<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB



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

                  For The Quarterly Period Ended:    MAY 31, 2001
                                                     ------------

                                       or

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

                  For The Transition Period From       To
                                                 ----      ---

                         Commission File Number: 0-21367
                                                 -------

                             DATA TRANSLATION, INC.
                             -----------------------
             (Exact name of registrant as specified in its charter)

          DELAWARE                                        04-3332230
---------------------------                   ----------------------------------
(State or other jurisdiction of organization  (I.R.S. Employer or incorporation)
Identification Number)

                                 100 Locke Drive
                             MARLBORO, MASSACHUSETTS
                -------------------------------------------------
                    (Address of principal executive offices)

                                      01752
                -------------------------------------------------
                                   (Zip code)

                                 (508) 481-3700
                -------------------------------------------------
              (Registrant's telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.    Yes   X     No
                                                                  ---       ---

As of June 30, 2001 there were 2,312,740 shares of the issuer's common stock
outstanding.

Transitional Small Business Disclosure Format (check one):   Yes         No  X
                                                                  ---       ---

<PAGE>
                                                                         2 of 15

                     DATA TRANSLATION, INC. AND SUBSIDIARIES



                                      INDEX
<TABLE>
<CAPTION>

                                                                                  PAGE NO.
<S>                                                                                 <C>
 Part I - Financial Information:
    Consolidated Balance Sheets as of May 31, 2001 and
        November 30, 2000............................................................3

    Consolidated Statements of Operations for the Three Months and Six Months
        Ended May 31, 2001 and May 31, 2000..........................................4

    Consolidated Statements of Cash Flows for the Six Months
        Ended May 31, 2001 and May 31, 2000..........................................5

    Notes to Consolidated Financial Statements.......................................6

    Management's Discussion and Analysis of
        Financial Condition and Results of Operations  .............................11


Part II - Other Information ........................................................14

Signature  .........................................................................15

</TABLE>

<PAGE>
                                                                         3 of 15

PART I.  FINANCIAL INFORMATION

                     DATA TRANSLATION, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                         May 31,              November 30,
                                                                                           2001                  2000
                                                                                      ---------------       ----------------
                                                                                        (Unaudited)
<S>                                                                                 <C>                   <C>
Current Assets:
               Cash and cash equivalents                                            $     2,685,000       $      2,741,000
               Marketable securities                                                        115,000                114,000
               Accounts receivable, net of reserves of
                 $272,000 and $277,000 in 2001 and 2000 respectively                      1,823,000              1,980,000
               Inventories                                                                1,854,000              1,577,000
               Prepaid expenses                                                             520,000                544,000
                                                                                      ---------------       ----------------
                    Total current assets                                                  6,997,000              6,956,000

Equipment and Leasehold Improvements, net                                                   677,000                890,000

Other Assets, net                                                                            72,000                 72,000
                                                                                      ---------------       ----------------

Total Assets                                                                        $     7,746,000       $      7,918,000
                                                                                      ===============       ================


Current Liabilities:
               Accounts payable                                                     $     1,434,000       $      1,450,000
               Accrued expenses                                                           1,906,000              1,895,000
                                                                                      ---------------       ----------------
                    Total current liabilities                                             3,340,000              3,345,000

Stockholders' Investment:
               Preferred Stock, $.01 par value,
                  Authorized - 5,000,000 shares; none issued                                 --                     --
               Common Stock, $.01 par value,
                  Authorized - 30,000,000 shares; 2,312,740 and 2,281,921 shares
                  issued in 2001 and 2000, respectively; 2,256,275 and 2,225,456
                  shares outstanding in 2001 and
                  2000, respectively                                                         23,000                 23,000
               Treasury Stock, common, at cost,
                  56,465 shares in 2001 and 2000                                           (227,000)              (227,000)
               Capital in excess of par value                                            13,186,000             13,145,000
               Accumulated deficit                                                       (8,512,000)            (8,282,000)
               Cumulative translation adjustment                                            (64,000)               (86,000)
                                                                                      ---------------       ----------------

                    Total stockholders' investment                                        4,406,000              4,573,000
                                                                                      ---------------       ----------------

Total Liabilities and Stockholders' Investment                                      $     7,746,000       $      7,918,000
                                                                                      ===============       ================


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

</TABLE>

<PAGE>
                                                                         4 of 15

                    DATA TRANSLATION, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                            Three Months Ended                          Six Months Ended
                                                        May 31,              May 31,              May 31,            May 31,
                                                         2001                 2000                  2001              2000
                                                    ----------------     ----------------      ---------------   ----------------

<S>                                               <C>                  <C>                   <C>               <C>
Net sales                                         $      3,998,000     $      3,959,000      $     8,184,000   $      7,862,000

Cost of sales                                            1,726,000            1,878,000            3,536,000          3,577,000
                                                    ----------------     ----------------      ---------------   ----------------

     Gross profit                                        2,272,000            2,081,000            4,648,000          4,285,000

Research and development expenses                          751,000              751,000            1,521,000          1,388,000
Selling and marketing expenses                           1,234,000            1,208,000            2,460,000          2,298,000
General and administrative expenses                        479,000              539,000              937,000          1,018,000
                                                    ----------------     ----------------      ---------------   ----------------

     Loss from operations                                 (192,000)            (417,000)            (270,000)          (419,000)

Interest income                                             16,000               33,000               42,000             58,000
                                                    ----------------     ----------------      ---------------   ----------------

     Net loss                                     $       (176,000)    $       (384,000)     $      (228,000)  $       (361,000)
                                                    ================     ================      ===============   ================

                                                  $          (0.08)    $          (0.17)     $         (0.10)  $          (0.16)
                                                    ================     ================      ===============   ================

Basic and diluted weighted average number
     of common shares outstanding                        2,256,000            2,195,000            2,250,000          2,189,000
                                                    ================     ================      ===============   ================
</TABLE>


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

<PAGE>
                                                                         5 of 15

                     DATA TRANSLATION, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                                 Six Months Ended
                                                                                           May 31,              May 31,
                                                                                             2001                 2000
                                                                                        ---------------      ---------------
<S>                                                                                   <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                                            $      (228,000)    $      (361,000)
  Adjustments to reconcile net loss to
   net cash used in operating activities-
                     Depreciation and amortization                                            273,000             384,000

                     Change in current assets and liabilities-
                       Accounts receivable                                                    157,000             224,000
                       Inventories                                                           (277,000)           (185,000)
                       Prepaid expenses                                                        24,000            (481,000)
                       Accounts payable                                                       (16,000)            330,000
                       Accrued expenses                                                        10,000            (457,000)
                                                                                        ---------------      ---------------

                     Net cash used in operating activities                                    (57,000)           (546,000)
                                                                                        ---------------      ---------------

CASH FLOWS FROM INVESTING ACTIVITIES:
                     Purchases of equipment and leasehold improvements                        (59,000)           (252,000)
                     Purchases of marketable securities                                      (115,000)            ---
                     Maturity of marketable securities                                        114,000             109,000
                     Increase in other assets                                                     ---             (49,000)
                                                                                        ---------------      ---------------

                     Net cash used in investing activities                                    (60,000)           (192,000)
                                                                                        ---------------      ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
                     Proceeds from stock plans                                                 41,000             107,000
                                                                                        ---------------      ---------------

                    Net cash provided by financing activities                                  41,000             107,000
                                                                                        ---------------      ---------------


EXCHANGE RATE EFFECTS                                                                          20,000             (22,000)
                                                                                        ---------------      ---------------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                                     (56,000)           (653,000)

CASH AND CASH EQUIVALENTS, beginning of period                                              2,741,000           3,989,000
                                                                                        ---------------      ---------------
CASH AND CASH EQUIVALENTS, end of period                                               $    2,685,000       $   3,336,000
                                                                                        ===============      ===============

</TABLE>

<PAGE>
                                                                         6 of 15

                     DATA TRANSLATION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  BASIS OF PRESENTATION

               In the opinion of management, these unaudited consolidated
financial statements and disclosures reflect all adjustments necessary for fair
presentation. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full year.

               Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the notes thereto included in the latest audited financial
statements of Data Translation, Inc. and its subsidiaries (the "Company"), which
are contained in the Company's 2000 Annual Report on Form 10-KSB, filed with the
Securities and Exchange Commission on February 28, 2001.

               The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

2. CASH EQUIVALENTS AND MARKETABLE SECURITIES

               Cash equivalents are carried at cost which approximates market
value and have maturities of less than three months. Cash equivalents include
money market accounts, overnight time deposits, and U.S. Treasury bills.

               The Company accounts for marketable securities in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 115, ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES. Under this standard, the
Company is required to classify all investments in debt and equity securities
into one or more of the following three categories: held-to-maturity,
available-for-sale or trading. The Company's marketable securities mature in
November 2001 and are classified as held-to-maturity as the Company has the
positive intent and ability to hold to maturity. Marketable securities are
reported at amortized cost, which approximates fair market value. The Company's
cash equivalents and marketable securities are invested in highly rated
government securities.

3. DERIVATIVES

               Effective December 1, 2000 the Company adopted SFAS No. 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133
requires that all derivatives, including foreign currency exchange contracts, be
recognized on the balance sheet at fair value. Derivatives that are not hedges
must be recorded at fair value through earnings. If a derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of the
derivative are either offset against the change in fair value of assets,
liabilities or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value is to be immediately
recognized in earnings. The adoption of SFAS No. 133 resulted in an immaterial
cumulative effect on income and other comprehensive income for the Company.

               At May 31, 2001, the Company had entered into certain forward
foreign exchange contracts in order to hedge specific future monthly obligations
denominated in Euros. The Company records its foreign currency exchange
contracts at fair value in its consolidated balance sheets and the related gains
or losses on these hedge contracts are recognized in earnings. Gains and losses
resulting from the impact of currency exchange rate movements on forward foreign
exchange contracts are designated to offset certain accounts receivable and are
recognized as other income or expense in the period in which the exchange rates
change and offset the foreign currency losses and gains on the underlying
exposures being hedged. The Company does not hold or transact in financial
instruments for purposes other than risk management.


4. SEGMENT REPORTING AND GEOGRAPHIC INFORMATION

     (A) SEGMENT REPORTING

<PAGE>
                                                                         7 of 15


     The Company adopted SFAS No. 131. DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION in the fiscal year ended November 30, 1999.
SFAS No. 131 establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected information for
those segments to be presented in interim financial reports issued to
stockholders. SFAS No. 131 also establishes standards for related disclosures
about products and services and geographic areas. Operating segments are
identified as components of an enterprise about which separate financial
information is available for evaluation by the chief decision maker, or decision
making group, in making decisions how to allocate resources and assess
performance. The Company's chief operating decision-maker, as defined under SFAS
No. 131, is the Chief Executive Officer.

     The Company's reportable segments are Core and Broadway(TM). The Core
segment is composed of the data acquisition, imaging and machine vision business
which consists of plug-in cards and Windows-based software that provide an
integrated, high performance system solution to the general scientific and
industrial, test and measurement marketplace. The Broadway segment is composed
of a plug-in video capture card, Broadway, which is a high-performance video
capture and encoding system for Windows 98 and Windows NT PCs. The accounting
policies of the segments are the same as those described in the summary of
significant accounting policies contained in the Company's 2000 Annual Report on
Form 10-KSB, filed with the Securities and Exchange Commission on February 28,
2001. The Company evaluates performance based on revenues and operating margin.
Revenues are attributed to geographic areas based on where the customer is
located. Segment information for the three and six months ended May 31, 2001 and
May 31, 2000 is as follows:

<PAGE>
                                                                         8 of 15

<TABLE>
<CAPTION>

                                                           CORE        BROADWAY          TOTAL

<S>                                                       <C>             <C>          <C>
FOR THE THREE MONTHS ENDED MAY 31, 2001
Revenues from unaffiliated customers................      $ 3,762,000     $ 236,000   $ 3,998,000
Cost of revenue.....................................        1,607,000       119,000     1,726,000
Research and development............................          748,000         3,000       751,000
                                                          -------------   ----------  -----------
Operating margin (1)................................      $ 1,407,000     $ 114,000   $ 1,521,000
                                                          ============    ==========  ===========
FOR THE THREE MONTHS ENDED MAY 31, 2000
Revenues from unaffiliated customers................      $ 3,490,000     $ 469,000   $ 3,959,000
Cost of revenue.....................................        1,648,000       230,000     1,878,000
Research and development............................          704,000        47,000       751,000
                                                          ------------    ----------  -----------
Operating margin (1)................................      $ 1,138,000     $ 192,000   $ 1,330,000
                                                          ============    ==========  ===========

FOR THE SIX MONTHS ENDED MAY 31, 2001
Revenues from unaffiliated customers................      $ 7,630,000     $ 554,000   $ 8,184,000
Cost of revenue.....................................        3,251,000       285,000     3,536,000
Research and development............................        1,515,000         6,000     1,521,000
                                                          ------------    ----------  -----------
Operating margin (1)................................      $ 2,864,000     $ 263,000   $ 3,127,000
                                                          ============    ==========  ===========
FOR THE SIX MONTHS ENDED MAY 31, 2000
Revenues from unaffiliated customers................      $ 6,934,000     $ 928,000   $ 7,862,000
Cost of revenue.....................................        3,118,000       459,000     3,577,000
Research and development............................        1,256,000       132,000     1,388,000
                                                          ------------    ----------  -----------
Operating margin (1)................................      $ 2,560,000     $ 337,000   $ 2,897,000
                                                          ============    ==========  ===========
</TABLE>

(1)  The Operating Margins reported reflect only the expenses of the line of
     business and do not represent the actual margins for each operating segment
     since they do not contain an allocation for selling and marketing, general
     and administrative and other corporate expenses incurred in support of the
     line of business.

     PROFIT RECONCILIATION:

<TABLE>
<CAPTION>
                                                            Three Months Ended                             Six Months Ended
                                                        May 31,              May 31,               May 31,               May 31,
                                                          2001                2000                  2001                   2000
                                                     ---------------     ----------------      ----------------       --------------

<S>                                                <C>                 <C>                   <C>                    <C>
Total operating margin for reportable segments.... $     1,521,000     $      1,330,000      $      3,127,000       $     2,897,000
Selling and marketing expenses....................      (1,234,000)          (1,208,000)           (2,460,000)           (2,298,000)
General and administrative expenses...............        (479,000)            (539,000)             (937,000)           (1,018,000)
Interest income...................................          16,000               33,000                42,000                58,000
                                                     ---------------     ----------------      ----------------       --------------

             Net loss............................. $      (176,000)    $      (384,000)      $       (228,000)      $     (361,000)
                                                     ===============     ================      ================       ==============
<CAPTION>

      (B) GEOGRAPHIC INFORMATION

                                                                         UNITED
                                                        UNITED STATES    KINGDOM       GERMANY    ELIMINATIONS     CONSOLIDATED

<S>                             <C>                       <C>            <C>            <C>             <C>        <C>
FOR THE THREE MONTHS ENDED MAY 31, 2001
Sales to unaffiliated customers (1).................      $ 3,075,000    $ 383,000      $ 540,000     $      --     $ 3,998,000
Sales or transfers between geographic areas.........          457,000           --             --      (457,000)           --
                                                           -----------    ---------       --------     ---------      ----------
Total net sales.....................................      $ 3,532,000    $ 383,000      $ 540,000     $(457,000)    $ 3,998,000
                                                           ===========    =========       ========     =========      ==========
Net loss............................................      $  (148,000)   $ (44,000)     $  (5,000)    $  21,000     $  (176,000)
                                                           ===========    =========       ========     =========      ==========
Long-lived assets...................................      $   615,000    $  53,000      $  22,000     $ (13,000)    $   677,000
                                                           ===========    =========       ========     =========      ==========
FOR THE THREE MONTHS ENDED MAY 31, 2000
Sales to unaffiliated customers (1).................      $ 2,988,000    $ 344,000      $ 627,000     $     --      $ 3,959,000
Sales or transfers between geographic areas.........          468,000           --             --      (468,000)             --
                                                           -----------    ---------       --------     ---------      ----------
Total net sales.....................................      $ 3,456,000    $ 344,000      $ 627,000    $ (468,000)    $ 3,959,000
                                                           ===========    =========       ========     =========      ==========
Net loss............................................      $  (339,000)   $ (32,000)     $ (18,000)   $    5,000     $ (384,000)
                                                           ===========    =========       ========     =========      ==========
Long-lived assets...................................      $ 1,033,000    $  77,000      $  15,000    $  (13,000)    $ 1,112,000
                                                           ===========    =========       ========     =========      ==========
</TABLE>

<PAGE>
                                                                         9 of 15
<TABLE>
<CAPTION>

<S>                             <C>                       <C>            <C>          <C>               <C>        <C>
FOR THE SIX MONTHS ENDED MAY 31, 2001
Sales to unaffiliated customers (2).................      $ 6,255,000    $ 800,000    $ 1,129,000     $      --     $ 8,184,000
Sales or transfers between geographic areas.........          968,000           --             --      (968,000)             --
                                                           -----------    ---------     ----------     ---------      ----------
Total net sales.....................................      $ 7,223,000    $ 800,000    $ 1,129,000     $(968,000)    $ 8,184,000
                                                           ===========    =========     ==========     =========      ==========
Net income (loss)...................................      $  (271,000)   $  (6,000)   $    39,000     $   10,000    $  (228,000)
                                                           ===========    =========     ==========     =========      ==========
Long-lived assets...................................      $   615,000    $  53,000    $    22,000     $ (13,000)    $   677,000
                                                           ===========    =========     ==========     =========      ==========
FOR THE SIX MONTHS ENDED MAY 31, 2000
Sales to unaffiliated customers (2).................      $ 5,941,000    $ 737,000     $1,184,000     $      --     $ 7,862,000
Sales or transfers between geographic areas.........          935,000           --             --      (935,000)             --
                                                           -----------    ---------     ----------     ---------      ----------
Total net sales.....................................      $ 6,876,000    $ 737,000     $1,184,000     $(935,000)    $ 7,862,000
                                                           ===========    =========     ==========     =========      ==========
Net loss............................................      $  (314,000)   $ (22,000)    $  (26,000)    $   1,000     $  (361,000)
                                                           ===========    =========     ==========     =========      ==========
Long-lived assets...................................      $ 1,033,000    $  77,000     $   15,000     $ (13,000)    $ 1,112,000
                                                           ===========    =========     ==========     =========      ==========
</TABLE>

(1)  Foreign sales from the United States to unaffiliated customers for the
     three months ended May 31, 2001 and May 31, 2000 were approximately
     $646,000, and $885,000, respectively.
(2)  Foreign sales from the United States to unaffiliated customers for the six
     months ended May 31, 2001 and May 31, 2000 were approximately $1,462,000,
     and $1,773,000, respectively.


                     DATA TRANSLATION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.  INVENTORIES

               Inventories are stated at the lower of first-in, first-out (FIFO)
cost or market and consist of the following:

                                               May 31,           November 30,
                                                2001                 2000
                                                ----             -----------
               Raw material               $ 1,126,000            $ 1,006,000
               Work-in-process                265,000                213,000
               Finished goods                 463,000                358,000
                                              -------                -------
                                          $ 1,854,000            $ 1,577,000
                                            =========              =========

Work-in-process and finished goods inventories include material, labor and
manufacturing overhead. Management performs periodic reviews of inventory and
disposes of items not required by their manufacturing and marketing plan.


6.  STOCK BUYBACK PLAN

               On June 22, 2000, the Company announced that its Board of
Directors had approved the purchase of up to $250,000 worth of its shares of
common stock over the remainder of the year. Purchases were made at prevailing
prices as market conditions and cash availability permitted. As of December 31,
2000, the Company completed the program and repurchased 41,465 and 15,000 shares
of its common stock under the 2000 and 1999 Plans, respectively, for an
aggregate purchase price of $227,000, which is classified as treasury stock in
the accompanying consolidated statements of stockholders investment.

7.  NET LOSS PER COMMON SHARE

               Basic net loss per share is computed by dividing net loss by the
weighted average number of common shares outstanding during the period. The
dilutive effect of potential common stock, consisting of outstanding stock
options, is determined using the treasury method in accordance with SFAS 128.
Diluted net loss per share for the three and six months ended May 31, 2001 and
2000 is the same as basic net loss per share since the inclusion of the
potential common stock equivalents would be antidilutive. As of May 31, 2001 and
2000, 21,162 and 230,567 common equivalent shares respectively, have been
excluded from the calculation of diluted earnings per share.

<PAGE>
                                                                        10 of 15

8.  STOCK COMPENSATION

               In March 2000, the FASB issued Interpretation No. 44, ACCOUNTING
FOR CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION-AN INTERPRETATION OF APB
OPINION NO. 25. The interpretation clarifies the application of Opinion 25 in
certain situations, as defined. The interpretation became effective on July 1,
2000, and covers certain events that occur after December 15, 1998. The effects
of applying this interpretation should be recognized on a prospective basis from
the effective date. As of May 31, 2001, 50,000 options that were repriced after
December 15, 1998 are subject to this interpretation and will be subject to
variable accounting through their date of exercise or termination. There was no
effect on earnings during the second quarter of fiscal 2001.

<PAGE>
                                                                        11 of 15


                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS

     This Form 10-Q may contain "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, including, without limitation, with
respect to (i) the Company's anticipated liquidity position, (ii) market
conditions and trends in the markets in which the Company participates, (iii)
the Company's ability to meet its current operating requirements, (iv) the
impact on the Company's business results of operations, and financial condition
of contingencies over which the Company has no control, and (vi) certain other
statements identified or qualified by words such as "likely", "will",
"suggests", "may", "would", "could", "should", "expects", "anticipates",
"estimates", "plans", "projects", "believes", "is optimistic about", or similar
expressions (and variants of such words of expressions). Investors are cautioned
that forward-looking statements are inherently uncertain. These forward-looking
statements represent the best judgment of the Company as on the date of this
Form 10-Q and the Company cautions readers not to place undue reliance on such
statements. Actual performance and results of operations may differ materially
from those projected or suggested in the forward-looking statements due to
certain risks and uncertainties including, without limitation, risks described
under the heading "Certain Factors That May Affect Future Results" in the
Company's 2000 Annual Report on Form 10-KSB, filed with the Securities and
Exchange Commission on February 28, 2001.

RESULTS OF OPERATIONS

     The following table sets forth certain consolidated statement of operations
     data as a percentage of net sales.

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED       SIX MONTHS ENDED
                                                                       MAY 31,                  MAY 31,

                                                                   2001        2000        2001        2000
                                                                   ----        ----        ----        ----
<S>                                                               <C>         <C>         <C>         <C>
Net sales.....................................................    100.0       100.0       100.0       100.0
Gross profit..................................................     56.8        52.6        56.8        54.5
Research and development expenses.............................     18.8        19.0        18.6        17.7
Selling and marketing expenses................................     30.8        30.5        30.0        29.2
General and administrative expenses...........................     12.0        13.6        11.5        12.9
                                                                  ------      ------      ------      -----
Loss from operations..........................................     (4.8)      (10.5)       (3.3)      (5.3)
Interest (expense) income and other, net......................      0.4         0.8         0.5        0.7
                                                                  ------      ------      ------      -----
Net loss......................................................     (4.4)%      (9.7)%      (2.8)%     (4.6)%
                                                                  ======      ------      ======      =====
</TABLE>

COMPARISON OF SECOND FISCAL QUARTER OF 2001 TO SECOND FISCAL QUARTER OF 2000:

     Net sales for the fiscal quarter ended May 31, 2001 were $3,998,000, an
increase of $39,000, or 1.0%, from the same period a year ago. The increase was
attributable primarily to higher sales of the Company's core products.
Additionally, the Company believes that it is currently in the midst of an
acceptance period as newly released products are being introduced to the
marketplace to replace the Company's legacy products. The Company will have to
manage successfully the transition from the legacy products in order to maintain
the appropriate level of revenue to support the Company's expense base.

     Gross profit for the fiscal quarter ended May 31, 2001 was 56.8%, compared
to 52.6% in the comparable quarter of the prior year. The increase in gross
profit from the comparable prior year period was the result of a more favorable
product mix and increased list prices.

<PAGE>
                                                                        12 of 15

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (CONTINUED)

     The loss from operations for the second fiscal quarter of 2001 was
$192,000, compared to a loss from operations of $417,000 in the comparable
quarter of the prior year. The decrease in net loss is primarily a result of
improved gross margin performance through a combination of product mix and
increased pricing. Operating expenses for the second quarter of fiscal 2001 were
$2,464,000, representing 61.6% of sales, compared to $2,498,000, representing
63.1% of sales, in the prior year period. Research and development expenses for
the second quarter of fiscal 2001 were $751,000, representing 18.8% of sales,
compared to $751,000, representing 19.0% of sales, for the comparable period of
the prior year. Sales and marketing expenses for the second quarter of fiscal
2001 were $1,234,000, representing 30.8% of sales, compared to $1,208,000,
representing 30.5% of sales, in the prior year period. General and
administrative expenses were $479,000 for the first quarter of fiscal 2001,
representing 12.0% of sales, compared to $539,000, representing 13.6% of sales,
for the same period last year. The slight decrease in general and administrative
expenses is primarily the result of a reduction in staff and professional fees
within the general and administrative departments.

     The net loss for the fiscal quarter ended May 31, 2001 was $176,000, or
$0.08 per diluted share, compared to a net loss of $384,000, or $0.17 per
diluted share, for the same period in 2000.

COMPARISON OF THE FIRST SIX MONTHS OF FISCAL 2001 TO THE FIRST SIX MONTHS OF
FISCAL 2000:

     Net sales for the six months ended May 31, 2001 were $8,184,000, an
increase of $322,000, or 4.1%, from the same period a year ago. Sales of the
Company's commercial product, Broadway, have decreased approximately 40.3% from
the same period in fiscal 2000. The decrease in sales is primarily a result of a
decrease in the size of the Company's Broadway sales force, consolidation of the
Company's Broadway marketing programs and continuing pricing pressures from
competitors. Sales of the Company's data acquisition, imaging and machine vision
products increased approximately 10.0% from the comparable period in fiscal
2000, which the Company believes is due primarily to release of new products
into the marketplace as well as continued success of the Company's legacy
business. Additionally, the Company believes that it is currently in the midst
of an acceptance period as newly released products are being introduced to the
marketplace to replace the Company's legacy products. The Company will have to
manage successfully the transition from the legacy products in order to maintain
the appropriate level of revenue to support the Company's expense base.

     Gross profit for the six months ended May 31, 2001 was 56.8%, compared to
54.5% in the comparable period of the prior year. The increase in gross profit
from the comparable prior year period was the result of a more favorable product
mix and increased list prices.

     The Company's loss from operations for the first six months of fiscal 2001
was $270,000, compared to a loss from operations of $419,000 in the comparable
period of the prior year. An increase in gross profits as a result of product
mix and increased pricing contributed to the reduced loss from operations.
Operating expenses for the first six months of fiscal 2001 were $4,918,000,
representing 60.1% of sales, compared to $4,704,000, representing 59.8% of
sales, in the prior year period. Current year operating expenses include a
continued investment in research and development, marketing, promotion and sales
channel development for the Company's data acquisition, imaging and machine
vision products. Research and development expenses were $1,521,000, representing
18.6% of sales, compared to $1,388,000, representing 17.7% of sales, for the
comparable period of the prior year. This increase is primarily attributable to
an increased development effort in the Company's data acquisition, imaging and
machine vision product lines. Sales and marketing expenses were $2,460,000,
representing 30.0% of sales, compared to $2,298,000, representing 29.2% of
sales, in the prior year period. The increase in sales and marketing expenses is
primarily a result of an increase in the size of the Company's sales force and
an aggressive marketing campaign that was introduced during fiscal 2000 to
promote the Company's new products. General and administrative expenses were
$937,000, representing 11.5% of sales, compared to $1,018,000, representing
12.9% of sales, for the comparable period in fiscal 2000. The slight decrease in
general and administrative expenses is primarily the result of a reduction in
staff and professional fees within the general and administrative departments.


     The net loss for the six months ended May 31, 2001 was $228,000, of $0.10
per diluted share, compared to a net loss of $361,000, or $0.16 per diluted
share.

<PAGE>
                                                                        13 of 15

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (CONTINUED)

LIQUIDITY AND CAPITAL RESOURCES

     As of May 31, 2001, the Company had cash, cash equivalents and marketable
securities totaling $2,800,000, as compared to cash, cash equivalents and
marketable securities of $2,855,000 as of November 30, 2000.

     In the first six months of 2001, the Company used $57,000 for operating
activities, resulting from a net loss, an increase in inventory and a decrease
in accounts payable, partially offset by decreases in accounts receivable and
prepaid expenses and an increase in accrued expenses.

     The Company used $60,000 for investing activities in the first six months
of 2001, principally as a result of acquisitions of property and equipment.

     The Company generated funds from financing activities of $41,000 during the
first six months of 2001 related to the issuance of stock under the Company's
employee stock purchase plan.

        On May 23, 2001, the Company filed a Form S-3 with the Securities and
Exchange Commission in conjunction with a planned rights offering, pursuant to
which the Company will distribute to its shareholders, one non-transferable
subscription right for each share of common stock owned by its shareholders as
of the record date of the rights offering. The rights offering will allow the
holders of the Company's common stock to purchase additional shares of the
Company's common stock at a fixed price and in an amount proportional to each
shareholder's existing interest.

       Alfred A. Molinari, Chief Executive Officer and a stockholder of the
Company, has advised us that he intends, but is not obligated, to exercise all
of his subscription rights to purchase 418,442 shares in the rights offering,
which is the full amount of his basic subscription right and also intends, but
is not obligated, to purchase additional shares of Data Translation common
stock, if available, provided that the aggregate dollar amount, including the
cost to exercise his basic subscription right does not exceed $2,000,000.

      The Company is offering the subscription rights to obtain additional
working capital, allowing us to continue to invest in research and development
and expand our sales and marketing capabilities. There can be no assurance that
the Company will be successful in obtaining financing in the rights offering.

      Given currently available funds, the Company believes that it will be able
to meet its current operating requirements for the remainder of the current
fiscal year. If the Company is unsuccessful in increasing revenues or if its
liquidity position deteriorates, the Company will need to secure external
financing in order to meet its ongoing expenses. Therefore, the Company is
pursuing possible financing alternatives, but there can be no assurance that the
Company will be successful in obtaining any required financing.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company does not engage in trading market risk sensitive instruments or
"other than trading" instruments that are likely to expose the Company to market
risk, whether interest rate, foreign currency exchange, commodity price or
equity price risk. At May 31, 2001, the Company had entered into certain forward
foreign exchange contracts in order to hedge specific future monthly obligations
denominated in Euros. The Company does not hold or transact in financial
instruments for purposes other than risk management. To a certain extent, the
Company is exposed to market risk related to changes in foreign currency
exchange rates. These exposures may change over time as business practices
evolve and could have a material adverse effect on the Company's business,
financial condition and results of operations. Historically, the Company's
primary foreign currency exchange rate exposure has been related to the
operations of its European subsidiaries. Through May 31, 2001, foreign currency
fluctuations have not had a material impact on the Company's financial position
or results of operations.

<PAGE>
                                                                        14 of 15

                           PART II. OTHER INFORMATION


Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
        ---------------------------------------------------

               a)  The Annual Meeting of Stockholders of the Company was held on
                   April 12, 2001.

               b)  The first matter voted upon at the meeting was the election
                   of D'Anne Hurd and Dr. David Cyganski for three-year terms as
                   a Class II Directors. The voting results were as follows:

                      1,980,438 votes FOR

                          4,723 votes AGAINST

                        324,467 votes ABSTAINED


Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

               a)  Exhibits

                           Exhibit
                           Number                         Description
                           -------                 -----------------------
                            27                     Financial Data Schedule

               b)  Reports on Form 8-K

                      No reports on Form 8-K were filed during the period
covered by this report.

<PAGE>
                                                                        15 of 15

                                    SIGNATURE


          Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                    DATA TRANSLATION, INC.



Date:    July 16, 2001              By: /s/ Michael A. DiPoto
                                        ----------------------------------------
                                         Michael A. DiPoto
                                         Vice President Finance
                                         and Chief Financial Officer