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: JANUARY 31, 1999

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


                         Commission file number: 0-20688
                         -------------------------------

                              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
-------------------------------                              ----------
(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
February 28, 1999 was 30,371,162.
<PAGE>
                              DATATEC SYSTEMS, INC.
                                    FORM 10-Q
                       NINE MONTHS ENDED JANUARY 31, 1999


                                      INDEX
                                      -----


PART I:  FINANCIAL INFORMATION

                                                                            PAGE
         Item 1:     Consolidated Financial Statements

                     Balance Sheets at January 31, 1999 and
                     April 30, 1998                                          3

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

                     Statements of Operations for the nine months ended
                     January 31, 1999 and 1998                               5

                     Statements of Cash Flows for the nine months ended
                     January 31, 1999 and 1998                               6

                     Notes to Unaudited Financial Statements                 7

         Item 2:     Management's Discussion and Analysis of Financial
                     Condition and Results of Operations                     9


PART II: OTHER INFORMATION

         Item 4:     Submission of Matters to a Vote of Security Holders     12

         Item 6:     Exhibits and Reports of Form 8-K                        13

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


<TABLE>
<CAPTION>
                                                                                             JANUARY 31, 1999
                                                                    APRIL 30, 1998              (UNAUDITED)
                                                                    --------------           ----------------
<S>                                                                  <C>                       <C>         
ASSETS

CURRENT ASSETS:

   Cash and cash equivalents                                         $    317,000              $    123,000
   Accounts receivable, net                                            18,106,000                15,912,000
   Inventory                                                            3,118,000                 3,271,000
   Prepaid expenses and other current assets                            2,983,000                 4,747,000
   Net assets from discontinued operations                                501,000                   756,000
                                                                     ------------              ------------

               Total current assets                                    25,025,000                24,809,000

Property and equipment, net                                             6,012,000                 5,383,000
Goodwill, net                                                           3,975,000                 3,648,000
Other Assets                                                            2,801,000                 2,223,000
                                                                     ============              ============

               Total assets                                          $ 37,813,000              $ 36,063,000
                                                                     ============              ============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

   Short-term borrowings                                             $ 10,759,000              $  7,521,000
   Current portion of long-term debt                                    1,063,000                   880,000
   Accounts payable                                                     7,085,000                 9,054,000
   Accrued liabilities                                                  3,882,000                 3,198,000
   Other current liabilities                                            1,214,000                   166,000
                                                                     ------------              ------------

               Total current liabilities                               24,003,000                20,819,000
                                                                     ------------              ------------

Due to related parties                                                    927,000                   903,000
                                                                     ------------              ------------

Long-term debt                                                          2,415,000                 1,777,000
                                                                     ------------              ------------

Commitments and contingencies

Shareholders' equity:

   Preferred stock                                                           --                        --
   Common stock                                                            29,000                    30,000
   Additional paid-in capital                                          29,556,000                32,209,000
   Accumulated deficit                                                (18,769,000)              (19,329,000)
   Cumulative translation adjustment                                     (348,000)                 (346,000)
                                                                     ------------              ------------

      Total shareholders' equity                                       10,468,000                12,564,000
                                                                     ============              ============

       Total liabilities and shareholders' equity                    $ 37,813,000              $ 36,063,000
                                                                     ============              ============
</TABLE>
                                       3
<PAGE>
                              DATATEC SYSTEMS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     FOR THE THREE MONTHS ENDED JANUARY 31,

<TABLE>
<CAPTION>
                                                                              1998                      1999
                                                                            --------                  --------
                                                                                       (unaudited)


<S>                                                                        <C>                        <C>
Net Sales                                                                  $ 17,954,000               $ 19,377,000

Cost of Sales                                                                10,729,000                 13,456,000
                                                                           ------------               ------------
Gross Profit                                                                  7,225,000                  5,921,000

Selling, general and administrative expenses                                  7,179,000                  7,017,000
                                                                           ------------               ------------


Operating income (loss)                                                          46,000                 (1,096,000)

Interest expense, net                                                           350,000                    483,000
                                                                           ------------               ------------

Income (loss) before taxes                                                     (304,000)                (1,579,000)

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

Income (loss) from continuing operations                                       (304,000)                (1,579,000)

Discontinued operations                                                        (443,000)                      --
                                                                           ------------               ------------

Net loss                                                                   $   (747,000)              $ (1,579,000)
                                                                           ============               ============

Income (loss) per share - Basic & Diluted

     Continuing operations                                                 $      (0.01)              $      (0.05)

     Discontinued operations                                               $      (0.02)              $       --
                                                                           ------------               ------------

     Net income (loss) per share - Basic & Diluted                         $      (0.03)              $      (0.05)
                                                                           ============               ============

Weighted average common and common stock
    equivalent shares - Basic & Diluted                                      28,431,000                 29,642,000
                                                                           ============               ============

</TABLE>

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

                                       4
<PAGE>
                              DATATEC SYSTEMS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      FOR THE NINE MONTHS ENDED JANUARY 31,

<TABLE>
<CAPTION>
                                                                             1998                       1999
                                                                           --------                    ------
                                                                                       (unaudited)

<S>                                                                         <C>                        <C>         
Net Sales                                                                   $ 56,078,000               $ 70,098,000

Cost of Sales                                                                 34,091,000                 46,146,000
                                                                            ------------               ------------

Gross Profit                                                                  21,987,000                 23,952,000

Selling, general and administrative expenses                                  20,877,000                 23,064,000
                                                                            ------------               ------------


Operating Income                                                               1,110,000                    888,000

Interest expense, net                                                          1,605,000                  1,448,000
                                                                            ------------               ------------

Income (loss) before taxes                                                      (495,000)                  (560,000)

Provisions for income taxes                                                         --                         --
                                                                            ------------               ------------

Income (loss) from continuing operations                                        (495,000)                  (560,000)

Discontinued operations                                                         (443,000)                      --
                                                                            ------------               ------------

Net income (loss)                                                           $   (938,000)              $   (560,000)
                                                                            ============               ============

Income (loss) per share - Basic & Diluted

     Continuing operations                                                  $      (0.02)              $      (0.02)

     Discontinued operations                                                $      (0.02)              $       --
                                                                            ------------               ------------

     Net income (loss) per share - Basic & Diluted                          $      (0.04)              $      (0.02)
                                                                            ============               ============

Weighted average common and common stock
    equivalent shares - Basic & Diluted                                       25,693,000                 29,285,000
                                                                            ============               ============
</TABLE>



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

                                       5
<PAGE>
                              DATATEC SYSTEMS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  FOR THE NINE MONTHS ENDED JANUARY 31,

<TABLE>
<CAPTION>
                                                                                       1998                1999
                                                                                   ----------           -------- 
                                                                                            (unaudited)

<S>                                                                             <C>                     <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss)                                                               $  (938,000)            $  (560,000)
Adjustments to reconcile net income (loss) to net
     cash used in operating activities:
   Depreciation and amortization                                                  1,451,000               2,387,000
   Accretion of debt discount                                                       250,000                    --
Changes in operating assets and liabilities:
   (Increase) decrease in accounts receivable                                    (2,984,000)              2,194,000
   (Increase) decrease in inventory                                              (1,187,000)               (153,000)
   (Increase) decrease in prepaid expenses and other assets                      (2,510,000)             (1,723,000
   (Increase) decrease in  assets held for sale or disposition                      237,000                (292,000)
                                                                                
    Increase (decrease) in accounts payable,                                    
     accrued and other liabilities                                                 (218,000)                237,000
                                                                                -----------             -----------
                                                                                

Net cash provided by (used in) operating activities                              (5,899,000)              2,090,000
                                                                                -----------             -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment
                                                                                   (994,000)               (881,000)
                                                                                -----------             -----------
  Net cash used in investing activities
                                                                                   (994,000)               (881,000)
                                                                                -----------             -----------


CASH FLOWS FROM FINANCING ACTIVITIES:
   Increase (decrease) in short-term borrowings, net
                                                                                 (7,324,000)             (3,238,000)
   Net proceeds (payments) of indebtedness                                         (811,000)               (821,000)
   Proceeds from issuance of stock                                                4,076,000               2,654,000
                                                                                -----------             -----------

    Net cash provided by (used in) financing activities                           5,941,000              (1,405,000)
                                                                                -----------             -----------
                                                                                             
    Net effect of foreign currency translation
                                                                                    (63,000)                  2,000
                                                                                -----------             -----------
    Net decrease in cash
                                                                                 (1,015,000)               (194,000)
CASH AT BEGINNING OF PERIOD
                                                                                  1,135,000                 317,000
                                                                                -----------             -----------
CASH AT END OF PERIOD                                                           $   120,000             $   123,000
                                                                                ===========             ===========
</TABLE>


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

                                       6
<PAGE>



                              DATATEC SYSTEMS, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


(1)     Business

        Datatec Systems,  Inc. (the "Company"),  and its subsidiaries are in the
business of providing rapid and accurate technology deployment services.

(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, 1998.  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 and nine months ended
January 31, 1999 are not necessarily  indicative of the results expected for the
full fiscal year.

(3)     Comprehensive Income

        Effective  May 1, 1998,  the  Company  adopted  Statement  of  Financial
Accounting Standards ("SFAS") No. 130 "Reporting  Comprehensive  Income",  which
establishes  standards for reporting and displaying of comprehensive  income and
its  components  (revenue,  expenses,  gains,  and  losses)  in a  full  set  of
general-purpose  financial  statements.  For the  three  and nine  months  ended
January 31, 1999, the components of comprehensive  income were  immaterial.  The
components of other comprehensive  income consists primarily of foreign currency
translation adjustments.

(4)     Equity

        In May 1998,  the  Company  issued  300  shares of Series E  Convertible
Preferred  Stock.  The  net  proceeds  from  this  issuance  were  approximately
$2,350,000. In connection with this transaction,  the Company issued warrants to
purchase 165,000 shares of common stock at $6.29.  Through January 31, 1999, 150
shares of the Series E Convertible  Preferred  Stock were converted into 601,000
shares of common stock.

        In February 1999, the Company issued 533,334 shares of common stock in a
private  placement  at $3.75 per  share.  Net  proceeds  were  approximately  $2
million.

(5)     Earnings per share:

        Basic earnings per share is calculated using the weighted average number
of shares  outstanding  for the three and nine months ended January 31, 1998 and
1999.  Diluted  

                                       7


<PAGE>

earnings per shares 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 and nine months ended  January 31, 1998
and  1999.  Outstanding  options  and  warrants  have  been  excluded  from  the
computation of diluted EPS as their inclusion would have been  anti-dilutive for
these periods.

(6)    Supplemental Disclosure of Cash Flows

       Cash paid during the nine months ended January 31:

                                              1998                 1999
                                       -----------------      --------------
                      Interest Paid         $828,000            $1,221,000


(7)    Change in Accounting Policy

       On March 4, 1998, the American  Institute of Certified Public Accountants
("AICPA") issues Statement of Position ("SOP") 98-1 "Accounting for the Costs of
Computer  Software  Developed or Obtained  for  Internal  Use." The new standard
provides guidance on accounting for the costs of computer software  developed or
obtained for internal use. The Company has adopted the new standard in the third
quarter of 1999.  The effect of  adopting  the new  standard  was to  capitalize
approximately $520,000 of internal software development costs.

       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  cots in  certain  industries  and
requires  that all  nongovernmental  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  and  organization
activities.  Companies  must adopt the new  standard in fiscal  years  beginning
after December 15, 1998. At adoption,  a company must record a cumulative effect
of a change in accounting  principle to write off any unamortized start-up costs
that existed as of the  beginning of the fiscal year in which the SOP is adopted
and an operating  expense for those costs which were  incurred  and  capitalized
since the beginning of the fiscal year and adoption of the SOP.

       The Company has decided to adopt the new standard in the first quarter of
2000.  Had the Company  adopted the new  standard as of January 31, 1999 the net
loss of $560,000 for the nine months ended January 31, 1999 would have increased
by $2,844,000  for the effect of the  write-off of  capitalized  costs  incurred
through the third quarter of 1999.


                                       8
<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 AND NINE MONTHS ENDED JANUARY 31, 1999

        Net sales for the three and nine  months  ended  January  31,  1999 were
$19,377,000  and   $70,098,000,   respectively,   compared  to  $17,954,000  and
$56,078,000  respectively  for the three and nine months ended January 31, 1998.
This  represents  an  increase  of 7.9% and 25.0% for the three and nine  months
ended  January 31, 1999,  respectively.  The increase in sales for the three and
nine  months  ended  January  31,  1999 is the result of several  factors:  more
focused efforts on the selling of rapid  configuration  and deployment  services
and increased  non-retail sales. The December holidays fall within the Company's
third  quarter and usually have a  significant  negative  impact on sales.  This
negative impact is the result of the Company's retail  customers  reducing their
purchases from the Company during their peak selling periods.  Historically, the
retail industry has represented  between 50% and 60% of the Company's  sales. As
of January 31, 1999,  the  Company's  backlog of services to be delivered in the
next twelve months increased by $18.9 million to $57.5 million compared to $38.6
million as of October 31, 1998, representing an increase of 49.0%.

        Gross  profits for the three and nine months ended January 31, 1999 were
$5,921,000 and $23,952,000, respectively, compared to $7,225,000 and $21,987,000
in the  three and nine  months  ended  January  31,  1998.  Gross  profits  as a
percentage of net sales were 30.6% and 34.2% for the three and nine months ended
January 31, 1999 compared to 40.2% and 39.2% for the three and nine months ended
January 31, 1998.  Gross  profits for the first two quarters of fiscal 1999 were
approximately  35.0%. The Company had anticipated  slightly lower margins in the
third  quarter,  as a result of lower sales volume and thus less leverage on the
fixed portion of cost of sales. The gross profit  percentage was also negatively
affected by several low margin projects  accounting for a greater  percentage of
the lower sales volume. The Company has undertaken several  initiatives aimed at
improving  its gross  margin  percentage.  These  initiatives  are  focused  on
improving project information, increasing accountability and improving quality.

        Selling,  general  and  administrative  expenses  for the three and nine
months  ended  January  31, 1999 were  $7,017,000  and  $23,064,000  compared to
$7,179,000 and $20,877,000 for the three and nine months ended January 31, 1998.
As a percentage  of sales,  selling,  general and  administrative  expenses were
36.2% and 32.9% for the three and nine months ended  January 31, 1999,  compared
to 40.0% and 37.2% for the three and nine months  ended  January 31,  1998.  The
decrease in selling,  general and  administrative  expenses as a  percentage  of
sales is the result of the  Company's  ability to leverage  its expense  base to
support  increased  sales volume.  In addition,  in accordance with Statement of
Position  98-1  "Accounting  for the Costs of  Computer  Software  Developed  or
Obtained

                                       9

<PAGE>

        for Internal Use", the Company has  capitalized  approximately  $520,000
relating to internal use software.

        Net  interest  expense for the three and nine months  ended  January 31,
1999 was  $483,000  and  $1,448,000,  respectively,  compared  to  $350,000  and
$1,605,000  for the three and nine months ended January 31, 1998.  This increase
in interest  expense for the three  months  ended  January 31, 1999 is primarily
attributable  to an increase  in the average  debt  outstanding  supporting  the
Company's growth in sales.

        The loss from discontinued operations for the three months ended January
31, 1998 was $443,000  representing  additional expenses related to the disposal
and  discontinuance  of  the  Company's   distribution  of  data  communications
equipment business. This business was discontinued in June 1997.

        The  Company's  net loss for the three and nine months ended January 31,
1999  was  $1,579,000  and  $560,000  respectively,  compared  to a net  loss of
$747,000 and $938,000 for the three and nine months ended January 31, 1998.

FINANCIAL POSITION

        During  the nine  months  ended  January  31,  1999,  cash  provided  by
operations was $2,090,000  compared to a year-ago cash usage of $5,899,000.  The
cash  provided by  operations is the result of  significant  collections  in the
third quarter reducing receivable levels and providing cash.

        Cash used for investing  activities  during the first nine months of the
fiscal year ending April 30, 1999 was $881,000  compared to $994,000  during the
first nine months of the fiscal year ended April 30, 1998.

        Cash used in financing  activities  during the nine months ended January
31,  1999 was  $1,405,000  compared  to  $5,941,000  of cash being  provided  by
financing activities in the year-ago period.  Included in the current nine-month
period were net proceeds of  approximately  $2,350,000  from the issuance of 300
shares of Series E Convertible  Preferred  Stock.  The net proceeds were used to
repay the  convertible  note  issued  during  March 1998 to the former  minority
interest  shareholder  of  the  Company's  subsidiary   Computer-Aided  Software
Integration, Inc. and for working capital purposes. Also included in the current
period were  proceeds  from the issuance of common stock related to the exercise
of stock options and  purchases  under the employee  stock  purchase  plan.  The
Company also used the cash  generated  from  operations to reduce the borrowings
outstanding under its revolving credit facility.

        The Company's  shareholders'  equity as of January 31, 1999 increased by
approximately $2,096,000 to $12,564,000, compared to $10,468,000 as of April 30,
1998. The increase in shareholder  equity reflects proceeds from the issuance of
Series E Convertible Preferred Stock and proceeds from the issuance


                                       10

<PAGE>

of common stock related to the exercise of stock options and purchases under the
employee stock purchase plan.

        The Company's working capital improved from $1,022,000 at April 30, 1998
to working capital of $3,990,000 at January 31, 1999.





                                    11

<PAGE>



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


ITEM 4:     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

            NONE



                                       12
<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.

                                       13
<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:       March 17, 1999                  By:  /s/ James M. Caci
                                                --------------------------------
                                                James M. Caci
                                                Chief Financial Officer and Duly
                                                Authorized Officer

                                       14