<PAGE>

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                                 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 SEPTEMBER 30, 1997

           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      55441-2644
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       (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)              (ZIP CODE)
                                           
                                           
                                 (612) 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                       OCTOBER 31, 1997
                  -----                       ----------------
               Common Stock,
              $0.01 par value                    13,459,884

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<PAGE>

                         PART 1. FINANCIAL INFORMATION

                          ITEM 1: FINANCIAL STATEMENTS   

                             TRICORD SYSTEMS, INC.  
                     CONSOLIDATED STATEMENTS OF OPERATIONS    
                                  (UNAUDITED)  

<TABLE>
<CAPTION>
                                        Three Months Ended Sept. 30,  Nine Months Ended Sept. 30,
                                        ----------------------------  ---------------------------
(in thousands, except per share data)       1997          1996           1997         1996
                                          -------        -------        -------      -------
<S>                                      <C>              <C>            <C>          <C>
Revenues                                 $  2,582         10,571         10,766       41,033
  
Cost of goods sold                          1,920          7,543         11,326       29,403
                                          -------        -------        -------      -------
    Gross margin                              662          3,028           (560)      11,630
                                          -------        -------        -------      -------
Operating expenses:                              
  Research and development                    698          1,885          3,309        5,649
  Sales and marketing                         530          4,944          4,022       14,787
  General and administrative                  386          2,575          1,711        4,977
  Nonrecurring items, net                       -              -            864         -   
                                          -------        -------        -------      -------
                                            1,614          9,404          9,906       25,413
                                          -------        -------        -------      -------

    Operating loss                           (952)        (6,376)       (10,466)     (13,783)
                                          -------        -------        -------      -------
Other income (expense):                          
  Interest income, net                         42             82            141          318
  Other, net                                  120            (22)          (177)        (132)
                                          -------        -------        -------      -------
                                              162             60            (36)         186
                                          -------        -------        -------      -------

    Loss before income taxes                 (790)        (6,316)       (10,502)     (13,597)
  
Provision for income taxes                    224              -            224         -   
                                          -------        -------        -------      -------

    Net loss                             $ (1,014)        (6,316)       (10,726)     (13,597)
                                          -------        -------        -------      -------
                                          -------        -------        -------      -------

    Net loss per share                   $  (0.08)         (0.47)         (0.80)       (1.02)
                                          -------        -------        -------      -------
                                          -------        -------        -------      -------

    Average common shares outstanding      13,460         13,392         13,442       13,342
                                          -------        -------        -------      -------
                                          -------        -------        -------      -------
</TABLE>

See accompanying notes to consolidated financial statements.

                                       1

<PAGE>

                             TRICORD SYSTEMS, INC.
                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                    ASSETS

                                                                   September 30,       December 31,
(in thousands, except per share data)                                  1997               1996
                                                                   -------------       ------------
<S>                                                                <C>                 <C>
                                                                     (unaudited)
Current assets:
 Cash and cash equivalents                                         $       3,164          5,711
 Accounts receivable, net                                                  1,529          4,636
 Inventories, net                                                          1,917          4,984
 Other current assets                                                        229            572
                                                                   -------------       ------------
  Total current assets                                                     6,839         15,903

Equipment and improvements, net                                              868          5,717

Other assets                                                                 130            318
                                                                   -------------       ------------

  Total Assets                                                     $       7,837         21,938
                                                                   -------------       ------------
                                                                   -------------       ------------


                              LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable                                                  $       1,239         2,897
 Accrued payroll, benefits and related taxes                                 591         1,275
 Deferred revenue                                                          1,049         1,045
 Other accrued expenses                                                    1,089         2,546
                                                                   -------------       ------------
  Total current liabilities                                                3,968         7,763

Stockholders' equity:
 Common stock, $0.01 par value; 27,000 shares authorized,
  13,460 and 13,407 shares issued and outstanding                            135           134
 Additional paid-in capital                                               77,607        77,522
 Cumulative translation adjustments                                           78          (256)
 Accumulated deficit                                                     (73,951)      (63,225)
                                                                   -------------       ------------
  Total stockholders' equity                                               3,869        14,175
                                                                   -------------       ------------

  Total Liabilities and Stockholders' Equity                       $       7,837        21,938
                                                                   -------------       ------------
                                                                   -------------       ------------

</TABLE>


           See accompanying notes to consolidated financial statements.

                                       2
<PAGE>

                             TRICORD SYSTEMS, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                                     Nine Months Ended Sept. 30,
                                                                    -----------------------------
(In thousands)                                                           1997            1996
                                                                    -------------    ------------
<S>                                                                 <C>              <C>
Cash flows from operating activities:
 Net loss                                                            $  (10,726)      (13,597)
 Adjustments to reconcile net loss to net
  cash used in operating activities:
   Depreciation and amortization                                          2,361         3,543
   Provision for losses on inventory                                      1,175           832
   Loss on termination of facilities lease                                  975             -
   Provision for losses on equipment                                        764             -
   Loss on disposal of equipment                                            346           157
   Provision for losses (recoveries) on accounts receivable                (195)        1,880
   Provision for income taxes                                               224             -
   Other                                                                    619           250
   Changes in operating assets and liabilities:
    Accounts receivable                                                   3,302         2,968
    Inventories                                                           1,892         1,804
    Other current assets                                                    649            (4)
    Accounts payable                                                     (1,658)       (2,918)
    Accrued payroll, benefits and related taxes                            (684)          (30)
    Deferred revenues and other accrued expenses                         (1,453)          706
                                                                    -------------    ------------
     Net cash used in operating activities                               (2,409)       (4,409)
                                                                    -------------    ------------
Cash flows from investing activities:
 Proceeds from maturities of short-term investments                           -         1,000
 Capital expenditures                                                      (557)       (2,620)
 Change in other assets                                                      54           155
                                                                    -------------    ------------
     Net cash used in investing activities                                 (503)       (1,465)
                                                                    -------------    ------------
Cash flows from financing activities:
 Stock option and employee stock purchase plan transactions                  31           307
                                                                    -------------    ------------
     Net cash provided by financing activities                               31           307
                                                                    -------------    ------------
Effect of exchange rate changes on cash                                     334           255
                                                                    -------------    ------------
Net decrease in cash and cash equivalents                                (2,547)       (5,312)
Cash and cash equivalents at beginning of period                          5,711        11,456
                                                                    -------------    ------------

Cash and cash equivalents at end of period                           $    3,164         6,144
                                                                    -------------    ------------
                                                                    -------------    ------------
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

                            TRICORD SYSTEMS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                           
1.  BASIS OF PRESENTATION
                                           
The accompanying unaudited consolidated statements of operations, balance sheet
and statements of cash flows reflect all adjustments of a normal recurring
nature, and also certain nonrecurring items as described in Note 7, which are,
in the opinion of management, necessary for a fair statement of the consolidated
financial position at September 30, 1997, and of consolidated results of
operations and cash flows for the interim periods ended September 30, 1997 and
1996.  The unaudited consolidated financial statements should be read in
conjunction with Tricord Systems Inc.'s (the "Company's") audited consolidated
financial statements for the year ended December 31, 1996, which were
incorporated by reference in its 1996 Form 10-K Annual Report.  The year-end
balance sheet data included herein is derived from audited financial statements,
but does not include all disclosures required by generally accepted accounting
principles.  The results of operations for the interim periods ended September
30, 1997 are not necessarily indicative of the results to be expected for the
full year or any future quarters.

2.  BALANCE SHEET INFORMATION         

<TABLE>
<CAPTION>
                                             September 30, 1997  December 31, 1996
                                             ------------------  -----------------
                                                 (unaudited)
    <S>                                            <C>               <C>
    Accounts receivable, net:
       Accounts receivable                         $  2,940            7,480
       Allowance for doubtful accounts               (1,411)          (2,844)
                                                  ---------         --------
                                                   $  1,529            4,636
                                                  ---------         --------
                                                  ---------         --------
    Inventories, net:
       Raw materials                               $  1,100            3,658
       Work-in-process                                1,292            4,696
       Finished goods                                 2,303            3,205
       Spare parts                                    4,421              755
       Inventory reserves                            (7,199)          (7,330)
                                                  ---------         --------
                                                   $  1,917            4,984
                                                  ---------         --------
                                                  ---------         --------
</TABLE>

                                       4
<PAGE>

3. CHANGE IN BUSINESS FOCUS

In February 1997, the Company announced that its effort to find strategic 
alternatives, including the possibility of finding a strategic partner, to 
strengthen the Company's probability of success in the server market was not 
successful.  The Company also announced that it would not bring its next 
generation server to market because the costs associated with bringing future 
server products through final development to market exceeded the available 
resources of the Company.  Instead, the Company is focusing its resources on 
developing and marketing distributed data access and management products for 
the Windows NT environment that will incorporate the Company's distributed 
file system software technology and related I/O ("input/output") technology. 
Specialization in distributed data access and management products represents 
a natural evolution for the Company and combines the Company's historical I/O 
technology and related expertise with the distributed file system technology 
that the Company has been developing since its acquisition of such additional 
technology in 1996.  This evolution in the Company's strategy necessitated a 
reduction in the Company's workforce, affecting approximately 90 employees.  
The Company intends to sell its remaining enterprise server inventory as long 
as there is sufficient customer demand and materials are available. In 
addition, the Company will sell spares and expansion products as long as 
materials are available and honor its warranty, service and support 
agreements. The Company expects that its sales will consist mainly of spares, 
service, disk drives, memory and expansion products.   

The Company does not anticipate any significant revenues from the development of
products related to the distributed data access and management products in 1997.

If the Company's operations progress as currently anticipated, of which there 
can be no assurance, the Company believes that its existing cash and cash 
equivalents, together with funds generated from the continued liquidation of 
its remaining enterprise server inventory, will be sufficient to fund its 
operations through the first quarter of 1998.  The Company is seeking 
additional capital through OEM or other strategic investments or alliances.

4. MAJOR CUSTOMERS

Toshiba Corporation ("Toshiba") accounted for 2.6% of the Company's revenues in
the third quarter of 1997 compared to 10.6% of the Company's revenues for the
third quarter of 1996. The Company does not expect future revenues from Toshiba
to be significant.    For the nine months ended September 30, 1997, revenues
from Toshiba were 7.1% compared to 17.8% for the same period last year. 
Included in the second quarter of 1997 was a purchase by Toshiba of spare parts
and add-on products of approximately $650,000.  Revenues from Memorex Telex
Corporation ("Memorex Telex") were 2.0%

                                       5
<PAGE>

of the Company's revenues for the third quarter of 1997 compared to 11.6% in 
the third quarter of 1996, and 3.8% of the Company's revenues in the first 
nine months of 1997 compared to 17.5% in the first nine months of 1996.  
Memorex Telex revenues in 1997 were primarily from the European subsidiaries 
of Memorex Telex due to the fourth quarter 1996 Chapter 11 bankruptcy filing 
of the Memorex Telex domestic operations (See Note 5).

5. LEGAL PROCEEDING - MEMOREX TELEX CORPORATION CHAPTER 11 BANKRUPTCY

In September 1997, the Company paid $350,000 in settlement of the Memorex 
Telex Chapter 11 bankruptcy preferential payment claim, which was accepted by 
the U.S. Bankruptcy Court in October 1997.  The Company has recorded the 
required payment as a charge to general and administrative expense in the 
third quarter of 1997.

6. PROVISION FOR EXCESS AND OBSOLETE INVENTORY

During the second quarter of 1997, the Company completed an updated forecast 
of its anticipated usage of current on-hand inventories and determined that 
it had more inventory than was required through the end of 1998. Accordingly, 
the Company recorded a second quarter charge of $1,332,000 to cost of goods 
sold to adjust inventories to their net realizable value.  

7. NONRECURRING ITEMS

Included in the nonrecurring items reported on the Company's Statement of 
Operations for the nine months ended September 30, 1997 are the following 
second quarter 1997 items:  a charge of $975,000 for the net value of 
leasehold improvements written off due to the termination of the Company's 
lease at its previous headquarters facility; a charge of $764,000 for the 
write-down of the net book value at June 30, 1997 of certain equipment based 
on an updated review of the equipment required to support the operations of 
the Company; a charge of $125,000 for the mutual settlement and release 
without admission of liability by either the Company or International 
Business Machines Corporation ("IBM") regarding IBM's assertion that certain 
of the Company's server systems and related products infringe on certain 
patents owned by IBM; and a credit of $1,000,000 for a one-time license fee 
paid to the Company by Toshiba for the world-wide, non-exclusive right and 
license to the Availability Management System ("AMS") Software.

8. NEW LEASED HEADQUARTERS FACILITY

In the third quarter of 1997 the Company moved its corporate headquarters to 
a smaller leased facility, consisting of approximately 15,000 square feet of 
office and warehouse space.  The Company's operating lease agreement has a 
three year term and includes a provision that requires the Company to pay a 
pro rata share of the lessor's operating costs.   

                                       6
<PAGE>

9. NEW ACCOUNTING STANDARD

The Company will adopt the requirements of Statement of Financial Accounting
Standards No. 128, "Earnings Per Share," in the fourth quarter of 1997.  The
Company does not believe that the adoption of this new accounting standard will
have a significant impact on earnings (loss) per share as currently reported
compared to earnings (loss) per share after adoption of this standard.

                                       7
<PAGE>

                                    ITEM 2:
                                           
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
                                           

GENERAL

The Company 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 Windows NT and Novell
NetWare. 

In February 1997, the Company announced that its effort to explore strategic 
alternatives, including the possibility of finding a strategic partner, to 
strengthen the Company's probability of success in the server market was not 
successful.  The Company also announced that it would therefore not bring its 
next generation server to market because the costs associated with bringing 
future server products through final development to market exceeded the 
available resources of the Company.  Instead, the Company is focusing its 
resources on developing and marketing distributed data access and management 
products for the Windows NT environment that will incorporate the Company's 
distributed file system software technology and related I/O ("input/output") 
technology.  I/O technology is a core competency of the Company and was one 
of the key differentiators of its enterprise server product line.  
Accordingly, specialization in distributed data access and management 
products represents a natural evolution for the Company and combines the 
Company's expertise in I/O technology with the distributed file system 
technology that the Company has been developing since the Company acquired 
such technology in August 1996.  This evolution in the Company's strategy 
necessitated a reduction in the Company's workforce in February 1997, 
affecting approximately 90 employees.  The Company intends to sell its 
remaining enterprise server inventory as long as there is sufficient customer 
demand and materials available, and will honor its warranty, service and 
support agreements.  The Company expects that its sales will consist mainly 
of spares, disk drives, memory and expansion products.

In addition to the factors described below, the Company's operating results
could materially differ from those anticipated by the Company based upon the
following  factors: the continued growth and acceptance of the Windows NT
operating system and the growth in demand for attached storage; the Company's
ability to develop, test and release its new products for this market on a
timely basis; the ability of the Company to anticipate changes in technology and
industry standards on a timely basis; the Company's ability to generate adequate
cash to fund operations, which in turn will depend on its ability to sell a
sufficient amount of its remaining enterprise server inventory and control
operating expenses; the Company's ability to successfully establish one or more
OEM or other strategic relationships in order for the Company to introduce and
market its distributed data access and management products; and competition from
other companies in the Windows NT storage products market. 

                                       8
<PAGE>

RESULTS OF OPERATIONS

REVENUES

Revenues for the third quarter and nine months ended September 30, 1997 were
$2,582,000 and $10,766,000, compared to $10,571,000 and $41,033,000 for the
third quarter and nine months ended September 30, 1996.  The decreases in
product revenues are due to the Company's announcement, as previously discussed,
that it would not bring its next generation server to market.  Decreases in
revenue for the third quarter of 1997 compared to the third quarter of 1996
consisted primarily of a $5,916,000 reduction in the ES Series server product
line and a $2,065,000 reduction in associated add-on products such as disk
drives, memory and expansion products.  Decreases in revenue for the first nine
months of 1997 compared to the first nine months of 1996 reflected a $20,480,000
reduction in the ES Series server product line; a $7,080,000 reduction on
associated add-on products; and a $2,828,000 reduction in the discontinued DS
and Model series server product lines.

Toshiba Corporation ("Toshiba") accounted for 2.6% of the Company's revenues in
the third quarter of 1997 compared to 10.6% of the Company's revenues for the
third quarter of 1996.  The Company does not expect future revenues from Toshiba
to be significant.  For the nine months ended September 30, 1997, revenues from
Toshiba were 7.1% compared to 17.8% for the same period last year.  Included in
the second quarter of 1997 was a purchase by Toshiba of spare parts and add-on
products of approximately $650,000.  Revenues from Memorex Telex Corporation
("Memorex Telex") were 2.0% of the Company's revenues for the third quarter of
1997 compared to 11.6% in the third quarter of 1996, and 3.8% of the Company's
revenues in the first nine months of 1997 compared to 17.5% in the first nine
months of 1996.  Memorex Telex revenues in 1997 were primarily from the European
subsidiaries of Memorex Telex due to the fourth quarter 1996 Chapter 11
bankruptcy filing of the Memorex Telex domestic operations.   

The Company currently anticipates that revenues will continue to be 
significantly less in 1997 compared to the corresponding 1996 periods as the 
Company focuses its resources on developing its distributed data access and 
management products and enterprise server sales are basically limited to the 
Company's remaining inventories.  The Company intends to sell its remaining 
enterprise server inventories as long as there is sufficient customer demand 
and materials are available.  In addition, the Company will sell spares and 
expansion products as long as materials are available and honor its warranty, 
service and support agreements. The Company expects that its sales will 
consist mainly of spares, service, disk drives, memory and expansion 
products.  The Company does not anticipate any significant revenues in 1997 
from the sale or license of its distributed data access and management 
products, which have yet to be fully developed.  Actual 1997 revenues could 
materially differ from those expressed in the foregoing forward-looking 
statements, depending on a number of factors, including whether anticipated 
demand in 1997 for the Company's remaining enterprise server inventory 
differs from the Company's expectations and the ability of the Company to 
purchase components to satisfy customer demand.      

                                       9
<PAGE>

GROSS MARGIN

Gross margin, as a percent of revenues, decreased to 26% in the third quarter of
1997 and a loss of 5% for the first nine months of 1997 compared to 29% in the
third quarter of 1996 and 28% for the first nine months of 1996.  The decease in
gross margin percent for the third quarter of 1997 and the first nine months of
1997 compared to the third quarter of 1996 and the first nine months of 1996 was
primarily due to a significant decrease in the Company's sales volume based on
the Company's announcement, as discussed above, that it would not bring its next
generation server to market and a charge of $1,332,000 in the second quarter of
1997 for the write-down of inventory based on an updated review by the Company
of forecasted revenues at that time.

The Company currently anticipates that gross margin will continue to be 
significantly less in 1997 compared to the corresponding 1996 periods, both 
in dollars and as a percent of revenue, because of the significant decrease 
in revenues in 1997 as discussed above.  Actual 1997 gross margin results 
could materially differ from those expressed in the foregoing forward-looking 
statement, depending on a number of factors, including the achievement of the 
Company's 1997 anticipated revenue level and the ability of the Company to 
purchase quality components in order to satisfy customer demand.   

RESEARCH AND DEVELOPMENT

Expenses for research and development consist primarily of compensation and
related benefit costs, project expenses, consulting on development and
depreciation on capital equipment used in the research and development process.
Research and development expenses decreased 63% to $698,000 for the third
quarter of 1997 from $1,885,000 for the third quarter of 1996, and decreased 41%
to $3,309,000 for the first nine months of 1997 from $5,649,000 for the first
nine months of 1996, primarily due to a decrease in salary and benefit costs
associated with fewer team members as a result of the workforce reduction which
took effect at the end of the first quarter of 1997. 

The Company currently anticipates that research and development costs will be a
critical activity during 1997 as the Company focuses on the development of
distributed data access and management products.  The Company does not, however,
anticipate that research and development costs in 1997 will reach the levels of
the last several years.  Actual 1997 research and development expenses could
materially differ from those expressed in the foregoing forward-looking
statements, depending on a number of factors, including the ability of the
Company to achieve its business plan and obtain and commit the required
resources to research and development and the ability to hire and train quality
research and development team members as well as retain current research and
development team members.  

                                       10
<PAGE>

SALES AND MARKETING

Sales and marketing expenses include compensation and benefits, sales 
commissions, travel, trade shows, marketing materials and programs and 
facility costs associated with worldwide sales offices.  Sales and marketing 
expenses decreased 89% to $530,000 for the third quarter of 1997 from 
$4,944,000 for the third quarter of 1996, primarily from lower salaries and 
benefits due to fewer team members, the reduction of commissions related to 
reduced revenues, the closing of the Company's domestic sales offices and the 
ongoing closing of the Company's foreign subsidiaries.  Sales and marketing 
expenses decreased 73% to $4,022,000 for the first nine months of 1997 from 
$14,787,000 for the first nine months of 1996 for the same reasons, except 
that the effect of the workforce reduction did not commence until the end of 
the first quarter of 1997.                                                   

The Company currently anticipates that sales and marketing expenses will
continue to be significantly less in 1997 compared to the corresponding 1996
periods as the Company focuses on the development of distributed data access and
management products.  Actual 1997 sales and marketing expenses could materially
differ from those expressed in the foregoing forward-looking statement,
depending on a number of factors, including the ability of the Company to
complete development and release commercially its distributed data access and
management products in accordance with its currently anticipated timetable. 

GENERAL AND ADMINISTRATIVE

General and administrative expenses decreased 85% to $386,000 for the third
quarter of 1997 from $2,575,000 for the third quarter of 1996 and decreased 66%
to $1,711,000 for the first nine months of 1997 from $4,977,000 for the first
nine months of 1996.  The decrease for the third quarter of 1997 compared to the
third quarter of 1996 was due to an increase in the allowance for doubtful
accounts of $1,700,000 in the third quarter of 1996 related to the Memorex Telex
Chapter 11 bankruptcy filing and lower salaries because of fewer team members. 
The decrease for the first nine months of 1997 compared to the first nine
months of 1996 was due to an increase in the allowance for doubtful accounts of
$1,700,000 for Memorex Telex as described above in the third quarter of 1996, a
second quarter 1996 charge of $400,000 related to the securities class action
lawsuit and lower salaries due to fewer team members.  Included in the third
quarter of 1997 and the first nine months of 1997 is a charge of $350,000 for
the settlement of the Memorex Telex Chapter 11 bankruptcy preferential payment
claim, offset by a credit for the decrease in the allowance for doubtful
accounts related to the amount provided for the Memorex Telex Chapter 11
bankruptcy filing. 

The Company currently anticipates that general and administrative expenses will
continue to be significantly less in 1997 compared to the corresponding 1996
periods due to the  workforce reduction and the related support necessary for
fewer team members.

                                       11
<PAGE>

NONRECURRING ITEMS

Nonrecurring items for the nine months ended September 30, 1997 include the 
following second quarter 1997 items: a charge of $975,000 for the net value 
of leasehold improvements written off due to the termination of the Company's 
lease at its previous headquarters facility; a charge of $764,000 for the 
write-down of the net book value at June 30, 1997 of certain equipment based 
on an updated review of the equipment required to support the operations of 
the Company; a charge of $125,000 for the mutual settlement and release of an 
alleged patent infringement without admission of liability by the Company or 
International Business Machines Corporation ("IBM"); and a credit of 
$1,000,000 for a one-time license fee paid to the Company by Toshiba for the 
world-wide, non-exclusive right and license to the Availability Management 
System ("AMS") Software.

OTHER INCOME (EXPENSE)

Interest income, net was $42,000 for the third quarter of 1997 and $141,000 
for the first nine months of 1997 compared to $82,000 for the third quarter 
of 1996 and $318,000 for the first nine months of 1996.  These decreases are 
due to lower interest income on lower cash and cash equivalent investments.  
Other income was $120,000 for the third quarter of 1997 compared to other 
expense of $22,000 for the third quarter of 1996.  For the first nine months 
of 1997, other expense was $177,000 compared to $132,000 for the first nine 
months of 1996, including a $247,000 first quarter 1997 loss on disposal of 
certain assets of the Company's equipment due to the redirection of the 
Company's efforts to supporting distributed data access and management 
product development.

LIQUIDITY AND CAPITAL RESOURCES

The aggregate net decrease in cash and cash equivalents during the first nine
months of 1997 was $2,547,000, including $2,409,000 of cash used in operating
activities, due to the net loss for the first nine months of 1997, partially
offset by depreciation and other non-cash losses and provisions and a reduction
of the Company's accounts receivable and inventories.  As of September 30, 1997
and December 31, 1996, accounts receivable were $1,529,000 and $4,636,000, and
inventories were $1,917,000 and $4,984,000, respectively.
 
Net cash used in investing activities was $503,000 in the first nine months 
of 1997, primarily due to capital expenditures of $557,000.  Capital 
expenditures were primarily related to capitalization of internally-developed 
equipment systems and upgrades to existing systems for demonstration 
equipment prior to the Company's announcement of a change in its business 
focus, for the purchase of computer equipment to support its ongoing 
operations and improvements to the Company's new leased headquarters 
facility.  The Company does not anticipate any significant purchases of 
capital equipment during the last three months of 1997.

                                       12
<PAGE>

The Company has no material commitments for the purchase of capital 
equipment.  

As of September 30, 1997, the Company had $3,164,000 in cash and cash 
equivalents.  If the Company's operations progress as currently anticipated, 
of which there can be no assurance, the Company believes that its existing 
cash and cash equivalents together with the funds generated from the 
continued liquidation of its remaining enterprise server inventory, will be 
sufficient to fund its operations through the first quarter of 1998.  Actual 
cash requirements could materially differ from those expressed in the 
foregoing forward-looking statement, depending on a number of factors, 
including the ability of the Company to achieve anticipated revenue levels 
from the continued sale of enterprise servers and related components, the 
ability of the Company to maintain its cost structure in accordance with its 
operating plan, the ability of the Company to develop, test and release 
distributed data access and management products in accordance with its 
currently anticipated timetable, and the development of the attached-storage 
market for Windows NT computing environments in the manner anticipated by the 
Company.

The Company is seeking additional capital through OEM or other strategic 
investments or alliances.  There can be no assurance, however, that 
additional capital will be available on acceptable terms or at all, and the 
failure to obtain additional capital as needed will have a material adverse 
effect on the Company.

                                       13
<PAGE>

                           PART II. OTHER INFORMATION
                                           


ITEM 1. LEGAL PROCEEDINGS

In September 1997, the Company paid $350,000 in settlement of the Memorex 
Telex Corporation ("Memorex Telex") Chapter 11 bankruptcy preferential 
payment claim, which was accepted by the U.S. Bankruptcy Court in October 
1997. 

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     27.1  Financial data schedule

(b)  Reports on Form 8-K

     No reports on Form 8-K were filed during the quarter ended September
30,1997.

                                       14
<PAGE>

                                   SIGNATURE

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


                                       TRICORD SYSTEMS, INC.
                                           (REGISTRANT)



                                       By:/s/ John J. Mitcham
                                          -------------------------
                                          John J. Mitcham, President
                                          and Chief Executive Officer
                                          (Principal Financial Officer)


                                       By:/s/ Jeff A. Stewart
                                          -------------------------
                                          Jeff A. Stewart, Vice President
                                          and Controller
                                          (Principal Accounting Officer)

                                       Date:  November 14, 1997

                                       15
<PAGE>

                                  INDEX TO EXHIBITS
                                           
                                           
     Exhibit                                                     Page
     Number                                                     Number
     -------                                                    ------
     27.1      Financial data schedule                            17


                                       16