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

                For the quarterly period ended: January 31, 2001
                                                ----------------

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


                        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.)


23 Madison Road, Fairfield, NJ                                 07004
-------------------------------                      ---------------------------
(Address of principal executive                              (Zip Code)
offices)

                                 (973) 808-4000
                           --------------------------
               Registrant's telephone number, including area code


Check 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 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 March 16, 2001
was 33,672,854.

<PAGE>
                              DATATEC SYSTEMS, INC.
                                    FORM 10-Q
                       THREE MONTHS ENDED JANUARY 31, 2001


                                      INDEX
                                      -----

PART I:   FINANCIAL INFORMATION

                                                                            Page
          Item 1: Consolidated Financial Statements

                  Balance Sheets at April 30, 2000 and
                  January 31, 2001                                             3

                  Statements of Operations for the three months ended
                  January 31, 2000 and 2001                                    4

                  Statements of Comprehensive Income for the
                  three months ended January 31, 2000 and 2001                 5

                  Statements of Operations for the nine months ended
                  January 31, 2000 and 2001                                    6

                  Statements of Comprehensive Income for the
                  nine months ended January 31, 2000 and 2001                  7

                  Statements of Cash Flows for the nine months ended
                  January 31, 2000 and 2001                                    8

                  Notes to Unaudited Consolidated Financial Statements      9,10

          Item 2: Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                      11,12


PART II:  OTHER INFORMATION

                  Item 3:     Defaults Upon Senior Securities                 13

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


                                       2
<PAGE>

ITEM 1:        CONSOLIDATED FINANCIAL STATEMENTS

                              DATATEC SYSTEMS, INC.
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                     January  31, 2001
                                                     April 30, 2000    (unaudited)
                                                     --------------    ------------

ASSETS
------------------------------------
CURRENT ASSETS:

<S>                                                  <C>              <C>
   Cash and cash equivalents                         $ 10,077,000     $  4,923,000
   Receivables, net                                    23,849,000       28,410,000
   Inventory                                            5,129,000        5,178,000
   Prepaid expenses and other current assets            1,301,000          880,000
                                                     ------------     ------------

               Total current assets                    40,356,000       39,391,000

Property and equipment, net                             5,169,000        5,572,000
Goodwill, net                                           3,102,000        2,774,000
Other assets                                            6,435,000        7,300,000
                                                     ------------     ------------

               Total assets                          $ 55,062,000     $ 55,037,000
                                                     ============     ============

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:

   Short-term borrowings                             $  9,070,000     $ 16,237,000
   Current portion of long-term debt                      776,000          233,000
   Accounts payable                                     9,480,000       10,653,000
   Accrued and other liabilities                        3,482,000        5,399,000
   Due to related parties                               1,390,000        1,390,000
                                                     ------------     ------------
               Total current liabilities               24,198,000       33,912,000
                                                     ------------     ------------
Long-term debt                                            226,000           54,000
                                                     ------------     ------------
                                                        9,593,000        9,654,000
Minority interest

Shareholders' equity:
   Common stock                                            33,000           33,000
   Additional paid-in capital                          42,268,000       42,892,000
   Accumulated deficit                                (20,908,000)     (31,160,000)
   Accumulated comprehensive loss                        (348,000)        (348,000)
                                                     ------------     ------------

      Total shareholders' equity                       21,045,000       11,417,000
                                                     ------------     ------------

      Total liabilities and shareholders' equity     $ 55,062,000     $ 55,037,000
                                                     ============     ============

</TABLE>


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

                                       3
<PAGE>
                              DATATEC SYSTEMS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)

                                                   For the Three Months Ended
                                                           January 31,
                                                 ------------------------------
                                                      2000              2001
                                                 ------------     -------------


Revenues                                         $ 21,363,000     $ 21,279,000

Cost of revenues                                   13,799,000       17,733,000
                                                 ------------     ------------

Gross profit                                        7,564,000        3,546,000

Selling, general and administrative expenses        8,158,000       12,951,000
                                                 ------------     ------------

Operating loss                                       (594,000)      (9,405,000)

Interest expense                                      437,000          475,000
                                                 ------------     ------------
 Loss before minority interest                     (1,031,000)      (9,880,000)

Minority interest                                        --           (171,000)
                                                 ------------     ------------

 Net loss                                        ($ 1,031,000)    ($10,051,000)
                                                 ============     ============

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

 Net loss                                        ($       .03)    ($       .30)
                                                 ============     ============

 WEIGHTED AVERAGE COMMON SHARES - BASIC            31,467,000       33,657,000
                                                 ============     ============

  WEIGHTED AVERAGE COMMON AND COMMON
     EQUIVALENT SHARES  - DILUTED                  31,467,000       33,657,000
                                                 ============     ============

     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 theThree Months Ended
                                                                         January 31,
                                                         -------------------------------------------
                                                            2000                    2001
                                                         -------------------      ------------------

<S>                                                        <C>                      <C>
     Net Loss                                              ($    1,031,000)         ($  10,051,000)

     Other comprehensive loss-
        Foreign currency translation adjustment                    ( 2,000)          ---
                                                         -------------------      ------------------

     Comprehensive loss                                     ($   1,033,000)         ($  10,051,000)
                                                         ===================      ==================
</TABLE>


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

                                       5
<PAGE>
                              DATATEC SYSTEMS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                         For the Nine Months Ended
                                                                January 31,
                                                    -----------------------------------
                                                         2000                 2001
                                                    --------------      ---------------

<S>                                                  <C>                  <C>
Revenues                                             $72,422,000          $ 78,638,000

Cost of revenues                                      45,560,000            53,633,000
                                                     -----------          ------------

Gross profit                                          26,862,000            25,005,000

Selling, general and administrative expenses          24,878,000            33,568,000
                                                     -----------          ------------

Operating income (loss)                                1,984,000            (8,563,000)

Interest expense                                       1,347,000             1,178,000
                                                     -----------          ------------
 Income (loss) before minority interest                  637,000            (9,741,000)

Minority interest                                           --                (511,000)
                                                     -----------          ------------

 Net income (loss)                                   $   637,000          ($10,252,000)
                                                     ===========          ============

 Income (loss) per share (Note 3):

 Basic:                                              $       .02          ($       .31)
                                                     ===========          ============

 Diluted:                                            $       .02          ($       .31)
                                                     ===========          ============

 WEIGHTED AVERAGE COMMON SHARES - BASIC               31,129,000            33,562,000
                                                     ===========          ============

  WEIGHTED AVERAGE COMMON AND COMMON
    EQUIVALENT SHARES  - DILUTED                      31,614,000            33,562,000
                                                     ===========          ============
</TABLE>

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



                                       6
<PAGE>
                              DATATEC SYSTEMS, INC.
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                                   (unaudited)

                                                 For the Nine Months Ended
                                                        January 31,
                                              ------------------------------
                                                  2000              2001
                                              -----------      -------------

Net Income (loss)                              $ 637,000       ($10,252,000)

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

Comprehensive income (loss)                    $ 634,000       ($10,252,000)
                                               =========       ============


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




                                       7

<PAGE>

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


<TABLE>
<CAPTION>
                                                                       For the Nine Months Ended
                                                                               January 31,
                                                                     ------------------------------
                                                                         2000              2001
                                                                     ------------     -------------
CASH FLOWS FROM OPERATING ACTIVITIES

<S>                                                                  <C>              <C>
  Net income (loss)                                                  $   637,000      ($10,252,000)

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

       Depreciation and amortization                                   2,518,000         3,700,000

       Accretion of preferred discount                                      --              61,000

       Changes in operating assets and liabilities:

           Increase in accounts receivable                            (4,949,000)       (4,561,000)

           Increase in inventory                                      (1,538,000)          (49,000)

           Increase in prepaid expenses and other assets                (179,000)       (2,026,000)


           Decrease in net assets held from discontinued
            operations                                                   447,000              --

         (Decrease) increase in accounts payable, accrued and
         other liabilities                                            (1,319,000)        3,090,000
                                                                     -----------      ------------

       Net cash used in operating activities                          (4,383,000)      (10,037,000)
                                                                     -----------      ------------

CASH FLOWS FROM INVESTING ACTIVITIES:

       Purchases of property and equipment                            (1,244,000)       (2,193,000)
                                                                     -----------      ------------
       Net cash used in investing activities                          (1,244,000)       (2,193,000)
                                                                     -----------      ------------
CASH FLOWS FROM FINANCING ACTIVITIES:

        Net increase in short-term borrowings                          2,617,000         7,167,000

        Net payments of indebtedness                                  (1,136,000)         (715,000)

        Net proceeds from common stock/warrant issuances               3,997,000           624,000
                                                                     -----------      ------------
              Net cash provided by financing activities                5,478,000         7,076,000
                                                                     -----------      ------------
              Net effect of foreign currency translation on cash          (3,000)             --
                                                                     -----------      ------------
              Net decrease in cash                                      (152,000)       (5,154,000)

Cash at beginning of period                                              234,000        10,077,000
                                                                     -----------      ------------
Cash at end of period                                                $    82,000      $  4,923,000
                                                                     ===========      ============
</TABLE>

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


                                       8
<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,  2000.  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, 2001 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 and nine months ended January
31, 2000 and 2001.  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 and nine months
ended  January 31, 2000 and 2001.  Outstanding  options and  warrants  have been
excluded for the three  months ended  January 31, 2000 and 2001 and for the nine
months ended January 31, 2001 as their  inclusion  would have been  antidilutive
for these periods.

(4)         Supplemental Disclosure of Cash Flows

            Cash paid during the nine months ended January 31:

                                              2000           2001
                                          -----------     ---------
                    Interest Paid         $ 1,132,000     $ 456,000


                                       9
<PAGE>


(5)         Segment Information

For the Three Months Ended January 31,
<TABLE>
<CAPTION>
                     --------------------------------------------------------------------------------------------------------------
                                               2001                                                  2000
                     --------------------------------------------------------------------------------------------------------------
                      Deployment                                              Deployment
                       Services      EDeploy    Eliminations  Consolidated     Services    eDeploy    Eliminations    Consolidated
                     --------------------------------------------------------------------------------------------------------------
<S>                   <C>             <C>        <C>           <C>           <C>            <C>           <C>          <C>
Revenues              $21,090,000     $264,000   ($ 75,000)    $21,279,000   $20,873,000    $490,000      $0           $21,363,000

Cost of
Revenues               17,412,000      396,000    ( 75,000)     17,733,000    13,699,000     100,000     ---            13,799,000
                     --------------------------------------------------------------------------------------------------------------

Gross Profit            3,678,000     (132,000)        ---       3,546,000     7,174,000     390,000     ---             7,564,000

SG&A
Expenses               10,179,000    2,772,000         ---      12,951,000     7,540,000     618,000     ---             8,158,000
                     --------------------------------------------------------------------------------------------------------------

Operating
Income (loss)          (6,501,000)  (2,904,000)        ---      (9,405,000)     (366,000)   (228,000)    ---              (594,000)

Interest expense,
net                       179,000      316,000     (20,000)        475,000       130,000     307,000     ---               437,000
                     --------------------------------------------------------------------------------------------------------------

Income (loss)
before Minority
Interest               (6,680,000)  (3,220,000)     20,000      (9,880,000)     (496,000)   (535,000)    ---           ( 1,031,000)

Minority Interest             ---          ---     171,000         171,000           ---         ---     ---                    $0
                     --------------------------------------------------------------------------------------------------------------

Net Income
(loss)                 (6,680,000)  (3,220,000)   (151,000)    (10,051,000)     (496,000)   (535,000)    ---            (1,031,000)
===================================================================================================================================
</TABLE>


For the Nine Months Ended January 31,
<TABLE>
<CAPTION>
                     -------------------------------------------------------------------------------------------------------------
                                               2001                                                  2000
                     -------------------------------------------------------------------------------------------------------------
                      Deployment                                              Deployment
                       Services      Edeploy     Eliminations  Consolidated   Services     eDeploy     Eliminations    Consolidated
                     ------------------------------------------------------------------------------------------------------------
<S>                   <C>            <C>          <C>           <C>          <C>           <C>              <C>       <C>
Revenues              $76,832,000    $2,215,000   ($409,000)    $78,638,000  $71,393,000   $1,029,000       $0        $72,422,000

Cost of
Revenues               52,951,000     1,091,000    (409,000)     53,633,000   45,259,000      301,000      ---         45,560,000
                     -------------------------------------------------------------------------------------------------------------

Gross Profit           23,881,000     1,124,000         ---      25,005,000   26,134,000      728,000      ---         26,862,000

SG&A Expenses
                       27,637,000     5,931,000         ---      33,568,000   23,086,000    1,792,000      ---         24,878,000
                     -------------------------------------------------------------------------------------------------------------

Operating
Income (loss)          (3,756,000)   (4,807,000)        ---      (8,563,000)    3,048,000  (1,064,000)     ---          1,984,000

Interest expense,
net                       431,000       808,000     (61,000)      1,178,000      482,000      865,000      ---          1,347,000
                     -------------------------------------------------------------------------------------------------------------
Income (loss)
before Minority
Interest               (4,187,000)   (5,615,000)     61,000       9,741,000    2,566,000   (1,929,000)     ---            637,000

Minority
Interest                      ---           ---    (511,000)       (511,000)         ---         ---       ---                ---
                     -------------------------------------------------------------------------------------------------------------

Net Income
(loss)                 (4,187,000)   (5,615,000)   (450,000)    (10,252,000)    2,566,000  (1,929,000)     ---            637,000
                     =============================================================================================================
</TABLE>


                                       10
<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 and Nine Months
------------------------------------------------------------
Ended January 31, 2001
----------------------

            Revenues.  Revenues for the three and nine months ended  January 31,
2001 were  $21,279,000 and  $78,638,000  compared to $21,363,000 and $72,422,000
for the three and nine months ended January 31, 2000, respectively, representing
an  decrease  of .4% and an  increase  of 8.6% for the  three  and nine  months,
respectively.  Included in revenues for the three and nine months ended  January
31, 2001 were eDeploy.com revenues of $189,000 and $1,806,000, respectively, net
of eliminating  intercompany  revenues.  Intercompany  revenues were $75,000 and
$409,000 for  eDeploy.com  for the three and nine months ended January 31, 2001,
respectively.

            Gross  Profit.  Gross  profits for the three and nine  months  ended
January 31, 2001 were  $3,546,000  and  $25,005,000  compared to $7,564,000  and
$27,163,000 for the three and nine months ended January 31, 2000,  respectively.
Gross  profits as a  percentage  of net sales were 16.7% and 31.8% for the three
and nine months ended January 31, 2001 compared to 35.4% and 37.5% for the three
and nine months  ended  January 31,  2000,  respectively.  The decrease in gross
margin  percentage is primarily  attributable  to project  postponements  in the
quarter and an  inability to eliminate  costs  following an abrupt  reduction in
sales volume.

            Selling, general and administrative  expenses.  Selling, general and
administrative  expenses  for the three and nine months  ended  January 31, 2001
were $12,951,000 and $33,568,000 compared to $8,158,000 and $25,179,000, for the
three and nine months ended January 31, 2000,  respectively.  As a percentage of
sales, selling, general and administrative expenses were 60.9% and 42.7% for the
three and nine months ended  January 31,  2001,  compared to 38.2% and 34.8% for
the three and nine months ended January 31, 2000, respectively.  The increase is
due to a combination of the Company's  continued  investment in eDeploy.com  and
higher expenses associated with growth in revenues. Included in selling, general
and administrative expenses for the three and nine months ended January 31, 2001
were eDeploy.com expenses of $2,772,000 and $5,931,000,  respectively,  compared
to $618,000 and $1,700,000 for the comparable periods in the prior year.

            Interest expense. Net interest expense for the three and nine months
ended  January 31, 2001 was  $475,000  and  $1,178,000  compared to $437,000 and
$1,347,000, for the three and nine months ended January 31, 2000, respectively.

Reclassifications
-----------------

            Certain prior year amounts have been  reclassified to conform to the
current year financial statement presentation.


                                       11

<PAGE>

Financial Position
------------------

            During  the  nine  months  ended  January  31,  2001,  cash  used in
operations was $10,037,000,  compared to $4,383,000 during the comparable period
in fiscal 2000.  This is primarily  due to the  continued  investment in eDeploy
operations.

            Cash used for  investing  activities  during the first  nine  months
ended  January  31,  2001 was  $2,193,000  compared  to  $1,244,000  during  the
comparable  period in fiscal 2000. This increase is primarily due to the capital
expenditures associated with the growth in eDeploy.com.

            Cash provided by financing  activities  during the nine months ended
January 31, 2001 was $7,076,000  compared to $5,478,000 in the comparable period
in fiscal  2000.  Included in the  current  period is  primarily  the short term
borrowings  from our current  lender.  In  comparable  period  fiscal 2000,  the
financing  activity  reflects the proceeds from issuance of common stock related
to the exercise of stock  options and  warrants as well as  purchases  under the
employee stock purchase plan.

            At  January  31,  2001,  total  debt  was  $16,524,000  compared  to
$10,072,000 at April 30, 2000.

            The Company's  working capital  decreased from  $16,158,000 at April
30, 2000 to $5,479,000 at January 31, 2001 primarily due to a combination of the
increase in short term borrowings and a decrease in cash.

            Shareholders'  equity  decreased  $9,628,000  during the nine months
ended January 31, 2001,  principally  reflecting a loss of $10,252,000 partially
offset by proceeds  of $624,000  from the  issuance of common  stock  related to
stock option and employee stock purchase plans.

            Datatec   Services  is   currently   meeting  its  working   capital
requirements  by  utilizing an $18 million  working  capital  facility  with IBM
Credit Corporation. As of the date of this filing the loan balance stood at $9.6
million with current availability of approximately $1.8 million. Availability is
dependent  upon several  variables  including  customer  billings and  inventory
levels.  As a  precaution,  the  Company  has  secured  term  sheets for several
different  types of funding from a number of  investment  banks and is reviewing
its options at this time.

            Due to substantial losses in the quarter ended January 31, 2001, the
Company  is  not  currently  in  compliance  with  certain  financial  covenants
contained in its  Inventory and Working  Capital  Financing  Agreement  with IBM
Credit  Corporation.  IBM,  consequently,  has the right to declare  all amounts
under that Agreement to be due and payable, terminating the credit line and term
loan  facility.  The  Company  is  currently  in  discussions  with  IBM  Credit
Corporation  and  believes  that these  issues will be resolved in a manner that
does not adversely impact the Company.

            Although  there can be no  assurance,  the Company  believes it will
have access to adequate cash reserves to sustain its operations  through the end
of fiscal year 2002.


                                       12
<PAGE>

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


Item 3:   Defaults Upon Senior Securities

            Due to substantial losses in the quarter ended January 31, 2001, the
Company  is  not  currently  in  compliance  with  certain  financial  covenants
contained in its  Inventory and Working  Capital  Financing  Agreement  with IBM
Credit  Corporation.  IBM,  consequently,  has the right to declare  all amounts
under that Agreement to be due and payable, terminating the credit line and term
loan  facility.  The  Company  is  currently  in  discussions  with  IBM  Credit
Corporation  and  believes  that these  issues will be resolved in a manner that
does not adversely impact the Company.


Item 6:      Exhibits and Reports on Form 8-K

             (a)  Exhibits

                   None

             (b)  Reports on Form 8-K

                   None



                                       13
<PAGE>
                                   SIGNATURES


In accordance with 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.

                                                DATATEC SYSTEMS, INC.
                                                     Registrant



Date: March 19, 2001                            By:/s/ Ron A. Marino
                                                   -----------------------------
                                                   Ron A. Marino
                                                   Chief Financial Officer