<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549
                                   FORM 10-Q

(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
                                       OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM  __________ TO __________


COMMISSION FILE NUMBER  0-23560


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

         GEORGIA                                             58-1749705
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                          Identification No.)

 5 CONCOURSE PARKWAY, SUITE 850
          ATLANTA, GA                                           30328
(Address of principal executive offices)                     (Zip Code)

                                 (770) 804-8100
              (Registrant's telephone number, including area code)


                                 Not applicable
   (Former name, former address and former fiscal year, if changed since last
                                    report)

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


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

Common Stock, $.01 par value - 7,354,750 shares as of  November 4, 1996
<PAGE>
 
                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements
        (Descriptions to come)


Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations
        (Descriptions to come)
<PAGE>

<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)

                                                                                  Unaudited
                                                                                September 30,  December 31,
                                                                                   1996           1995
--------------------------------------------------------------------------------------------------------
<S>                                                                              <C>           <C> 
Assets
Current assets:
  Cash and cash equivalents                                                      $ 8,565         $ 9,304
  Short-term investments                                                           7,620           9,115
  Receivables, net of $325 allowance for doubtful accounts                         9,334           8,091
  Prepaid expenses and other current assets                                        1,405             714
  Income tax receivable                                                              550             522
--------------------------------------------------------------------------------------------------------
                                                                                  27,474          27,746
--------------------------------------------------------------------------------------------------------
Furniture, fixtures, and equipment, net of $5,301 and $4,975 
    accumulated depreciation                                                       5,020           4,885
Capitalized software development costs, net of $1,303 and $922                               
    accumulated amortization                                                       2,126             767
Long-term investment                                                                 229              --
Other noncurrent assets                                                              182              63
--------------------------------------------------------------------------------------------------------
                                                                                 $35,031         $33,461
--------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities                                                              $ 3,061         $ 2,778
Noncurrent liabilities                                                               858             834
Stockholders' equity                                                              31,112          29,849
--------------------------------------------------------------------------------------------------------
                                                                                 $35,031         $33,461
--------------------------------------------------------------------------------------------------------
</TABLE>

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

<PAGE>
 
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(In thousands, except per share data)
<TABLE> 
<CAPTION> 
                                                          Three Months Ended       Nine Months Ended
                                                             September 30,            September 30,
                                                          1996         1995         1996       1995
----------------------------------------------------------------------------------------------------
<S>                                                    <C>          <C>           <C>        <C> 
REVENUES
  Software license fees                               $  6,133      $ 4,918      $ 20,445   $ 18,771
  Services                                               3,227        2,195         8,491      6,054
----------------------------------------------------------------------------------------------------
                                                         9,360        7,113        28,936     24,825
----------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
  Costs of license fees and services                     1,325          998         3,913      3,042
  Sales and marketing                                    5,384        3,281        15,223     10,541
  Product development                                    1,500        1,251         4,402      3,755
  General and administrative                             1,506        1,200         4,388      4,131
  Nonrecurring charges                                     384           --           384         --
----------------------------------------------------------------------------------------------------
                                                        10,099        6,730        28,310     21,469
-----------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS)                                   (739)         383           626      3,356
Other income, net                                          204          330           757        968
-----------------------------------------------------------------------------------------------------
Income (loss) before income taxes                         (535)         713         1,383      4,324
Provision (credit) for income taxes                       (160)         264           529      1,633
-----------------------------------------------------------------------------------------------------
NET INCOME (LOSS)                                     $   (375)     $   449       $   854     $2,691
-----------------------------------------------------------------------------------------------------

NET INCOME (LOSS) PER SHARE                           $  (0.05)     $  0.05       $  0.11     $ 0.31
-----------------------------------------------------------------------------------------------------
SHARES USED IN PER SHARE COMPUTATIONS                    7,238        8,502         7,845      8,580
-----------------------------------------------------------------------------------------------------
</TABLE> 
The accompanying notes are an integral part of these 
consolidated condensed statements.

<PAGE>


CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - UNAUDITED
(In thousands)

<TABLE> 
<CAPTION> 
                                                                    Nine Months Ended
                                                                      September 30,
                                                                    1996         1995
---------------------------------------------------------------------------------------
<S>                                                              <C>            <C> 
Cash Flows from Operating Activities
  Net Income                                                   $      854    $ 2,691
---------------------------------------------------------------------------------------
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Increase in trade receivables                                  (1,243)      (262)
    Increase in prepaid expenses and other current assets            (691)       (35)
    (Increase) decrease in income taxes receivable                    (28)       517
    Depreciation and amortization                                   2,248      1,716
    Increase (decrease) in current liabilities                        283       (259)
    Increase in noncurrent liabilities                                 24        115
---------------------------------------------------------------------------------------
      Total adjustments                                               593      1,792
---------------------------------------------------------------------------------------
      Net cash provided by operating activities                     1,447      4,483
---------------------------------------------------------------------------------------

Cash Flows from Investing Activities
  Decrease (increase) in short-term investments                     1,495     (4,942)
  Purchases of furniture, fixtures, and equipment, net             (2,002)    (2,739)
  Additions to capitalized software development costs              (1,740)      (113)
  Increase in long-term investments                                  (229)       (12)
  Other                                                              (172)        12
---------------------------------------------------------------------------------------
      Net cash used for investing activities                       (2,648)    (7,794)
---------------------------------------------------------------------------------------

Cash Flows from Financing Activities
  Proceeds from issuance of common stock, net of related costs        525        207
  Income tax benefits related to exercise of stock options             --        528
  Other                                                               (63)       (36)
---------------------------------------------------------------------------------------
      Net cash provided by financing activities                       462        699
---------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents                            (739)    (2,612)
Cash and cash equivalents, beginning of period                      9,304     12,735
---------------------------------------------------------------------------------------
Cash and cash equivalents, end of period                       $    8,565    $10,123
---------------------------------------------------------------------------------------

Supplemental Disclosures
  Interest paid                                                $       --    $    --
  Income taxes paid                                            $      868    $ 1,215
---------------------------------------------------------------------------------------

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

</TABLE> 
<PAGE>
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - UNAUDITED


1. In the Company's opinion, the accompanying consolidated interim financial
   statements include all adjustments, consisting only of normal, recurring
   adjustments, necessary to present fairly the Company's consolidated results
   of operations, condensed financial position and condensed cash flows for the
   periods indicated.  The results of operations for interim periods are not
   necessarily indicative of results expected for the entire year.  The interim
   financial statements should be read in conjunction with the audited
   consolidated financial statements as of December 31, 1995 and the notes
   thereto included in the Company's annual report incorporated by reference
   into the Company's Form 10-K for the year ended December 31, 1995 filed with
   the Securities and Exchange Commission.  Certain prior year amounts have been
   re-classified to conform with the current year presentations.

2. Net Income per share is computed using the weighted average number of shares
   of common stock outstanding plus common equivalent shares.  Common equivalent
   shares from stock options have been included in the computation when
   dilutive.  The effect of stock options was anti-dilutive for the three months
   ended September 30, 1996 and was excluded from the calculation.  The
   difference between primary and fully diluted earnings per share is not
   material for the periods presented, and therefore fully diluted net income
   per share has not been presented.

3. The Company expenses the production costs of advertising at the time
   incurred, except for direct-response advertising, which is capitalized and
   amortized over its expected period of future benefits.  Direct-response
   advertising consists primarily of advertisements in business, financial, and
   software magazines and newspapers.  The cost of each advertisement is
   amortized over the four-month period following the issuance of the
   publication in which it appears.  Advertising expenditures totaled $702,000
   and $31,000 in the three months ended September 30, 1996 and 1995, and
   $1,877,000 and $119,000 for the nine months ended September 30, 1996 and
   1995, respectively.  Advertising expense was $564,000 and $31,000 for the
   three months ended September 30, 1996 and 1995, and $1,466,000 and $119,000
   for the nine months ended September 30, 1996 and 1995, respectively.
   Unamortized advertising costs included in prepaid expenses were $411,000 and
   $0 at September 30, 1996 and 1995.
<PAGE>
                               FINANCIAL REVIEW

RESULTS OF OPERATIONS:

Revenues.  Total revenues increased 32% to $9,360,000 for the three months ended
September 30, 1996 as compared to $7,113,000 for the same period in 1995.
Revenues increased 17% to $28,936,000 for the nine months ended September 30,
1996 as compared to $24,825,000 for the prior year period.

The Company derives revenue from license fees for its RemoteWare products and 
service fees for its software support and maintenance program and systems 
integration and training services.  Revenues from license fees increased 25% to 
$6,133,000 and 9% to $20,445,000 in the three and nine months ended September 
30, 1996 as compared to the same periods in 1995.  The increase in license fees 
is primarily due to a 38% increase in add-on license fees from the installed 
customer base for the third quarter of 1996 as compared to the same period in 
1995.  License fees from new customers were approximately the same in the third 
quarter of 1996 as compared to the prior year period, with the number of new 
customers added declining from 71 to 65 but the average deal size increasing 
from $26,000 to $29,000.  Average deal size varies as a function of product mix 
(OS/2 versus NT server-based product), number of clients included in the sale, 
whether the sale was direct or through a partner, and product packaging.

In March and September of 1996, the Company released RemoteWare products that 
run on the Microsoft NT operating system.  License fees from the NT products 
contributed 17% of total license fees for the third quarter of 1996.

The Company distributes its products through a combination of direct sales and
Solution Partner channels. License fees from direct sales accounted for 61% and
56% of total license fees in the three and nine months ended September 30, 1996
as compared to 47% and 53% in the prior year periods. License fee revenue
outside North America increased 70% in the third quarter of 1996 as compared to
the same period in 1995 primarily due to increased sales and marketing efforts
and a large add-on license fee from an installed customer.

Revenues from services increased 47% to $3,227,000 and 40% to $8,491,000 in the
three and nine months ended September 30, 1996 as compared to the same periods
in 1995.  The increase in service revenues is attributable to the growth in the
Company's installed base of customers and their participation in the Company's
software support and maintenance program called the RemoteCare Assurance Plan.

Costs of license fees and services.  Costs of license fees and services
increased 33% to $1,325,000 and 29% to $3,913,000 in the three and nine months
ended September 30, 1996 as compared to the same periods in 1995.  Costs of
license fees and services remained constant as a percentage of revenues at 14%
for the three months ended September 30, 1996 and increased  to 14% from 12% in
the nine months ended September 30, 1996 as compared to the prior year periods.
The increase in cost of license fees and services is primarily due to additional
personnel expenses in product support and field services to support the growing
customer base.

Sales and marketing. Sales and marketing expenses increased 64% to $5,384,000
and 44% to $15,223,000 in the three and nine months ended September 30, 1996 as
compared to the same periods in 1995. Sales and marketing expenses increased as
a percentage of revenues to 58% from 46% and to 53% from 42% for the three and
nine months ended September 30, 1996 as compared to the prior year periods. The
increase in expenses was due to higher advertising, personnel and international
marketing costs. During the first quarter of 1996, the Company launched a
national print media advertising campaign to further increase market awareness
for RemoteWare. The advertising campaign is currently scheduled to continue
throughout 1996. In addition, the Company increased its marketing programs
expenditures in Europe to bolster market awareness for the U.K., French and
German operations, and opened a new sales office in Australia.

Product development.  Product development expenditures (expenses plus
capitalized software development costs) increased 75% to $2,311,000 and 59% to
$6,142,000 for the three and nine months ended September 30, 1996 as compared to
the same periods in 1995. The increase in product development expenditures was
primarily due to additional personnel costs (including outside contractor costs)
for development of RemoteWare on the Microsoft Windows NT operating system.
Capitalized software development costs were $811,000 and $70,000 for the three
months ended September 30, 1996 and 1995, respectively, and $1,740,000 and
$113,000 for the nine months ended September 30, 1996 and 1995. The increase in
capitalized software development costs reflects investments in the 3.0 and 3.1
versions of RemoteWare and the development of a replication agent for Lotus
Notes. RemoteWare 3.1 and the replication agent for Lotus Notes were released
for general availability on September 30, 1996. Net product development expenses
(product development expenditures less capitalized software) increased 20% to
$1,500,000 and 17% to $4,402,000 for the three and nine months ended September
30, 1996 as compared to the same periods in 1995. Net product development
expenses as a percentage of revenues decreased to 16% from 18% for the three
months ended September 30, 1996 and 1995 and remained constant at 15% for the
nine months ended September 30, 1996 as compared to the same period in 1995.

<PAGE>



The following table summarizes product development expenditures:


<TABLE>
<CAPTION>


                                                 Three Months Ended                Nine Months Ended
                                                    September 30,                     September 30,
(in thousands)                                  1996            1995              1996            1995
----------------------------------------------------------------------------------------------------------
<S>                                           <C>              <C>               <C>            <C> 
Product development expenditures              $ 2,311         $ 1,321           $ 6,142         $ 3,868
Less:  Capitalized software development costs     811              70             1,740             113
                                              ------------------------------------------------------------
Net product development expenses              $ 1,500         $ 1,251           $ 4,402         $ 3,755
                                              ------------------------------------------------------------

As a percentage of revenues:
  Gross product development expenditures           25%             19%               21%             16%
  Net product development expenses                 16%             18%               15%             15%

Capitalized product development rate               35%              5%               28%              3%

</TABLE>

General and administrative.  General and administrative expenses increased 26%
to $1,506,000 and 6% to $4,388,000 in the three and nine months ended September
30, 1996 as compared to the same periods in 1995.  General and administrative
expenses decreased as a percentage of revenues to 16% from 17% in the three
months ended September 30, 1996 and to 15% from 17% for the nine months ended
September 30, 1996 as compared to the prior year periods. The increase in
general and administrative expenses was primarily due to additional personnel
expenses to support administrative functions.

Nonrecurring Charges. The Company recorded a nonrecurring charge
of $384,000 during the third quarter of 1996 associated with changes in the 
Company's executive management team. Excluding the nonrecurring charge, the 
operating loss as a percent of revenues was 4% for the third quarter of 1996 as 
compared to operating income of 5% of revenues for the prior year period, and 
operating income of 3% and 14% of revenues for the nine months ended September 
30, 1996 and 1995, respectively.

Other income and expense.  Other income, primarily interest income, decreased 
38% to $204,000 and 22% to $757,000 in the three and nine months ended September
30, 1996 as compared to the same periods in 1995 due primarily to lower cash
balances as a result of the Company's repurchase of $8,000,000 of its common
stock in the fourth quarter of 1995.


LIQUIDITY AND CAPITAL RESOURCES:

At September 30, 1996, the Company had cash, cash equivalents, and short-term
investments of $16,185,000 and working capital of $24,413,000.  During  the
first nine months of 1996, the Company generated $1,447,000 of cash from
operating activities, purchased capital equipment of $2,002,000 and capitalized
software development costs of $1,740,000.

The Company believes cash flows from operations and existing cash and short-term
investments will be sufficient to meet its cash requirements over at least the
next two years.


<PAGE>
 
                          PART II. - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K
        (a) Exhibits
            11  Statement re computation of per share earnings
            27  Financial data schedule
 

        (b) Reports on Form 8-K
            No reports on Form 8-K were filed by the registrant during the
quarter ended September 30, 1996.



                                   SIGNATURES

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


                                      XcelleNet, Inc.
                                        (Registrant)


Date:  November 14, 1996                    By:   /s/ SIDNEY V. SACK
                                              --------------------------
                                           Sidney V. Sack
                                           Chief Financial Officer
                                           (Principal Financial and
                                           Authorized Officer)


 
<PAGE>
 
<TABLE>
<CAPTION>
 
 
Exhibit
Number                   Exhibit Description
---------                -------------------
 
 
 
 
<S>        <C>
11         Statement re computation of per share earnings
27         Financial data schedule 
 
 
</TABLE>