<PAGE>



================================================================================


                                  UNITED STATES
                       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 JUNE 30, 2002



                  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 0-21366


                              TRICORD SYSTEMS, INC.
                              ---------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)




              DELAWARE                                         41-1590621
----------------------------------                        -------------------
  (STATE OR OTHER JURISDICTION OF                          (I.R.S. EMPLOYER
   INCORPORATION OR ORGANIZATION)                         IDENTIFICATION NO.)


          2905 NORTHWEST BOULEVARD, SUITE 20, PLYMOUTH, MINNESOTA      55441
          ------------------------------------------------------------------
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)   (ZIP CODE)


                                 (763) 557-9005
           --------------------------------------------------------
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)




     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                  YES       X                     NO
                        ---------                        -------



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

                                                            OUTSTANDING AT
            CLASS                                           AUGUST 14, 2002
            -----                                           ---------------
        Common Stock,
       $0.01 par value                                         24,988,911


================================================================================


<PAGE>




                          PART I. FINANCIAL INFORMATION

                          ITEM 1: FINANCIAL STATEMENTS

                              TRICORD SYSTEMS, INC.
                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                Three Months Ended June 30,          Six Months Ended June 30,
                                                               ----------------------------        -----------------------------

(In thousands, except per share data)                            2002                2001            2002                 2001
                                                              -----------       -----------       -----------        -----------
<S>                                                            <C>               <C>               <C>                <C>
 Revenue:
      Product                                                  $       50        $       94        $      141         $       94
      Service                                                          17              --                  30              --
                                                              -----------       -----------       -----------        -----------
                                                                       67                94               171                 94

Cost of sales and service:
      Product                                                         265               175               513                175
      Service                                                          90              --                 186              --
                                                              -----------       -----------       -----------        -----------
                                                                      355               175               699                175

Gross loss                                                           (288)              (81)             (528)               (81)
                                                              -----------       -----------       -----------        -----------

Operating expenses:
      Research and development                                      1,720             2,990             3,694              5,873
      Sales and marketing                                           1,445             2,545             2,666              4,790
      General and administrative                                    1,600               750             2,701              1,594
      Restructuring                                                 1,095              --               1,164               --
                                                              -----------       -----------       -----------        -----------
                                                                    5,860             6,285            10,225             12,257

Operating loss                                                     (6,148)           (6,366)          (10,753)           (12,338)
                                                              -----------       -----------       -----------        -----------

Other income (expense):
      Interest, net                                                    40               344                97                667
      Other, net                                                       (6)                5                (8)                 6
                                                              -----------       -----------       -----------        -----------
                                                                       34               349                89                673

Net loss                                                           (6,114)           (6,017)          (10,664)           (11,665)
                                                              -----------       -----------       -----------        -----------

Beneficial conversion charge, Series E Preferred Stock               (607)             (493)           (1,178)              (660)
Premium on Series E Preferred Stock                                  (297)             (297)             (594)              (396)
                                                              -----------       -----------       -----------        -----------

Net loss applicable to common shares                           $   (7,018)       $   (6,807)       $  (12,436)        $  (12,721)
                                                              ===========       ===========       ===========        ===========

Net loss per common share - basic and diluted                  $    (0.28)       $    (0.28)       $    (0.50)        $    (0.52)
                                                              ===========       ===========       ===========        ===========

Weighted average common shares outstanding
      - basic and diluted                                          24,975            24,380            24,912             24,353
                                                              ===========       ===========       ===========        ===========

</TABLE>


                 See accompanying notes to financial statements.




                                        1




<PAGE>


                              TRICORD SYSTEMS, INC.
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                     ASSETS

                                                                                June 30,               December 31,
(In thousands, except per share data)                                             2002                     2001
                                                                           --------------------     --------------------
                                                                               (unaudited)
<S>                                                                          <C>                      <C>
Current assets:
     Cash and cash equivalents                                               $           8,459        $          17,357
     Accounts receivable, net                                                               72                       82
     Inventories                                                                            68                      321
     Other current assets                                                                  186                      312
                                                                           --------------------     --------------------
        Total current assets                                                             8,785                   18,072

Equipment and improvements, net                                                          1,142                    2,180

Other assets                                                                               194                      194
                                                                           --------------------     --------------------

        Total Assets                                                         $          10,121        $          20,446
                                                                           ====================     ====================

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                                        $             664        $             597
     Accrued payroll, benefits and related taxes                                           617                    1,126
     Other accrued expenses                                                                918                      597
                                                                           --------------------     --------------------
        Total current liabilities                                                        2,199                    2,320

Capital lease obligation                                                                    18                       64

Convertible, redeemable Series E Preferred Stock, $1,000 par value; 25 shares
     authorized, 25 issued and outstanding (redemption value at June 30, 2002 of
     $26,580)                                                                           13,553                   11,781

Stockholders' equity:
     Common stock, $0.01 par value; 75,000 shares
        authorized, 24,988 and 24,697 shares
        issued and outstanding                                                             250                      247
     Additional paid-in capital                                                        126,145                  127,688
     Unearned compensation                                                                (250)                    (524)
     Accumulated deficit                                                              (131,794)                (121,130)
                                                                           --------------------     --------------------
        Total stockholders' equity                                                      (5,649)                   6,281
                                                                           --------------------     --------------------

        Total Liabilities, Convertible, Redeemable Preferred
           Preferred Stock and Stockholders' Equity                          $          10,121        $          20,446
                                                                           ====================     ====================
</TABLE>


                See accompanying notes to financial statements.


                                        2





<PAGE>

                              TRICORD SYSTEMS, INC.
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                    Six Months Ended June 30,
                                                                       ----------------------------------------------
(In thousands)                                                                   2002                      2001
                                                                       --------------------      --------------------

<S>                                                                      <C>                       <C>
Cash flows from operating activities:
     Net loss                                                            $         (10,664)        $         (11,665)
     Adjustments to reconcile net loss to net
       cash used in operating activities:
        Stock compensation                                                             313                       268
        Depreciation and amortization                                                  742                     1,122
        Loss on disposal of equipment                                                  375                         -
        Provision for losses on accounts receivable                                     50                         -
        Provision for losses on inventories                                            359                         -
        Provision for facility exit costs                                              618                         -
        Changes in operating assets and liabilities:
           Accounts receivable                                                         (40)                      (72)
           Inventories                                                                (150)                     (570)
           Other current assets                                                        126                      (138)
           Accounts payable                                                             67                      (761)
           Accrued payroll, benefits and related taxes                                (409)                      331
           Accrued restructuring expenses                                             (151)                        -
           Other accrued expenses                                                       (6)                       30
                                                                       --------------------      --------------------
              Net cash used in operating activities                                 (8,770)                  (11,455)
                                                                       --------------------      --------------------

Cash flows from investing activities:
     Capital expenditures                                                              (79)                   (1,656)
                                                                       --------------------      --------------------
              Net cash used in investing activities                                    (79)                   (1,656)
                                                                       --------------------      --------------------

Cash flows from financing activities:
     Principal payments on capital lease obligations                                   (61)                      (44)
     Stock option and warrant exercises                                                 12                       102
     Net proceeds from private placement                                                 -                    23,400
                                                                       --------------------      --------------------
              Net cash provided by financing activities                                (49)                   23,458
                                                                       --------------------      --------------------

Net increase (decrease) in cash and cash equivalents                                (8,898)                   10,347

Cash and cash equivalents at beginning of period                                    17,357                    16,825
                                                                       --------------------      --------------------

Cash and cash equivalents at end of period                               $           8,459         $          27,172
                                                                       ====================      ====================

</TABLE>

                 See accompanying notes to financial statements.

                                        3


<PAGE>




                              TRICORD SYSTEMS, INC.

                          NOTES TO FINANCIAL STATEMENTS



1.  BASIS OF PRESENTATION

The accompanying unaudited interim statements of operations, balance sheet and
statements of cash flows reflect all adjustments of a normal recurring nature,
which are, in the opinion of management, necessary for a fair statement of the
financial position at June 30, 2002, and results of operations and cash flows
for the interim periods ended June 30, 2002 and 2001. The unaudited financial
statements should be read in conjunction with the Company's audited financial
statements for the year ended December 31, 2001, which were included in the
Company's 2001 Annual Report on Form 10-K. The year-end balance sheet data
included herein is derived from such audited financial statements, but does not
include all disclosures required by accounting principles generally accepted in
the United States of America. The results of operations for the interim periods
ended June 30, 2002 are not necessarily indicative of the results to be expected
for the full year or any future periods. None of these financial statements have
been adjusted to reflect the effect of the ultimate outcome of the
reorganization proceedings discussed in Note 2, which could materially impact
the realization of assets and the settlement of liabilities reflected in these
financial statements.

2. BANKRUPTCY FILING

On August 2, 2002, the Company filed a voluntary petition in the United States
Bankruptcy Court for the District of Minnesota for reorganization relief under
Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Filing"). The
Company is currently operating its business as a debtor-in-possession in
accordance with provisions of the Bankruptcy Code. The Bankruptcy Filing was
initiated to address the Company's deteriorating financial condition, the
continuing impact of the lawsuit brought by RGC International Investors, LDC
("Rose Glen"), and the tactics employed by Rose Glen.

Under Chapter 11, the Company will continue to operate under court protection
while it seeks new investors or a buyer for the Company. The Company believes
that it has sufficient working capital to sustain operations pending such
investment or sale. However, there can be no assurance that the Company will
identify a willing buyer or that it will obtain additional financing, or that
terms proposed by any potential buyer or investor will be acceptable to the
Company or the Bankruptcy Court. Accordingly, there continues to be substantial
doubt about the Company's ability to continue as a going concern. The financial
statements for the three and six months ended June 30, 2002 assume the
realization of assets and the settlement of liabilities in the normal course of
business, which may not occur depending on the outcome of the Company's efforts
to obtain additional capital from investors or to find a buyer.


                                       4


<PAGE>

3. NASDAQ DELISTING

On May 16, 2002, the Company received a letter from The Nasdaq Stock Market,
Inc., regarding its non-compliance with both the minimum $2 million net tangible
assets and the minimum $2.5 million stockholders' equity requirements for
continued listing of the Company's common stock on the Nasdaq SmallCap Market
under Marketplace Rule 4310(c(2)(B). On May 31, 2002, the Company submitted to
Nasdaq its plan to regain compliance with these continued listing requirements.
On July 26, 2002, the Company received a notice from the Nasdaq Stock Market,
Inc. that its plan to regain compliance with the continued listing requirements
had been denied and that its Common Stock would be delisted from the Nasdaq
SmallCap Market at the opening of business on August 5, 2002 pending the filing
of an appeal. The Company determined not to appeal this decision. Accordingly,
the Company's Common Stock was delisted from the Nasdaq SmallCap Market at the
opening of business on August 5, 2002. As a result of this delisting, the
Company's preferred shareholders would, but for the Bankrupcty Filing, have the
right to seek redemption of their investment as described in more detail in Note
7.

4. LITIGATION

On April 5, 2002, the holder of the Series E preferred stock filed a lawsuit
against the Company alleging that the Company breached certain representations
and that the continuation of business by the Company constitutes a waste of its
assets. The shareholder is seeking damages of $25 million plus interest and the
appointment of a receiver to wind up the affairs of the Company. The Company
believes that the lawsuit is without merit and is vigorously contesting it. This
lawsuit was stayed as a result of the Bankruptcy Filing. If this matter is not
resolved, it could have a material adverse effect on the Company's financial
position. A more detailed discussion of this lawsuit and the impact of the
Bankruptcy Filing is set forth in "Part II, Item 1. Legal Proceedings" of this
Form 10-Q.

5. INVENTORIES

Inventories, which consist primarily of finished units, are stated at the lower
of cost or market. Cost is determined using weighted average costs which
approximate actual costs determined using the first-in, first-out method.
Appropriate consideration is given to deterioration, obsolescence or other
factors in the evaluation of net realizable value.

The Company has a non-exclusive integration agreement with a contract
manufacturer to manufacture, integrate and assemble the Company's Lunar
Flare(TM) NAS server appliance. Under the agreement, the manufacturer supplies
and assembles the hardware components that comprise Lunar Flare appliances,
integrates the Company's Illumina(TM) aggregation software, provides testing
services and drop-ships to the Company's channel partners and customers. All
product purchases by the Company from the manufacturer are through purchase
orders. The Company determines the minimum number of units of server appliances
that the manufacturer builds and holds as finished goods, ready for shipment to
the Company's customers. The Company provides a non-cancelable, non-returnable
purchase order for all such finished goods inventory. In addition, the Company
provides the manufacturer with a non-cancelable, non-returnable purchase order
for unique parts (as defined by the agreement) to be purchased by the
manufacturer for integration into the Company's server appliance. The Company is
also required to reimburse the manufacturer for obsolete, unique and excess
material (as defined) and related supplier cancellation charges because of
actions by the Company, including cancellation of a


                                       5

<PAGE>


purchase order, termination of the agreement or implementation of an engineering
change order. During the second quarter of 2002, the Company paid its contract
manufacturer approximately $84,000 for unique and excess material (as defined).

During the three and six month periods ended June 30, 2002, the Company recorded
charges of $213,000 and $359,000, respectively to cost of sales and service to
write-down the carrying value of certain excess inventories and certain
inventories that required refurbishment, to their estimated net realizable
values.

6. RESTRUCTURING AND OTHER CHARGES

In the first two quarters of 2002, the Company recorded restructuring charges of
$546,000 related to a workforce reduction of 26 employees. This restructuring
was implemented throughout 2002 and reduced the total number of employees at the
Company to approximately 44. The restructuring charge consists of
severance-related costs including cash payments of $539,000 and non-cash charges
of $5,000 for common stock issued to affected employees. In addition, during the
second quarter of 2002, the Company recorded a restructuring charge of
approximately $618,000 primarily for the accrual of future rental payments, less
estimated future sublease rental income.

As previously described in the Company's annual report on Form 10-K for the year
ended December 31, 2001, the Company also recorded certain restructuring
accruals during 2001. The table below reflects the activity during the quarter
impacting the accrual related to these restructuring activities:

<TABLE>
<CAPTION>

                                                                June 30,
                                                                 2002
                                                           ---------------
<S>                                                          <C>
Restructuring accrual as of December 31, 2001                $    211,000
2002 Accruals:
  Cash severance                                                  541,000
  Non-cash severance                                                5,000
2002 Payments:
  Cash severance                                                 (668,000)
  Non-cash severance                                              (29,000)
                                                           ---------------
Restructuring accrual as of June 30, 2002                    $     60,000
                                                           ===============

</TABLE>




Restructuring expense related to workforce reductions for the second quarter and
six months ended June 30, 2002 was $477,000 and $546,000, respectively. Also,
during the second quarter of 2002, the Company determined that it would exit its
Colorado facility. The Company retained a broker and subsequently was able to
sublease approximately 10,000 square feet out of a total of approximately 15,000
square feet. The Company is continuing to pursue other sublease opportunities
for the remaining approximately 5,000 square feet. The Company recorded a
restructuring charge of approximately $618,000 primarily for the accrual of
future rental payments, less estimated future sublease rental income. Total
restructuring reported for the second quarter and six months ended June 30, 2002
was $1,095,000 and $1,164,000, respectively.

                                       6

<PAGE>


In addition, the Company wrote-off approximately $353,000 of abandoned assets
related to the Colorado facility, which is included in general and
administrative expense in the second quarter of 2002.

7. CONVERTIBLE, REDEEMABLE SERIES E PREFERRED STOCK

On February 27, 2001 the Company closed a private placement of $25.0 million in
Series E Convertible Preferred Stock. Net cash proceeds from the placement were
approximately $23.4 million, net of approximately $1.6 million of transaction
costs. Under terms of the offering, the Company issued 25,000 shares of 4.75%
Series E Convertible Preferred Stock ("Preferred Stock"). Each share of
Preferred Stock is convertible into the number of shares of the Company's common
stock that is equal to the stated value ($1,000) of each share plus accrued
premium and default payments (if any) divided by the conversion price, which is
currently $9.50, but is subject to adjustment in certain circumstances. As of
June 30, 2002, the Preferred Stock was convertible into approximately 2,830,000
shares of common stock. In addition, the Company issued warrants to the
Preferred Stockholders with an 18-month term to purchase up to 986,842
additional shares of the Company's common stock at $12.40 per share, and
warrants with a 24-month term to purchase up to 986,842 additional shares of the
Company's common stock at $14.50 per share. In addition, the Company issued
warrants to the placement agent with a five-year term to purchase up to 110,526
shares of the Company's common stock at $9.50 per share.

Accounting for the preferred stock conversion feature in accordance with
Emerging Issues Task Force (EITF) issue No. 98-5 "Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Rates" and EITF Issue No. 00-27 "Application of Issue 98-5 to Certain
Convertible Investments" resulted in the allocation of approximately $7.9
million of the net offering proceeds to a "beneficial conversion feature". This
beneficial conversion feature was initially recorded as an increase in
additional paid-in capital and will be amortized using the effective interest
method as a non-cash charge against stockholders' equity over the shorter of
three years or the period during which the Preferred Stock remains outstanding.
These charges will also increase the carrying value of the Preferred Stock. In
addition, the Company will accrue a premium on the stated value of outstanding
Preferred Stock, which is payable to the Preferred Stockholders in additional
common stock upon conversion or in cash upon redemption of the Preferred Stock,
at an annual rate of 4.75%. This premium will also be recorded as a non-cash
charge against stockholders' equity and an increase in the carrying value of
Preferred Stock. The charges against stockholders' equity resulting from the
amortization of the beneficial conversion feature and accrual of the premium
will reduce income (increase the loss) applicable to common stockholders, which
will reduce income (increase the loss) per common share reported by the Company.
If the Preferred Shares remain outstanding for their full three-year term,
without adjustment of the conversion price as described below, charges to equity
for amortization of the beneficial conversion feature and accrual of the premium
would total approximately $11.5 million. As a result of the delisting of the
Company's common stock on August 5, 2002, the preferred shareholders have the
right to demand redemption of the preferred shares on or after October 27, 2002,
however, this redemption right will be stayed as a result of the




                                       7


<PAGE>


Bankruptcy Filing. Accordingly, the remaining beneficial conversion charge of
approximately $5.0 million will be recorded by the Company and approximately
$8.4 million of additional accretion charges will be recorded during the third
quarter of 2002 (see "Required Redemption below). In addition, as a result of
the delisting of the Company's common stock, the Company would, but for the
Bankruptcy Filing, owe the preferred shareholders a fee of $250,000 per month.
During the three months ended June 30, 2002 and 2001, respectively, the Company
recorded amortization of the beneficial conversion feature of $607,000 and
$493,000, respectively and accrued premium of $297,000 and $297,000,
respectively. During the six months ended June 30, 2002 and 2001, respectively,
the Company recorded amortization of the beneficial conversion feature of
$1,178,000 and $660,000, respectively and accrued premium of $594,000 and
$396,000, respectively.

The fair value of the warrants was measured using the Black-Scholes
option-pricing model. The recorded value of the warrants of approximately $6.5
million, initially recorded as an increase in additional paid-in capital,
reflects an allocation of the net proceeds of the offering based upon the
relative fair values of the Preferred Stock and the warrants issued with the
Preferred Stock.

Key terms of the Preferred Stock include the following:

Voting Rights. The holders of the Preferred Stock have no voting rights except
as may be required by Delaware law.

Dividends. The holders of Preferred Stock are not entitled to the payment of
dividends other than the 4.75% premium. The Company is prohibited from paying
dividends to any other stockholders or from repurchasing or redeeming any other
class of stock without the prior approval of the majority of the Preferred
Stockholders.

Liquidation Preference. Upon any liquidation, dissolution or winding up of the
affairs of the Company or any change in control of the Company, as defined, the
holder of each share of Preferred Stock shall be entitled to be paid $1,000 per
share plus all accrued premium amounts and any default payments due (as defined)
(the "Liquidation Preference Amount") prior and in preference to any payment to
holders of common stock. If the assets of the Company upon such event are
insufficient to make such payment in full, then the holders of the Preferred
Stock shall be entitled to pro rata distribution of all the assets of the
Company.

Conversion. The holders of Preferred Stock may convert such stock into shares of
common stock at any time until maturity (also see Forced Conversion at Maturity
below).

Conversion Rate. The stated value of each share of the Preferred Stock ($1,000)
plus any premium accrued at 4.75% and any default payments due (as defined) is
convertible into common stock at $9.50 per share, subject to adjustment in
certain circumstances ("Conversion Rate").

Adjustments to Conversion Rate. The Conversion Rate is subject to adjustment at
maturity or upon certain future issuances of common stock or rights to acquire
common stock (as defined) at a price less than $9.50 per share. Any adjustment
to the conversion rate will result in an increase in the amount ascribed to the
beneficial conversion feature

                                       8

<PAGE>


discussed above.

Forced Conversion or Redemption at Maturity. Subject to certain limitations (as
defined), any Preferred Stock remaining outstanding at February 27, 2004 shall
be subject to a forced conversion unless the Company elects to redeem such
outstanding Preferred Stock for the Liquidation Preference Amount. The
conversion rate for the forced conversion shall be based upon the lowest average
trading price of the Company's common stock for 10 of the last 15 trading days
preceding February 27, 2004. Most rights, including the right to earn the 4.75%
annual premium, shall cease for any shares of Preferred Stock remaining
outstanding after February 27, 2004.

Early Forced Conversion. If the Company's common stock trades at an average
price of at least $19 for at least 20 consecutive trading days and the Company
has fulfilled certain registration requirements, the Company may require the
holders of the Preferred Stock to convert their shares at the Conversion Rate.

Optional Redemption. At any time, if the Company has fulfilled certain
registration requirements, the Company may elect to redeem any outstanding
shares of Preferred Stock at a price per share equal to 115% of the Liquidation
Preference Amount.

Penalties. Pursuant to the terms of the Preferred Stock, the Company is required
to pay to the holders of the Series E Preferred Stock a fee of approximately
$250,000 or more per month for each month that the Company's Common Stock is not
listed on the Nasdaq SmallCap Market, although the Bankruptcy Filing has stayed
this obligation. As explained in Note 3, the Company's Common Stock was delisted
from the Nasdaq SmallCap Market on August 5, 2002 and the Company does not
anticipate its Common Stock being listed on the Nasdaq SmallCap Market for the
foreseeable future.

Required Redemption. In the event of certain defaults by the Company, which such
defaults include, but are not limited to, a failure by the Company to issue
shares of common stock upon conversion of the Preferred Stock, a failure to use
the proceeds for permitted purposes, as defined, a failure to file all required
SEC reports on a timely basis, or, the failure of the Company to maintain the
listing of its common stock on the Nasdaq SmallCap Market (or other required
trading market) for any 60-day period any time after August 27, 2002, the
holders of the Preferred Stock may require the Company to redeem the Preferred
Stock at the Liquidation Preference Amount or such other amount (as defined) to
be determined at the date of the redemption. Also, under certain circumstances
the Company may be required to obtain stockholders' approval to allow for
issuance of additional shares of common stock upon conversion of the Preferred
Stock. If such approval is not obtained, the Company may be required to redeem
the portion of shares of Preferred Stock, which cannot be converted into common
stock due to the lack of stockholder consent. As discussed in Note 2, the
Company was delisted on August 5, 2002 and, but for the bankruptcy filing, the
Preferred Stock holders would be entitled to require redemption as discussed
above. If future events permit the Preferred Stock holders to elect to exercise
such redemption rights, the carrying value of the Preferred Stock would be
increased from its carrying value ($13,553,000 at June 30, 2002) to its
redemption value ($26,600,000 at June 30, 2002) by making a charge against
stockholders' equity. Such a charge would also increase the net loss available
to common


                                       9



<PAGE>



stockholders. If this charge were required as of June 30, 2002, it would be
$13,047,000.

Registration Rights. The Company is required to maintain an effective
registration statement with the Securities and Exchange Commission (SEC) to
cover the resale of the Company's common stock issuable upon the conversion of
the Preferred Stock and the exercise of the warrants issued with the Preferred
Stock.

8.  SUPPLEMENTAL CASH FLOW INFORMATION

During the six months ended June 30, 2002 and 2001, expenses for outside
directors meeting fees of $40,000 and $20,000 were settled through the issuance
of 67,869 and 2,171 shares of common stock, respectively.

During the six months ended June 30, 2002, $181,000 of accrued payroll
obligations were settled through the issuance of 197,037 shares of common stock.
During the six months ended June 30, 2001, the Company acquired $134,000 of
equipment pursuant to terms of capital leases.

9. INCOME (LOSS) PER SHARE

Net loss per common share is computed by dividing net loss applicable to common
shares by the weighted average number of common shares outstanding during each
period. Potentially dilutive common shares are excluded from the calculation of
net loss per common share as their impact is antidilutive. Net loss per common
share does not reflect common stock options and warrants ultimately exercisable
for the purchase of approximately 13,400,000 shares for the three and six month
periods ended June 30, 2002 and approximately 15,200,000 shares for the three
and six month periods ended June 30, 2001. The net loss per common share for the
three and six months ended June 30, 2002 does not reflect the approximately
2,800,000 common shares into which the Series E Preferred Stock could be
converted as of June 30, 2002 because the effect would be antidilutive.

10. COMPREHENSIVE INCOME (LOSS)

The Company has no significant comprehensive income (loss) items other than net
loss.

11. NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board approved Statements of
Financial Accounting Standards (SFAS) No. 141, "Business Combinations" and No.
142, "Goodwill and Other Intangible Assets". The statements eliminate the
pooling-of-interests method of accounting for business combinations and require
that goodwill and intangible assets with indefinite useful lives not be
amortized. Instead, these assets will be reviewed for impairment annually with
any related losses recognized when incurred. SFAS No. 141 is generally effective
for business combinations completed after June 30, 2001. SFAS No. 142 was
effective for the Company beginning January 1, 2002. Adoption of this standard
did not affect the Company's financial position or results of operations.


                                       10

<PAGE>

 In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." This standard requires that obligations associated with the
retirement of tangible long-lived assets be recorded as liabilities when those
obligations are incurred, with the amount of the liability initially measured at
fair value. SFAS No. 143 is effective for the Company in 2003. The Company does
not expect adoption of this standard to affect its financial position or its
results of operations.

In May 2002, the FASB has also issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44,and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." This Statement rescinds SFAS No. 4, "Reporting Gains and Losses
from Extinguishment of Debt", and an amendment of that Statement, SFAS No. 64,
"Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements". This
Statement also rescinds SFAS No. 44, "Accounting for Intangible Assets of Motor
Carriers". This Statement amends SFAS No. 13, "Accounting for Leases", to
eliminate an inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease modifications that
have economic effects that are similar to sale-leaseback transactions. This
Statement also amends other existing authoritative pronouncements to make
various technical corrections, clarify meanings, or describe their applicability
under changed conditions. The provisions of this Statement are required to be
applied starting with fiscal years beginning after May 15, 2002. The Company
does not expect adoption of this standard to affect its financial condition or
results of operations.

In October 2001, the Financial Accounting Standards Board approved SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." This statement
addresses financial accounting and reporting for the impairment of long-lived
assets and for long-lived assets to be disposed of and supersedes SFAS No. 121
and APB Opinion No. 30, "Reporting the Results of Operations - Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions." SFAS No. 144 is effective for
fiscal years beginning after December 15, 2001, and interim periods within those
fiscal years, with early application encouraged. Adoption of this standard does
not affect the Company's financial position or results of operations.

In June 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards Board No. ("FAS") 146, "Accounting for Costs
Associated with Exit or Disposal Activities." FAS 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities.
This statement supersedes Emerging Issues Task Force Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity." The Company is required to adopt FAS 146 no later than January 1,
2003. The Company does not believe that the adoption of FAS 146 will have a
material impact on its consolidated financial statements.

12. SUBSEQUENT EVENTS

In August 2002, the Company completed additional workforce reductions totaling
15 employees. Once these reductions take full effect, the Company will have 29
employees which, assuming the Company continues to operate, should result in an
annualized decrease in expenses of



                                       11


<PAGE>


approximately $2.2 million. However, in connection with the headcount reduction
the Company incurred severance related expenses of approximately $400,000.






                                       12


<PAGE>


                                     ITEM 2:

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


GENERAL

Tricord Systems, Inc. designs, develops and markets clustered server appliances
and software for content-intensive applications. The core of our technology is
our patented Illumina(TM) software that aggregates multiple appliances into a
single cluster, managed as a single resource.

Before focusing our efforts exclusively on the development of Illumina, we had
historically engaged in the business of designing, manufacturing, marketing and
supporting high-performance enterprise servers for use in mission critical
applications principally running on Microsoft(R) Windows NT(R) and Novell(R)
NetWare(R).

See "Factors That May Affect Future Results" at the end of this section for a
discussion regarding forward-looking statements contained herein.

VOLUNTARY PETITION FOR REORGANIZATION RELIEF UNDER CHAPTER 11

On August 2, 2002 we filed a voluntary petition in the United States Bankruptcy
Court for the District of Minnesota for reorganization relief under Chapter 11
of the Federal Bankruptcy Code (the Bankruptcy Filing"). We are currently
operating our business as a debtor-in-possession in accordance with provisions
of the Bankruptcy Code. The Bankruptcy Filing was initiated to address the
Company's deteriorating financial condition, the continuing impact of the
lawsuit brought by RGC International Investors, LDC ("Rose Glen") and the
tactics employed by Rose Glen.

Under Chapter 11, we will continue to operate under court protection while we
seek new investors or a buyer for the Company. We believe that we have
sufficient working capital to sustain operations pending such investment or
sale. However, there can be no assurance that we will identify a willing buyer
or that we will obtain additional financing, or that terms proposed by any
potential buyer or investor will be acceptable to us or the Bankruptcy Court.
Accordingly, there continues to be substantial doubt about our ability to
continue as a going concern. The financial statements for the three and six
months ended June 30, 2002 assume the realization of assets and the settlement
of liabilities in the normal course of business, which may not occur depending
on the outcome of the Company's efforts to obtain additional capital from
investors or to find a buyer.

CONSEQUENCES OF THE BANKRUPTCY FILING

As a consequence of the Bankruptcy Filing, all pending claims and litigation
against Tricord have been stayed automatically by Section 362 of the Bankruptcy
Code and absent further order of the Bankruptcy Court, no party may take any
action to recover on



                                       13



<PAGE>


pre-petition claims, enforce any lien against us or obtain possession of any
property from us. In addition, pursuant to Section 365 of the Bankruptcy Code,
we may reject or assume pre-petition executory contracts and unexpired leases,
and parties affected by rejections of these contracts or leases may file claims
with the Bankruptcy Court, in accordance with the Chapter 11 reorganization
process.

We currently anticipate that substantially all liabilities as of the date of the
Bankruptcy Filing will be subject to settlement in accordance with a Chapter 11
plan of reorganization, which will be proposed and voted on in accordance with
the provisions of the Bankruptcy Code. However, we are also exploring whether to
sell our assets under Section 363 of the Bankruptcy Code prior to confirmation
of a Chapter 11 plan of reorganization to prevent any material erosion in our
cash position. Subject to court approval, we will be engaging an investment
banking firm to examine our options. If we determine that such a sale is in the
interest of our creditors and shareholders, appropriate notice will be given and
court-approved sale procedures will be followed. Creditors' and equity security
holders' committees may be formed and, in accordance with the provisions of the
Bankruptcy Code, will have the right to be heard on all matters that come before
the Bankruptcy Court, including confirmation or a sale.

Although we currently intend to file and seek confirmation of a plan of
reorganization that seeks new investors in the Company or that seeks a buyer for
the Company or certain of its assets on an operating basis, there can be no
assurance as to when, or if, we will file such a plan or that any such plan will
be confirmed by the Bankruptcy Court and consummated. As provided by the
Bankruptcy Code, absent a court order, we initially have the exclusive right for
120 days following the date of the Bankruptcy Filing to propose a plan of
reorganization. If we fail to file a plan of reorganization during such period
or any extension thereof, or if we file a plan that is not accepted within 180
days following the date of the Bankruptcy Filing by the requisite numbers of
creditors and equity holders entitled to vote on the plan, other parties in
interest may be permitted to propose their own plan or plans of reorganization
for us.

We are unable to predict at this time what the treatment of our creditors and
equity holders will be under any proposed plan or plans of reorganization.
However, given the various financial and strategic alternatives currently being
considered by us, we believe that it is unlikely that our common stock will have
any value. The Bankruptcy Court may confirm a plan of reorganization only upon
making certain findings required by the Bankruptcy Code, and a plan may be
confirmed over the dissent of non-accepting creditors and equity security
holders if certain requirements of the Bankruptcy Code are met. The claims of
our pre-petition creditors or stockholders may be substantially altered by any
plan of reorganization confirmed in the Chapter 11 case. As a result, there is
no assurance that there will be sufficient assets to satisfy the claims of our
pre-petition creditors and stockholders, in whole or in part, and certain of our
pre-petition creditors and stockholders may be treated differently than others.

Prior to the Bankruptcy Filing, we reduced our headcount and cash burn rate and
have now suspended product operations. However, we will continue to operate on a
limited basis under court protection while we file and seek confirmation of a
plan of reorganization or approval of a motion pursuant to which we will seek
new investors or a



                                       14


<PAGE>



buyer for the Company or its assets. As of June 30, 2002, we had $8.5 million of
cash and cash equivalents. We currently believe that we have sufficient cash and
cash equivalents to sustain these limited operations pending any such investment
or sale. However, if we are unable to file and obtain confirmation of such a
plan of reorganization, or consummate any such investment or sale, on a timely
basis, we may be required to suspend even these limited operations and seek a
liquidation of our assets.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

For discussion of critical accounting policies and estimates, see our 2001
Annual Report on Form 10-K.

RESULTS OF OPERATIONS

Revenues

Revenues from sales of our Lunar Flare NAS server appliances were $67,000 and
$171,000 for the second quarter and six months ended June 30, 2002,
respectively, compared to $94,000 for the second quarter and six months ended
June 30, 2001. Revenues in the second quarter of 2002 declined relative to the
first quarter of 2002 due to slower than anticipated market acceptance of the
Company's product and, at least in part, due to awareness in the marketplace of
the Company's difficulties, including a lawsuit filed against the Company by its
preferred shareholders and the delisting of the Company's common stock.

Cost of Sales and Service

Cost of sales and service, which consists primarily of the costs of units sold
and costs of the Company's customer care functions, were $355,000 and $699,000
for the second quarter and six months ended June 30, 2002, respectively, and
$175,000 for the second quarter and six months ended June 30, 2001.

The cost of sales and service for the second quarter and six months ended June
30, 2002 included charges of $213,000 and $359,000, respectively, to write-down
the carrying value of certain excess inventories and certain inventories that
required refurbishment, to their estimated net realizable values.

Gross Loss

The company incurred gross losses of $288,000 and $528,000 for the second
quarter and six months ended June 30, 2002, respectively, and $81,000 for the
second quarter and six months ended June 30, 2001 primarily due to the
write-down of the carrying value of certain inventories and insufficient
revenues to absorb the fixed components of cost of sales and service, product
discounts given to customers, costs incurred to refurbish units and a charge
related to the write-down of excess inventories. Gross loss was also
attributable to customer support expenses associated with product installations
and upgrades as well as proactive efforts by the Company to ensure customer
satisfaction with the product.


                                       15



<PAGE>


Research and Development

Research and development expenses decreased to $1,720,000 and $3,694,000,
respectively for the second quarter and six months ended June 30, 2002, from
$2,990,000 and $5,873,000, respectively for the second quarter and six months
ended June 30, 2001. The decrease was primarily due to headcount reductions from
restructuring actions taken in September and December 2001 and April and May of
2002. Although the Company considers research and development expenditures to be
a key component in its long term strategy, the Company expects that research and
development costs will continue to decrease in the short term as the Company
continues to pursue cost containment measures. As part of these measures, the
Company reduced the number of employees engaged in research and development
activities by 17 in April and May 2002.

Sales and Marketing

Sales and marketing expenses decreased to $1,445,000 and $2,666,000 for the
second quarter and six months ended June 30, 2002, respectively, from $2,545,000
and $4,790,000 for the second quarter and six months ended June 30, 2001. The
decrease was primarily due to headcount reductions from restructuring actions
taken in September and December 2001.

General and Administrative

General and administrative expenses increased to $1,600,000 and $2,701,000 for
the second quarter and six months ended June 30, 2002, respectively, from
$750,000 and $1,594,000 for the second quarter and six months ended June 30,
2001, respectively. The increase was primarily due to $315,000 of severance
payments made to our former Chief Executive Officer in January 2002, the write
off of $353,000 of abandoned furniture and equipment at the Company's Colorado
leased facility and increased legal expenses.

Restructuring and Other Charges

In the second quarter and the six months ending June 30, 2002, the company
recorded restructuring charges of $1,095,000 and $1,164,000 respectively. The
restructuring consisted of severance related to terminations of 5 and 21
employees in the first and second quarters of 2002 resulting in charges of
$477,000 and $546,000, in the second quarter and the six months ended June 30,
2002, respectively, and charges associated with the abandonment of the Company's
leased Colorado office space of $618,000.

Stock-Based Compensation

Stock-based compensation was $154,000 and $314,000, respectively, for the second
quarter and six month ended June 30, 2002 and $117,000 and $268,000 for the
quarter and six month ended June 30, 2001. These amounts do not affect our net
stockholders' equity. These non-cash expenses increased operating expenses, loss
from continuing operations and net loss applicable to common shares as follows:


                                       16


<PAGE>

Non-Cash Stock Compensation Expense
(in thousands, except per share amounts)

<TABLE>
<CAPTION>


                                               Three Months Ended           Six Months ended
                                                    June 30                      June 30
                                        -----------------------------  ---------------------------
                                              2002           2001          2002          2001
                                        -------------- --------------  ------------- -------------

<S>                                       <C>            <C>             <C>           <C>
Research and development                  $        110   $        100    $       221   $       209
Sales and marketing                                 12             12             24            24
General and administrative                          32              5             69            35
                                        -------------- --------------  ------------- -------------
                                          $        154   $        117    $       314   $       268
                                        ============== ==============  ============= =============

Impact per common share                   $      (0.01)  $      (0.00)   $     (0.01)  $     (0.01)
                                        ============== ==============  ============= =============
</TABLE>



Other Income, Net

Other income, net decreased to $34,000 and $89,000, respectively, for the second
quarter and six months ended June 30, 2002 from $349,000 and $673,000 for the
second quarter and six months ended June 30 2001, respectively, primarily due to
lower interest income as a result of lower cash investments and lower interest
rates earned in the first two quarters of 2002.

Series E Convertible Preferred Stock Charges

Preferred stock charges during the second quarter and six months ended June 30,
2002 reflected charges against stockholders' equity that consist of the
beneficial conversion charges of $607,000 and $1,178,000, respectively, and the
accrual of the 4.75% premium related to the Series E Preferred Stock of $297,000
and $594,000 respectively. Preferred stock charges during the second quarter and
six months ended June 30, 2001 reflected charges against stockholders' equity
that consist of the beneficial conversion charges of $493,000 and $660,000,
respectively, and the accrual of the 4.75% premium related to the Series E
Preferred Stock of $297,000 and $396,000 respectively. The beneficial conversion
charge reflected amortization of the beneficial conversion feature related to
the preferred stock. These non-cash charges reduced stockholders' equity and
increased the net loss applicable to common shares. As a result of the delisting
of the Company's common stock on August 5, 2002, the preferred shareholders have
the right to demand redemption of the preferred shares on or after October 27,
2002, however, this redemption right is being stayed as a result of the
Bankruptcy Filing. Accordingly, the remaining beneficial conversion charge of
approximately $5.0 million, will be recorded by the Company and approximately
$8.4 million of additional accretion charges will be recorded during the third
quarter of 2002. See Note 7 in Notes to Financial Statements for further
discussion of the Series E Convertible Preferred Stock Charges.


                                       17

<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

The net decrease in cash and cash equivalents during the first six months of
2002 was $8,898,000, due primarily to the net loss of $10,664,000 for the first
six months of 2002. The Company made minimal capital expenditures during the
first two quarters, and currently anticipates that capital expenditures for
second half of the year will not be significantly larger than the first two
quarters of 2002.

The net increase in cash and cash equivalents during the first six months of
2001 was $10,347,000, due primarily to $23,400,000 received from the net
proceeds of the private placement of Series E Convertible Preferred Stock in
February 2001, partially offset by net cash used of $11,455,000 in operating
activities and capital expenditures of $1,656,000. Cash used in operating
activities was due primarily to the net loss of $11,665,000 for the first six
months of 2001.

As of June 30, 2002, we had $8.5 million of cash and cash equivalents. We
currently believe that we have sufficient cash and cash equivalents to sustain
our limited operations pending confirmation of a plan of reorganization pursuant
to which we will seek new investors or a buyer for the Company or its assets.
There can be no assurance, however, that we will be able to consummate any such
plan of reorganization on a timely basis or at all, and, in such event, we may
be required to suspend even these limited operations and seek a liquidation of
our assets.

Because our common stock has been delisted from the Nasdaq SmallCap Market, the
terms of our Series E Preferred Stock provide for payments to the holders of the
Series E Preferred Stock of $250,000 for each month our common stock is not
listed on the Nasdaq SmallCap Market and, if the failure to be listed on the
Nasdaq SmallCap Market continues for a period of more than 60 days after August
27, 2002, the terms of our Series E Preferred Stock provide that holders of the
Series E Preferred Stock could require us to redeem such shares for an amount in
excess of $25 million. As described above, however, any such action by the
holders of the Series E Preferred Stock has been stayed by the Bankruptcy
Filing.

NEW ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board approved Statements of
Financial Accounting Standards (SFAS) No. 141, "Business Combinations" and No.
142, "Goodwill and Other Intangible Assets". The statements eliminate the
pooling-of-interests method of accounting for business combinations and require
that goodwill and intangible assets with indefinite useful lives not be
amortized. Instead, these assets will be reviewed for impairment annually with
any related losses recognized when incurred. SFAS No. 141 is generally effective
for business combinations completed after June 30, 2001. SFAS No. 142 was
effective for the Company beginning January 1, 2002. Adoption of this standard
did not affect the Company's financial position or results of operations.

 In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." This standard requires that obligations associated with the
retirement of tangible long-lived assets be recorded as liabilities when those
obligations are incurred, with the amount of the liability initially measured at
fair value. SFAS No. 143 is effective for the Company in 2003. The Company does
not expect adoption of this standard to affect its financial position or its
results of operations.

In May 2002, the FASB has also issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44,and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." This Statement rescinds SFAS No. 4, "Reporting Gains and Losses
from Extinguishment



                                       18



<PAGE>


of Debt", and an amendment of that Statement, SFAS No. 64, "Extinguishments of
Debt Made to Satisfy Sinking-Fund Requirements". This Statement also rescinds
SFAS No. 44, "Accounting for Intangible Assets of Motor Carriers". This
Statement amends SFAS No. 13, "Accounting for Leases", to eliminate an
inconsistency between the required accounting for sale-leaseback transactions
and the required accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. This Statement also
amends other existing authoritative pronouncements to make various technical
corrections, clarify meanings, or describe their applicability under changed
conditions. The provisions of this Statement are required to be applied starting
with fiscal years beginning after May 15, 2002. The Company does not expect
adoption of this standard to affect its financial condition or results of
operations.

In October 2001, the Financial Accounting Standards Board approved SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." This statement
addresses financial accounting and reporting for the impairment of long-lived
assets and for long-lived assets to be disposed of and supersedes SFAS No. 121
and APB Opinion No. 30, "Reporting the Results of Operations - Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions." SFAS No. 144 is effective for
fiscal years beginning after December 15, 2001, and interim periods within those
fiscal years, with early application encouraged. Adoption of this standard did
not affect the Company's financial position or results of operations.

In June 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards Board No. ("FAS") 146, "Accounting for Costs
Associated with Exit or Disposal Activities." FAS 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities.
This statement supersedes Emerging Issues Task Force Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity." The Company is required to adopt FAS 146 no later than January 1,
2003. The Company does not believe that the adoption of FAS 146 will have a
material impact on its consolidated financial statements.

FACTORS THAT MAY AFFECT FUTURE RESULTS

This Quarterly Report on Form 10-Q contains certain forward-looking statements
within the meaning of the Private Securities Reform Act of 1995. When used in
this report, the words "anticipates," "believes," "expects," "intends,"
"forecasts," "plans," "future," "strategy," or words of similar import are
intended to identify forward-looking statements. Other statements of the
Company's plans and objectives may also be considered to be forward-looking
statements. Such statements are subject to certain risks and uncertainties,
which could cause actual results to differ materially from those expressed in
the forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to publish revised forward-looking
statements to reflect the occurrence of unanticipated events or circumstances
after the date hereof. The risks and uncertainties described below are not the
only ones that we face. Additional risks and uncertainties not presently known
to us, or that are currently deemed immaterial, may also impair our business
operations. If any of these risks actually occur,

                                       19

<PAGE>

our financial condition and operating results could be materially adversely
affected. Readers are urged to carefully review and consider the various
disclosures made in this Quarterly Report by the Company as well as the
Company's other filings with the Securities and Exchange Commission.

OUR PLAN OF REORGANIZATION OR PROPOSED ASSET SALE UNDER CHAPTER 11 OF THE
BANKRUPTCY CODE MAY NOT BE CONFIRMED OR APPROVED BY THE BANKRUPTCY COURT ON A
TIMELY BASIS OR AT ALL AND, EVEN IF CONFIRMED OR APPROVED, MAY NOT BE
CONSUMMATED.

Although we intend to file and seek confirmation of a plan of reorganization or
approval of a motion seeking new investors in the Company or a buyer for the
Company or certain of its assets on an operating basis, there can be no
assurance as to when we will file such a plan or motion or that any such plan or
motion will be confirmed or approved by the Bankruptcy Court and consummated. As
provided by the Bankruptcy Code, we initially have the exclusive right for 120
days following the date of the Bankruptcy Filing to propose a plan of
reorganization. If we fail to file a plan of reorganization during such period
or any extension thereof, or if a plan is filed and not accepted within 180 days
following the date of the Bankruptcy Filing by the requisite numbers of
creditors and equity holders entitled to vote on the plan, other parties in
interest may be permitted to propose their own plan or plans of reorganization
for us. We will continue to operate on a limited basis under court protection
while we file and seek confirmation of our plan of reorganization or approval of
a sale by motion. Although we currently believe that we have sufficient cash and
cash equivalents to sustain these limited operations pending an investment or
sale pursuant to any such plan of reorganization or motion, there can be no
assurance that this will be the case. If we are unable to file and obtain
confirmation or approval of such a plan of reorganization or motion, or
consummate any such sale, on a timely basis, we may be required to suspend even
these limited operations and seek a liquidation of our assets, which will likely
result in the realization of less value for the Company's assets.

WE WILL LIKELY NOT HAVE SUFFICIENT ASSETS TO SATISFY ALL OF THE CLAIMS OF OUR
PRE-PETITION CREDITORS AND STOCKHOLDERS AND IT IS UNLIKELY THAT OUR COMMON STOCK
WILL HAVE ANY VALUE.

We are unable to predict at this time what the treatment of our creditors and
equity holders will be under any proposed plan or plans of reorganization.
However, given the various financial and strategic alternatives currently being
considered by us, we believe that it is unlikely that our common stock will have
any value. The Bankruptcy Court may confirm a plan of reorganization only upon
making certain findings required by the Bankruptcy Code, and a plan may be
confirmed over the dissent of non-accepting creditors and equity security
holders if certain requirements of the Bankruptcy Code are met. The claims of
our pre-petition creditors or stockholders may be substantially altered by any
plan of reorganization confirmed in the Chapter 11 case. As a result, there is
no assurance that there will be sufficient assets to satisfy the claims of our
pre-petition creditors and stockholders, in whole or in part, and certain of our
pre-petition creditors and stockholders may be treated differently than others.

THE BANKRUPTCY FILING MAY HAVE A NEGATIVE IMPACT OUR ABILITY TO OPERATE OUR



                                       20




<PAGE>


BUSINESS ON EVEN A LIMITED BASIS, WHICH COULD ADVERSELY AFFECT OUR ABILITY TO
FIND INVESTORS OR A BUYER FOR THE COMPANY OR ITS ASSETS.

As a result of the Bankruptcy Filing, we reduced our headcount and cash burn
rate and suspended product operations. We are therefore presently operating our
business on a limited basis as a debtor-in-possession while we focus on finding
investors or a buyer for the Company or its assets. The Bankruptcy Filing,
however, and the potential adverse publicity associated with it, may have a
negative impact on our ability to operate even on this limited basis by, among
other things, making it more difficult to retain and compensate our employees,
including our core engineering and support team; straining management resources;
and impairing relationships with customers and vendors. As a result, the
Bankruptcy Filing could adversely affect our ability to find investors or a
buyer for the Company or its assets.

OUR COMMON STOCK HAS BEEN DELISTED FROM THE NASDAQ SMALLCAP MARKET, WHICH MAY
ADVERSELY AFFECT THE PRICE AND LIQUIDITY OF OUR COMMON STOCK AND MAKE OUR COMMON
STOCK LESS ATTRACTIVE TO INVESTORS AND WILL GIVE RISE TO CERTAIN ADDITIONAL
RIGHTS UNDER THE TERMS OF THE SERIES E PREFERRED STOCK.

In August 2002, as a result of our noncompliance with the qualification
standards for continued listing of our common stock on the Nasdaq SmallCap
Market, our common stock was delisted from the Nasdaq SmallCap Market and is now
quoted for trading in the over-the-counter market in what is commonly referred
to as the "pink sheets" or the National Association of Securities Dealers'
"Electronic Bulletin Board." This move to the OTC Bulletin Board will, among
other things, restrict the ability of broker-dealers to buy or sell our common
stock, and may affect the ability of holders to buy or sell our common stock in
the secondary market and the price at which such holders can buy or sell our
common stock. Trading in our common stock through market makers and quotation on
the OTC Bulletin Board entails other risks. The trading price of our common
stock may change quickly, and market makers may not be able to execute trades as
quickly as they could when the common stock was listed on the Nasdaq SmallCap
Market. In addition, our delisting from the Nasdaq SmallCap Market may make it
more difficult for us to raise additional capital because investors may be
reluctant to invest in a company that is thinly traded or not traded at all.

Due to the delisting of our common stock from the Nasdaq SmallCap Market, we are
also no longer in compliance with certain covenants that we have with the
holders of our outstanding shares of Series E Preferred Stock, which gives rise
to certain additional rights under the terms of the Series E Preferred Stock.
Pursuant to such terms, absent the Bankruptcy Filing, we would have been
required to pay to the holders of shares of Series E Preferred Stock a fee of
approximately $250,000 or more per month for each month that our common stock is
not listed on the Nasdaq SmallCap Market. In addition, if our common stock
remains delisted from the Nasdaq SmallCap Market for more than sixty days after
August 27, 2002, the terms of the Series E Preferred Stock provide such holders
with the right to require us to redeem all or a portion of such shares. If we
were required to redeem all of such outstanding shares, we would have to pay to
the holders of these shares an amount in excess of $25 million in connection
with this redemption. As a result of our Bankruptcy Filing, however, all pending
claims against us, including any



                                       21


<PAGE>



claims by the holders of Series E Preferred Stock for any such payments or
redemption, have been automatically stayed and will be settled in accordance
with the plan of reorganization that is ultimately confirmed by the Bankruptcy
Court or otherwise in accordance with the bankruptcy process.



                                       22





<PAGE>

                                     ITEM 3:

                          QUANTITATIVE AND QUALITATIVE
                          DISCLOSURES ABOUT MARKET RISK


FINANCIAL INSTRUMENTS

The Company invests excess funds not required for current operations in cash
equivalents, primarily money market funds or high-grade commercial paper. Market
risk was estimated as the potential decrease in interest income resulting from a
hypothetical one percent decrease in interest rates for the cash equivalents,
which would have resulted in a decrease in interest income for the six months
ended June 30, 2002 of approximately $65,000.



                                       23



<PAGE>


                           PART II. OTHER INFORMATION


Item 1.  Legal Proceedings

On April 5, 2002, RGC International Investors, LDC ("RGC") filed an action
against the Company and certain of its current and former officers and directors
(collectively, the "Defendants") in Delaware Chancery Court. The Amended
Verified Complaint alleges breach of the February 27, 2001 Series E Convertible
Preferred Stock Purchase Agreement (the "Securities Purchase Agreement"), fraud,
breach of fiduciary duty, waste, and breach of the covenant of good faith and
fair dealing, alleging that the Defendants breached certain representations in
the Securities Purchase Agreement, and that the continuation of business by the
company constitutes a waste of its assets. RGC seeks damages of $25 million plus
interest and the appointment of a receiver to wind up the Company's affairs.
Defendants have moved to dismiss the Amended Verified Complaint, and that motion
is pending. RGC and Defendants have served document demands and interrogatories,
RGC has served third-party discovery, and there has been motion practice
addressed to the timing and propriety of such discovery. RGC has moved to
expedite the proceedings on two occasions, and on July 30, 2002, the Chancery
Court set a trial date of October 7, 2002.

On August 2, 2002, we filed a voluntary petition for bankruptcy protection under
Chapter 11 of the U.S. Bankruptcy Code. On that same day, defendants removed the
action from Delaware Chancery Court to the United States Bankruptcy Court for
the District of Delaware. On August 8, 2002, defendants filed a motion to
transfer venue of the lawsuit to the United States Bankruptcy Court for the
District of Minnesota, where our Chapter 11 proceeding is pending.

Item 5.  Other Information

In August 2002, the Company completed workforce reductions totaling 15 employees
in order to reduce current cost levels because of lower than projected revenues
levels of the Company. Once these reductions take full effect, the Company will
have 29 employees and expects to realize an annualized decrease in expenses of
approximately $2.2 million as a result of such reductions. However, in
connection with the headcount reduction, the Company incurred approximately
$400,000 of severance costs.

Item 6.  Exhibits and Reports on Form 8-K

 (b) Reports on Form 8-K

     On April 9, 2002, the Company furnished a report on Form 8-K under Item 5,
     Other, related to a press release announcing that a lawsuit was filed
     against the Company, its board of directors and its former chief executive
     officer who was also a director, by preferred shareholder Rose Glen
     International LDC.


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<PAGE>




     On April 9, 2002, the Company furnished a report on Form 8-K under Item 5,
     Other, related to a press release announcing that the Company's chief
     financial officer had resigned from the Company.

     On April 11, 2002, the Company furnished a report on Form 8-K under Item 5,
     Other, related to a press release announcing that the Company's vice
     president of product development had resigned form the Company.

     On April 30, 2002, the Company furnished a report on Form 8-K under Item 5,
     Other, related to a press release announcing financial results for the
     first quarter ended March 31, 2002 and related to a press release
     announcing developments in litigation with RGC International Investors.

     On May 17, 2002, the Company furnished a report on Form 8-K under Item 5,
     Other, related to a press release announcing that it had received an
     additional notice on May 16, 2002 of non-compliance from Nasdaq for the
     requirement to sustain a minimum level of net income, stock holders equity,
     net tangible assets or market capitalization.




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<PAGE>



                                    SIGNATURE

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


                                          TRICORD SYSTEMS, INC.

                                             (REGISTRANT)



                                          By:   /s/ Keith T. Thorndyke
                                                ----------------------
                                                Keith T. Thorndyke, President
                                                and Chief Executive Officer
                                                and Chief Financial Officer
                                                (Principal Executive, Financial
                                                and Accounting Officer)



                                          Date: August 14, 2002



The written statements of our Chief Executive Officer and Chief Financial
Officer required pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, accompanied the filing of this
report by correspondence to the Securities and Exchange Commission and have been
furnished under Item 9 of our Form 8-K filed August 14, 2002.




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