<PAGE>
 
                                   FORM 10-Q

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549


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

For the quarterly period ended:   June 30, 1997
                                  -------------

                                      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  0-26540
                        -------

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

       DELAWARE                             04-3016142
     (State or other jurisdiction of        (I.R.S. Employer
     incorporation or organization)         Identification Number)

                               80 Blanchard Road
                        Burlington, Massachusetts 01803
                   (Address of principal executive offices)

                                (617) 229-3000
             (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 60 days.  Yes   X  .  No ___.
                                         ----

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

<TABLE> 
<CAPTION> 

Title of each class                     Outstanding at August 1, 1997
-------------------                     -----------------------------
<S>                                     <C> 
Common Stock, par value $.01            8,661,910
</TABLE> 
<PAGE>
 
                      DESKTOP DATA, INC. AND SUBSIDIARIES

                               TABLE OF CONTENTS

<TABLE> 
<CAPTION> 

PART I    -  FINANCIAL INFORMATION                                                                                 Page Number
<S>       <C>                                                                                                      <C> 
Item 1    -  Financial Statements

 
             Condensed Consolidated Balance Sheets at           
                      June 30, 1997 and December 31, 1996........................................................       3 
                                                                                
             Condensed Consolidated Statements of Income                         
                      for the three and six months ended June 30, 1997 and 1996..................................       4
                                                                                
             Condensed Consolidated Statements of Cash Flows                     
                      for the six months ended June 30, 1997 and 1996............................................       5  
                                                                                
             Notes to the Condensed Consolidated Financial Statements............................................       6

Item 2    -  Management's Discussion and Analysis of                     
             Financial Condition and Results of Operations.......................................................       8 
 
PART II   -  OTHER INFORMATION
 
Item 4    -  Submission of Matters to a Vote of Security Holders.................................................      12
 
Item 6(a) -  Exhibits............................................................................................      12
 
Item 6(b) -  Reports on Form 8-K.................................................................................      12
 
Signature........................................................................................................      13
 
Exhibit Index....................................................................................................      14
 
Exhibits.........................................................................................................      15
 
</TABLE>

                                       2
<PAGE>
 
ITEM 1                DESKTOP DATA, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                (in thousands)

<TABLE>
<CAPTION>
                                                       Unaudited               
                                                        June 30,   December 31,
                                                          1997         1996    
                                                       ---------   ------------
<S>                                                    <C>         <C>         
                                                                               
ASSETS                                                                         
                                                                               
Current assets:                                                                
  Cash and cash equivalents                             $14,823       $10,735  
  Short-term investments                                 25,961        18,120  
  Accounts receivable                                     7,393         4,948  
  Prepaid expenses and deposits                           2,057         1,814  
                                                        -------       -------  
   Total current assets                                  50,234        35,617  
                                                        -------       -------  
                                                                               
Long-term investments                                       -           7,928  
                                                        -------       -------  
                                                                               
Property and equipment, net                               5,615         4,640  
                                                        -------       -------  
                                                                               
Other assets                                                143           142  
                                                        -------       -------  
                                                                               
      Total assets                                      $55,992       $48,327  
                                                        =======       =======  
                                                                               
LIABILITIES AND STOCKHOLDERS' EQUITY                                           
                                                                               
Current liabilities:                         
  Accounts payable                                      $ 2,286       $   878  
  Accrued expenses                                        5,584         3,572  
  Deferred revenue, current                              16,442        13,631  
  Obligations under capital leases, current                  38            34  
                                                        -------       -------  
   Total current liabilities                             24,350        18,115  
                                                        -------       -------  
                                                                               
Obligations under capital leases, noncurrent                 17            38  
                                                        -------       -------  
                                                                               
Deferred revenue, noncurrent                                 33           190  
                                                        -------       -------  
                                                                               
Commitments (Note 3)                                                           
                                                                               
Stockholders' equity:                                                          
  Common stock                                               87            86  
  Additional paid-in capital                             31,898        31,782  
  Accumulated deficit                                      (393)       (1,884) 
                                                        -------       -------  
   Total stockholders' equity                            31,592        29,984   
                                                        -------       -------  
      Total liabilities &                                                   
         stockholders' equity                           $55,992       $48,327  
                                                        =======       =======   
</TABLE>





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

                                       3
<PAGE>
 
                      DESKTOP DATA, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                  (UNAUDITED)
                     (in thousands, except per share data)
<TABLE>
<CAPTION>
 
 
                                        Three Months Ended   Six Months Ended
                                             June 30,            June 30,
                                          1997      1996      1997      1996
                                          ----      ----      ----      ----
<S>                                      <C>       <C>      <C>      <C>
 
Subscription and royalty revenues        $ 9,893   $7,508   $19,008  $ 14,395 
Other revenues                               822      544     1,456       955
                                         -------   ------   -------  --------
  Total revenues                          10,715    8,052    20,464    15,350
 
Cost of revenues                           3,297    2,178     6,176     4,110
Customer support expenses                  1,471      868     2,480     1,649
Development expenses                       1,339    1,089     2,472     2,160
Sales and marketing expenses               3,742    2,834     7,087     5,450
General and administrative expenses          523      360       976       765
                                         -------   ------   -------   -------
  Total costs and expenses                10,372    7,329    19,191    14,134
                                         -------   ------   -------   -------
 
  Income from operations                     343      723     1,273     1,216
 
Interest income, net                         544      429     1,064       880
                                         -------   ------   -------   -------
 
Income before provision for
  income taxes                               887    1,152     2,337     2,096
 
Provision for income taxes                   266      129       846       233
                                         -------   ------   -------   -------
 
  Net income                             $   621   $1,023   $ 1,491   $ 1,863
                                         =======   ======   =======   =======
 
Net income per common and common
  equivalent share                       $  0.07   $ 0.12   $ 0.17     $ 0.21
                                         =======   ======   =======    ======
 
Weighted average number of
  common and common equivalent
  shares outstanding                       8,737    8,839     8,883     8,787
                                         =======   ======   =======   =======
 
</TABLE>



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

                                       4
<PAGE>
 
                      DESKTOP DATA, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
                                 (in thousands)
<TABLE>
<CAPTION>
 
                                                         Six Months Ended
                                                             June 30,
                                                      1997              1996
                                                      ----              ----
<S>                                                <C>                 <C>   
Cash flows from operating activities:                     
  Net income                                       $  1,491           $  1,863
  Adjustment to reconcile net income to net      
    cash provided by operating activities:                
     Depreciation                                       767                428
  Changes in assets and liabilities:                 
     Accounts receivable                             (2,445)            (2,090)
     Prepaid expenses and deposits                     (243)              (257)
     Accounts payable                                 1,408                 56
     Accrued expenses                                 2,012                162
     Deferred revenue                                 2,654              3,670
                                                   --------           --------
        Net adjustments to net income                 4,153              1,969
                                                   --------           --------
                                                 
        Net cash provided by operating activities     5,644              3,832
                                                   --------           --------
Cash flows from investing activities:                     
  Proceeds from maturities/sales of investments      34,600             13,298
  Purchases of investments                          (34,514)           (25,073)
  Purchases of property and equipment                (1,742)            (2,143)
  Increase in other assets                                -               (149)
                                                   --------           --------
        Net cash used in investing activities        (1,656)           (14,067)
                                                   --------           --------
Cash flows from financing activities:                                     
  Proceeds from exercise of stock options                54                102
  Proceeds from common stock issuance under the                      
    employee stock purchase plan                         63                154
  Payments on obligations under capital leases          (17)               (12)
                                                   --------           --------
        Net cash provided by financing activities       100                244
                                                   --------           --------
Increase (decrease) in cash and cash equivalents      4,088             (9,991)
Cash and cash equivalents, beginning of period       10,735             19,300
                                                   --------           --------
Cash and cash equivalents, end of period           $ 14,823           $  9,309
                                                   ========           ========
Supplemental disclosure of cash flow information:                          
  Cash paid for income taxes                       $    114           $    174
                                                   ========           ========
 
</TABLE>



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

                                       5
<PAGE>
 
                      DESKTOP DATA, INC. AND SUBSIDIARIES
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

1.  Operations and Significant Accounting Policies
 
Basis of Presentation

  The condensed consolidated financial statements of Desktop Data, Inc. (the
"Company") presented herein have been prepared pursuant to the rules of the
Securities and Exchange Commission for quarterly reports on Form 10-Q and do not
include all of the information and note disclosures required by generally
accepted accounting principles.  These financial statements should be read in
conjunction with the Company's consolidated financial statements and notes
thereto for the year ended December 31, 1996 included in the Company's Form 10-
K.  In the opinion of management, the accompanying unaudited consolidated
financial statements include all adjustments, consisting of only normal
recurring adjustments, necessary to present fairly the consolidated financial
position, results of operations and cash flows of the Company and its
subsidiaries.  Quarterly operating results are not necessarily indicative of the
results which would be expected for the full year.

Principles of Consolidation

  The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, Desktop Data Canada, Inc. and Desktop
Data Securities Corp.  All material intercompany accounts and transactions have
been eliminated in consolidation.

Cash Equivalents and Investments

  Cash equivalents consist of highly liquid investments purchased with an
original maturity of three months or less.  Those securities with maturities of
three months to twelve months as of the balance sheet date are classified as
short-term investments and securities with maturities of greater than twelve
months are classified as long-term investments.
 
  At June 30, 1997, cash equivalents included approximately $453,000 in money
market investments and $9,629,000 in U.S. government agency securities.  At June
30, 1997, short-term investments included approximately $12,244,000 in U.S.
Treasury Notes and $13,717,000 in U.S. government agency securities.  As of June
30, 1997, all of the Company's investments are classified and accounted for as
held to maturity.

Net Income Per Common and Common Equivalent Share

  For the three and six month periods ended June 30, 1997 and 1996, net income
per common and common equivalent share is computed by dividing net income by the
weighted average number of common and common equivalent shares outstanding
during that period.  Common equivalent shares from stock options have been
included in the computation using the treasury-stock method.

  In February 1997, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings Per Share.  SFAS No. 128 specifies revised
computational guidelines, presentation and disclosure requirements for earnings
per share and supersedes Accounting Principles Board Opinion No. 15.  SFAS No.
128 is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods.  Earlier application is not
permitted; however, upon adoption, SFAS No. 128 requires restatement of all
prior period earnings per share information.  The difference between earnings
per share for the three and six months ended June 30, 1997 and 1996, calculated
in accordance with SFAS No. 128, and net income per common and common equivalent
share computed using the existing rules, is not expected to be significant.

                                       6
<PAGE>
 
                      DESKTOP DATA, INC. AND SUBSIDIARIES
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

2.  Stockholders' Equity

    On June 18, 1997, the Company's Board of Directors authorized the repricing
of 518,075 and 4,203 stock options previously granted under the 1995 Plan and
1989 Plan, respectively. The repricing provided for the exercise price of the
total 522,278 options to be reduced to $8.625 per share, the closing price of
the Company's stock on June 18, 1997. Prior to the repricing, such options had
exercise prices ranging from $9.13 to $24.00.

3.  Commitments

    On August 31, 1995, the Company entered into an operating lease for office
facilities, which commenced in February, 1996 and expires in fiscal 2003.  The
Company will pay out a total of approximately $2.3 million in monthly lease
payments over the period of the lease.  As of June 30, 1997, the Company has
paid a deposit of approximately $229,000 related to the lease.

                                       7
<PAGE>
 
ITEM 2             Management's Discussion and Analysis of Financial
                      Condition and Results of Operations

Overview

  Desktop Data, through its NewsEDGE products, delivers, via both corporations'
intranets and the internet, a large variety of news and information sources in
real time to professionals' personal computers, automatically monitoring and
filtering the news, and alerting the users to stories of interest to them.

  The Company's revenues consist primarily of NewsEDGE subscription fees and
related royalties received from news providers in connection with sales of their
newswires through NewsEDGE.  Historically, royalties have constituted less than
10% of this amount.  The Company's other revenues consist principally of
NewsEDGE installation services and related computer hardware system sales, and
non-recurring custom development projects related to the Company's software.

  NewsEDGE subscriptions are generally for an initial term of twelve months,
payable in advance, and are automatically renewable for successive one year
periods unless the customer delivers notice of termination prior to the
expiration date of the then current agreement.  NewsEDGE subscription revenues
are recognized ratably over the subscription term, beginning on installation of
the NewsEDGE service.  Accordingly, a substantial portion of the Company's
revenues are recorded as deferred revenues until they are recognized over the
license term.  The Company does not capitalize customer acquisition costs.

  Certain newswires offered by the Company through NewsEDGE are purchased by the
customer directly from the news provider and payments are made directly from the
NewsEDGE customer to the provider.  For some of these newswires, the Company
receives ongoing royalties on payments made by the customer to the news
provider, and those royalties constitute part of the Company's subscription and
royalty revenues.  For other newswires that are resold by Desktop Data to the
NewsEDGE customer, the Company includes a fee for the newswire in the NewsEDGE
subscription fee paid by the customer and pays a royalty to the news provider.
Such royalties are included in the Company's cost of revenues.

Results of Operations for the Three and Six Month Periods Ended June 30, 1997

  Total revenues increased 33.1% to $10.7 million for the three months ended
June 30, 1997 as compared to $8.1 million for the same period in 1996.  Year-to-
date total revenues increased 33.3% to $20.5 million as compared to $15.4
million for the same period in 1996.  For the three months ended June 30, 1997,
subscription and royalty revenues increased 31.8% to $9.9 million, up from $7.5
million for the same period in 1996.  Year-to-date subscription and royalty
revenues increased 32% to $19 million as compared to $14.4 million for the same
period in 1996.  Other revenues increased 51.1% to $822,000 and 52.5% to $1.5
million, respectively, for the three and six month periods ended June 30, 1997,
up from $544,000 and $955,000, respectively, for the same periods in 1996.  The
increase in subscription and royalty revenues was due to increased subscription
revenues from new customers, the retention and growth of revenues from existing
customers and increased royalties from the sale of third party information news.
The increase in other revenues was primarily due to increases in non-recurring
custom development projects and installations of NewsEDGE.

  The number of installed customers increased from 363 customers at June 30,
1996, to 396 customers at June 30, 1997, an increase of 9.1%.  The number of
authorized users within customer organizations increased from 105,877 users at
June 30, 1996 to 156,748 users at June 30, 1997, an increase of 48%.  The
average users per customer increased from 267 users at June 30, 1996 to 360
users at June 30, 1997, an increase of 34.8%.  The Company's average revenues
per customer increased from $41,244 for the six months ended June 30, 1996 to
$48,865 for the six months ended June 30, 1997, an increase of 18.5%.

  On April 17, 1997, in conjunction with the announcement of financial results
for the three months ended March 31, 1997, the Company stated that it
experienced a lower than anticipated level of order bookings during the first
quarter of 1997 which would result in lower than anticipated revenue growth for
the remainder of 1997.  The Company also indicated that it intended to continue
to invest in development, support and sales resources at planned levels to
address both the market opportunity and increased 

                                       8
<PAGE>
 
competition. The Company further mentioned that as a consequence of the above,
the 1997 operating profit margin would be lower than that generated in 1996.

  Cost of revenues, as a percentage of total revenues, increased to 30.8% and
30.2%, respectively, for the three and six month periods ended June 30, 1997
from 27% and 26.8%, respectively, for the same periods in 1996.  The percentage
increases in cost of revenues were due primarily to increases in royalties paid
to third party information providers and increases in transmission costs.

  Customer support expenses increased 69.5% to $1.5 million for the three months
ended June 30, 1997, as compared to $868,000 for the same period in 1996.  Year-
to-date customer support expenses increased 50.4% to $2.5 million for the six
months ended June 30, 1997, as compared to $1.6 million for the same period in
1996.  These increases resulted primarily from higher staffing levels and the
continuing need for the Company to provide additional support to its growing
customer base.  As a percentage of total revenues, customer support expenses
increased to 13.7% and 12.1% for the three and six month periods ended June 30,
1997 from 10.8% and 10.7% for the comparable periods in 1996.  At June 30, 1997,
Desktop Data had 55 employees engaged in field and central customer support
operations.

  Development expenses increased 23% to $1.3 million for the three months ended
June 30, 1997, as compared to $1.1 million for same period in 1996.  Year-to-
date development expenses increased 14.4% to $2.5 million for the six months
ended June 30, 1997, as compared to $2.2 million for the same period in 1996.
Development expenses increased as a result of an investment in more experienced
personnel to provide for enhancements of existing features and the development
and quality assurance testing of new features.  As a percentage of total
revenues, development expenses decreased slightly to 12.5% and 12.1% for the
three and six month periods ended June 30, 1997, as compared to 13.5% and 14.1%
for the comparable periods in 1996. At June 30, 1997, Desktop Data had 43
employees engaged in development and quality assurance operations.

  Sales and marketing expenses increased 32% to $3.7 million for the three month
period ended June 30, 1997, as compared to $2.8 million for the same period in
1996.  Year-to-date sales and marketing expenses increased 30% to $7.1 million
for the six month period ended June 30, 1997, from $5.5 million for the same
period in 1996.  Sales and marketing expenses increased during these periods,
primarily due to the expansion of the sales and marketing organizations.  As a
percentage of total revenues, sales and marketing expenses remained relatively
constant at 34.9% and 34.6% for the three and six month periods ended June 30,
1997, as compared with 35.2% and 35.5% for the same periods in 1996.  As of June
30, 1997, Desktop Data's direct sales force and marketing staff consisted of 72
employees.

  General and administrative expenses increased 45.3% to $523,000 for the three
months ended June 30, 1997 from $360,000 for the same period in 1996.  Year-to-
date general and administrative expenses increased 27.6% to $976,000 for the six
months ended June 30, 1997 from $765,000 for the same period in 1996.  The
increases in general and administrative expenses were due primarily to additions
to staff  and new administrative functions to support the Company's growth.
General and administrative expenses, as a percentage of total revenues, remained
relatively constant at 4.9% and 4.8% for the three and six month periods ended
June 30, 1997, as compared to 4.5% and 5% for the same periods in 1996.  At June
30, 1997, Desktop Data had 14 employees engaged in general and administrative
operations.

  Interest income, net increased to $544,000 and $1.1 million for the three and
six month periods ended June 30, 1997, from $429,000 and $880,000 for the
comparable periods in 1996 due to higher cash and investment balances generated
from operations and higher interest rates earned on cash, cash equivalent and
investment balances.

  The provision for income taxes increased to $266,000 and $846,000,
respectively, for the three and six month periods ended June 30, 1997 from
$129,000 and $233,000, respectively, for the comparable periods in 1996.  The
increase in the tax provision is due to both a reduction in the tax loss
carryforwards and higher expected taxable income from the Company's foreign
operations which are subject to higher tax rates.

                                       9
<PAGE>
 
Liquidity and Capital Resources

  The Company's combined cash, cash equivalent and investment balance was $40.8
million at June 30, 1997, as compared to $36.8 million at December 31, 1996, an
increase of $4 million.  Net cash generated from operations was $5.6 million for
the six months ending June 30, 1997 compared with $3.8 million for the
comparable period in 1996, due primarily to increases in accounts payable and
accrued expenses balances.  Net cash used for investing activities for the six
months ended June 30, 1997 was $1.7 million, due to the purchase of property and
equipment.  Net cash provided by financing activities in the six months ended
June 30, 1997 was $100,000, due primarily to employee stock option exercises and
stock purchases pursuant to the employee stock purchase plan.

  The Company continues to investigate the possibility of investments in or
acquisitions of complementary businesses, products or technologies, although the
Company has not entered into any commitments or negotiations with respect to any
such transactions.

  The Company believes that its current cash, cash equivalent and investment
balances combined with funds anticipated to be generated from future operations
will be sufficient to satisfy working capital and capital expenditure
requirements for at least the next twelve months.

Certain Factors Affecting Future Operating Results

  The Company operates in a rapidly changing environment that involves a number
of risks, some of which are beyond the Company's control.  The following
discussion highlights some of the risks which may affect future operating
results.

  Competition. The business information services industry is intensely
competitive and is characterized by rapid technological change and the entry
into the field of extremely large and well-capitalized companies as well as
smaller competitors.  Increased competition, on the basis of price or otherwise,
may require price reductions or increased spending on marketing or software
development, which could have material adverse effect on the Company's business
and results of operations.  In the recent past, competition has increased as
several new companies and Internet-based technologies have entered the market.
The Company believes that this has resulted in a lengthening of its customers'
decision making process and may adversely affect the Company's business and
results of operations in the future.

  Dependence on NewsEDGE Service. The Company currently derives substantially
all of its revenues from NewsEDGE service subscriptions and related royalties.
Although the Company intends to increase the number of news and other
information sources available through NewsEDGE and to otherwise enhance
NewsEDGE, the Company's strategy is to continue to focus on providing the
NewsEDGE service as its sole line of business. In addition, there can be no
assurance that the Company will be able to increase the number of news sources
or otherwise enhance NewsEDGE. As a result, any factor adversely affecting sales
of NewsEDGE would have a material adverse effect on the Company. The Company's
future financial performance will depend principally on the market's acceptance
of NewsEDGE and the Company's ability to sell NewsEDGE to additional customers
and to increase revenue derived from existing customers by increasing the number
of users within each customer, adding additional newswires or adding additional
NewsEDGE servers.

  Dependence on News Providers. The Company currently makes over 650 news and
information sources available through NewsEDGE, pursuant to agreements between
the Company and numerous news providers. A significant percentage of the
Company's customers subscribe to services provided by one or more of Press
Association Inc., a subsidiary of The Associated Press, Dow Jones & Company,
Inc., The Financial Times (London), Reuters America, Inc. and Thomson. The
Company's agreements with news providers are generally for a term of one year,
with automatic renewal unless notice of termination is provided before the end
of the term by either party. These agreements may also be terminated by the
provider if Desktop Data fails to fulfill its obligations under the agreement
and, under some of the agreements, upon the occurrence of a change in control of
the Company. Many of these news and information providers compete with one
another and, to some extent, with the Company. Termination of one or more
significant news provider agreements would decrease the news and information
which the Company can offer its customers and would have a material adverse
effect on the Company's business and results of operations.

                                       10
<PAGE>
 
  Dependence on News Transmission Sources. NewsEDGE news and information is
transmitted using one or more of three methods: leased telephone lines,
satellites or FM radio transmission. None of these methods of news transmission
is within the control of the Company, and the loss or significant disruption of
any of them could have a material adverse effect on the Company's business. Many
newswire providers have established their own broadcast communications networks
using one or more of these three vehicles. In these cases, Desktop Data's role
is to arrange communications between the news provider and the NewsEDGE
customer's server. For sources which do not have their own broadcast
communications capability, news and information is delivered to the Company's
news consolidation facility, where it is reformatted for broadcast to NewsEDGE
servers and retransmitted to customers through an arrangement between the
Company and WavePhore  ("WavePhore"), a common carrier communications vendor.
WavePhore is also the communications provider for many newswires offered by the
Company through NewsEDGE. The Company's agreement with WavePhore expires on
December 31, 1998.  This agreement can be terminated earlier in the event of a
material breach by the Company of the agreement. If the agreement with WavePhore
were terminated on short notice, or if WavePhore were to encounter technical or
financial difficulties adversely affecting its ability to continue to perform
under the agreement or otherwise, the Company's business would be materially and
adversely affected. The Company believes that if WavePhore were unable to
fulfill its obligations, other sources of retransmission would be available to
the Company, although the transition from WavePhore to those sources could
result in delays or interruptions of service that could have a material adverse
affect on the Company's business.

  Rapid Technological Change. The business information services, software and
communications industries are subject to rapid technological change, which may
render existing products and services obsolete or require significant
unanticipated investments in research and development. The Company's future
success will depend, in part, upon its ability to enhance NewsEDGE and keep pace
with technological developments.

  Dependence on Key Personnel. The Company's success depends to a significant
extent upon the continued service of its executive officers and other key
management, sales and technical personnel, and on its ability to continue to
attract, retain and motivate qualified personnel. The competition for such
employees is intense. The Company has no long-term employment contracts with any
of its employees. The loss of the services of one or more of the Company's
executive officers, sales people, design engineers or other key personnel or the
Company's inability to recruit replacements for such personnel or to otherwise
attract, retain and motivate qualified personnel could have a material adverse
effect on the Company's business and results of operations. The Company
maintains $3 million of key-man life insurance on Donald L. McLagan, the
Company's Chairman, President and Chief Executive Officer.

                                       11
<PAGE>
 
                      DESKTOP DATA, INC. AND SUBSIDIARIES



PART II - OTHER INFORMATION

Item 4.  Submission of Matters to a Vote of Security Holders
------------------------------------------------------------

The Annual Meeting of Stockholders was held on June 3, 1997.  Holders of an
aggregate of 8,636,705 shares at the close of business on April 16, 1997 were
entitled to vote at the meeting.  At such meeting, the Company's stockholders
voted as follows:

a) To reelect Ms. June Rokoff and Ms. Ellen Carnahan to the Board of Directors
for a three-year term.

<TABLE> 
<CAPTION> 
                                        Total Vote for Each       Total Vote Withheld
                                             Director             from Each Director
<S>                                     <C>                       <C>  
Ellen Carnahan                               7,291,038                 265,115
June Rokoff                                  7,287,927                 268,226
</TABLE> 

Messrs. Donald L. McLagan and Rory J. Cowan will continue to hold office until
the 1998 Annual Meeting of Stockholders or until their successors have been duly
elected or until their earlier resignation or removal. Mr. A. Baron Cass will
continue to hold office until the 1999 Annual Meeting of Stockholders or until
his successor has been duly elected or until his earlier resignation or removal.

b)  To amend the Company's 1995 Stock Plan to increase the number of shares of
Common Stock reserved for issuance thereunder from 625,000 shares to 1,625,000
shares.

<TABLE>
<S>                                <C>
Total Vote for the Proposal        4,996,651
Total Vote Against the Proposal    1,427,857
Abstentions                           14,081
Broker Non-votes                   1,117,564
</TABLE>

c)  To ratify the appointment of the firm of Arthur Andersen LLP as independent
accountants for the Company for the fiscal year ending December 31, 1997.

<TABLE>
<S>                                <C>
Total Vote for the Proposal        7,472,078
Total Vote Against the Proposal       71,999
Abstentions                           12,076
</TABLE>

Item 6.  Exhibits and Reports Filed on Form 8-K.
------------------------------------------------

6(a) Exhibits.

     10.1 - 1995 Stock Plan, as amended
     11.1 - Computation of Earnings Per Share
     27.0 - Financial Data Schedule

6(b) REPORTS ON FORM 8-K

     No reports on Form 8-K have been filed during the quarter for which this
report is filed.

                                       12
<PAGE>
 
                      DESKTOP DATA, INC. AND SUBSIDIARIES


SIGNATURE


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


                                               DESKTOP DATA, INC.
                                               (Registrant)



Date:  August 12, 1997                      /s/ Edward R. Siegfried
                                            -------------------------
                                            Edward R. Siegfried
                                            Vice President--Finance and 
                                            Operations, Treasurer and 
                                            Assistant Secretary

                                       13
<PAGE>
 
                      DESKTOP DATA, INC. AND SUBSIDIARIES
                                 EXHIBIT INDEX
                                        
<TABLE>
<CAPTION>

Exhibit No.                    Description                          Page
-----------                    -----------                          ----
<S>                  <C>                                            <C>
 
     10.1      -     1995 Stock Plan, as amended (filed as an         --
                     attachment to the Company's Definitive 
                     Proxy Statement, filed with The Securities 
                     and Exchange Commission on April 24, 1997, 
                     and incorporated by reference herein)
                
     11.1      -     Computation of earnings per share                15
                
     27.0      -     Financial Data Schedule                          16

</TABLE>

                                       14