred.  Under  the SOP,  the term
"start-up"  has been  broadly  defined  to  include  pre-operating,  pre-opening
organization activities.  Upon further review of the provisions of SOP 98-5, the
Company believes that its  pre-contract  costs are not start-up costs subject to
this SOP.

                                       7

<PAGE>

                              DATATEC SYSTEMS, INC.
                         PART I - FINANCIAL INFORMATION


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

Results of Operations - For the Three Months Ended July 31, 1999

            Revenues.  Revenues  for the three  months  ended July 31, 1999 were
$25,556,000  compared to  $25,143,000  for the three months ended July 31, 1998,
representing  an increase of 2%.  Beginning in the third quarter of fiscal 1999,
the Company began terminating certain low margin customer relationships that did
not fit in the  business  model.  The  estimated  impact  of  terminating  these
relationships  was a reduction in sales of  approximately  8%. In addition,  the
growth rate has been negatively affected by customers completing Y2K remediation
projects.  Included in  revenues  for the three  months  ended July 31, 1999 was
$60,000 of software sales from e-Deploy.com.

            Gross Profit. Gross profits for the three months ended July 31, 1999
were $9,742,000 compared to $8,992,000 for the three months ended July 31, 1998.
Gross  profits as a percentage of revenues were 38.1% for the three months ended
July 31, 1999  compared to 35.8% for the three months  ended July 31, 1998.  The
increase in gross margin  percentage  is the result of  initiatives  the Company
began in the  third  and  fourth  quarters  of fiscal  1999.  These  initiatives
included improved project management information using new systems,  including a
centralization  of the management of the Company's labor and material  resources
and additional quality control personnel. As a result of these initiatives,  the
Company is better able to manage its  existing  projects  and has  improved  its
efficiency, utilization of labor and other resources, and improved quality.

            Selling, general and administrative  expenses.  Selling, general and
administrative expenses for the three months ended July 31, 1999 were $8,462,000
compared to  $8,039,000  for the three months ended July 31, 1998,  representing
33.1% and 32.0% of  revenues,  respectively.  The most  significant  increase in
selling,  general and administrative expenses was $500,000 relating to personnel
costs.  Personnel  costs  increased  by 10% over the same period last year.  The
increase  of  personnel  costs  has  three  components:   additional  personnel,
predominantly  project  management,   professional  services  and  e-Deploy.com;
recruiting  costs  associated  with  these  additional  personnel;   and  salary
increases.  Included  in  selling,  general  and  administrative  expenses  were
$352,000 relating to e-Deploy.com.

            Interest  expense.  Interest expense for the three months ended July
31, 1999 was  $436,000  compared to $493,000 for the three months ended July 31,
1998,  representing  a  decrease  of 11.6%.  The  decrease  is a result of lower
long-term debt levels, primarily due to the repayment of a mortgage.

Financial Position

            During the three months ended July 31, 1999 cash used in  operations
was $2,525,000 compared to a year-ago cash usage of $242,000.

                                       8
<PAGE>

            Cash used for investing  activities  during the first quarter of the
fiscal year ending April 30, 2000 was $430,000  compared to $256,000  during the
first quarter of the fiscal year ended April 30, 1999.

            Cash provided by financing  activities during the three months ended
July 31, 1999 was $2,846,000  compared to $315,000 in the year-ago  period.  The
cash was provided by increases in the  Company's  borrowing  under its revolving
credit facility to fund receivables and growth.

            The  Company's  working  capital  was  $2,719,000  at July 31,  1999
compared to $2,297,000 at April 30, 1999.

            At July 31, 1999, total debt was $13,742,000 compared to $11,013,000
at April 30, 1999.

            Shareholders'  equity  increased  $960,000  during the three  months
ended July 31, 1999, principally reflecting income of $844,000 and proceeds from
the issuance of common stock related to stock option and employee stock plans of
$117,000.



                                       9

<PAGE>
                              DATATEC SYSTEMS, INC.
                                    FORM 10-Q
                           PART II - OTHER INFORMATION

Item 4:     Submission of Matters to a Vote of Security Holders

                        None









                                       10
<PAGE>
                              DATATEC SYSTEMS, INC.
                                    FORM 10-Q
                     PART II - OTHER INFORMATION - CONTINUED


Item 6:     Exhibits and Reports on Form 8-K

            (a)         Exhibit 27 - Financial Data Schedule

(b)         Reports on Form 8-K

                                    None













                                       11
<PAGE>

                                   SIGNATURES


In accordance with the requirements of the Securities  Exchange Act of 1934, the
Registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                                               DATATEC SYSTEMS, INC.
                                                    Registrant



Date:       September 14, 1999                 By: /s/ James M. Caci
                                                   ---------------------------
                                               James M. Caci
                                               Chief Financial Officer and Duly
                                               Authorized Officer