<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.   20549
                                Amendment NO. 1
                                      to
                                   FORM 10-Q

(Mark One)      

   [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
             THE SECURITIES EXCHANGE ACT OF 1934
                
        For The Quarterly Period Ended:    August 31, 1995     

   [ ]  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: 0-14779

        
                             DATA TRANSLATION, INC.
            (Exact name of registrant as specified in its charter)      
        
          Massachusetts                               04-2532613
   (State or other jurisdiction         (I.R.S. Employer Identification Number)
  of organization or incorporation)               
        
                                 100 Locke Drive
                            Marlborough, Massachusetts   
                    (Address of principal executive offices)
                
                                    01752
                                  (Zip code)

                                 (508) 481-3700
              (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 90 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.
        
                                                        
      Common Stock, par value $.01 per share         6,189,307 shares
                     Class                    Outstanding at September 30, 1995
        
        
<PAGE>
 
                                                             Page 2 of 14

                    DATA TRANSLATION, INC. AND SUBSIDIARIES


                                     INDEX

                                                                    Page No.
        Financial Information:                                      --------

          Consolidated Balance Sheets as of
            November 30, 1994 and August 31, 1995 ...................... 3

          Consolidated Statements of Operations for the 
            Three and Nine Months Ended August 31, 1994 and 1995 ....... 4 
          
          Consolidated Statements of Stockholders' Equity
            For the Fiscal Year Ended November 30, 1994
              and the Nine Months Ended August 31, 1995 ................ 5

          Consolidated Statements of Cash Flows for the 
            Nine Months Ended August 31, 1994 and 1995 ................. 6

          Notes to Consolidated Financial Statements ................... 7-9

          Management's Discussion and Analysis of 
            Financial Condition and Results of Operations .............. 10-12


        Part II - Other Information .................................... 13

        Signatures ..................................................... 14

                                                        
<PAGE>
 
                                                                    Page 3 of 14

                     DATA TRANSLATION, INC. & SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS 

<TABLE> 
<CAPTION> 

                                                              November 30,          August 31,
                                                                  1994                 1995
                                                              ------------          ----------
                                                                                    (Unaudited)
<S>                                                          <C>                    <C> 
Current Assets:                                                 
        Cash and cash equivalents                            $ 1,592,000            $ 7,072,000
        Marketable securities (Note 2)                         2,487,000              6,558,000
        Accounts receivable, net of reserves of
         $435,000 in 1994 and $506,000 in 1995                 9,045,000             11,948,000
        Inventories                                            2,759,000              5,915,000
        Prepaid expenses                                         647,000              1,381,000
        Prepaid income taxes                                      61,000                 60,000
                                                             -----------            -----------
             Total current assets                             16,591,000             32,934,000

Equipment and Leasehold Improvements, net                      2,367,000              3,384,000
                                                        
Other Assets - net                                               241,000                223,000
                                                             -----------            -----------
Total Assets                                                 $19,199,000            $36,541,000
                                                             ===========            ===========
Current Liabilities:                                                    
        Accounts payable                                    $  3,745,000            $ 4,378,000
        Due to related party                                     546,000                273,000
        Borrowings from bank                                           -                544,000
        Accrued expenses                                       3,697,000              5,912,000
        Deferred revenue                                         225,000              1,487,000
                                                             -----------            -----------
             Total current liabilities                         8,213,000             12,594,000
                                                        
Deferred Income Taxes                                              2,000                  3,000
                                                        
Stockholders' Equity:                                                   
        Preferred Stock, $.01 par value,
         Authorized - 1,000,000 shares, none issued                    -                      -
        Common Stock, $.01 par value,
         Authorized - 10,000,000 shares, issued -
         6,765,472 in 1994 and 7,051,794 in 1995                  68,000                 71,000
        Capital in excess of par value                         8,739,000             15,685,000
        Retained earnings                                      6,894,000             10,058,000
        Cumulative translation adjustment                         64,000                 34,000
        Less treasury stock, at cost, 2,254,496 
         shares in 1994 and 869,096 shares in 1995            (4,781,000)            (1,843,000)
        Unrealized holding loss on available for                                                
           sale securities                                             -                (61,000)
                                                             -----------            -----------
             Total stockholders' equity                       10,984,000             23,944,000
                                                        
Total Liabilities and Stockholders' Equity                   $19,199,000            $36,541,000
                                                             ===========            ===========
</TABLE> 


                   The accompanying notes are an integral part of these 
                           consolidated financial statements.
<PAGE>
 
                                                                    Page 4 of 14

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

<TABLE> 
<CAPTION> 

                                              Three Months Ended August 31,        Nine Months Ended August 31,  
                                                  1994             1995               1994            1995
                                                --------         --------           --------        --------
<S>                                            <C>              <C>                <C>             <C> 
Net sales:                                                                        
   Digital Media                               $ 3,453,000      $ 8,137,000        $ 7,916,000     $ 20,323,000
   Data acquisition and imaging                  5,408,000        5,583,000         16,953,000       16,359,000
   Networking distribution                       3,730,000        5,353,000         10,886,000       14,604,000
                                               -----------      -----------        -----------      -----------
Total net sales                                 12,591,000       19,073,000         35,755,000       51,286,000
                                                                                
Cost of sales                                    6,688,000        9,933,000         19,122,000       26,679,000
                                               -----------      -----------        -----------      -----------
     Gross profit                                5,903,000        9,140,000         16,633,000       24,607,000
                                                                                
Research and development expenses                1,691,000        1,961,000          5,180,000        5,488,000
Selling and marketing expenses                   3,219,000        4,556,000          9,070,000       13,158,000
General and administrative expenses                775,000        1,325,000          2,433,000        3,199,000
                                               -----------      -----------        -----------      -----------
     Operating income (loss)                       218,000        1,298,000            (50,000)       2,762,000
                                                                                
Interest income                                     34,000          135,000            118,000          494,000
Interest expense                                    (1,000)          (9,000)            (5,000)         (17,000)
Other income (expense)                              (3,000)           8,000            (39,000)           6,000
                                               -----------      -----------        -----------      -----------
     Income (loss) before provision                                                                       
           for income taxes                        248,000        1,432,000             24,000        3,245,000
                                                                                
Tax provision                                       12,000            6,000             84,000           81,000
                                               -----------      -----------        -----------      -----------
    Net income (loss)                          $   236,000      $ 1,426,000        $   (60,000)     $ 3,164,000
                                               ===========      ===========        ===========      ===========
Net income (loss) per common and                                                                          
     common equivalent share                         $0.05            $0.21             ($0.01)           $0.48 
                                               ===========      ===========        ===========      ===========
Weighted average number of common                                                                         
     and common equivalent shares outstanding    4,914,000        6,812,000          4,348,000        6,621,000
</TABLE> 


             The accompanying notes are an integral part of these 
                      consolidated financial statements.
<PAGE>
 
                                                                    Page 5 of 14

               DATA TRANSLATION, INC. AND SUBSIDIARIES 
                CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                  (Unaudited)


<TABLE> 
<CAPTION> 

                                      Common Stock
                                     $.01 Par Value
                             ------------------------------
                                                                                                     Unrealized
                                                                                                    Holding Value
                                                  Capital in               Cumulative               on Available       Total
                              Issued              Excess of    Retained    Translation   Treasury     for Sale     Stockholders'
                              Shares     Amount   Par Value    Earnings    Adjustment     Stock      Securities       Equity
                              --------------------------------------------------------------------------------------------------
<S>                           <C>       <C>      <C>          <C>          <C>         <C>          <C>            <C> 
Balance November 30, 1993     6,563,450 $66,000 $ 8,289,000  $ 6,574,000   ($102,000)  ($4,781,000)          --    $10,046,000
Proceeds from stock plans       248,986   2,000     761,000           --          --            --           --        763,000
Effect of stock-for-stock
 exercise                       (46,964)     --    (311,000)          --          --            --           --       (311,000)
Translation adjustment               --      --          --           --     166,000            --           --        166,000
Net income                           --      --          --      320,000          --            --           --        320,000
                              ------------------------------------------------------------------------------------------------
Balance November 30, 1994     6,765,472 $68,000 $ 8,739,000   $6,894,000    $ 64,000   ($4,781,000)          --    $10,984,000
Proceeds from stock plans       286,322   3,000   1,082,000           --          --            --           --      1,085,000
Public sale of treasury stock,
 net of issuance costs of
 $375,000                            --      --   5,864,000           --          --     2,938,000           --      8,802,000
Translation adjustment               --      --          --           --     (30,000)           --           --        (30,000)
Net income                           --      --          --    3,164,000          --            --           --      3,164,000
Reserve for unrealized
 investment losses                   --      --          --           --          --            --      (61,000)       (61,000)
                              ------------------------------------------------------------------------------------------------
Balance August 31, 1995       7,051,794 $71,000 $15,685,000  $10,058,000     $34,000   ($1,843,000)    ($61,000)   $23,944,000
                              ================================================================================================
</TABLE> 

             The accompanying notes are an integral part of these 
                             financial statements.
<PAGE>
 
                                                                    Page 6 of 14
                    DATA TRANSLATION, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (Unaudited) 

<TABLE> 
<CAPTION> 
                                                                               Nine Months Ended:
                                                                      August 31,               August 31,
                                                                         1994                    1995
                                                                      ----------               ----------
<S>                                                                 <C>                       <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                   
  Net income (loss)                                                 $    (60,000)              $ 3,164,000
  Adjustments to reconcile net income (loss) to                                                                         
   net cash used in operating activities-                                                                       
             Depreciation and amortization                             1,254,000                 1,287,000
             Deferred income taxes                                             -                     1,000
             Loss on sale of equipment                                     9,000                     2,000
             Loss on sale of marketable securities                         3,000                    34,000
                                                                        
             Change in assets and liabilities-                                                          
               Accounts receivable                                    (2,207,000)               (2,903,000)
               Inventories                                              (589,000)               (3,156,000)
               Prepaid expenses                                         (362,000)                 (734,000)
               Prepaid income taxes                                      166,000                     1,000
               Accounts payable                                          268,000                   633,000
               Due to related party                                     (273,000)                 (273,000)
               Accrued expenses                                          572,000                 2,214,000
               Deferred revenue                                                -                 1,262,000
                                                                     -----------               -----------
             Net cash provided by (used in) operating activities     $(1,219,000)              $ 1,532,000
                                                                        
CASH FLOWS FROM INVESTING ACTIVITIES:                                                                   
             Purchases of equipment and leasehold improvements          (785,000)               (2,176,000)
             Proceeds from sale of equipment                                   -                     5,000
             Increase in other assets                                   (150,000)                 (107,000)
             Purchases of marketable securities                         (862,000)               (9,132,000)
             Proceeds from sales of marketable securities              1,009,000                 4,966,000
                                                                     -----------               -----------
             Net cash used in investing activities                   $  (788,000)              $(6,444,000)
                                                                        
CASH FLOWS FROM FINANCING ACTIVITIES:                                                                   
             Borrowings from bank                                         95,000                   544,000
             Proceeds from stock plans                                   407,000                 1,085,000
             Net proceeds from public sale of treasury stock                   -                 8,802,000
                                                                     -----------               -----------
             Net cash provided by financing activities               $   502,000               $10,431,000
                                                                        
EXCHANGE RATE EFFECTS                                                    134,000                   (39,000)
                                                                        
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                 $(1,371,000)              $ 5,480,000
                                                                        
CASH AND CASH EQUIVALENTS, beginning of period                         1,528,000                 1,592,000
                                                                        
CASH AND CASH EQUIVALENTS, end of period                             $   157,000               $ 7,072,000
                                                                     ===========               ===========
OTHER TRANSACTIONS NOT PROVIDING (USING) CASH                                                                    
             Decrease in value of marketable securities                        -                    61,000
             Increase in unrealized holding loss on                                                             
               available for sale securities                                   -                   (61,000)
                                                                     -----------               -----------
                                                                     $         -               $         -
                                                                     ============              ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                                                       
             Cash paid for income taxes                              $     10,000              $    21,000
                                                                     ============              ===========
             Cash paid for interest                                  $      5,000              $    17,000
                                                                     ============              ===========
</TABLE> 

The accompanying notes are an integral part of these consolidated financial 
statements. 
<PAGE>
 
                                                                    Page 7 of 14
                    DATA TRANSLATION, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (UNAUDITED)     

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. It is suggested that these consolidated
condensed financial statements be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's latest
audited financial statements, which are contained in the Company's 1994 Annual
Report on Form 10-K, filed with the Securities and Exchange Commission on
February 28, 1995.
        
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 and U.S. Treasury bills.

     Marketable securities held as of August 31, 1995, consist of the following:

                                             Maturity             Market Value
                                             ---------------------------------
        Investments held to maturity:
            U.S. Treasury Bills               less than 1 year   $3,930,000

        Investments available for sale:
            U.S. Treasury Notes               1 - 3  years        1,489,000

            U.S. Agency Bonds                 1 - 5  years          553,000
            U.S. Agency Bonds                 6 - 10 years          286,000
                                                                   --------
            Total U.S. Agency Bonds                                 839,000

            Utility Bonds                     1 - 5  years          295,000

            Corporate Obligations                10+ years            5,000
                                                                   --------
        Total Investments Available for Sale                     $2,628,000
                                                                  =========

     Marketable securities had a cost of $2,600,000 and $6,619,000 at November
30, 1994 and August 31, 1995, respectively, and a market value of $2,487,000 and
$6,558,000, respectively. To reduce the carrying amount of the portfolio to
market value at November 30, 1994, a valuation allowance in the amount of
$113,000 was established with a corresponding charge to net income. The
valuation allowance has been reflected as a separate component of shareholders'
equity on August 31, 1995 pursuant to the provisions of SFAS No. 115.
<PAGE>
 
                                                                Page 8 of 14
                  DATA TRANSLATION, INC. AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (UNAUDITED)

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

                                        November 30,      August 31,
                                            1994            1995
                                        -----------      -----------
        Raw materials                   $   617,000      $ 2,256,000
        Work-in-process                     434,000          226,000
        Finished goods                    1,708,000        3,433,000
                                          ---------        ---------  
                                        $ 2,759,000      $ 5,915,000
                                          =========        =========

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.
        
4.  Net Income <Loss> Per Common Share
        
     Net income <loss> per common share is determined by dividing net income
<loss> by the weighted average number of common and common equivalent shares
outstanding during each period. Common equivalent shares have been calculated in
accordance with the treasury stock method and are included for all periods where
their effect is dilutive. Fully dilute net income <loss> per share has not been
separately presented, as the amounts would not be materially different from net
income <loss> per share.

5.  Contingencies
        
     On June 7, 1995, a lawsuit was filed against the Company by Avid
Technology, Inc., in the United States District Court for the District of
Massachusetts. The complaint generally alleges patent infringement by the
Company arising from the manufacture, sale, and use of the Company's Media 100
product. The complaint includes requests for injuctive relief, treble damages,
interests, costs and fees. In July, 1995 the Company filed an Answer and
Counterclaim denying any infringe-ment and asserting that the patent in question
is invalid. The Company intends vigorously to defend the lawsuit. There can be
no assurance that the Company will prevail in the litigation, or that any of the
effects of the litigation, whether or not successful, will not be material.

     From time to time the Company is involved in disputes and/or litigation
encountered in its normal course of business. The Company does not believe that
the ultimate impact of the resolution of any outstanding matters will have a
material effect on the Company's financial condition or results of operations.

6. Capitalized Software Development Costs
        
     The Company capitalizes certain computer software development costs. Such
costs, net of accumulated amortization, were approximately $215,000 and $195,000
as of November 30, 1994 and August 31, 1995, respectively and are included in
other assets. These costs are amortized on a straight-line basis over two years
which approximates the life of the product. Amortization expense, included in
cost of goods sold, was approximately $35,000 and $55,000 for the three months
ended August 31, 1994 and 1995, respectively. During the nine months ended
August 31, 1994 and 1995, amortization expense was $125,000, respectively.
<PAGE>
 
                                                                Page 9 of 14

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


7. Income Taxes

     In February 1992, the Financial Accounting Standards Board issued SFAS No.
109, "Accounting for Income Taxes." The Company adopted the provisions of SFAS
No. 109 on December 1, 1993. There was no effect on net income of adopting the
provisions of SFAS No. 109.

     The tax provision of $81,000 for the first nine months of fiscal 1995
compares to a tax provision of $84,000 in fiscal 1994. Any potential tax
provision resulting from operating income by the Company's domestic operations
has been offset by net operating loss carryforwards.
        
     The components of the net deferred tax amount recognized in the
accompanying balance sheets are:

                                        November 30,       August 31, 
                                            1994              1995
                                        ------------     -------------
        Deferred tax assets            $ 3,563,000       $  2,746,000
        Deferred tax liabilities          (271,000)          (291,000)
        Valuation allowance             (3,294,000)        (2,458,000) 
                                        ----------         ----------
                                       $    (2,000)      $     (3,000)
                                        ==========         ==========

     The approximate tax effect of each type of temporary difference and
carryforward before allocation of the valuation allowance is:

        Net operating losses           $ 1,638,000       $    263,000 
        Other temporary differences        989,000          1,347,000
        Alternative minimum tax credits     50,000             50,000
        General business credits           615,000            795,000
                                        ----------         ----------
                                       $ 3,292,000       $  2,455,000
                                        ==========         ==========

     The tax credit and net operating loss carryforwards expire at various dates
through 2008. Due to the uncertainty surrounding the timing of realizing the
benefits of its favorable tax attributes in future tax returns, the Company has
placed a valuation allowance against its otherwise recognizable net deferred tax
assets.

     The United States Tax Reform Act of 1986 contains provisions which may
limit the net operating loss and tax credit carryforwards available to be used
in any given year in the event of significant changes in ownership, as defined.

8.  Recapitalization

     On June 28, 1995, the Board of Directors approved a 2 for 1 stock split
effected in the form of a dividend for all shareholders of record as of July 17,
1995. All share and per share data included in these financial statements have
been retroactively restated to reflect the stock split.
<PAGE>
 
                                                                Page 10 of 14

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

Results of Operations 
        
     The following table shows certain consolidated statement of operations data
as a percentage of total net sales.

                                           Three Months       Nine Months
                                               Ended             Ended
                                             August 31,        August 31, 
                                         ----------------   ---------------
                                           1994    1995      1994     1995
                                           ----    ----      ----     ----
        Net sales:
            Digital media...............   27.4%   42.7%     22.1%    39.6%
            Data acquisition and imaging   43.0    29.3      47.4     31.9
            Networking distribution.....   29.6    28.0      30.5     28.5
                                          -----   -----     -----    -----
        Total net sales.................  100.0   100.0     100.0    100.0

        Gross margin....................   46.9    47.9      46.5     48.0
        Research and development........   13.4    10.3      14.5     10.7
        Selling and marketing...........   25.6    23.9      25.3     25.7
        General and administrative......    6.2     6.9       6.8      6.2
                                          -----   -----     -----    -----
        Income <loss> from operations...    1.7     6.8      <0.1>     5.4
        Other income, net...............    0.3     0.7       0.1      0.9
        Provision for taxes.............    0.1      -        0.2      0.1
                                          -----   -----     -----    -----
        Net income <loss>...............    1.9     7.5      <0.2>     6.2
                                          =====   =====     =====    =====

Comparison of Third Fiscal Quarter of 1995 to 
 Third Fiscal Quarter of 1994:
                
     Total net sales for the fiscal quarter ended August 31, 1995 were
$19,073,000, an increase of 51.5% or $6,482,000 from the same period a year ago.
This increase was primarily a result of higher unit sales from the Company's
digital media product line, Media 100(R), which accounted for $8,137,000 or
42.7% of the Company's total net sales compared to $3,453,000 or 27.4% in the
same period a year ago. The third quarter shipments include Version 2.5 of Media
100 which is compatible with the latest Power Macintosh (TM) computers utilizing
the PCI Bus architecture. Networking distribution sales increased $1,623,000 or
43.5% from the comparable quarter in 1994 to $5,353,000 or 28.0% of the
Company's total net sales. The increase in networking products represent the
continued steady growth in demand for networking products in the United Kingdom.
Net sales from the Company's data acquisition and imaging products were up 3.2%
or $175,000 compared to the third quarter of fiscal 1994.

     While total net sales increased 51.5%, cost of sales increased by 48.5%
increasing the gross margin to 47.9% of total net sales compared to 46.9% in the
comparable quarter of the prior year. The increase in gross margin was primarily
a result of higher gross margins on the Company's manufactured product sales due
to the higher utilization of the Company's manufacturing capacity as well as a
favorable product mix.
<PAGE>
 
                                                                Page 11 of 14

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

Comparison of Third Fiscal Quarter of 1995 to 
 Third Fiscal Quarter of 1994 (continued):
 
     The income from operations for the third fiscal quarter of 1995 was
$1,298,000, compared to $218,000 in the third quarter of the prior year. The
operating income reflects the higher net sales and gross margins as mentioned
above, offset by an increase in operating expenses of $2,157,000. Selling and
marketing expenses increased by $1,337,000 over the comparable quarter largely
due to higher sales and promotional expenses for Media 100. General and
administrative expenses increased by $550,000 reflecting higher fees for
professional services as well as higher personnel levels. Research and
development expenses increased by $270,000 demonstrating the Company's continued
investment in product development.

     Interest income was $135,000 for the third fiscal quarter of 1995 compared
to $34,000 in the comparable period of 1994 reflecting the increase in cash
balance on hand during 1995.
                
     The tax provision of $6,000 for the third quarter of fiscal 1995 compares
to a tax provision of $12,000 in fiscal 1994 which was due to the taxable
operations in the United Kingdom. Any potential tax provision resulting from
operating income by the Company's domestic operations has been offset by net
operating loss carryforwards.

     Net income for the fiscal quarter ended August 31, 1995 was $1,426,000 or 
$0.21 per share and 504.2% over net income of $236,000 or $0.05 per share for 
the same period in 1994.

Comparison of First Nine Months of Fiscal 1995 to 
 First Nine Months of Fiscal 1994:    

     Net sales for the nine month period ended August 31, 1995 were $51,286,000,
or 43.4% over the same period a year ago. The increase was primarily a result of
higher unit sales from Media 100 which increased 156.7% to $20,323,000 and
accounted for 39.6% of the Company's total net sales compared to $7,916,000 or
22.1% in the same period a year ago. During the first nine months of fiscal
1995, networking distribution sales increased $3,718,000 or 34.2% from the
comparable period in fiscal 1994 due to increased demand in the market for
networking products. Data acquisition and imaging net sales were down slightly
despite an increase in unit sales from the same period in fiscal 1994 and
represented 31.9% of the Company's total net sales compared to 47.4% in fiscal
1994. These lower net sales represent a shift in the data acquisition and
imaging market toward new, lower priced hardware and software solutions.
        
     Gross margins for the first nine months of fiscal 1995 were 48.0% compared
to 46.5% in the comparable period of a year ago. This increase reflects higher
margins on the Company's manufactured products as mentioned previously. In
addition, networking product sales constituted a lesser percentage of the
Company's total net sales, thereby increasing gross margins since the networking
products carry a significantly lower gross margin than the Company's
manufactured products.
<PAGE>
 
                                                                Page 12 of 14

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

Comparison of First Nine Months of Fiscal 1995 to
 First Nine Months of Fiscal 1994 (continued):

     Income from operations for the first nine months of fiscal 1995 was
$2,762,000 compared to a loss on operations of $50,000 in the same period of
last year. The operating income reflects the higher net sales and gross margins,
partially offset by higher operating expenses of $5,162,000. Selling and
marketing expenses and general and administrative expenses as a percentage of
total sales were relatively flat for the two nine month periods. Research and
development expenses increased $308,000 from the comparable period in the prior
year, reflecting the continued investment in product development. However, as a
percentage of total sales, research and development expenses represented 10.7%
compared to 14.5% for the prior period, reflecting the impact of increased
networking distribution sales of products manufactured by third parties and the
156.7% growth in Media 100 sales in this period. Although operating expenses
were higher than the same period of a year ago, as a percent of total net sales,
operating expenses decreased from 46.6% to 42.6%.

     Interest income was $494,000 for the first nine months of fiscal 1995
compared to $118,000 in the comparable period of 1994 reflecting the increase in
cash balances on hand during 1995.

     The tax provision of $81,000 for the first nine months of fiscal 1995
compares to a $84,000 tax provision for the same period of a year ago. These tax
provisions are a result of profitable operations in the United Kingdom. Any
potential tax provision resulting from profitable operations in the Company's
domestic operations has been offset by net operating loss carryforwards.

     Net income for the first nine months of fiscal 1995 was $3,164,000 or $0.48
per share compared to net loss of $60,000 for the same period in 1994.

Liquidity and Capital Resources:
        
     During the first nine months of fiscal 1995, the Company's cash and cash
equivalents balance increased by $5,480,000 while marketable securities
increased $4,071,000. These increases were primarily a result of a December 1994
public stock offering generating net proceeds of approximately $8,802,000. The
net proceeds were invested in U.S. Treasury bills with maturities ranging from
three months to one year. Cash generated from operations amounted to $1,532,000.
This was the result of net income of $3,164,000 offset by higher working capital
requirements for the Company's growing operations.

     As of August, 1995, the Company had a line of credit in the United Kingdom
equivalent to approximately $600,000 of which $544,000 was outstanding. The
Company is currently negotiating a higher line of credit of approximately
$1,200,000 for its networking operations in the United Kingdom.

     The Company believes that the net proceeds from its secondary stock
offering, together with existing cash and other resources along with cash
generated from future operations, will be sufficient to meet the Company's cash
requirements for the foreseeable future.
<PAGE>
 
                                                           Page 13 of 14

                        PART II.  OTHER INFORMATION

Item 1. Legal Proceedings

On June 7, 1995, a lawsuit was filed against the Company by Avid, a 
Massachusett-based company, in the United States District Court for the 
District of Massachusetts. The complaint alleges patent infringement by the
Company arising from the manufacture, sale and use of the Company's Media 100
line of products. The complaint includes requests for injunctive relief, treble
damages, interest, costs and fees. On July 28, 1995, the Company filed an Answer
and Counterclaim denying any infringement and asserting that the patent in
question is invalid. The Company intends vigorously to defend the lawsuit, which
is currently early in the pre-trial stage. In addition, Avid has filed papers in
the United States Patent and Trademark Office requesting reissuanse of the
patent and stating that it seeks patent claims broader than those set forth in
the existing patent. The reissuance proceedings remain pending. If such broader
claims were to issue, the Company expects that Avid would seek to incorporate
such claims into the litigation, although Avid has made no reference to the
reissue proceedings in the litigation to date. If the Company does not prevail
in the action, it could be required to pay substantial damages for infringement
and cease offering products that allegedly infringe such patent, either of which
results would have a material adverse effect on the Company. Alternatively, the
Company could be required to seek to obtain a license under patent. If so, there
can be no assurance that such a license would be available to the Company or, if
available, that the terms of any such license would be satisfactory. Moreover,
the pendency and expense of the litigation could adversely affect the Company's
business, market share, financial condition and operating results, regardless of
the outcome of the litigation. There can be no assurance that the Company will
prevail in the litigation, or that any of the above-described effects of
litigation, whether or not successful, will not be material.

From time to time, the Company is involved in other disputes and/or litigation
encountered in its normal course of business. The Company does not believe that
the ultimate impact of the resolution of such other outstanding matters will
have a material effect on the Company's financial condition or results of
operations.

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 have been filed during the quarter
            for which this report is filed.
                        
<PAGE>
 
                                                           Page 14 of 14


                                SIGNATURES
        
     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: November 14, 1995         By:   /s/ Peter J. Rice
                                    --------------------------------
                                             Peter J. Rice
                                      Vice President & Treasurer
                                       (Chief Financial Officer)
        
Date: November 14, 1995         By:   /s/ Gary B. Godin
                                    --------------------------------
                                             Gary B. Godin
                                      Chief Accounting Officer &
                                         Corporate Controller
                                 
<PAGE>
 
                                   Exhibits

Exhibits 
 Number                        Description                             Page
--------                       -----------                             ----

   27                 Financial Data Schedule