SECURITIES AND EXCHANGE 
COMMISSION
Washington, DC 20549

FORM 10-KSB

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

For the Fiscal Year Ended December 31, 1996

Commission File Number: 1-13760

THE NETWORK CONNECTION, INC.

1324 Union Hill Road 
Alpharetta, Georgia 30201
(770-751-0889)

A Georgia Corporation	IRS Employer ID No. 58-1712432

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $.001 par value per share	Registered on The Nasdaq 
Stock Market
Common Stock Purchase Warrants	Registered on The Nasdaq Stock 
Market

Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(b) of the Securities Exchange Act 
of 1934 during the preceding 12 months, and (2) has been subject to such 
filing requirements for the past 90 days.   Yes [X]  No [   ]


Indicate by check mark if disclosure of delinquent filers pursuant to Item 
405 of Regulation S-K is not contained herein, and will not be contained, 
to the best of registrants knowledge, in definitive proxy or information 
statements incorporated by reference in Part III of this Form 10-KSB or 
any amendment of this Form 10-KSB.   [    ]


The aggregate market value of the voting stock held by non-affiliates of 
the registrant, based on the closing sale price of the Common Stock on 
April 1, 1997, in the over-the-counter market as reported by The Nasdaq 
SmallCap Market, was approximately $11.8 million.  Shares of Common 
Stock held by each officer and director and by each person who owns 5% 
or more of the outstanding Common Stock have been excluded in that 
such persons may be deemed to be affiliates.  This determination of 
affiliate status is not necessarily a conclusive determination for other 
purposes.

As of April 1, 1997, the registrant had outstanding 3,419,304 shares of its 
Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

None

PART I


Item 1.   Business

GLOSSARY

	Superserver - a network computer designed to provide local 
area networks with the performance, availability, scalability and 
upgradability characteristic of mainframes and minicomputers, as well as 
the compatibility of a PC; superservers reduce the input/output 
bottlenecks and performance degradation typically associated with 
PC-based servers attempting to perform multiple tasks concurrently using 
a single microprocessor. 

	Compatibility - also called openness; supports 
industry-standard network operating systems, applications and 
application development tools, and network connectivity products; 
non-proprietary. 

	Local Area Network or LAN - a network or connected group 
of computers or workstations located within the confines of a single 
physical structure or related group of structures, all the members of which 
group are in close proximity to each other. 

	Performance - a level of compute power, data I/O and 
communication capability comparable to that provided by mainframes 
and minicomputers; meets the requirements of large numbers of users 
running compute and I/O- intensive applications and high-speed 
communication functions. 

	Availability - providing the reliability, data integrity and 
recoverability features required for business-critical applications; 
providing reliability features that increase the mean-time between failures 
and promote the continuing operation of the superserver after failure; 
offering data integrity features that protect against data loss or corruption 
during system operation; and incorporating recoverability features to 
facilitate recovery when a stoppage does occur. 

	Scalability - also called expandability; the ability to maintain 
rapid response time to each client as the number of concurrent clients or 
applications increases; supported in the field through the incorporation of 
an additional central processing unit subsystem, main memory chips, 
mass storage and other subsystems, such as network interface cards; 
scalability extends the superserver's useful life and protects the end user's 
initial investment. 

	Upgradability - the ability to replace subsystems and disk 
drives economically, within superserver product generations, with higher 
performance products that either are available today or become available 
in the future, without requiring alteration of the superserver's network 
operating system, application software or other hardware. 

	Wide Area Network or WAN - a network of computers or 
workstations the individual members of which are geographically 
dispersed and generally interconnected through the facilities of a 
common carrier telecommunications system.


General

	The Company designs, manufactures and distributes computer 
networking products and systems, including high performance 
superservers and workstations, which provide users with video on 
demand applications and support and full motion digital video, imaging 
and other multimedia processes. The Company's networking products are 
used in connection with employee training, academic, 
telecommunications, entertainment and other industry applications. 
Video on demand permits new ways to employ video as an instructional, 
entertaining and communications medium over existing computer 
networks. Each user is given the ability to call-up video content as 
needed, without affecting any other network participant's requirements on 
the system, and without requiring any other system participant 
simultaneously to view the same content. 

	The Company was originally incorporated in 1986 to distribute 
computer network products as a value added distributor ("VAD") of such 
products. Although its principal business continued as a VAD, in 1987 
the Company made a strategic shift in its business operations by moving 
away from the distribution of products manufactured by others and to 
seek to become principally a manufacturer of its own superserver and 
workstation products. This shift resulted from changing trends in the 
computer industry, which included increased profit margin pressures on 
VADs due to the perception that VADs were offering simple 
commodities rather than value added products for sale to their customers. 

	The Company's products are sold under the name TRIUMPH, 
and are based upon non-proprietary PC hardware standards and utilize 
standard major components and subsystems in order to provide flexibility 
and reliability. The Company's products are designed to be compatible 
with industry standard network operating systems, such as Novell 
NetWare, Microsoft LAN Manager, Windows NT, OS2, UNIX (SCO, 
SVR4, MPX) and new network operating systems as they become 
available. Product design allows compatibility with most applications 
running in such network environments, and enables TRIUMPH 
superserver systems to operate efficiently as servers and work stations for 
groups of interconnected PCs arranged in LANs and WANs. The 
Company currently distributes its products worldwide principally through 
its own internal sales force and strategic resellers. 

Background and Industry

	During the 1980s, personal computers played an increasingly 
significant role in the workplace. The need of PC users to share files, 
applications and peripherals, such as printers, has resulted in the 
widespread proliferation of LANs. Each LAN requires a network 
operating system to function. This need is being filled by such products 
as Microsoft Windows NT, Novell NetWare, Microsoft LAN Manager, 
SCO UNIX and Banyan VINES, among others. Each LAN also requires 
a computer to manage its operations. In simple LANs, a dedicated 
personal computer acts as the LAN's "server." Larger LANs have 
employed high-end PCs, such as the Compaq SystemPro, to act as 
servers. 

	The number, size and complexity of LANs have increased 
dramatically in recent years. New LANs are being developed that support 
a greater number of users than in the past, and groups of smaller LANs 
are being replaced by single, larger LANs. In addition, multiple LANs are 
being internetworked to form WANs. More sophisticated tasks, such as 
document and image processing, employee training, academic teaching, 
medical diagnostic services and multimedia publishing and broadcasting 
editing are increasingly being implemented on LANs. Some applications, 
such as groupware (e.g., Lotus' Notes and electronic mail), are 
implemented only on networks. In addition, companies such as Oracle 
Systems Corporation, Informix Corporation, Sybase, Inc. and Centura 
Software have recently introduced network versions of sophisticated 
database management applications that have traditionally been run on 
mainframes or minicomputers. 

	Large organizations with multiple sites are creating 
enterprise-wide networks to more fully integrate their various geographic 
locations. In this regard, enterprises are interconnecting their multiple 
LANs, WANs, digital satellite communication channels, mainframes, 
minicomputers and other computing resources to facilitate 
communication and information sharing within the organization. 
Innovations such as multi-protocol routing, LAN-to-mainframe gateway 
software and network management products are facilitating such 
interconnectivity. The Company believes that these communication 
functions will increasingly be executed on network servers. 

	As organizations migrate toward enterprise networking, 
superservers that perform more complex and business-critical tasks will 
be required. Although PCs have adequately addressed simple file serving, 
even high-end PCs do not have the required performance and 
input/output ("I/O") capability to meet the needs of large and complex 
networks efficiently. In addition, as business-critical applications and 
communication functions are increasingly implemented on the network, 
network servers need to offer the availability, scalability and 
upgradability that are characteristic of mainframes and minicomputers. 

	One of the developing distribution functions that is increasingly 
being demanded for LAN processing is video display and information 
distribution. Video technology requires amounts of information (e.g., 
data per second) to be available and distributed which is in excess of that 
required by other applications, such as word processing, even when that 
information is technologically compressed. Available hard disk storage 
and network bandwidth is consumed by video information at far faster 
rates than by other types of processed data. Furthermore, to meet the 
demands of current applications video information also must be provided 
continuously and smoothly to multiple users simultaneously. Thus, the 
current challenge for manufacturers and distributors of superservers is to 
create a cost effective, standardized product to satisfy the demands of a 
marketplace for video/multimedia network equipment and software that 
Management of the Company expects will experience rapid growth in the 
next three years. 

	The Company believes that mainframes and minicomputers are 
too costly a means for satisfactory service of this emerging market, and 
their proprietary architectures are generally incompatible with the PC 
networks which are increasingly used for information processing in 
today's more decentralized business environment. Thus, as networks 
increase in size and complexity and as business-critical applications and 
communication functions are increasingly implemented on networks, a 
need is emerging for servers both designed specifically for the demands 
of this new enterprise, and video/multimedia, networking environment, 
and made available as a cost-effective means for distributing the required 
information. 

The Network Connection Solution

	In 1987, the Company first introduced the initial entry of its 
TRIUMPH family of superservers, which is designed to provide the 
compatibility, performance, availability, scalability and upgradability 
necessary for sophisticated networks. The Company believes that its 
superservers contain the following features. 

		Compatibility 

	The TRIUMPH family is based upon PC hardware standards 
and is designed to be compatible with industry standard network 
operating systems, such as Windows NT, Novell NetWare, Microsoft 
LAN Manager, SCO UNIX and Banyan VINES, and with new network 
operating systems as they become available. In addition, the Company's 
products are designed to be compatible with applications designed to run 
in such network environments. TRIUMPH superserver use of common 
PC "interfaces" (e.g., products utilized to increase system functionality in 
terms of system power and/or special or additional features availability), 
such as the Small Computer System Interface ("SCSI"), and its 
employment of Peripheral Component Interconnect (PCI) and 
Extended Industry Standard Architecture ("EISA"), also enables the 
Company's products to connect with hardware produced by third-party 
vendors. The TRIUMPH superserver also provides for ease of support of 
a wide range of network connectivity standards. 

		Performance 

	The TRIUMPH architecture consists of independent subsystems 
interfaced by a high-speed multiprocessor connection system. This 
architecture is designed to reduce the I/O bottlenecks and performance 
degradation typically associated with PC- based servers attempting to 
perform multiple tasks concurrently with a single microprocessor. The 
TRIUMPH open systems architecture and RAID ("redundant array of 
independent disks") technology incorporates the fault tolerance and high 
throughput necessary to provide simultaneous services, such as 
video-on-demand, LAN-based video training, and database/file imaging 
and printing. In addition, as the TRIUMPH superservers can provide 
video/multimedia systems encompassing voice or sound, pictorial and 
graphic, live or recorded, and touch technologies, the Company believes 
that easy access to information in a "user friendly" environment is made 
available. In this respect, the TRIUMPH architecture is designed to 
provide features found in mainframes and minicomputers at a 
significantly lower cost. A single TRIUMPH superserver may often be 
used to replace multiple high-end PCs acting as LAN servers. Returning 
these high- end PCs to the desktop to perform other tasks reduces the 
effective cost of the TRIUMPH superserver. 

		Availability 

	The TRIUMPH architecture is designed to permit systems to be 
configured to provide the high level of availability required for 
business-critical applications through reliability, data integrity and 
recoverability features. Reliability features available for certain 
TRIUMPH models include power supply and other key module 
redundancy to promote continued system operation, cooling system 
redundancy to protect against premature component failure and disk 
mirroring and automatic disk backup by providing an ability to replace 
hard disks during system operation without interruption. The TRIUMPH 
data integrity features minimize the potential for data loss during system 
operation and, in addition to the disk backup features described above, 
include data parity checking to enhance data integrity. Recoverability 
features facilitate recovery when a stoppage does occur and include 
subsystems which permit remote diagnostics subsystems for TRIUMPH 
superservers running Novell NetWare and Microsoft NT Advanced 
Server. 

		Scalability 

	The TRIUMPH platform is configurable to meet the less 
demanding requirements of simpler LAN applications and may 
subsequently be scaled up in the field as the user enlarges its network or 
implements more sophisticated applications. An additional Intelligent I/O 
Processor subsystem, an additional Central Processing Unit ("CPU") 
subsystem, components such as memory chips and disk drives, and 
PCI/EISA- compatible subsystems such as network interface cards, may 
be added. 

		Upgradability 

	The TRIUMPH superserver subsystems and disk drives may be 
replaced economically in the field with higher performance products that 
either are available today or, presumably become available in the future, 
without requiring alteration of the network operating system, application 
software or other hardware.

Product Strategy

	The Company is implementing certain technology, product, 
distribution and manufacturing strategies to effectuate the Network 
Connection Solution. 

Technology and Product Strategy

		Support Popular Network Operating Systems 

	The Company intends to support new releases of popular 
network operating systems that it currently supports as they become 
available. The Company also intends to support additional network 
operating systems as their popularity increases. The TRIUMPH 
superserver open architecture and compatibility features permit ease of 
support. In addition, Windows NT takes advantage of the TRIUMPH 
superserver shared memory architecture, as does SCO UNIX (and 
presumably as will other multi-processing network operating systems as 
they become available). 

		Develop Higher Performance Superservers While 
Maintaining Compatibility 

	The Company's principal technological challenge with respect 
to the development of its TRIUMPH family of superservers was to 
simultaneously deliver high performance and compatibility with existing 
PC hardware and software standards. The Company intends to continue 
improving the performance of its superservers while maintaining 
compatibility with popular network operating systems and hardware 
interfaces. 

		Offer Broad Product Line 

	The scalability of TRIUMPH superservers increases the 
desirability of these products from the perspective of a user who currently 
has a simple LAN that is anticipated to grow or to support new, more 
sophisticated applications. As a result, the Company believes that it is 
important to offer a base configuration product at a relatively low price 
point to induce these users to purchase the next level TRIUMPH 
superserver in anticipation of scaling up as network demands increase 
(e.g., video/multimedia). On the other hand, users with sophisticated 
applications or complex LANs typically require superservers configured 
with faster microprocessors and other higher performance subsystems 
(e.g., video and other multimedia accessibility). Therefore, the Company 
also offers higher performance TRIUMPH superservers at higher price 
points. In 1995, the Company introduced, hardware, software and 
services packaged as complete value added system solutions for the travel 
and transportation commercial markets. See Turnkey Packaging below.

		Turnkey Packaging 

	Sales of the Company's TRIUMPH superservers are made 
increasingly as "turnkey" systems. The Company sells its products as a 
complete solution to a customer's needs, rather than as only a "finger in 
the dike" or a niche filler. In 1995, the Company introduced, hardware, 
software and services packaged as complete value added system solutions 
for the travel and transportation commercial markets: (i) AirView an 
in-flight interactive entertainment and cabin management system 
mounted in individual airline seats, (ii) TrainView an in-transit 
interactive entertainment and railcar management system mounted in 
individual railcar seats and (iii) InnView an in-room interactive 
entertainment system for the hotel hospitality market and (iv) 
CruiseView an in-room interactive entertainment system for the cruise 
ship market.  This sales trend is expected to continue, and even to 
accelerate, as video/multimedia superserver equipment become more and 
more of a commodity. 

Distribution Strategy


		Leverage Existing Distribution Channels 

	The Company intends to continue to direct and operate its 
internal sales force primarily from its Georgia headquarters as its 
principal means of product distribution sales. However, in the future it 
plans to increase the number of such sales personnel and to augment the 
scope of their responsibilities to include opening remote sales offices and 
new, strategic channels of distribution outlined below. Since 1995, the 
Company has established external employee sales representation in 
Virginia and Singapore.

		Create International Distribution 

	The Company believes that foreign countries offer significant 
potential markets for its products due to increasing worldwide demand 
for complex networking solutions. Approximately 38% of the 
Companys revenues for fiscal 1996 were derived from sales of its 
products in foreign countries. The Company is not assured of success in 
its international distribution efforts; however, those efforts will be 
intensified. Management believes that foreign purchasers are more 
receptive than domestic purchasers to new "United States" technologies, 
for fear of being left behind. At the same time international customers 
have grown accustomed to higher relative prices for new American 
technologies. 

		Establish Relationships with Independent Vendors 

	The Company is developing relationships with independent 
vendors that encourage their customers to purchase the Company's 
systems in conjunction with their products on the basis that overall 
system performance and value will be enhanced. In 1996, the Company 
entered into a worldwide distribution agreement with Siemens A.G. 
(Siemens) for TrainView and InnView in the rail and hotel marketplace 
and a non-binding memorandum of agreement to define a cooperative 
business relationship with Lockheed Martin Display Systems (LMDS) 
for AirView in the airline market. Additionally the Company entered into 
an OEM agreement with Advanced Telecommunications Module, Inc 
(ATML) for the Cheetah server packaged with asynchronous transfer 
mode (ATM) switching to be used in Intranet applications worldwide. 
Approximately 14% of the Companys revenues for 1996 were derived 
form this OEM relationship. The Company intends to leverage these and 
other similar relationships to enhance its ability to target application 
specific end users. 

Manufacturing Strategy
	
		Subsystem Manufacturing 

	The Company believes that one of its significant strengths is its 
hardware architecture development expertise. 
Nevertheless, the Company does not at this time subcontract the 
manufacture, assembly and test function of printed circuit boards or the 
assembly of mechanical components. The Company does subcontract the 
manufacture of cabinets for its products. In the future, as production 
levels and product sales increase, the Company may subcontract to third 
parties, such as Allied Signal and Siemens, the manufacture, assembly 
and test functions that it currently performs for particular product 
offerings. 

		Subcontract Higher Level Manufacturing 

	Based upon successful teaming relationships with respect to the 
development and sale of its AirView and TrainView products, the 
Company has plans to develop manufacturing relationships with LMDS 
for AirView and Siemens for TrainView in order to permit performance 
of higher level system manufacturing, integration and test functions for 
its current generation of products. Such arrangements, if effected, would 
enable the Company to manufacture its next generation superservers (if 
developed) in its existing facility, thereby avoiding the need to provide 
for additional manufacturing capacity, if required. 

Technology

	The Company believes that the TRIUMPH architecture allows 
its products to provide the performance and availability advantages of a 
mainframe without sacrificing compatibility with PC hardware and 
software standards. This architecture consists of independent subsystems 
interfaced by the Company's high-speed system Bus. These subsystems 
include: the Company's proprietary TRIUMPH RAID Accelerated 
Controller ("TRAC"), an Intel Pentium-based Intelligent Input/Output 
Processor subsystem; the Intel Pentium-based CPU subsystem; the 
PCI/EISA Bus subsystem; and the main memory subsystem. These 
subsystems operate independently and thus reduce the I/O bottlenecks 
and performance degradation typically associated with PC-based servers 
attempting to perform multiple tasks concurrently using a single 
microprocessor. 

 Network Operating System Compatibility Features.  Network operating 
systems are designed to work with architectures that incorporate industry 
standard connection features. When a server design features an 
architecture that does not incorporate such industry standards, the server 
manufacturer must modify the network operating systems utilized in 
order for it to work with its nonstandard architecture. Generally, the time, 
expense and knowledge necessary to complete these modifications limit 
the number of network operating systems supported by these proprietary 
servers and restrict their ability to respond quickly to new NOS releases. 
The TRIUMPH superserver open architecture is compatible with the 
basic I/O system that allows computer hardware to connect to a network 
operating system. This enables the TRIUMPH superserver to support any 
network operating systems with the relatively simple addition of drivers 
specific to that network operating system. TRIUMPH superservers are, 
therefore, compatible with leading network operating systems such as 
Windows NT, Novell NetWare, Microsoft LAN Manager, SCO UNIX 
and Banyan VINES. The Company's products are also designed to be 
compatible with new network operating systems as they become 
available. 

 Application Compatibility Features.  The TRIUMPH superserver open 
architecture permits applications written for use with the network 
operating systems supported by the Company to run unmodified. 
TRIUMPH superservers, therefore, support applications that require both 
network operating systems and basic I/O system compatibility. 

 Hardware Interface Protocols.  Each TRIUMPH subsystem provides 
hardware compatibility by supporting industry standard interfaces with 
simple software drivers. The TRAC subsystem offers SCSI compatibility, 
the CPU subsystem offers Intel compatibility and the Bus subsystem 
offers PCI/EISA compatibility. SCSI peripherals, network interface cards 
or other subsystems designed by third parties that incorporate 
technological advances in any of these standards-based product areas 
may be added easily to TRIUMPH superservers. 

 Intelligent I/0 Processor Subsystem.  The TRAC subsystem includes an 
Intel processor, which is dedicated to managing mass storage and 
consequently relieves the main CPU of that task and improves overall 
system performance. With the TRAC, data is accessed from the disk 
drives and is more easily and economically (in terms of bandwidth usage) 
available to the CPU and main memory. Each TRAC contains two SCSI 
channels, each of which is capable of supporting up to seven fast SCSI 
disk drives or other SCSI peripherals, including third-party disk arrays, 
tape backup units, printers and CD-ROM drives. Up to two TRACs can 
be configured in a TRIUMPH superserver, allowing a maximum of 35 
SCSI peripherals per system. 

	The TRAC also incorporates RAID technology at the output and 
input levels to help protect the system from data loss. This technology, 
which is commonly referred to as data striping and disk mirroring, also 
improves system performance by reducing data transfer and access times 
from disk drives. 

 Central Processing Unit Subsystem.  The CPU subsystem runs the NOS 
and applications in client-server environments. The CPUoffers complete 
Intel compatibility.  Each subsystem may be upgraded with a CPU that 
incorporates a microprocessor operating at a higher clock speed. 

 Availability Features.  The TRIUMPH superserver's architecture is 
designed to permit systems to be configured to provide the high level of 
availability required for business- critical applications through reliability, 
data integrity and recoverability features. Reliability features available for 
certain TRIUMPH models include power supply and other key module 
redundancy to promote continued system operation, cooling system 
redundancy to protect against premature component failure and disk 
mirroring and automatic disk backup through duplexing and hot sparing 
supported at the hardware level. The TRIUMPH superserver data 
integrity features minimize the potential for data loss during system 
operation and, in addition to the disk backup features described above, 
include data parity checking to enhance data integrity. Recoverability 
features facilitate recovery when a stoppage does occur and include 
systems providing a remote diagnostics subsystem for TRIUMPH 
superservers running Novell NetWare. 

Products

	The current TRIUMPH product line consists of: the Cheetah 
Enterprise Video File Server, the M2 Enterprise File Server, the TNX 
Large Workgroup File Server, the T4000 Small Workgroup File Server, 
the T300 and T5000 high end network work stations, and the TNX/C 
Video File Encoder. 

	The following lists the basic features of each model in the 
Company's current generation of TRIUMPH products: 




VIDEO SERVERS

 Cheetah? Enterprise Video File Server.  The Cheetah? or MV2 has the 
same capabilities as the M2 Enterprise File Server (see below), except 
that it contains certain configuration enhancements that allow for the 
support of video applications across entire networks. It is designed to 
serve up to 300 simultaneous video users per single system and can be 
rack mounted to achieve up to 336 gigabytes of disk storage. The 
Cheetah? sells for between $70,000 to $500,000 per system, depending 
upon functions and configurations required. 

 Cheetah? Large Workgroup Video File Server.  The video capable 
version of the TNX is very similar to Cheetah? described above, but 
with reduced work station service capacity and reduced disk storage 
capabilities. This product sells for between $25,000 to $50,000 per 
system, depending upon functions and configurations required. 

FILE SERVERS

 M2 Enterprise File Server.  The Company's top-level non-video file 
server, it is designed to serve over 1000 work stations. The M2 may 
contain up to six CPUs and has a disk storage capacity of up to 100 
gigabytes. This system contains an enhanced cooling system and RAID 5 
and multiple power supplies for support of its large disk hard drive 
capacity. The M2 sells for between $30,000 and $150,000 per system, 
depending upon functions and configurations required. 

 TNX Large Workgroup File Server.  The Company's mid-level file 
server, it is designed to serve between 40-100 work stations. The TNX 
may contain up to 6 processors and has a disk capacity of between 12-16 
gigabytes. This system may or may not contain disk redundancy features 
depending upon the needs of the particular customer. The TNX sells for 
between $8,000 and $30,000 per system, depending upon functions and 
configurations required. 

 T4000 Small Workgroup File Server.  The Company's entry level file 
server, it is designed as a "commodity" product to serve 10-20 work 
stations. It contains a single CPU processor and has a small disk capacity 
(between 4-8 gigabytes). This system may or may not contain disk 
redundancy features depending upon the needs of the particular customer. 
The T4000 sells for between $4,000 and $10,000 per system, depending 
upon functions and configurations required. 

WORK STATIONS

 T3000.  An entry level network work station, includes the capability of 
providing normal office automation, graphics and word processing. The 
T3000 sells for between $900 and $4,000, depending upon functions and 
configuration required. 

 T5000.  A high end, engineering work station, with single or multiple 
processor configurations, designed for a range of desktop applications; 
including - computer aided design, graphics, mathematical applications 
and computer modeling. The T5000 sells for between $3,000 and 
$10,000, depending upon functions and configurations required. 

OTHER PRODUCTS

 TNX-C Encoder.  The TNX-C is a real-time, networked Motion Pictures 
Export Group (MPEG) encoder impression station. It converts analog 
video data to digital files when conjoined with either of the Company's 
video file servers. All encoded files are compressed and able to run 
throughout an associated network at 30 frames per second and near 
broadcast quality. It sells for $49,000. 


TURN-KEY PACKAGED SOLUTIONS

AirView.  An in-flight interactive entertainment and cabin management 
system mounted in individual airline seats. 

TrainView.  An in-transit interactive entertainment and railcar 
management system mounted in individual railcar seats.

InnView.   An in-room interactive entertainment system for the hotel 
hospitality market.

CruiseView   An in-room interactive entertainment system for the cruise 
ship market.

End Users

	The Company's products are sold to end users in a wide range of 
industries. Customers that have purchased the Company's products are 
financial institutions, health care companies, academic institutions, 
communications/broadcasting companies, governmental agencies and 
other bureaucracies, entertainment providers and end-users operating in 
various other industries. 

	In late 1995, the Company began offering its interactive 
video-on-demand (IVOD) systems to commercial airlines (AirView), 
rail companies (TrainView) and related aircraft and railcar 
manufacturers, and hotels (InnView) and in 1996 introduced 
CruiseView to cruise ship operators. The systems are designed to deliver 
VHS-quality video material to travelers using  seat back displays, or to 
displays in hotel or cruise ship rooms, and include a file server which can 
support up to 300 simultaneous users and with disk drives that can store 
up to 700 hours of video content. Only one order for AirView, delivered 
to the United States Air Force, 417th Squadron, has been received to date. 
The Company has not yet received any firm orders for TrainView or 
CruiseView systems. The Company currently has responded to major 
requests for proposal and is in various stages of negotiation for 
CruiseView, InnView, AirView and TrainView systems with multi-
year deliveries from some of the worlds largest travel related 
companies. There can be no assurance however, that the Company will 
successfully negotiate definitive agreements for the purchase of these 
systems.

	In 1996, three customers of the Company accounted for greater 
than 10% of total sales. The United States government (encompassed by 
aggregated sales to several federal agencies and United States 
government controlled bureaucracies), Conhan Ltd. and ATML, 
accounted for approximately 15%, 38% and 14%, respectively, of the 
Company's total sales during that period. The Company believes that its 
sales to the United States government, as well as to state governments 
and their agencies which make purchases in accordance with federal 
Government Services Administration ("GSA") guidelines, will continue 
to grow. The Company is on the GSA list of qualified vendors and 
descriptions of the Company's superserver products have been recently 
included as the required design specifications identified in federal 
government request for proposals distributed to potential vendors. 

Backlog

	The Company does not have significant backlog because it is 
able to manufacture and deliver products generally within only 45 days 
of order receipt and it has no long-term contracts to supply products to 
customers (but rather manufactures and sells products on the basis of 
individual purchase orders as and when received). The Company cannot 
determine when customer orders will be received, and to date all of the 
Company's customers have ordered products on an as-needed basis. As a 
result, backlog at the beginning of a quarter may not represent a 
significant percentage of the products anticipated to be sold in that 
quarter. Quarterly revenues and operating results, therefore, depend on 
the volume and timing of bookings received during the quarter, which are 
difficult to forecast. As a result, the Company's Management does not 
consider order backlog at this time a significant indicator of the 
Company's future revenues. However, as significant orders under long-
term contracts, if any, are placed for the Companys turn-key packaged 
systems, backlog will become a significant indicator of future revenues.

Sales and Distribution

	The Company currently distributes its products principally 
through the efforts of its internal direct sales force and to a much lesser 
extent through independent sales representatives. In the future the 
Company intends to offer its products through an augmented internal 
sales force. The Company also distributes its superserver products 
through a select group of network-oriented resellers, including VADs and 
system integrators, OEMs and international distributors. The Company 
recently entered into distribution agreements with distributors of 
computer equipment in South Africa, South Korea, Austria, United Arab 
Emirates, Thailand and Brazil and is currently negotiating for distribution 
of its products with companies in Japan, Singapore, Hong Kong, 
Australia, Sweden, France and the United Kingdom. Currently, the 
Company's principal means of conducting its sales effort internationally 
is through trade show attendance, holding end-user seminars to 
demonstrate Company products, internal and a limited amount of 
customer on site demonstrations of product use (solely for superserver 
products), print advertising in trade publications and telemarketing. The 
Company will continue and accelerate these marketing efforts. (See 
Distribution Strategy)

	The Company is also attempting to develop relationships with 
software and other product vendor "partners" capable of encouraging 
their customers to purchase the Company's systems in conjunction with 
their own products on the basis that overall system or product 
performance will be enhanced (see Distribution Strategy). The 
Company would assist these partner-vendors by determining the 
configuration of the Companys products that will deliver optimal 
performance along with the partner-vendor's products. In 1996, the 
Company entered into a worldwide distribution agreement with Siemens 
A.G. for TrainView and InnView in the rail and hotel marketplace and a 
non-binding memorandum of agreement to define a cooperative business 
relationship with Lockheed Martin Display Systems for AirView in the 
airline market. Additionally the Company entered into an OEM 
agreement with Advanced Telecommunications Module, Inc for the 
Cheetah server packaged with asynchronous transfer mode (ATM) 
switching to be used in Intranet applications worldwide. Approximately 
14% of the Companys revenues for 1996 were derived form this OEM 
relationship.

	The Companys marketing efforts focus on holding end-user 
seminars and attending trade shows (including international trade shows) 
as the primary method to create market awareness of the Company and 
its products. The Company also invested approximately $400,000 to 
build and operate at customer locations three product demonstration 
projects and also to expand its demonstration capabilities at its corporate 
offices. See  ITEM 6, "MANAGEMENT'S DISCUSSION AND 
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 
OPERATIONS ." Approximately 38% of the Companys revenues for 
fiscal 1996 were derived from sales of its products in foreign countries. 
In 1996, three customers accounted for 67.0% (38%, 15% and 14%, 
respectively) of the Companys revenues.  During 1995, one customer 
accounted for approximately 19% of the Companys revenues. 

	The purchase price for the Companys turn-key packaged 
systems for the travel related entertainment market is relatively high - 
estimated to range from approximately $500,000 to $4,000,000 per 
system depending upon various factors such as the size and type of 
airplane, train, hotel or ship, and the requested system features. The high 
system purchase price is anticipated to result in a relatively extensive 
sales cycle, which will include the evaluation of the Companys 
technology, a test installation of the system and negotiation of related 
agreements. The sales cycle is also dependent upon a number of factors 
beyond the Companys control such as the financial condition, safety and 
maintenance concerns, regulatory issues and purchasing patterns of 
particular operators, and the respective industry generally. As a result, 
this can result in extremely cyclical buying patterns.



Customer Support

	The Company believes that customer service and support is a 
significant competitive factor in the network server market which will 
become increasingly important as LANs become more complex and as 
more enterprises implement business-critical applications on their 
networks. The Company supports its customers by providing rapid 
problem resolution both during and after the installation process. The 
Company maintains a small technical support organization that assists 
customers in troubleshooting problems and providing replacement parts. 
The Company provides a toll-free hotline to help diagnose and correct 
system interruptions as they occur at customer sites and its support staff is 
available seven days a week. 

	The Company warrants all of its TRIUMPH superservers 
against defects in materials and workmanship for one year (three years 
for disk drives). During the warranty period the Company will repair or 
replace, within four days, any TRIUMPH server component(s) which the 
Company identifies as containing defects which do not prevent the 
continued use of the server. For defects that do prevent the continued use 
of the server, the Company will attempt to repair or replace the identified 
defective component within 24-hours. The Company's product warranties 
do not materially differ from those generally available in the industry. 

	To date, the Company has not experienced significant claims 
under such warranties, and its ability to meet the full demands of having a 
significant number of units sold to customers who require such service 
has not been tested. The Company has contracted with a hardware 
manufacturer to provide nationwide customer support services for the 
Company's products, which customer services are paid for by the 
Company on the basis of a fee for service schedule. The Company also 
passes through to end users the warranties that it receives from vendors 
on any separate hardware, software or component parts that it sells 
independently of full systems. 

Manufacturing

	The Company currently manufactures all of its TRIUMPH 
products in the United States at its Atlanta, Georgia metropolitan area 
facility. 

	The Company obtains electronic components for its TRIUMPH 
products "off-the-shelf" from a number of wholesalers and performs at its 
own facility the assembly and test of the printed circuit boards and 
mechanical components incorporated into its products. The only 
significant subcontracted manufacturing work performed for the 
Company is the manufacture of cabinets for its file servers. The 
Company has established a comprehensive testing and qualification 
program with the goal of ensuring that all subassemblies meet the 
Company's specifications and standards before final assembly and 
testing. 

	Diagnostic tests, assembly, burn-in, final configuration and final 
quality assurance tests currently are completed at the Company's 
manufacturing facility. The Company employs statistical process controls 
at its manufacturing facility. The Company has also implemented quality 
control policies that are reviewed and accepted by the Company's major 
customers. The Company believes that this procedure helps ensure a 
high-quality product. 

	The Company has elected to assemble into its products 
principally off the shelf component parts available from multiple sources. 
The Company believes that this practice helps to ensure better quality 
control and pricing, by allowing the Company to select the best 
manufactured and best performing components available on the market 
(rather than a proprietary product that may fall behind the "curve" in 
terms of either such characteristic) and to purchase such components 
from marketplace sources that offer the best prices at the time that the 
particular components are needed for production (rather than to have 
prices dictated by the limited sources able to provide a proprietary 
component). The Company obtains component parts on a purchase order 
basis and does not have long-term contracts with any of its suppliers. To 
date, the Company has not experienced interruptions in the supply of 
such component parts, and believes that numerous qualified suppliers are 
available. The inability of any of its current suppliers, except as identified 
below, to provide component parts to the Company would not adversely 
affect the Company's operations. Alternate sources could be readily 
established. 

	Based upon the success of the strategic alliances with LMDS 
and Siemens for the development and sale of its AirView and TrainView 
products,  the Company has further plans to develop manufacturing 
relationships with LMDS for AirView and Siemens for TrainView in 
order to permit performance of higher level system manufacturing, 
integration and test functions for its current generation of products. Such 
arrangements, if effected, would enable the Company to manufacture its 
next generation superservers (if developed) in its existing facility, thereby 
avoiding the need to provide for additional manufacturing capacity, if 
required. 


Competition

	The Company faces substantial competition from the 
manufacturers of several different types of products used as network 
servers. The Company expects competition to intensify as more firms 
enter the market and compete for market share. In addition, companies 
currently in the server market will continue to change product offerings 
in order to capture further market share. Many of these companies have 
substantially greater financial resources, research and development staffs, 
manufacturing, marketing and distribution facilities than the Company. 
The Company also expects its competitors to continue to improve their 
network-oriented distribution channels. 

	With respect to base configuration TRIUMPH superservers for 
simple LANs, the Company competes with manufacturers of high-end 
PCs used as network servers. Competitors offering products in this 
market include International Business Machines Corporation ("IBM"), 
Compaq Computer, Inc., Dell Corporation, Tricord Corporation 
("Tricord") and Network Netframe Systems, Inc. ("Net Frame"). In 
addition, NetFrame offers superservers that compete in this market. One 
of the principal competitive factors in the market for simple LANs is 
price, and the economies of scale available to high-end PC manufacturers 
may permit them to offer their products at a lower price. The Company 
expects its competitors to continue to improve the performance, 
availability, scalability and upgradability features of their products. The 
Company expects all of its competitors in the simple LAN market to 
improve the distribution channels for their products used as servers. 

	With respect to more fully configured TRIUMPH superservers 
for larger and more complex LANs and more sophisticated or 
business-critical applications, the Company competes indirectly with 
manufacturers of mainframes and minicomputers. In addition, certain 
manufacturers promote their mainframes and minicomputers as being 
appropriate for use as network servers. Competitors offering products in 
this market include IBM, Digital Equipment Corporation, 
Hewlett-Packard Corporation, National Cash Register Corporation, 
UNYSIS, Inc. and Sequent Corporation. The Company believes that the 
positive competitive factors in this market include the Company's ability 
to provide server products with performance and availability 
characteristic of mainframes and minicomputers, at a significantly 
reduced cost, as well as with the compatibility to support current and 
future networking solutions built around industry standard hardware and 
software. The Company's operating results could, however, be adversely 
affected if one or more of these competitors elects to compete more 
aggressively with respect to price or product features of their mainframes 
or minicomputers. The Company competes in the market for complex 
LANs with other manufacturers of superservers, including NetFrame, 
Tricord and Parallan, Inc. ("Parallan"). The Company competes in the 
market for turn-key systems for travel related entertainment with other 
manufacturers of complete systems , including BE Aeorspace, Sony 
Transcom, Matsushita, Interactive Flight Technologies, Seavision and 
Trans Digital. The Company believes that it competes favorably with 
other manufacturers of superservers and turn-key systems with respect 
to the compatibility, performance, availability, scalability, upgradability 
and technical support required for sophisticated network computing 
available with the Companys products. In addition , components of the 
Companys products are smaller, weigh considerably less and consume 
much less power than those of several competitors. Because these factors 
affect operating costs for the operator, they may be critical factors for 
customers.  

	There can be no assurance that alternative technologies will not 
be developed in the future that will be capable of providing certain 
services now performed by network servers. The development of such 
technologies could reduce the need for network servers and adversely 
affect the Company's operating results. 

	As many of the Company's competitors are more established, 
benefit from greater market recognition and have greater financial, 
technological, production and marketing resources than the Company, 
establishing and maintaining the Company's competitive position will 
require continued investment by the Company in research and 
development and sales and marketing. There can be no assurance that the 
Company will have sufficient resources to make such investments or that 
the Company will be able to make the necessary technological advances. 
In addition, if more manufacturers of PCs, mainframes or minicomputers 
were to develop and market their own superserver class of products, the 
Company's operating results could be adversely affected. 

Research and Development

	The market for the Company's products is characterized by 
rapid technological change and evolving industry standards, and it is 
highly competitive with respect to timely product innovation. The 
introduction of products embodying new technology and the emergence 
of new industry standards can render existing products obsolete and 
unmarketable. The Company believes that its future success will depend 
upon its ability to develop, manufacture and market new products and 
enhancements to existing products on a cost-effective and timely basis. 
The Company introduced in 1995, hardware, software and services 
packaged as complete value added system solutions for the travel and 
transportation commercial markets: (i) AirView an in-flight interactive 
entertainment and cabin management system mounted in individual 
airline seats, (ii) TrainView an in-transit interactive entertainment and 
railcar management system mounted in individual railcar seats and (iii) 
InnView an in-room interactive entertainment system for the hotel 
hospitality market; and (iv) in 1996, CruiseView an in-room interactive 
entertainment system for the cruise ship market.

	If the Company is unable, for technological or other reasons, to 
develop products in a timely manner in response to changes in the 
industry, or if products or product enhancements that the Company 
develops do not achieve market acceptance, the Company's business will 
be materially and adversely affected. The Company has in the past 
experienced delays in introducing certain of its products and 
enhancements, and there can be no assurance that it will not encounter 
technical or other difficulties that could in the future delay the 
introduction of new products or enhancements. Such delays in the past 
have generally resulted from the Company's need to obtain a requisite 
component from a third-party vendor whose own development process 
has been delayed (e.g., 9 month delay in Microsoft's development in 
1992 of Microsoft Windows NT, the primary operating software system 
used in the Company's superserver products). 

	The Company performs all of its research and development 
activities at its headquarters in Alpharetta, Georgia. During 1995 and 
1996, research and development expenses totaled $88,015 and $160,276, 
respectively. The Company intends to continue to invest in research and 
development. Approximately 5 employees, including James Riner, who 
is Vice President - Research and Development and Engineering, currently 
are engaged in research and development activities. 

Intellectual Property

	The Company currently holds no patents and has no patent 
applications pending with respect to its products or technology. The 
Company currently holds federal trademarks, for the marks "TNX", 
"TRIUMPH", "THE NETWORK CONNECTION", "M2", "M2V" and 
"T.R.A.C.", "CHEETAH", EDUVIEW, AIRVIEW, TRAINVIEW 
and has trademark applications pending for the marks QUAD-
CHEETAH,CHEETAH WORKGROUP, BATTLEVIEW and 
INNVIEW. The Company also relies on a combination of trade secret 
and other intellectual property law, nondisclosure agreements with all of 
its employees and other protective measures, to establish and protect its 
proprietary rights in its products. The Company believes that because of 
the rapid pace of technological change in the networking industry, legal 
protection of its proprietary information is less significant to the 
Company's competitive position than factors such as the Company's 
strategy, the knowledge, ability and experience of the Company's 
personnel, new product development, market recognition and ongoing 
product maintenance and support. Without legal protection, however, it 
may be possible for third parties to copy aspects of the Company's 
products or technology or to obtain and use information that the 
Company regards as proprietary. In addition, the laws of some foreign 
countries do not protect proprietary rights in products and technology to 
the same extent as do the laws of the United States. Although the 
Company continues to implement protective measures and intends to 
defend its proprietary rights vigorously, there can be no assurance that 
these efforts will be successful. The failure or inability of the Company to 
effectively protect its proprietary information could have an adverse 
effect on the Company's business. 

	There can be no assurance that third parties will not assert 
intellectual property infringement claims against the Company. Although 
no claims or litigation related to any such matter are currently pending 
against the Company, there can be no assurance that none will be 
initiated, that the Company would prevail in any such litigation seeking 
damages or an injunction against the sale of the Company's products, or 
that the Company would be able to obtain any necessary licenses on 
reasonable terms if at all. 

Employees

	As of December 31, 1996, the Company had 32 employees, 
including 16 in marketing and sales, 4 in engineering, research and 
development, 8 in manufacturing, operations and support services and 4 
in corporate operations and administration. The Company's success 
depends to a significant extent upon the performance of its executive 
officers and other key personnel. 

Item 2.    Property

	The Company's primary operations are performed in its 20,000 
square foot, owned facilities located on two acres in Alpharetta, Georgia. 
The Company is indebted to an institutional lender as of December 31, 
1996, in the aggregate amount of  $.25 million, for the purchase of this 
primary operating facility.  This loan is secured by the purchased real 
estate and the personal guarantees of Wilbur and Barbara Riner, and 
bears annual interest at the rate of such lenders prime rate plus 2%.

	The Company believes that its current facilities described above 
are adequate for its immediate and near-term needs and does not 
anticipate the need for significant expansion in the near future. 

Item 3.    Legal Proceedings

	Except for ordinary, routine proceedings incidental to its 
business, there are no pending legal proceedings to which the Company 
or any of its property is subject. 

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

None

PART II


Item 5.    Market for Registrants Common Equity and Related 
Stockholder Matters

Market for Common Stock

The Companys common stock trades on The Nasdaq SmallCap Market 
tier of The Nasdaq Stock Market under the symbol TNCX.  The 
following table sets forth the high and low sale prices for the Companys 
common stock for each quarter of fiscal 1995 (commencing with the 
inception of trading) and for fiscal 1996 as reported by The Nasdaq Stock 
Market:

						High	   Low
	Fiscal 1995:				
			Second Quarter		$6.250	  $5.000
			Third Quarter		  7.750	    4.875
			Fourth Quarter		  9.250	    6.875	
		
	Fiscal 1996:				
			First Quarter		$25.375	  $7.625
			Second Quarter		  26.125	    9.875
			Third Quarter		  14.750	    8.500
			Fourth Quarter		  13.750	    8.750
				
	The Company completed an initial public offering of its common stock 
on May 11, 1995.  Prior to May 11, 1995, there was no public market for 
trading the securities of the Company.

		
Holders of Record

	At April 1, 1997, there were approximately 62 shareholders of 
record of the Companys common stock, but the Company believes that 
there are over 1,000 beneficial shareholders, based upon broker requests 
for distribution of annual meeting materials.

Dividends

	Other than prior to September 22, 1994 when the Company 
made distributions to shareholders as an S Corporation, the Company has 
not declared or paid any cash dividends on its Common Stock and does 
not intend to do so in the foreseeable future.

		
	

Item 6.   Management's Discussion and Analysis of Financial 
Condition and Results of Operations

	The following discussion and analysis should be read in 
conjunction with the information set forth in the Financial Statements and 
notes thereto included elsewhere in this report. 

Company Overview

	The Company designs, manufactures and distributes computer 
networking products, including high performance superservers and 
workstations, which provide full motion digital video, imaging and other 
multimedia processes. The Company's products are used in employee 
training, academic, telecommunications, entertainment and other industry 
applications. Sold under the name TRIUMPH, the Company's products 
utilize standard PC hardware, major components and subsystems, and are 
designed to be compatible with industry standard network operating 
systems, such as Novell NetWare, Microsoft LAN Manager, Windows 
NT, OS2, UNIX (SCO, SVR4, MPX) and new network operating 
systems as they become available. The Company has always focused on 
the single factor which has made LANs so successful, which is the ability 
to use "open systems," which principally consist of standard interfaces 
between system components and standard operating systems. In today's 
market, and for the foreseeable future, the Company believes that its 
place in the market for network equipment results from its ability to 
produce high performing LAN systems for demanding combined video 
and data applications using an open systems, standards based design. The 
Company believes that its equipment may be distinguished from the 
products of competitors by the Company's attention to constant shifts in 
the developing market for network equipment, and by the design quality 
of the equipment the Company produces to take advantage of those 
shifts. The Company believes that its principal "value added 
contribution" is its ability to design standards based equipment that 
provides higher performance than that designed and offered by its 
competitors, an advantage that the Company intends to maintain in the 
future. 

	The market niches for the Company's high-end, high 
performance, video capable superserver products currently encompass, 
but are not limited to, applications for education and corporate skills 
training, product training, hotel, train, ship and airplane video-on-demand 
and retail facility information kiosks. Due to the fact that all of the 
markets for this type of product are in their infancy, and their actual 
aggregate size is impossible to measure accurately, the Company is 
unable to determine the shares of these markets held by its own products. 
There Company has made no sales of products for the train, ship and 
commercial airline video-on-demand applications.  Nevertheless, 
following the current developmental period, Management of the 
Company expects the video server market to experience significant 
growth, with the growth to come principally from the high-performance 
superserver segment of the market. 

	Enhanced video capability differentiates the Company's 
products from competing lower cost PC-based server products. To 
maintain its competitive position the Company is committed to 
expanding the range of equipment and software features available to its 
customers. The current principal markets for the Company's superservers 
is corporate training, education and travel related interactive 
entertainment (although the Company has made no significant sales of 
products for the travel related entertainment market). Although training 
and education applications has in the past been considered a non-critical 
function, that does not appear to be an accurate assessment of the 
importance of training and education in today's environment. 
Management of the Company believes both that corporations and 
academic institutions have significantly expanded their budgets in recent 
years, and that a significant percentage of the resulting training and 
education applications will be provided with video content distributed by 
network superservers, which application demands high performance 
equipment. Given the magnitude of these budgeted expenditures, despite 
the high price and technical, high performance requirements of the 
equipment necessary to meet this application's demands, management 
believes that departments responsible for administering these budgets will 
not settle for low performance, PC-based equipment. Travel related 
entertainment systems, to date based on broadcast analog distribution 
technology, are not designed for interactive use and have not been 
successful in meeting the requirements of todays market applications. 
Management of the Company believes this to be a rapid growth market 
where proven interactive technology of LANs which support the high 
performance demands of video data, like the products of the Company, 
are uniquely applicable and will become dominant.  Management of the 
Company further believes that although the market for network 
equipment is currently cost driven, with PC- based servers 
predominating, the future market for server equipment will be dictated by 
performance and available features, with video capability being a primary 
sales motivator. 

	It is expected that print advertising, other than publicity for new 
product announcements and technical journal analyses of product 
capabilities, will not play the most significant role in developing a 
customer base for the Company's products. The Company's management 
believes that its greatest success can be gained through informational 
seminars and hands-on product demonstrations, at which potential 
customers can experience directly the capabilities of the Company's 
products. 

	The Company's marketing strategy encompasses attendance and 
presentations at targeted trade shows. The Company also targets the 
establishment of demonstration projects at customer facilities. The latter 
allows the Company to show-off product capabilities in a specific 
customer's operational setting. This marketing method is intended to give 
the prospective customer a "reality" experience at minimal economic or 
other risk, with the equipment being operated by its own personnel. This 
method of marketing has an adverse impact on the Company's results of 
operations in the short-run, by requiring the Company to build the 
demonstration equipment at its own expense, obtain a minimal rental 
charge, if any, during the demonstration period, and achieve recoupment 
of expenses and any "profit" only upon the ultimate sale of the equipment 
to the customer. Management estimates that approximately one-third of 
its demonstration projects result in system sales, and believes that this 
ratio of demonstration projects to actual sales should continue in the 
future. The proceeds of the Companys 1995 public offering and the 
Private Placement in 1996 boosted the Companys resources available for 
additional sales generation (in terms of increased advertising budgets, 
larger sales and demonstration project personnel and equipment and 
increased funds to support seminar and trade show attendance), and 
Management believes that expenditure of the proceeds of such offerings 
for such marketing activities can lead to increasing levels of revenues 
from operations in the future.

	The Company does not believe that its server products will 
compete in the near future with those manufactured by IBM, Compaq 
Computers, Inc. or the other "major players" in the industry. The 
Company believes that the major computer manufacturers will generally 
seek to produce and service higher production-lower margin commodity 
products, and will refrain from producing lower production-higher 
margin products (like the Company's video servers) until the market for 
each related product and product series is perceived to be large enough to 
support the sizable investments in production capability and advertising 
that the "major players" must make prior to launching new products. 
Nevertheless, based upon the perceived size of the market for video 
capable network equipment, the Company's management recognizes that 
it will only be a matter of time before the "major players" will start to 
produce higher margin network equipment products which will compete 
directly with those produced by the Company. 

	Despite the general trend away from mainframe computing, 
some resistance to network-based computing continues due to existing 
mainframe investments. Furthermore, there is always the possibility that 
in the competition for equipment sales mainframe and mini computer 
manufacturers may attempt to aggressively price their excess equipment 
inventories to maintain marketability. However, as network server power 
increases, the Company believes that equipment downsizing will 
continue and local network server computing will continue to gain 
acceptance as a reliable replacement for centralized mainframe 
processing. Moreover, with network-based computing becoming the 
standard for operating efficiency, even at lower pricing excess mainframe 
inventories are not a serious threat to sales of network equipment. In 
addition, the costs associated with maintenance of mainframe and mini 
computers is typically much higher than network servers.

	To enhance product awareness, image and market credibility, 
the Company continually considers strategic business alliances and OEM 
arrangements (original equipment manufacturer agreements) with larger 
companies in the computer equipment and other types of equipment 
manufacturing industry. Management believes strategic business 
alliances will play a vital role in achieving success for the Companys 
products in the travel related entertainment market and will continue to 
evaluate the advantages and disadvantages to the Company from such 
arrangements. At present, the Company has entered into a worldwide 
distribution agreement with Siemens A.G. for TrainView and InnView in 
the rail and hotel marketplace and a non-binding memorandum of 
agreement to define a cooperative business relationship with Lockheed 
Martin Display Systems for AirView in the airline market. Additionally 
the Company has entered into an OEM agreement with Advanced 
Telecommunications Module, Inc for the Cheetah server packaged with 
asynchronous transfer mode (ATM) switching to be used in Intranet 
applications worldwide. Management of the Company believes that such 
strategic relationships will provide the Company with enhanced 
credibility and access to the greater resources that are needed to be 
successful in the travel related entertainment markets. 

Results of Operations: Year Ended December 31, 1996 Compared 
With Year Ended December 31, 1995.
	
Revenues increased 6.4% to $4.1 million for the year ended December 
31, 1996 from $3.8 million for the year ended December 31, 1995, 
respectively. This increase primarily resulted from increased 
international sales through the Companys Korean reseller (38% of 
revenues) and initial sales to resellers and new strategic alliance 
partners (ATML and Siemens). More sales efforts in 1996 were 
focused on larger system sales into niche markets of the Companys 
turn-key products (see below) which have longer sales cycles and 
will contribute to sales backlog for revenues derived from multiple roll-
out deliveries over 12 to 36 months. As a result, the Company entered 
into nonbinding arrangements on long-term programs with substantial 
revenue opportunity if fully completed over 12 to 24 months at the 
Korean Government School Program (sales of up to $15.0 million for 
950 schools, if all systems are purchased, of which approximately $1.1 
million was recognized in revenues in 1996), Interactivo (sales of up to 
$4.0 million for 80 hotels, if all systems are purchased, of which 
approximately $78,000 was recognized in revenues in 1996) and 
Allegis Systems, Ltd ($1.9 million letter of intent for an AirView 
system, subject to completion of a definitive agreement). However, 
there can be no assurance that the Company will successfully negotiate 
definitive agreements or receive firm orders for the remainder of these 
programs.

The Company introduced several new products in late fiscal 1995 and 
early 1996 which utilize its "Cheetah" high performance video servers. 
The new products  result from turn-key packaged solutions for (i) 
AirView, in the airline market, (ii) TrainView, in the rail transportation 
market, (iii) InnView, in the hospitality market and (iv) CruiseView, in 
the cruise ship market. Research and development activities have been 
limited to these products which represent enhancements of the existing 
Cheetah server to meet the needs of specific market applications. 

Gross profit as a percentage of revenues decreased to 26% for the year 
ended December 31, 1996 as compared to 37% for the same period in 
1995.  This decrease was primarily due to a higher percentage of 
revenues generated during the 1996 periods from new resellers with a 
higher average discount for demonstration and development systems and 
lower prices for the initial phase of orders from customers with multiple 
site deliveries over several months. Management of the Company 
believes that gross margins will improve as revenues from these initial 
projects and sales from these new resellers increase.

Selling, general and administrative expenses increased by $1,667,064 
(70%) for the year ended December 31, 1996, as compared to the same 
1995 periods. This increase related primarily to expenses, which were 
not incurred in the respective period in 1995 due to deficient working 
capital prior to the initial public offering of common stock in May of 
1995, for additional (i) marketing costs (including advertising, trade 
show, public relations, bidding and proposal and demonstration 
expenses); (ii) recurring costs for a remote sales office in Virginia 
opened in July 1995 and employment of sales and marketing personnel 
and related payroll costs and; (iii) administrative expenses related to 
regulatory reporting and investor relations. Management of the 
Company believes the investments in sales and marketing will result in 
increased revenues for 1997.

By maintaining its current level of operations through fiscal 1997, 
management believes that it will be more capable of improving sales 
levels and directing sales activities by expanding its internal sales force 
and forming strategic business alliances (see ITEM 1 Distribution 
Strategy), rather than by attempting to create a network of independent 
distributors, resellers and sales representatives. 

The Company believes that its own cost of sales will continue to be 
affected in the future by two major factors: 

 Selling Price  The average selling price should continue to increase 
based upon product mix, which will continue to be in favor of higher 
selling price, larger server systems. 

 Gross Margin  Margins should continue to increase because of the 
increased added value in performance and application capability offered 
to the customer. In addition, whether the application is data serving or 
video serving, the components of these systems remain the same. This 
tends to further reduce actual cost due to the benefits of volume 
purchasing discounts. 

Another major factor in overall revenue generation is that with the 
assumed increase of average selling price from higher end servers and  
the assumption that the same system volume will continue, then overall 
revenues should increase. Since significant further assets need not be 
employed, selling, general and administrative costs will decrease as a 
percentage of revenue as average selling price increases. 

The Company anticipates that it will continue to invest in its 
marketing and sales generation strategy  (advertising, trade show 
expenses and sales and marketing personnel with related payroll costs) 
to increase revenues and increase net income from operations in the 
future; such investment may adversely affect short-term operating 
performance. 

	Research and development expense is comprised primarily of 
the salaries of employees devoted to development. However, fluctuations 
in the periods presented are due to increased material and outside labor 
costs associated with the further development in 1996 of the travel related 
entertainment products. 

	Changes in interest expense are attributable to changes in 
average outstanding borrowings during the periods presented. Other 
income results from interest income on restricted cash and short-term 
securities.

Liquidity and Capital Resources; Certain Transactions

During the year ended December 31, 1996, the Companys cash did not 
change principally due to the net proceeds from the issuance of 
common stock of $4.70 million and bank borrowings of $496,000, 
offset by cash used in operating activities of  $3.29 million, and the 
purchase of short-term investments of $495,713 and of property and 
equipment of $1.28 million.  The negative change in cash from 
operating activities primarily resulted from a net loss of $3.25 million 
and an increase of $331,826 in accounts receivable and $360,585 in 
inventory, offset by a decrease in accounts payable and accrued 
expenses of $236,665.  The reduction in cash from operating activities 
was offset by depreciation and amortization of $271,000 and bad debts 
of $150,064.

The Companys products are often used with other products in large 
complex projects. As a result, the Company may grant extended 
payment terms, usually secured by irrevocable letters of credit, for 
certain sales. Accounts receivable at December 31, 1996 consisted of 
approximately $451,000 from sales to such customers with extended 
credit terms of up to 180 days based on the nature of the project. 

The Company's inventory increased between December 31, 1995 and 
December 31, 1996 due to the transformation of the Company's business 
from its principally being a seller of workstations to being principally a 
seller of high-end, higher priced file superservers (including those with 
video capability). This transformation has resulted in higher dollar values 
for existing inventory. Management believes that this increase in 
inventory does not have an effect on the Company's liquidity due to the 
fact that substantially all of the Company's current inventory is useable, 
saleable and readily liquid and is closely matched with orders in process. 

The Companys primary source of funds at December 31, 1996 
consisted of $1.00 million in cash, $495,713 in short-term securities 
and funds available under a $1.00 million revolving line of credit. 
$1.00 million of cash represents two certificates of deposit which were 
restricted from use by the fact that they were pledged as collateral for 
the availability of the line of credit. The line of credit which expires 
May 1997 bears interest at an annual rate of 6.92%. At December 31, 
1996, the Company had $496,000 borrowings outstanding under the 
line of credit. 

Capital expenditures for the purchase of property and equipment for 
the year ended December 31, 1996 were $1.28 million and consisted 
primarily of (i) approximately $400,000 for land and a building which 
had previously been leased on a month to month basis, to increase 
engineering, warehousing and production capacity in anticipation of 
increased revenues and: (ii) approximately $794,000 for the purchase 
of additional equipment in order to expand product demonstration and 
development capabilities. During 1997, capital expenditures are 
anticipated to be funded through existing working capital or other 
financing.

The Company is indebted to an institutional lender as of December 31, 
1996, in the aggregate amount of  $230,372, for the purchase of its 
primary operating facility.  This loan is secured by the purchased real 
estate and the personal guarantees of Wilbur and Barbara Riner, and 
bears annual interest at the rate of such lenders prime rate plus 2%. A 
default by the Company in payment of this mortgage loan could result 
in foreclosure against the property. 

The Company has outstanding at December 31, 1996, 1,051,550 
Redeemable Common Stock Purchase Warrants (the "Warrants") of the 
Company.  Each Warrant entitles the registered holder thereof to 
purchase, at any time during the period commencing on May 11, 1995, 
one share of Common Stock at a price of $5.00 per share, subject to 
adjustment under certain circumstances, through May 11, 1998. The 
Warrants are not exercisable unless, at the time of exercise, the Company 
has a current prospectus covering the shares of Common Stock issuable 
upon exercise of the Warrants and such shares have been registered, 
qualified or deemed to be exempt under the securities laws of the states of 
residence of the exercising holders of the Warrants. Commencing after 
May 11, 1996, the Warrants are subject to redemption by the Company at 
$.25 per Warrant on 30 days' prior written notice if the closing bid price 
for the Company's Common Stock, as reported on The Nasdaq SmallCap 
Market ("Nasdaq"), or the closing sale price as reported on a national or 
regional securities exchange, as applicable, for 30 consecutive trading 
days ending within 10 days of the notice of redemption of the Warrants, 
averages in excess of $8.00. The Company is required to maintain an 
effective registration statement with respect to the Common Stock 
underlying the Warrants prior to redemption of the Warrants. 

In March 1996, the Company completed a Private Placement of 
300,000 shares of its Common Stock  under Regulation D of the 
Securities and Exchange Act of 1933.  The transaction resulted in 
proceeds of $3.1 million for the Company.

On February 26, 1997, the Company announced it will redeem in 
whole its publicly traded Redeemable Common Stock Purchase 
Warrants ( the Warrants) on March 31, 1997 at the redemption price 
of $.25 per Warrant. On March 18, 1997 the Company extended the 
date of redemption until April 30, 1997. Anticipated proceeds from the 
redemption are $5.23 million.

The Company believes that its working capital requirements will 
increase throughout 1997 and beyond.  The Company believes that 
currently available cash, proceeds from the exercise of Warrants and 
funds generated from operations, if any, further expansion of terms 
with trade creditors and the existing line of credit will be sufficient to 
satisfy its cash needs for the foreseeable future.  However, maintaining 
an adequate level of working capital through the end of 1997 and 
thereafter will depend in part on the success of the Companys products 
in the marketplace, the relative profitability of those products, 
continued availability of memory and storage components at favorable 
pricing and the Companys ability to control operating expenses. The 
Company may seek or require additional financing for growth 
opportunities, including any expansion that the Company may 
undertake internally, through strategic acquisitions or partnerships or 
through expansion of additional sales activities and locations.  There 
can be no assurance that any such financing will be available on terms 
acceptable to the Company, if at all.

Forward Looking Statements

Except for historical information contained herein, the matters 
discussed in this ITEM 6 and elsewhere in this annual Report on Form 
10KSB are forward-looking statements (within the meaning of Section 
27A of the Securities Act of 1933, as amended  (the Securities Act) 
and Section 21E of the Securities Exchange Act of 1934, as amended ( 
the Exchange Act) ) that are subject to certain risks and uncertainties 
that could cause actual results to differ materially from those set forth 
in such forward-looking statements.  Such risks and uncertainties 
include, bet are not limited to, the failure to execute definitive 
agreements with additional customers on favorable terms or at all, the 
failure of  the Company to receive sufficient financing to perform 
under any new contracts or to perform sufficient research and 
development, the impact of competition and downward pricing 
pressures, the effect of changing economic conditions and conditions in 
the specific industries the Company has targeted, the impact of any 
changes in domestic and foreign regulatory environments or the 
Companys inability to obtain requisite government approvals, risks in 
technology development, the risks involved in currency fluctuations, 
and the other risks and uncertainties detailed herein.




Item 7.    Financial Statements and Supplementary Data


INDEX TO FINANCIAL STATEMENTS


					
			         Page

Report of Independent Auditors				24
Balance Sheet as of December 31, 1996			25
Statements of Operations for the years ended December 31, 1996 and 
1995							27
Statements of Shareholders Equity(Deficit)for the years ended 
   December 31, 1996 and 1995				28
Statements of Cash Flows for the years ended December 31, 1996 and 
1995							29
Notes to Financial Statements				30

Report of Independent Accountants

To the Shareholders and Board of Directors
of The Network Connection, Inc.


We have audited the accompanying balance sheet 
of The Network Connection Inc. as 
of December 31, 1996, and the related 
statements of operations, shareholders 
equity (deficit), and cash flows for the years 
ended December 31, 1996 and 1995. 
These financial statements are the 
responsibility of the Company's management. 
Our responsibility is to express an opinion on 
these financial statements based 
on our audits.

We conducted our audits in accordance with 
generally accepted auditing 
standards. Those standards require that we plan 
and perform the audit to obtain 
reasonable assurance about whether the 
financial statements are free of material 
misstatement. An audit includes examining, on a 
test basis, evidence supporting 
the amounts and disclosures in the financial 
statements. An audit also includes 
assessing the accounting principles used and 
significant estimates made by 
management, as well as evaluating the overall 
financial statement presentation. 
We believe that our audits provide a reasonable 
basis for our opinion.

In our opinion, the financial statements 
referred to above present fairly, in 
all material respects, the financial position 
of The Network Connection, Inc. as 
of December 31, 1996, and the results of its 
operations and its cash flows for 
the years ended December 31, 1996 and 1995, in 
conformity with generally 
accepted accounting principles.


						
	COOPERS & LYBRAND L.L.P

Atlanta, Georgia
February 26, 1997



THE NETWORK CONNECTION, INC.
BALANCE SHEET 
                                    December 31,
                                      1996


ASSETS
Current assets:

Restricted cash                                     $1,000,000
Short term investments                                 495,713
Accounts receivable, less allowance of $220,792      1,805,279 
Inventories                                          1,108,410 
Prepaid expenses                                       131,901 
                                            ------------------
Total current assets                                 4,541,303 

Property and equipment:
Land                                       150,000 
Building and improvements                  806,409 
Furniture, fixtures and equipment        1,686,290 
Software                                    31,829 
Vehicles                                   112,420
                                ------------------
                                                     2,786,948 
Less accumulated depreciation and amortization        (627,535)
                                             ------------------
                                                     2,159,413 

Other assets, net                                       91,883 
                                            ------------------
Total assets                                        $6,792,599 
                                                    ==========


THE NETWORK CONNECTION, INC.
BALANCE SHEET
                                                  December 31,
                                                      1996
LIABILITIES AND SHAREHOLDERS' EQUITY(DEFICIT)
Current liabilities:
Accounts payable and accrued expenses               $1,177,912 
Payable to shareholders                                 68,851 
Borrowings under bank line of credit                   496,000 
Current portion of long-term debt and capital lease obligations
                                                        35,066 
                                          --------------------
Total current liabilities                            1,777,829 

Long-term debt, less current portion                   250,600 
Obligations under capital leases, less current portion   7,817 
                                          --------------------
Total liabilities                                    2,036,246 

Shareholders' equity (deficit):

Preferred stock, $.01 par value:
  Authorized, 2,500,000 shares;
  Issued and outstanding, none
Common stock, $.001 par value:
  Authorized,  10,000,000 shares;
  Issued and outstanding, 3,036,710 shares               3,037 
 Additional paid-in capital                          9,179,825 
Accumulated deficit                                 (4,426,509)
                                           --------------------
Total shareholders' equity                           4,756,353 
                                           --------------------
Total liabilities and shareholders' equity          $6,792,599 
                                                   ============

THE NETWORK CONNECTION, INC.
STATEMENTS OF OPERATIONS

For the years ended December 31, 
                                   1996                  1995 
Revenues                     $4,092,023             $3,846,189 
Cost of revenues
3,050,596 2,425,278 
--------------------
-------------------
Gross profit
1,041,427 1,420,911 

Selling, general and administrative
4,016,351 2,349,287 
Loan origination expense
60,000 0 
Research and development
160,276 88,015 
--------------------
--------------------
Operating loss
(3,195,200)(1,016,391)
Interest expense
(99,026)(134,530)
Other income
41,327 54,443 
--------------------
-------------------
Net loss
($3,252,899)($1,096,478)
============
===========
Net loss per share
($1.14)($0.54)
============
===========

Weighted average shares outstanding
2,846,715 2,036,359 
============
===========

THE NETWORK CONNECTION, INC.
STATEMENTS OF SHAREHOLDERS EQUITY (DEFICIT)
Common   Stock   Preferred  Stock  Additional  Accumulated     Total
Shares    Amount    Shares   Amount   PIC         Deficit     Equity(Deficit)

Balance at January 1, 1995
1,288,438 $1,288       0       $0    $71,233      ($77,132)     ($4,611)
   Preferred stock sold
                    11,562    116     39,884                     40,000 
  Common Stock sold
1,150,000 1,150                    4,373,335                   4,374,485 
   Conversion of preferred stock to common stock
   11,562    12    (11,562)  (116)                                  (104)
   Stock option plan
                                      14,217                      14,217 
   Net Loss
                                                (1,096,478)    (1,096,478)
__________
__________
________
__________
_________
____________
____________
Balance at December 31, 1995
2,450,000  2,450        0    0    4,498,669     (1,173,610)     3,327,509
   Common Stock sold
300,000      300                  2,945,155                     2,945,455 
   Conversion of warrants to common stock
214,950      215                  1,433,685                     1,433,900
   Stock option plan
71,760        72                    302,316                       302,388 
   Net Loss
                                                (3,252,899)    (3,252,899)
_________
__________
________
__________
_________
____________
____________
Balance at December 31, 1996
3,036,710    $3,037  0       $0  $9,179,825    ($4,426,509)    $4,756,353 

THE NETWORK CONNECTION, INC.
STATEMENTS OF CASH FLOWS 
For the years ended December 31,
1996       1995
Operating activities
Net loss
($3,252,899)($1,096,478)
Adjustments to reconcile net loss to net cash used 
in operating activities
  Depreciation and amortization
271,000 184,919 
  Allowance for doubtful accounts
150,064 0 
  Noncash expenses charged for issuance of common stock options
0 14,215
Changes in operating assets and liabilities:
  Accounts receivable
(331,826)(1,043,645)
  Inventories
(360,585)(377,093)
  Prepaids and other assets
(664) 9,956
  Accounts payable and accrued expenses
236,665 (415,011) 
  Payable to shareholders
(1,293) 3,014 
-------------------
-------------------
Net cash used in operating activities
(3,289,538)(2,720,123)
Investing activities:
Purchase of property and equipment
(1,279,152) (537,726)
Purchase of short-term investments(495,713)0    
-------------------
------------------
Net cash (used in) provided by investing activities
(1,774,865)(537,726) 
Financing activities:
Proceeds from bank line of credit
496,000 0 
Payment of shareholder debt
0  (59,618) 
Net proceeds from issuance of stock
4,681,743 4,414,383 
Payment of long-term debt and capital lease obligations
(140,785)(69,471)
-------------------
-------------------
Net cash provided by financing activities
5,036,958 4,285,294 
-------------------
-------------------
Net change in cash
(27,445) 1,027,445 
Cash at  beginning of year
1,027,045  0 
-------------------
-------------------
Cash at end of year
$1,000,00  $1,027,445 
===========
===========
Supplemental Information:
Assets acquired in exchange for debt
$0 $113,018
Assets acquired in exchange for capital lease obligations
$0 $20,686 


NOTES TO FINANCIAL STATEMENTS

1.   Significant Accounting Policies

Basis of Presentation

The Network Connection, Inc. (the Company) was incorporated on 
December 30, 1986.  The Company designs, manufactures and 
distributes computer networking products for use in employee training, 
academic, telecommunications, entertainment and other industry 
applications.  The Companys products are based upon a proprietary 
engineered process utilizing non-proprietary personal computer 
hardware standards with standard major components and subsystems.  
The Companys products are designed to be compatible with industry 
standard network operating systems.

Concentration of Credit Risk

The Companys principal financial instruments subject to potential 
credit risk are cash and equivalents and trade accounts receivable.  The 
Company invests its cash and credit instruments with highly rated 
financial institutions and performs periodic evaluations of the relative 
standing of these financial institutions.  Other than for international 
sales, which are usually secured by letters of credit, trade accounts 
receivable are generally unsecured; therefore, the Company is at risk to 
the extent such amounts become uncollectible.  (See Note 12.)

In 1996, three customers accounted for 67.0% (38%, 15% and 14%, 
respectively) of the Companys revenues.  During 1995, one customer 
accounted for approximately 19% of the Companys revenues. 

Cash and Cash Equivalents

The Company considers all financial instruments with an initial maturity of
3 months or less to be cash equivalents.

Inventories

Inventories consist primarily of components purchased for assembly 
into products and are stated at the lower of cost or market using the 
first-in, first-out (FIFO) method.

Property and Equipment

Property and equipment are recorded at cost.  Depreciation and 
amortization are calculated using the straight-line method over the 
estimated useful lives of the assets, principally five years, except for 
buildings for which the life is forty years.

Income Taxes

Under the Statement of Financial Accounting Standards No. 109 
(SFAS 109), Accounting for Income Taxes, the liability method is 
used in accounting for income taxes.  Under this method, deferred tax 
assets and liabilities are determined based on differences between 
financial reporting and tax bases of assets and liabilities and are 
measured using the enacted tax rates and laws that will be in effect 
when the differences are expected to reverse.

The Company provides a valuation allowance for deferred tax assets 
which are determined by management to be below the threshold for 
realization established by SFAS 109.

Revenue Recognition

Revenues are recognized when the products are shipped.

Other Assets

Costs incurred to establish and defend trademarks and patents are 
capitalized. Such costs are amortized using the straight-line method 
over 20 years.

The Company capitalized $150,000 in loan origination costs in 
connection with a $500,000 line of credit agreement with Stanhope 
Capital, Inc. (Stanhope) (Note 4).  These costs are being amortized 
using the straight-line method over the three year life of the agreement.

Net Loss Per Common Share 

Net loss per common share has been computed by dividing net loss by 
the weighted average number of common shares outstanding during 
each period.  All share and per share data, except par value per share, 
have been retroactively adjusted to reflect the 1.1562894 for 1 stock 
split of the Companys common stock   which occurred on March 7, 
1995.

Managements Use of Estimates

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 dates 
of the financial statements and the reported amounts of revenues and 
expenses during the reporting periods.  Actual results could differ from 
those estimates.

Advertising Costs

Costs of advertising are expensed when incurred.  The Company 
recognized advertising expenses of approximately $646,000 and 
$190,000 in 1996 and 1995, respectively.

2.  Accounts Receivable

The Companys products are often used with other products in large 
complex projects. As a result, the Company may grant extended 
payment terms, usually secured by irrevocable letters of credit, for 
certain sales. Accounts receivable at December 31, 1996 consisted of 
approximately $705,000 from sales to such customers with extended 
credit terms of up to 180 days based on the nature of the project. 

3.  Commitments and Contingencies

The Company leases certain equipment and office space.  Property and 
equipment includes $102,476 of equipment under capital lease 
agreements at December 31, 1996.  Accumulated amortization was 
$26,151 at December 31, 1996.  Amortization of leased assets is 
included in depreciation and amortization expense.  The Company also 
leases certain equipment under noncancelable operating leases that 
expire in various years through 2001.

Future minimum lease payments required under capital lease 
obligations and noncancelable operating leases with initial or 
remaining terms of one year or more are summarized as follows at 
December 31, 1996:

Year ending December 31,	Capital		Operating

1997  		 $19,513  	 $25,294
1998			    7,223  	  23,288
1999			    1,392		   19,960
2000			        0    	15,288
2001      			  0  	   7,644    	
Total minimum lease payments	$28,128		$91,474
Less amounts representing interest			       
572	
Present value of minimum capital lease payments  	  
27,556
Less current portion				  
19,739
Long-term obligations under capital leases	 
	$  7,817

During 1996 and 1995, total rental expense for all operating leases was 
approximately $36,000 and $25,000, respectively.

4.  Debt Obligations

Debt obligations consist of the following:
								      
1996		 1995
Note payable due in varying installments through 2009, interest at 
  prime (8.5% at December 31, 1996) plus 2%, collateralized by
  certain commercial property and personally guaranteed by two 
  shareholders						
	$249,350	$259,128
Note payable due in varying installments through 2005, interest 
  at 9.5%, collateralized by commercial property.		   	             
0	    86,900
Note payable due in varying installments through 2000, interest at
  11.0%, collateralized by a vehicle.					    
16,577 	    20,605 
								  
265,927	  366,633
Less current portion						    
15,327	    19,731
							
	$250,600	$346,902

Aggregate maturities of long-term debt as of December 31, 1996 are as 
follows:

	1997					$ 15,327
	1998					   17,041
	1999					   18,947
2000					   16,297
2001					   16,457
Thereafter				  181,858
$265,927

On June 15, 1994, the Company entered into a three year $500,000 line 
of credit agreement with Stanhope.  Outstanding advances bear interest 
at 10% per annum through the maturity date of June 15, 1997, and 
thereafter at 14% per annum.  Advances in excess of aggregate 
outstanding borrowings of $150,000 require consent of Stanhope.  
Interest is payable quarterly in arrears, commencing September 30, 
1994.  On September 30, 1994, the Company issued common stock to 
Stanhope in connection with the line of credit. In connection with this 
stock transaction, the Company recorded $150,000 in deferred loan 
origination costs and charged  expense in the amount of $450,000 in 
1994.  The amount of deferred loan origination costs was imputed by 
management at approximately 33% to reflect the anticipated returns 
associated with higher risk borrowings such as venture capital and 
accounts receivable factoring.  Loan origination costs charged to 
expense represent the fair value of the shares issued in excess of the 
deferred loan origination costs. There were no advances under this line 
of credit as of December 31, 1996 or 1995, respectively.
 
On May 28, 1996, the Company entered into a $1,000,000 line of 
credit agreement with a bank. Outstanding advances bear interest at 
6.92% per annum through the maturity date of May 28, 1997.  Interest 
is payable monthly in arrears, commencing January 1, 1997. As of 
December 31, 1996, there was $496,000 advanced under this line of 
credit. This line of credit is collateralized by two certificates of deposit 
in the total amount of $1.00 million and are presented in the balance 
sheet as restricted cash.

The Company paid interest of approximately $99,000 and $75,000 
during fiscal years 1996 and 1995, respectively.   

5.  Common Stock

On March 7, 1995, the Company effected an additional stock split such 
that every share of the Companys common stock became equal to 
1.1562894 shares of common stock. All share and per share amounts 
related to the common stock have been retroactively restated to reflect 
the stock split for all periods presented.

On February 17, 1995, the Companys Board of Directors acted to 
create 100,000 shares of Series A 8% Convertible Preferred Stock, out 
of its authorized preferred stock, and issued 11,562 shares of the 
Preferred Stock at that time for an aggregate consideration of $38,000 
(which was net of issuance costs of $2,000).  Each share of Preferred 
Stock was convertible into one share of Common Stock at any time at 
the option of the holder.  Upon consummation of the public offering in 
1995, the outstanding Preferred Stock was automatically converted into 
shares of Common Stock.

An initial public offering of 1,000,000 shares of the Companys 
common stock and 1,000,000 warrants, each providing the owner the 
right to purchase 1 additional share of common stock for $5.00 per 
share, became effective May 11, 1995.  The selling price of the 
warrants initially was $.125 per warrant.  On June 13, 1995, the 
underwriters exercised an over-allotment option to acquire an 
additional 150,000 common shares and 150,000 warrants.  The 
Company generated gross proceeds of approximately $5.9 million.

During 1996 and 1995, the Company recognized compensation 
expense of $0 and $14,217, respectively, from the grant of stock 
options under the 1994 Employee Stock Option Plan.

On March 1, 1996, the Company completed a Private Placement of 
300,000 shares of its Common Stock under Regulation D of the 
Securities and Exchange Act of 1933.  The transaction resulted in 
proceeds of $3.1 million for the Company. On June 28, 1996, the 
Company completed a registration statement with the Securities and 
Exchange Commission to register the 300,000 shares for sale to the 
public.

On March 15, 1996 the Companys Board of Directors authorized the 
Company to enter into a financial public relations and financial 
consulting agreement with Goodbody International Inc. (Goodbody), 
pursuant to which Goodbodys compensation under the contract would 
be a three (3) year warrant to acquire 50,000 shares of the Companys 
common stock at an exercise price of $12.00 per share. In 1996 the 
Company recognized $30,000 of consulting expense related to this 
agreement.

6.  Income Taxes

The Company has accounted for income taxes under the liability 
method required by SFAS 109. Deferred income taxes reflect the net 
effect of temporary differences between the carrying amounts of assets 
and liabilities for financial reporting purposes and the amounts used for 
income tax purposes. At December 31, 1996, the Company had a net 
deferred tax asset of approximately $1,909,000 which was totally offset 
by a valuation allowance because the assets do not meet the criteria for 
recognition in SFAS 109. Significant components of the Companys 
deferred tax liabilities and assets as of December 31, 1996 and 1995 
are as follows:
						1996		
	1995
	Deferred tax liabilities:
	   Tax over book depreciation		($27,000)	
	($29,000)
	    Tax over book amortization		  (31,000)	
	  (23,000)
	Total deferred tax liabilities		($58,000)	
	($52,000)

	Deferred tax assets:					
	    Bad debt reserve			  $   27,000	
	$  27,000
	    Accrued salary				                0	
	    18,000
	    Non-qualified stock options		                0	
	      5,000
	    Uniform capitalization			       22,000	
	      2,000
	    Net operating loss			  1,918,000	
	  487,000
	Total deferred tax assets			$1,967,000	
	$539,000

	Net deferred tax assets			 1,909,000	
	$487,000
	Valuation allowance			(1,909,000)	
	(487,000)
	Net deferred taxes			$             0	
	 $          0

The valuation allowance for deferred tax assets as of January 1, 1996 
was approximately $487,000. The net change in the total valuation 
allowance for 1996 was approximately $1,422,000.  This change 
resulted primarily from increases in the above described temporary 
differences on which a valuation allowance was provided.

The Company did not record any income tax expense or benefit from 
operations for the years ended December 31, 1996 and 1995, 
respectively.  The following table provides a reconciliation between the 
Federal income tax rate and the Companys effective income tax rate:

						1996	1995
	Statutory Federal income tax rate		34%	34%
	Disallowed meals and entertainment	 (1)	 (1)
	Increase in valuation allowance		(32)	(31)
	Other, net				 (1)	(2)
	Effective tax rate				 0%	 0%

At December 31, 1996, the Company has net operating loss (NOL) 
carryforwards of approximately $5,132,000.  The NOLs expire, if not 
utilized, as follows:

	December 31, 2009	$   168,000
	December 31, 2010	$1,112,000
	December 31, 2011	$3,852,000


7.  Related Party Transactions

The Company owed $27,311 to two shareholders/officers as of 
December 31, 1996.

On September 1, 1994, the Company entered into four promissory 
notes in the aggregate amount of     $69, 290 payable to certain 
shareholders/officers for accrued and unpaid salaries owed through 
August 31, 1994.  Under the terms of the notes, outstanding amounts 
bear interest at 5% per annum, with payments of principal and accrued 
interest being payable to the extent certain operating cash flow 
requirements are met. As of December 31, 1996, $60,248 remained 
outstanding under these notes.

8.  401(k) Plan

During 1995, the Company established a deferred compensation plan 
(the 401(k) Plan) pursuant to Section 401(k) of the Internal Revenue 
Code, whereby substantially all employees are eligible to contribute up 
to 15% of their pre-tax earnings, not to exceed amounts allowed under 
the Internal Revenue Code.  The Company may make contributions to 
the 401(k) Plan at the discretion of the Board of Directors.  No 
employer contributions have been made to the 401(k) Plan by the 
Company.

9.  Stock Options

Under the Companys 1994 Employee Stock Option Plan (the Plan), 
as amended, the Company has reserved an aggregate of 700,000 shares 
of Common Stock for issuance under the Plan.  Options granted under 
the Plan are for periods not to exceed ten years.  Under the Plan, 
incentive and non-qualified stock options may be granted.  All option 
grants under the Plan are subject to the terms and conditions 
established by the Plan and the Stock Option Committee of the Board 
of Directors. Options must be granted at not less than 100% of fair 
value for incentive options and not less than 85% of fair value of non-
qualified options of the stock as of the date of grant and generally are 
exerciseable in increments of 25% each year subject to continued 
employment with the Company. Options generally expire five years 
from the date of grant. Options canceled represent the unexercised 
options of former employees, returned to the option pool in accordance 
with the terms of the Plan upon departure from the Company.  The 
Board of Directors may terminate the Plan at any time at their 
discretion.  During 1996, options to purchase 540,500 shares were 
granted at per share prices ranging from $6.48 to $11.62.  Options to 
purchase 575,869 shares were outstanding at December 31, 1996.  
Options to purchase 61,305 shares under the Plan were exercisable at 
December 31, 1996. There were 206,629 options outstanding as of 
December 31, 1995. 

On August 16, 1995, the Company adopted the 1995 Stock Option Plan 
For Non-Employee Directors (the Directors Plan) and reserved 
100,000 shares of unissued common stock for issuance to all non-
employee directors of the Company. The Directors Plan is administered 
by a committee appointed by the Board of Directors consisting of 
directors who are not eligible to participate in the Directors Plan. 
Pursuant to the Directors Plan, directors who are not employees of the 
Company receive for their services, on the date first elected as a member 
of the Board and on each anniversary thereafter, if they continue to serve 
on the Board of Directors, an automatically  granted option to acquire 
1,000 shares of the Companys common stock at its fair market value on 
the date of grant; such options become exercisable in two equal annual 
installments if the individual continues at that time to serve as a director, 
and once exercisable remain so until the fifth anniversary of the date of 
grant. Options to purchase 4,000 shares under the Directors Plan were 
outstanding at December 31, 1996. Options to purchase 3,000 shares 
under the Directors Plan were exercisable at December 31, 1996. There 
were 2,000 options to purchase shares under the Directors Plan 
outstanding at December 31, 1995. 
						Shares	       
Weighted Average Exercise Share Price
Options outstanding at December 31, 1994
0

Granted
208,629
$4.219
Canceled or expired
0

Exercised
0

Options outstanding at December 31, 1995
208,629
4.219
Granted
542,500
8.663
Canceled or expired
(99,500)
8.359
Exercised
(71,760)
4.214
Options outstanding at December 31, 1996
579,869
$7.667

The Company accounts for its employee stock option plans in 
accordance with the provisions of Accounting Principles Board 
Opinion No. 25. In October 1995, the Financial Accounting Standards 
Board issued Statements of Financial Accounting Standards No, 123, 
Accounting for Stock Based Compensation (SFAS 123) which 
requires that companies with stock-based compensation plans either 
recognize compensation expense based on new fair value accounting 
methods or continue to apply existing accounting rules and disclose pro 
forma net income and earnings per share assuming the fair value 
method had been applied.  The Company elected to adopt the 
disclosure method of SFAS 123. Had compensation cost for the 
Companys option plans been determined based on the fair value at the 
grant dates, as prescribed in SFAS 123, the Companys net loss and pro 
forma net loss per share would have been as follows:

					1996		1995
	Net loss: (millions)
		As reported		($3.25)		($1.10) 
		Pro forma		($3.98)		($1.25)

	Net loss per share:
		As reported		($1.14)		($0.54)
		Pro forma		($1.40)		($0.61)


The fair value was determined using the Black-Sholes option pricing 
model incorporating the following range of assumptions in the 
calculations:

					1996		1995
	Expected life			4.3 years	3.4 
years
	Interest rate at grant date		5.93%		6.83%
	Volatility at grant date		72%		72%
	Dividend yield			0%		0%




The following table summarizes information about all options 
outstanding as of December 31, 1996:

Range of 
Exercise Prices
Outstanding 
Shares
Outstanding 
Weighted 
Average Share 
Price
Weighted 
Average 
Remaining 
Years In 
Contractual 
Life
Exerciseable 
Shares
Exerciseable 
Weighted 
Average Share 
Price
$2.59 - 2.85
219,128
$2.78
4.5
22,060
$2.79
 4.17 - 5.63
18,000
4.17
3.5
12,250
4.17
6.48 - 9.38
415,000
8.33
8.1
29,500
6.74
9.75 - 13.26
68,000
10.20
4.8
0
0
$2.59 - 13.26
579,869
$7.67
7.1
63,810
$4.88













Because additional stock options are expected to be granted each year, 
the above pro forma disclosures are not representative of pro forma 
effects on reported financial results for future years.

10.  Warrants

The Company had outstanding at December 31, 1996, 1,051,550 
Redeemable Common Stock Purchase Warrants (the "Warrants") of the 
Company.  Each Warrant entitles the registered holder thereof to 
purchase, at any time during the period commencing on May 11, 1995, 
one share of Common Stock at a price of $5.00 per share, subject to 
adjustment under certain circumstances, through May 11, 1998. The 
Warrants are not exercisable unless, at the time of exercise, the Company 
has a current prospectus covering the shares of Common Stock issuable 
upon exercise of the Warrants and such shares have been registered, 
qualified or deemed to be exempt under the securities laws of the states of 
residence of the exercising holders of the Warrants. Commencing after 
May 11, 1996, the Warrants are subject to redemption by the Company at 
$.25 per Warrant on 30 days' prior written notice if the closing bid price 
for the Company's Common Stock, as reported on The Nasdaq SmallCap 
Market ("Nasdaq"), or the closing sale price as reported on a national or 
regional securities exchange, as applicable, for 30 consecutive trading 
days ending within 10 days of the notice of redemption of the Warrants, 
averages in excess of $8.00. The Company is required to maintain an 
effective registration statement with respect to the Common Stock 
underlying the Warrants prior to redemption of the Warrants. 

11.  Subsequent Events

On February 26, 1997, the Company announced it will redeem in 
whole its publicly traded Redeemable Common Stock Purchase 
Warrants ( the Warrants) on March 31, 1997 at the redemption price 
of $.25 per Warrant. On March 18, 1997 the Company extended the 
date of redemption until April 30, 1997. Anticipated proceeds from the 
redemption are $5.26 million.

12.  Fourth Quarter Adjustments

Approximately $1 million or 35 cents per share of the loss in 1996 was 
for charges during the fourth fiscal quarter with no material affect on 
cash from returns and allowances and pre-contract expenses associated 
with initial project development activities

Item 8.    Changes In and Disagreements With Accountants on 
Accounting and Financial Disclosure

	None



PART III 

Item  9.    Directors and Executive Officers of the Registrant

The following table sets forth certain information concerning the 
directors and executive officers of the Company. 

Name
Age
Position
Wilbur Riner (2)
68
Chief Executive Officer; Chairman of the Board of Directors since 
1986 until the 1998 annual shareholders meeting
Barbara Riner 
53
President since 1986
James Riner (2)
32
Vice President - Research and Development and Engineering,
Director since 1986 until the 1997 annual shareholders meeting
Bryan Carr(1)
42
Vice President - Finance and Chief Financial Officer, Treasurer, 
Director since 1996 until the 1998 annual shareholders meeting
Luther Maners
56
Vice President of Sales & Marketing
Transportation & Entertainment
Kevin Sheldon
42
Secretary, General Counsel
 Marc  Doyle (1)(2)
49
Director since 1995 until the 1996 annual shareholders meeting
James Newman (1)(2)
71
Director since 1995 until the 1997 annual shareholders meeting

(1)	Member of the Compensation Committee.

(2)	Member of the Audit Committee.



	Wilbur Riner - Chairman and Chief Executive Officer.  
Mr. Riner co-founded the Company with his son, James Riner, in 1986, 
at which time he became Chairman and Chief Executive Officer. He is 
responsible for the overall direction of the Company and its operating 
divisions. Prior to joining the Company, from 1984 to 1986, Mr. Riner 
was the CEO of Asher Technologies, which was a manufacturer of 
telecommunications products. Prior to that, Mr. Riner had served as 
Executive Vice President for OKI Telecom's operations in the United 
States (1981-1984), Vice President/United States Sales and Marketing 
for Mitel Corp. (1979 to 1981), and General Manager of ITT North 
Microsystems for ITT Telecommunication (1975 to 1979). In all of 
these positions, Mr. Riner has combined technical expertise in 
telecommunications engineering with sales and marketing business 
acumen. Mr. Riner is the husband of Barbara Riner, the father of James 
Riner and the father-in-law of Kevin Sheldon. 

	Barbara Riner - President. Ms. Riner co-founded the 
Company in 1986, and has been responsible for overseeing the 
purchasing department of the Company as well as its accounting 
department since that time. From 1966 to April 1971, Ms. Riner 
worked in the accounting office of SCM Corporation. From 1971 to 
1986, Ms. Riner was a homemaker. Ms. Riner is the wife of Wilbur 
Riner, the step mother of James Riner, and the mother-in-law of Kevin 
Sheldon. 

	James Riner - Vice President - Research and Development 
and Engineering and Director. Mr. Riner co-founded the Company in 
1986, joining the Company on a full-time basis as Vice President - 
Engineering and Research and Development, Secretary and Treasurer in 
1987. In that capacity he is responsible for all product technical support, 
as well as all new product development. Mr. Riner co-developed the 
Company's TRIUMPH family of servers, including the TRAC 
asymmetric I/O processor to provide RAID level protection (1992). 
Mr. Riner is the son of Wilbur Riner and the step son of Barbara Riner.

	Bryan Carr - Vice President - Finance and Chief Financial 
Officer, Treasurer and Director.  Mr. Carr joined the Company in July 
1995 as Chief Financial Officer and was appointed Vice President - 
Finance in November 1995.  Mr. Carr was appointed a director of the 
Company in April of 1996, and was appointed Treasurer of the 
Company in November of 1996.  He is responsible for the Companys 
overall financial management and policy making and conduct of the 
Companys relationship with creditors, shareholders and the financial 
community.  Prior to joining the Company, from 1988 to 1995,  Mr. 
Carr was Director of Business Administration for LXE, Inc., a public 
company providing wireless data communications products worldwide. 
From 1981 to 1988 he was Controller for UTL Corporation, a public 
company providing advanced communications systems for Government 
and commercial applications internationally. Prior to 1981 he was a 
senior auditor with Coopers & Lybrand.

	Luther Maners - Vice President of Sales and Marketing - 
Transportation and Entertainment. Mr. Maners joined the Company in 
January 1996 as Vice President - AirView Sales with responsibility for 
sales management and marketing support for the AirView products of 
the Company. From 1986 to 1996, Mr. Maners was Vice President of 
Sales for Burns Aerospace, a worldwide supplier of aircraft seats and 
cabin management system integration. His responsibilities included 
overall sales management and direct account responsibility for selected 
airline and major leasing companies. From 1980 to 1986, he held 
various direct sales management positions at Burns Aerospace. From 
1981 to 1986, Mr. Maners was Director of Contract Services for World 
Airways, a company providing third party contract aircraft maintenance 
services worldwide.

	Kevin Sheldon - Secretary.  Mr. Sheldon re-joined the 
Company in August of 1996 as General Counsel with responsibility for 
the legal, risk management and human resource affairs of the Company.  
Mr. Sheldon was appointed to the position of Secretary of the Company 
in November of 1996.  Prior to joining the Company, from 1994 to 
1996, Mr. Sheldon was Legal Counsel and Contracts Manager for 
LXE, Inc., a public company providing wireless data communications 
products worldwide. His responsibilities included negotiating and 
drafting a full range of high technology commercial licenses and various 
other agreements as well as managing the contractual aspects of LXEs 
distribution channels.  He served his first term with the Company from 
1992 to 1994 as its Corporate Counsel.  Prior to that, Mr. Sheldon was 
in private practice at the law firm of Brown Raysman and Millstein in 
New York from 1990 to 1992 where he specialized in high technology 
commercial transactions.  Mr. Sheldon is the son-in-law of Wilbur 
Riner and Barbara Riner.

	Marc Doyle -  Director. Mr. Doyle joined the Company in 
July 1995 as a director.  Mr. Doyle  founded in 1988, and is currently 
President of, Doyle & Associates, a program development and 
production company for television and industrial video material. From 
1974 to 1988, Mr. Doyle was Director of Station Operations at WAGA-
TV, a CBS affiliate, responsible for managing program acquisition and 
development as well as operational functions such as program 
production and marketing. During his tenure at WAGA, Mr. Doyle was 
a three time Emmy award winner and produced numerous award 
winning programs.

	James Newman - Director.  Mr. Newman joined the 
Company in July 1995 as a director.  Mr. Newman, a behavioral 
scientist, founded and has managed the PACE organization, a 
motivational development company,  providing tools for increased 
success to top executives and sales professionals since 1961.  Mr. 
Newman is a well recognized author and  speaker on human behavior 
topics.









Compliance with Section 16(a) of the Securities Exchange Act

	Section 16(a) of the Securities Exchange Act of 1934 requires 
the Companys directors and officers, and persons who own beneficially 
more than ten percent (10%) of the Common Stock of the Company, to 
file reports of ownership and changes of ownership with the Securities 
and Exchange Commission.  Copies of all reports are required to be 
furnished to the Company pursuant to Section 16(a).  Based solely on 
the reports received by the Company and on written representations 
from reporting persons, the Company believes that persons subject to 
the reporting requirements complied with all applicable Section 16(a) 
filing requirements during the fiscal year ended December 31, 1996.

PART III

Item 10.    Executive Compensation 

	The following table sets forth certain information, for the years 
ended December 31, 1996, 1995 and 1994, with respect to 
compensation paid or accrued by the Company to the Company's Chief 
Executive Officer and to each of the most highly compensated other 
executive officers whose combined salary and bonus compensation for 
1996 exceeded $100,000.

SUMMARY COMPENSATION TABLE
	Annual Compensation			Long Term
	Compensation

Name and
Principal Position
Year
Salary
Bonus
Other annual
Compensation
Securities 
Underlying
Options/SARs (#)
Wilbur Riner, Chairman and Chief 
Executive Officer
1996
1995
1994

  $101,414 
85,000                   
  85,000(1)


-0-
-0-
-0-
$24,375(2)
23,400(2)
6,300(2)

20,000
-0-
-0-


(1)	Includes $10,229 of accrued salary owed to Wilbur Riner as of 
December 31, 1994. 
(2)	Consists of the following: 


Automobile 
Allowance
Commissions
Total
Wilbur Riner --- 1996  
$5,625
 $18,750
$24,375
Wilbur Riner --- 1995
5,400
18,000
23,400
Wilbur Riner --- 1994
5,400
900
6,300


	Mr. Riner, from time to time, provided significant assistance 
to the Company's sales and marketing staff in effecting sales of the 
Company's products, for which sales he received commission 
compensation.

	
Option/SAR Grants in Last Fiscal Year

	The following table sets forth certain information with respect 
to individual grants of stock options and freestanding SARs made to 
named executive officers during the year ended December 31, 1996.

			Individual Grants



Name
Number of 
Securities 
Underlying 
Options/
SARs 
Granted
% of Total 
Options/
SARs 
Granted to 
Employees 
in Fiscal 
Year
Exercise 
of Base 
Price 
($/Sh)
Expiration 
Date
Wilbur Riner
70,000
3.7%
$8.750
7/23/06



Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End 
Option/SAR Values

	The following table sets forth certain information with respect 
to the exercise of stock options and freestanding SARs by each of the 
named executive officers during the last completed fiscal year, and the 
fiscal year-end value of unexercised options and SARs for the last 
completed fiscal year.


Name
Shares Acquired 
on Exercise (#)
Value 
Realized ($)
Number of 
Securities 
Underlying 
Unexercised 
Options/SARs 
at FY-End (#) 
Exercisable/
Unexercisable
Value of 
Unexercised 
In-the-Money 
Options/SARs 
at FY-End ($) 
Exercisable/
Unexercisable

Wilbur Riner

-0-

-0-

0 /
70,000

$0 /
 $70,000



Compensation of Directors

Directors who are employees of the Company receive no remuneration 
for their service as directors of the Company.  Pursuant to the 
Companys 1995 Stock Option Plan for Non-Employee Directors, 
directors  who are not employees of the Company receive for their 
services, on the date first elected as a member of the Board and on each 
anniversary thereafter if they continue to serve on the Board of 
Directors, an automatically granted option to acquire 1,000 shares of the 
Companys common stock at its fair market value on the date of grant; 
such options become exercisable in two equal annual installments if the 
individual continues at that time to serve as a director, and once 
exercisable remain so until the fifth anniversary of the date of grant.  
The Company reimburses directors for travel and lodging expenses, if 
any, in connection with attendance at Board meetings. 


Employment Contracts and Termination of Employment and 
Change-in-Control Arrangements

	All of the Company's executive officers are employed under 
contracts approved by the Board of Directors.  

	Wilbur L. Riner serves as Chief Executive Officer of the 
Company pursuant to the terms of a five-year employment agreement 
which terminates on October 31, 1998. Mr. Riner receives an annual 
base salary of $101,414 per year. The employment agreement provides 
for payment of bonuses and for such other fringe benefits as are paid to 
other executive officers of the Company. Such fringe benefits take the 
form of medical coverage and an automobile expense allowance of $470 
per month, the aggregate value of which is estimated at approximately 
$5,640 per year.

	Barbara L. Riner serves as President of the Company pursuant 
to the terms of a five-year employment agreement which terminates on 
October 31, 1998. Ms. Riner receives an annual base salary of $66,760 
per year. The employment agreement provides for payment of bonuses 
and for such other fringe benefits as are paid to other executive officers 
of the Company. Such fringe benefits take the form of medical coverage 
and an automobile expense allowance of $450 per month, the aggregate 
value of which is estimated at approximately $5,400 per year. 

	James E. Riner serves as Vice President of Research and 
Development and Engineering pursuant to the terms of a five-year 
employment agreement which terminates on October 31, 1998. 
Mr. Riner receives an annual salary of $86,790 per year. The 
employment agreement provides for payment of bonuses and for such 
other fringe benefits as are paid to other executive officers of the 
Company. Such fringe benefits take the form of medical coverage and 
an automobile expense allowance of $300 per month, the aggregate 
value of which is estimated at approximately $3,600 per year. 

	Bryan Carr serves as Vice President - Finance and Chief 
Financial Officer of the Company pursuant to the terms of an 
employment agreement which terminates on October 31, 1998. 
Mr. Carr receives an annual base salary of $100,000 per year and 
commissions of .5% for net sales which exceed $500,000 in a fiscal 
month. The employment agreement provides for payment of bonuses 
and for such other fringe benefits as are paid to other executive officers 
of the Company. Such fringe benefits take the form of medical coverage 
and an automobile expense allowance of $400 per month, the aggregate 
value of which is estimated at approximately $4,800 per year. 

	Luther Maners serves as Vice President - AirView Sales of the 
Company pursuant to the terms of an employment agreement which 
terminates on January 11, 1999. Mr. Maners receives an annual base 
salary of $82,000 per year. The employment agreement provides for 
payment of bonuses and for such other fringe benefits as are paid to 
other executive officers of the Company. Such fringe benefits take the 
form of medical coverage and an automobile expense allowance of $450 
per month, the aggregate value of which is estimated at approximately 
$5,400 per year.

	Kevin D. Sheldon serves as General Counsel and Secretary of 
the Company pursuant to the terms of a three-year employment 
agreement which terminates on December 6, 1999. Mr. Sheldon 
receives an annual base salary of $70,000 per year. The employment 
agreement provides for payment of bonuses and for such other fringe 
benefits as are paid to other executive officers of the Company. Such 
fringe benefits take the form of medical coverage and an automobile 
expense allowance of $400 per month, the aggregate value of which is 
estimated at approximately $4,800 per year.

Board Compensation Committee Report on Executive 
Compensation

	The Board of Directors of the Company has decided that the 
best way to attract and retain capable employees on a basis that will 
encourage them to perform at increasing levels of effectiveness and to 
use their best efforts to promote the growth and profitability of the 
Company and its subsidiaries, is to enter into employment agreements 
with its senior executive officers.  During the fiscal year ended 
December 31, 1996, Messrs. Wilbur Riner, James Riner, Bryan Carr, 
Luther Maners and Kevin Sheldon and Ms. Barbara Riner were all 
under contract with the Company.  This enabled the Board to 
concentrate on particular employment contracts rather than on the 
formulation of more general compensation policies for all management 
and other personnel.  As of April 1, 1997, all of the Companys senior 
executive officers were employed under contracts approved by the full 
Board of Directors.  The Company believes that its compensation levels 
as to all of its employees are comparable to industry standards.

	In setting levels of compensation under such employment 
contracts, including that of Mr. Wilbur Riner as Chairman and Chief 
Executive Officer, and in approving managements compensation of all 
other Company employees, the Board of Directors evaluates the 
Companys overall revenue levels, the contribution of particular 
individuals to Company performance and industry compensation 
standards. Applying those standards, the Companys Compensation 
Committee in 1996 approved a fifteen percent increase in the 
compensation to Messrs. Wilbur Riner and James Riner and Ms. 
Barbara Riner.  The members of the Companys Board of Directors 
Compensation Committee are Messrs. Bryan Carr, Mark Doyle and 
James Newman.

Item 11.    Security Ownership of Certain Beneficial Owners and 
Management

	The following table sets forth certain information concerning 
shares of the Companys Common Stock beneficially owned as of April 
1, 1997 by the Companys directors and namned officers, and as of 
December 31, 1996 by persons who beneficially own more than 5% of 
the Common Stock. Except as otherwise indicated, the named person 
has sole voting power and sole investment power of the securities.

 Name and Address of Beneficial Owner


Number
Percent



Shares Beneficially
Owned 

Wilbur Riner (2)(3)


0
0 
Barbara Riner (2)(4)


538,044
15.6
James Riner (2)(5) 


86,134
2.5
Bryan Carr (2)(6)


73,500
2.1
James Newman, PO Box 1378, Studio City, CA 91614 (7)


1,500
0
Marc Doyle, PO Box 8688, Atlanta, GA 30306 (7)


500

Focus Financial Corp. (8)


627,561
18.2
Infinity Fund L.P. (9)


271,861
7.9
Officers and Directors as a Group (10 Persons) (10)	


862,344
25.1


(1)	As used herein, the term beneficial ownership with respect to a 
security is defined by Rule 13d-3 under the Securities Exchange Act of 
1934 as consisting of sole or shared voting power (including the power 
to vote or direct the vote) and/or sole or shared investment power 
(including the power to dispose or direct the disposition of) with respect 
to the security through any contract, arrangement, understanding, 
relationship or otherwise, including a right to acquire such power(s) 
during the next 60 days. Unless otherwise noted, beneficial ownership 
consists of sole ownership, voting and investment power with respect to 
all shares shown as beneficially owned by them.

(2)	The business address for the named person is 1324 Union Hill 
Road, Alpharetta, Georgia 30201.

 (3)	Does not include 490,120 shares held by Barbara Riner, the 
wife of Wilbur Riner. Also does not include options exercisable within 
60 days of April 1, 1997 to purchase an aggregate of 47,924 shares held 
by Barbara Riner. Mr. Riner has disclaimed all beneficial interest in the 
shares held by his wife. 

 (4)	Includes options exercisable to acquire 47,924 shares. Barbara 
Riner is the wife of Wilbur Riner.

(5)	Includes options exercisable to acquire 6,848 shares of the 
Companys common stock.

(6)	Includes options exercisable to acquire 42,500 shares of the 
Companys common stock.

(7)	Includes options exercisable to acquire 500 shares of the 
Companys common stock.

(8)	The business address of Focus Financial Corp. is 9341 Collins 
Avenue, Suite 804, Surfside, Florida 33154.  Includes 80,100 shares 
with sole voting power and 547,461 shares with shared voting power; 
and includes 80,100 shares with sole investment power and 547,461 
shares with shared investment power.  All information is derived from 
Securities and Exchange Commission filings.

(9)	The business address for Infinity Fund L.P. is 3565 Piedmont 
Road, N.E., 3 Piedmont Center, Suite 210, Atlanta, Georgia 30305.  
All such information is derived from Securities and Exchange 
Commission filings.

(10) Includes options, which are exercisable to acquire 114,371 
shares by officers, directors and key employees of the 
Company.


Certain Relationships and Related Transactions

In March 1996, Barron Chase, the lead underwriter of its May 
1995 initial public offering  released certain lock-up restrictions on 
the holders of  the Companys common stock, by (I) immediately 
releasing transfer restrictions on approximately 58,000 shares of 
common stock underlying stock options granted to members of 
management in January 1995 under the Companys employee stock 
option plan, (II) effective January 1, 1997, releasing transfer 
restrictions on another approximately 58,000 shares of common stock 
underlying stock options granted to members of management in 
January 1995 under the employee stock option plan, and (III) effective 
May 11, 1996, releasing transfer restrictions on shares of common 
stock purchased by shareholders prior to the date of the Companys 
May 1995 initial public offering other than the shares held by 
management and members of the immediate family of Wilbur Riner, 
the Chairman and Chief Executive Officer of the Company.

The Company purchased  property and equipment in the 
amount of $89,668, on May 26, 1995, from Wilbur Riner, Chairman 
and Chief Executive Officer of  the Company.  Mr. Riner acquired the 
property in 1990 for approximately $115,000.  Prior to its purchase by 
the Company, the acquired property had been used in the Companys 
business operations.



Item 13.    Exhibits and Reports on Form 8-K


(a)  The following documents are filed as part of this report:

Exhibit	
	Description________________________________________
_______

3.1	Amended and Restated Certificate of Incorporation 
of Registrant (including all
amendments thereto). (5)

3.2	Amended and Restated By-laws of Registrant. (5)

4.1 Specimen certificate of common stock. (1)
4.2 Warrant to Purchase Common Stock of the 
Registrant. (6)
4.3 	Stock Option Plan , including form of Stock Option 
Agreement. (1)
5.1	Opinion of Greenberg, Traurig, Hoffman, Rosen, 
Lipoff & Quental, counsel to the Registrant. (6)
10.1 	Employment Agreement, dated November 1, 1993, 
by and between the Registrant
		and Wilbur L. Riner. (1)

10.2 	Employment Agreement, dated November 1, 1993, 
by and between the Registrant
		and Barbara L. Riner. (1)

10.3 	Employment Agreement, dated November 1, 1993, 
by and between the Registrant
		and James E. Riner. (1)

10.4 	Employment Agreement, dated November 1, 1993, 
by and between the Registrant
		and Stephen H. Stethers. (1)

10.5 	Employment Agreement, dated July 15, 1995, by and 
between the Registrant
		and Bryan R. Carr. (4)

10.6 	Employment Agreement, dated December 31, 1995, 
by and between the Registrant
		and Kevin Sheldon.

10.7 	Employment Agreement, dated January 11, 1996, by 
and between the Registrant
		and Luther Del Maners. (4)

10.8	$20,000 Demand Promissory Note of the Registrant, 
dated April 1, 1993, made to 
the order of Barbara L. Riner. (1)

10.9	Letter Agreement with Barbara Riner dated 
September 15, 1994. (1)

10.10	Promissory Note, dated September 1, 1994, made by 
the Company to the order of
		Wilbur Riner. (1)

10.11	Promissory Note, dated September 1, 1994, made by 
the Company to the order of
		Barbara Riner. (1)

10.12	 Promissory Note, dated September 1, 1994, made by 
the Company to the order of
		James Riner. (1)

10.13	 Promissory Note, dated September 1, 1994, made by 
the Company to the order of
		Stephen Stethers. (1)

10.17	Agreement, dated January 10, 1994, by and between 
the Company and Computer
		Alliance (Pty) Ltd. (South Africa distribution). (3)

10.18	Business Partner Agreement, dated February 24, 
1995, by and between the Company
		and Conhan Co. Ltd. (South Korea distribution). (3)

10.19	1995 Stock Option Plan for Non-Employee 
Directors. (4)

10.20	Note and Security Agreement, dated November 27, 
1995, by and between the Company
		and Wachovia Bank of Georgia N.A. (4)

10.21	Collateral Assignment Agreement, dated November 
27, 1995, by and between the
		the Company and Wachovia Bank of Georgia N.A. 
(4)

10.22	Note and Security Agreement, dated May 26, 1995, 
by and between the Company
		and Wachovia Bank of Georgia N.A. (4)

23.1 Consent of Coopers & Lybrand L.L.P. (6)

23.2 Consent of Ernst & Young LLP. (6)

23.3 Consent of Greenberg, Traurig, Hoffman, Rosen, 
Lipoff &Quental (included in Exhibit 5.1) (6)

27 Financial data schedule

______________________

1.  Incorporated by reference, filed as an exhibit with the Companys 
Registration Statement on Form
	SB-2 on October 26, 1994. SEC File No. 33-85654.
2.  Incorporated by reference, filed as an exhibit with Amendment No. 
1 to the Companys Registration 
	Statement on Form SB-2 on March 24, 1994.
3.  Incorporated by reference, filed as an exhibit with Amendment No. 
2 to the Companys Registration
	Statement on Form SB-2 on April 27, 1995.
4.  Incorporated by reference, filed as an exhibit with the Companys 
Annual Report on Form 10KSB for the fiscal year ended 
December 31, 1995 on April 12, 1996.
5.  Incorporated by reference and filed as Exhibits to Report on Form 
8-K filed with the Securities and Exchange Commission on June 
21, 1996 File No. 1-13760.
6.  Incorporated by reference, filed as an exhibit with the Companys 
Registration Statement on Form
	S-3 on June 28, 1996. SEC File No. 33-07093.




(b)  Reports on form 8-K:

	None

SIGNATURES



	Pursuant to the requirements of Section 13 or 15(d) of the 
Securities Exchange Act of 1934, the Registrant has duly caused this 
report to be signed on its behalf by the undersigned hereto duly 
authorized, in the city of Alpharetta, State of Georgia.


						THE 
NETWORK CONNECTION, INC.
						



Dated:  April 15, 1997				By: /s/ Wilbur R. 
Riner___________________
							Wilbur 
L. Riner
						
	Chairman and Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, 
this Report ha been signed below by the following persons on behalf of 
the Registrant and in the capacities and on the dates indicated.


Signature				Title			
		           Date                                               


/s/ Wilbur L. Riner________________	Chairman, Chief 
Executive Officer		    April 15, 1997
Wilbur L. Riner				and Director  


/s/ Bryan R. Carr_________________	Vice President - Finance, 
Chief Financial	    April 15, 1997
Bryan R. Carr				and Principal Accounting  
Officer and
					Director

/s/ James E. Riner________________	Vice President - 
Engineering		    April 15, 1997
James E. Riner				and Director


/s/ Marc Doyle___________________	Director			
		    April 15, 1997
Marc Doyle


/s/ James Newman________________	Director			
		    April 15, 1997
James Newman