<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 September 30, 1996

                                    or

    [ ]     Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.

                  For the transition period from ______to ______

                       Commission file number: 0-20124


                       NETWORK COMPUTING DEVICES, INC.
            (Exact name of registrant as specified in its charter)


              California                                         77-0177255
     (State or other jurisdiction of                          (I.R.S. Employer
     incorporation or organization)                          Identification No.)

          350 North Bernardo Avenue, Mountain View, California 94043
            (Address of principal executive offices and zip code)

              Registrant's telephone number:  (415) 694-0650


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 
                                      -----    -----

The number of shares outstanding of the Registrant's Common Stock was 
16,777,590 at October 31, 1996.


<PAGE>

                          NETWORK COMPUTING DEVICES, INC.

                                       INDEX


DESCRIPTION                                                          PAGE NUMBER
-----------                                                          -----------

Cover Page                                                                 1

Index                                                                      2

Part I: Financial Information

   Item 1: Financial Statements

           Condensed Consolidated Balance Sheets as of September
             30, 1996 and December 31, 1995                                3

           Condensed Consolidated Statements of Operations for the
             Three- and Nine-Month Periods Ended September 30,
             1996 and 1995                                                 4

           Condensed Consolidated Statements of Cash Flows for the
             Nine-Month Periods Ended September 30, 1996 and 1995          5

           Notes to Condensed Consolidated Financial Statements            6
                
   Item 2: Management's Discussion and Analysis of Financial
           Condition and Results of Operations                             8

Part II: Other Information
        
   Item 1: Legal Proceedings                                              16
        
   Item 4: Submission of Matters to a Vote of Security Holders            16
        
   Item 6: Exhibits and Reports on Form 8-K                               16
        
Signature                                                                 17




                                       2

<PAGE>

                         NETWORK COMPUTING DEVICES, INC.

                         PART I:  FINANCIAL INFORMATION
                         ITEM 1.  FINANCIAL STATEMENTS

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)


                                    ASSETS
<TABLE>
<CAPTION>
                                                     September 30,  December 31,
                                                        1996            1995
                                                     -------------  ------------
                                                     (UNAUDITED)
<S>                                                  <C>            <C>
Current assets:
  Cash and cash equivalents                           $  18,722      $  13,364 
  Short-term investments                                 12,526         22,786 
  Accounts receivable, net                               18,957         28,591 
  Inventories                                            13,786         14,398 
  Prepaid expenses and other                             12,267          6,863 
                                                     -------------  ------------
Total current assets                                     76,258         86,002 

Property and equipment, net                               5,565          6,749 
Other assets                                              2,160          4,786 
                                                     -------------  ------------
Total assets                                          $  83,983      $  97,537 
                                                     -------------  ------------
                                                     -------------  ------------


                        LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                     $  5,167      $  13,893 
  Accrued expenses                                        8,548          7,429 
  Income taxes payable                                      343          2,666 
  Current portion of capital lease obligations              835          1,246 
  Deferred revenue                                        4,087          3,298 
                                                     -------------  ------------
Total current liabilities                                18,980         28,532 
Long-term portion of capital lease obligations              365            991 
Shareholders' equity:
  Undesignated preferred stock                               --             -- 
  Common stock                                           66,485         63,543 
  Unrealized gain on available-for-sale securities           --             31 
  Retained earnings                                      (1,847)         4,440 
                                                     -------------  ------------
Total shareholders' equity                               64,638         68,014 
                                                     -------------  ------------
Total liabilities and shareholders' equity            $  83,983      $  97,537 
                                                     -------------  ------------
                                                     -------------  ------------
</TABLE>


                             See accompanying notes.

                                       3


<PAGE>


                         NETWORK COMPUTING DEVICES, INC.

                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (UNAUDITED - IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                         Three Months          Nine Months
                                      Ended September 30,    Ended September 30,
                                      -------------------    -------------------
                                        1996      1995          1996      1995
                                      --------  ---------    ---------  --------
<S>                                   <C>       <C>           <C>       <C>
Net revenues:
    Hardware products and services    $ 22,642  $ 23,858      $ 69,742  $ 84,195
    Software licenses and services       5,309     9,649        17,976    21,871
                                      --------  ---------    ---------  --------
Total net revenues                      27,951    33,507        87,718   106,066
Cost of revenues:
    Hardware products and services      14,875    20,457        55,592    64,211
    Software licenses and services       1,779     1,197         5,964     2,878
                                      --------  ---------    ---------  --------
Total cost of revenues                  16,654    21,654        61,556    67,089
                                      --------  ---------    ---------  --------
Gross margin                            11,297    11,853        26,162    38,977
Operating expenses:
  Research and development               3,207     3,515        11,346     9,505
  Marketing and selling                  6,181     8,366        25,140    25,514
  General and administrative             2,219     2,121         8,255     6,135
  Charge for business restructuring         --     4,832            --     4,832
                                      --------  ---------    ---------  --------
Total operating expenses                11,607    18,834        44,741    45,986
                                      --------  ---------    ---------  --------
Operating loss                            (310)   (6,981)      (18,579)   (7,009)
Other income, net                          343       335         1,167       950
Gain on sale of product lines               --        --         6,932        --
                                      --------  ---------    ---------  --------
Income (loss) before income taxes           33    (6,646)      (10,480)   (6,059)
Provision for income taxes (income 
   tax benefit)                             13    (1,927)       (4,193)   (1,729)
                                      --------  ---------    ---------  --------
Net income (loss)                     $     20  $ (4,719)     $ (6,287) $ (4,330)
                                      --------  ---------    ---------  --------
                                      --------  ---------    ---------  --------
Net income (loss) per share:
     Primary                          $   0.00  $  (0.30)     $  (0.38)  $ (0.27)
                                      --------  ---------    ---------  --------
                                      --------  ---------    ---------  --------
     Fully diluted                    $   0.00  $  (0.30)     $  (0.38)  $ (0.27)
                                      --------  ---------    ---------  --------
                                      --------  ---------    ---------  --------
Shares used in per share computations:
     Primary                            17,122    15,851        16,460    15,783
                                      --------  ---------    ---------  --------
                                      --------  ---------    ---------  --------
     Fully diluted                      17,700    15,851        16,460    15,783
                                      --------  ---------    ---------  --------
                                      --------  ---------    ---------  --------
</TABLE>


                             See accompanying notes.

                                       4


<PAGE>

                       NETWORK COMPUTING DEVICES, INC.

               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (UNAUDITED - IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                       Nine Months Ended September 30,
                                                                       -------------------------------
                                                                           1996                 1995
                                                                       -----------           ----------
<S>                                                                    <C>                   <C>
    
Cash flows from operations:
  Net loss                                                              $  (6,287)           $  (4,330)
  Reconciliation to cash provided (used) by operations:
    Noncash restructuring charges                                              --                6,588 
    Depreciation and amortization                                           3,227                3,564 
    Gain on sale of product lines                                          (6,932)                  -- 
    Deferred income taxes                                                  (2,563)                 559 
    Other, net                                                                526                   -- 
    Changes in:
      Accounts receivable, net                                              9,634                9,574 
      Inventories                                                             445                6,505 
      Prepaid expenses and other                                           (1,945)              (3,055)
      Accounts payable                                                     (8,726)              (8,543)
      Income taxes payable                                                 (2,323)                (833)
      Accrued expenses                                                        375                 (352)
      Deferred revenue                                                      1,179                4,607 
                                                                       -----------           ----------
    Cash provided (used) by operations                                    (13,390)              14,284 
    Cash flows from investing activities:
      Short-term investments, net                                          10,229               (1,536)
      Proceeds from sale of product lines                                   8,625                   -- 
      Capitalization of software costs                                         --                 (392)
      Changes in other assets                                                 249               (1,056)
      Property and equipment purchases, net                                (2,105)              (2,743)
                                                                       -----------           ----------
    Cash provided (used) by investing activities                           16,998               (5,727)
    Cash flows from financing activities:
      Principal payments on capital lease obligations                      (1,037)              (1,162)
      Repurchases of stock                                                    (89)              (4,026)
      Proceeds from issuance of stock, net                                  2,876                1,721 
                                                                       -----------           ----------
    Cash provided (used) by financing activities                            1,750               (3,467)
    Increase in cash and equivalents                                        5,358                5,090 
    Cash and equivalents:
      Beginning of period                                                  13,364                7,407 
                                                                       -----------           ----------
      End of period                                                     $  18,722            $  12,497 
                                                                       -----------           ----------
                                                                       -----------           ----------
    Noncash investing and financing activities:
      Property and equipment acquired under capital leases              $      --            $     482 
                                                                       -----------           ----------
                                                                       -----------           ----------
</TABLE>


                             See accompanying notes.

                                       5


<PAGE>


                          NETWORK COMPUTING DEVICES, INC.

               NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


BASIS OF PRESENTATION

The unaudited condensed consolidated financial information of Network 
Computing Devices, Inc. (the "Company") furnished herein reflects all 
adjustments, consisting only of normal recurring adjustments, which in the 
opinion of management are necessary to fairly state the Company's 
consolidated financial position, results of operations and cash flows for the 
periods presented.  This Quarterly Report on Form 10-Q should be read in 
conjunction with the consolidated financial statements and notes thereto 
included in the Company's 1995 Annual Report on Form 10-K.  The consolidated 
results of operations for the three- and nine-month periods ended September 
30, 1996 are not necessarily indicative of the results to be expected for any 
subsequent quarter or for the entire year ending December 31, 1996.  Certain 
financial statement amounts from 1995 have been reclassified to conform with 
current year methods of presentation.

PER SHARE INFORMATION

Per share information is computed using the weighted average number of common 
and dilutive common equivalent shares outstanding.  For primary and fully 
diluted earnings per share, common equivalent shares consist of the 
incremental shares issuable upon the assumed exercise of dilutive stock 
options.  The effect of common equivalent shares is not included in earnings 
per share calculations during periods in which such effect would be 
antidilutive. 

INVENTORIES 

Inventories, stated at the lower of standard cost, which approximates actual 
cost on a first-in, first-out basis, or market, consisted of (in thousands):

                                               September 30,    December 31,
                                                    1996             1995 
                                               -------------    ------------

Purchased components and sub-assemblies            $11,930         $ 9,548
Work in process                                        364           1,814
Finished goods                                       1,492           3,036
                                                   -------         -------
                                                   $13,786         $14,398
                                                   -------         -------
                                                   -------         -------


BUSINESS RESTRUCTURING

In the third quarter of 1995, the Company determined to undertake a strategic 
restructuring plan intended to realign and consolidate its software 
businesses and reduce operating expenses, and to improve the operating 
performance of its hardware operations in reaction to intense competition and 
perceived slowness in the X-terminal market.  The Company began implementing 
this plan during the third quarter of 1995, and terminated approximately 
fifty employees associated with such operations. 

The plan's major components include:

   --   modifying the method of manufacturing and materials management to a
        "build-to-order" paradigm in order to increase the efficiency with which
        the Company receives product orders and manufactures and delivers
        products to its customers;
   --   phasing out products that were currently yielding, or were anticipated
        to yield, profit margins that did not meet certain minimum requirements
        of the Company;


                                       6

<PAGE>

                          NETWORK COMPUTING DEVICES, INC.

               NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


   --   reducing and consolidating facilities devoted to the conduct of the
        business through a combination of sublease activities or negotiating
        early exits to existing lease agreements; and 
   --   reducing the number of employees to a level deemed to be essential to
        reengineer the business for improved operating performance.
          
A description of the types and amounts (in thousands) of accruals made for 
restructuring costs in 1995, and the cumulative amounts charged against such 
accruals, is presented below.

                                 Initial                          Sept. 30,
                                 Amounts     Asset       Cash       1996
                                 Accrued   Write-offs   Payments   Balance
                                 -------   ----------   --------   -------
Reserve for the write-down of  
  phase-out inventories          $2,706    ($2,706)     $    --     $   --
Employee termination benefits     1,580         --       (1,252)       328
Exiting facilities - related
  obligations                     2,256         --       (1,296)       960
Asset impairment & other            996       (815)          --        181
                                 ------    --------     --------    ------
Total                            $7,538    ($3,521)     ($2,548)    $1,469
                                 ------    --------     --------    ------
                                 ------    --------     --------    ------


It is anticipated that the restructuring plan will continue through 1996.

INTEREST AND TAX PAYMENTS

Interest payments, primarily related to interest on capital lease 
liabilities, were $98,000 and $173,000 for the first nine months of 1996 and 
1995, respectively.  Income tax payments were $209,000 and $120,000 for the 
first nine months of 1996 and 1995, respectively. 


                                       7


<PAGE>

                          NETWORK COMPUTING DEVICES, INC.

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

OVERVIEW

THIS DISCUSSION INCLUDES FORWARD-LOOKING STATEMENTS, INCLUDING BUT NOT 
LIMITED TO STATEMENTS WITH RESPECT TO THE COMPANY'S FUTURE FINANCIAL 
PERFORMANCE, OPERATING RESULTS, PLANS AND OBJECTIVES.  ACTUAL RESULTS MAY 
DIFFER MATERIALLY FROM THOSE CURRENTLY ANTICIPATED DEPENDING UPON A VARIETY 
OF FACTORS, INCLUDING THOSE DESCRIBED BELOW UNDER THE SUB-HEADING, "FUTURE 
PERFORMANCE AND RISK FACTORS."

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE UNAUDITED 
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AND NOTES THERETO 
INCLUDED IN PART I -- ITEM 1 OF THIS QUARTERLY REPORT ON FORM 10-Q, AND THE 
AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO AND MANAGEMENT'S 
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR 
THE YEAR ENDED DECEMBER 31, 1995, CONTAINED IN THE COMPANY'S 1995 ANNUAL 
REPORT ON FORM 10-K. 

The Company designs, develops, manufactures and markets network computers and 
associated software products that provide information access to networks of 
heterogeneous computers.  During 1995, the Company took various actions to 
reorganize the two basic components of its business into two separate 
business units: the Systems business, consisting of the Company's network 
computers and related software; and the Software business, consisting of its 
lines of PC connectivity software and, initially, its electronic messaging 
software and its Mariner Internet access software. In addition, the Company 
took steps to consolidate the management and sales organizations of the 
geographically separated segments of its Software business and reoriented its 
software sales strategy toward the increased use of distributors, value added 
resellers ("VARs") and other resellers.  In June 1996, the Company determined 
to recombine its Systems and Software business units.

During the third quarter of 1995, the Company created and began implementing 
a plan to restructure the business to improve its operating performance. The 
plan included substantial modifications to the Company's manufacturing 
processes, phasing out lower margin products, a reduction in the amount of 
leased space, and a reduction in the number of employees.  During the third 
quarter of 1995, the Company recognized charges totaling $7.5 million for the 
implementation of this plan, which is anticipated to continue through 1996. 
Included in these restructuring charges were amounts related to the severance 
of personnel, phase-out of certain products, and costs associated with the 
termination of lease obligations.

In 1994, the Company began the development of Mariner, an Internet access and 
navigation tool which it intended to market to large enterprises, as well as 
to original equipment manufacturers ("OEMs") and VARs.  In January 1995, the 
Company entered into a software development and licensing agreement with AT&T 
to develop a custom version of Mariner for AT&T (the "AT&T Agreement").  The 
AT&T Agreement provided for total minimum royalties of $15 million through 
1998, and contemplated the development of additional Internet access products 
by NCD for license to AT&T.  In September 1995, the AT&T Agreement was 
amended to provide that the additional products would not be developed and 
that NCD would be paid fees totaling $9 million through 1996 for development 
work completed at the time of the amendment and for a license to evaluate the 
Mariner product.  In 1995, the Company recognized license fees totaling $6.8 
million under the AT&T Agreement and received $500,000 in fees for 
non-recurring engineering costs that offset research and development 
expenses.  In 1995, the Company also recognized revenues of $300,000 from 
customers other than AT&T related to the Mariner product line.  In light of 
the Company's inability to develop a long-term relationship with AT&T, as 
well as other changes in the Internet market, including the development of 
intense price competition among vendors of Internet access products, the 
Company in late 1995 determined to sell the Mariner product line and focus 
its attention on providing desktop information access solutions for network 
computing environments.  In February 1996, the Company sold the Mariner 
product line to FTP Software, Inc. ("FTP") for $9.8 million.  NCD paid FTP a 
one-time license fee of $2.5 million for the right to incorporate Mariner 
technology into future versions of NCD's hardware and software products.  The 
net gain recognized on this transaction was $7.0 million.

                                       8

<PAGE>

                          NETWORK COMPUTING DEVICES, INC.

In February 1994, the Company acquired all of the outstanding stock of Z-Code 
Software Corp., a developer of electronic mail and messaging application 
products for open system environments.  The Company's Z-mail electronic 
messaging product was a part of the Company's Software business unit.  The 
initial consideration for the acquisition was approximately $3.2 million in 
cash and 3,000,000 shares of the Company's Common Stock (including 
approximately 269,000 shares issuable upon the exercise of options).  Of 
these shares, approximately 1,183,000 (the "Performance Shares") were held in 
escrow and subject to release in whole or in part upon the achievement of 
certain financial performance objectives over a 15-month period that ended in 
the second quarter of 1995.  Additional cash of up to $3.2 million was 
contingently payable based on the achievement of these objectives.  In July 
1994, the Company repurchased 1,361,802 shares of its Common Stock from the 
former principal shareholder of Z-Code for approximately $5.0 million and 
paid approximately $2.5 million for his contingent rights to an additional 
1,041,378 Performance Shares that were held in escrow as well as his 
contingent right to receive up to approximately $2.5 million in cash.  None 
of the remaining Performance Shares or contingent cash payments were issued 
or paid.  In light of disappointing operating results, intensifying 
competition in this market, and other related factors, the Company determined 
during the second quarter of 1996 to sell or discontinue this product line.  
In June 1996, the Company sold its Z-Mail product line to NetManage, Inc. for 
a total sales price of $1.3 million.  The net loss recognized on this 
transaction was $27,000.

In June 1996, the Company announced an agreement with International Business 
Machines Corporation ("IBM") for the joint development of a network 
application terminal for resale by IBM.  Under the agreement, IBM has funded 
and will continue to fund a portion of NCD's development efforts.  NCD has 
completed certain hardware and software deliverables, including the shipment 
of certain prototypes of the network application terminal to IBM.  Subject to 
the successful completion of the development effort, including satisfaction 
of certain design and manufacturing requirements, the agreement states that 
IBM will purchase a substantial portion of its requirements from NCD during 
1997 and 1998, although IBM will be under no obligation to make such 
purchases until the development phase has been successfully completed and IBM 
has commenced volume shipments of such devices.  

RESULTS OF OPERATIONS

As mentioned above under "Overview," the Company determined to recombine its 
two former business units (i.e., "Systems" and "Software") into a single 
operation in June 1996.  Although the Company is now managed as one operating 
entity, the Company is reporting hardware and software revenues 
independently, as reflected in this Form 10-Q.  Revenues, cost of revenues 
and gross margins relating to prior operating periods have been conformed to 
the current presentation, and the following discussions of net revenues and 
gross margins address the revised presentation.

TOTAL NET REVENUES

Total net revenues for the third quarter and first nine months of 1996 were 
$28.0 million and $87.7 million, respectively, both representing decreases of 
17% when compared with the same periods of 1995.  The proportion of 
international revenues to total net revenues has increased from 28% for the 
third quarter of 1995 to 32% for the third quarter of 1996; this proportion 
of international revenues has remained relatively flat when comparing the 
nine-month periods presented (32% for 1996 and 31% for 1995).

Sales to Motorola Inc. ("Motorola"), which is deemed to be a related party 
due to its ownership of approximately 9% of the Company's common stock, 
accounted for 7% and 6% of the Company's total net revenues in the third 
quarters of 1996 and 1995, respectively, and 6% and 8% of total net revenues 
for the first nine months of 1996 and 1995, respectively.  Motorola is the 
Company's largest OEM customer, and also purchases the Company's products as 
an end user customer. The Company does not have a long-term sales contract 
with Motorola, which purchases products on an as-needed basis to satisfy the 
requirements of its own customers as well as its internal requirements.  The 
Company believes that sales to Motorola will continue to decline during the 
balance of 1996, but is unable to predict

                                       9

<PAGE>
                          NETWORK COMPUTING DEVICES, INC.

future levels of sales to Motorola over the longer term.  Substantial 
reductions in such sales levels could have a material adverse effect on the 
Company's operating results in future periods.  

HARDWARE REVENUES

Hardware revenues consist primarily of revenues from the sale of network 
computers, related hardware, and to a lesser extent, the sale of related 
service activities.  Hardware revenues were $22.6 million for the third 
quarter of 1996, compared to $23.9 million for the third quarter of 1995, and 
$69.7 million for the first nine months of 1996, compared to $84.2 million 
for the first nine months of 1995.  The decline in revenues for all 
comparative periods was due to a decline in units shipped and a decline in 
the average selling prices ("ASPs") of the Company's hardware products due to 
lower-priced network computers and intense competition.

SOFTWARE REVENUES

Software revenues consist primarily of revenues from the licensing of 
software products and related support services.  Current software products 
that are generating revenue include WINCENTER,-TM- the Company's multi-user 
WindowsNT-Registered Trademark- application server software, 
PC-XWARE,-Registered Trademark- the Company's network computer software for 
PCs, and NCDWARE,-Registered Trademark- the Company's proprietary network 
computer software. Through the first quarter of 1996, Software revenues also 
included revenues from the development and licensing of the Company's Mariner 
Internet connectivity software (which product line was sold in the first 
quarter of 1996), and the Z-Mail product line (which was sold during the 
second quarter of 1996).  Software revenues were $5.3 million for the third 
quarter of 1996, a decrease of 45% compared to the third quarter of 1995, and 
$18.0 million for the first nine months of 1996, a decrease of 18% compared 
to the same period of 1995.  The decline in software revenues for all 
comparative periods presented resulted from reduced revenues from the 
Company's former Z-Mail and Mariner product lines, in addition to 
significantly reduced PC-Xware revenues during a period in which its sales 
force was in transition.  The declines in the aforementioned revenue streams 
were offset to a degree by higher WINCENTER software revenues.  Revenues 
related to Z-Mail were $352,000 and $1.1 million for the second quarter and 
first six months of 1996, respectively.  No such revenues were recognized 
during the third quarter of 1996, and such revenues will not occur in the 
future, as the Z-Mail product line was sold during the second quarter of 
1996.  Net revenues for the first quarter of 1996 also included $426,000 
associated with the AT&T Agreement, while no such revenues were recognized 
during the second or third quarters of 1996.  The Company will recognize the 
remaining $1.3 million in revenues associated with the AT&T Agreement as its 
obligations thereunder are satisfied through the filling of orders placed by 
AT&T or upon expiration of the Company's obligations under the Agreement in 
the third quarter of 1997, whichever is earlier. 

GROSS MARGIN ON HARDWARE REVENUES

The Company's gross margin on Hardware revenues was 34% and 14% for the third 
quarters of 1996 and 1995, respectively, and 20% and 24% for the first nine 
months of 1996 and 1995, respectively.  The gross margin for the third 
quarter of 1995 reflects a $2.7 million inventory-related charge to cost of 
revenues associated with the restructuring that impacted margin for that 
quarter. Contributing to higher gross margins in the third quarter of 1996 
were comparatively lower sales discounts and material costs.  Sales discounts 
declined as a result of more stringent pricing controls, and material costs 
declined primarily as a result of market declines in the cost of certain 
semiconductor components.  These positive influences on margin were slightly 
offset by increased sales of lower-priced EXPLORA-TM- network computers, which 
generally carry lower margins.  The slight decrease in the nine-month period 
of 1996 compared to the nine-month period of 1995 is due to an increased mix 
of lower-priced, lower-margin EXPLORA network computers and decreased 
manufacturing efficiencies caused by lower volumes.

GROSS MARGIN ON SOFTWARE REVENUES

The Company's gross margin on Software revenues was 66% and 88% for the third 
quarters of 1996 and 1995, respectively, and 67% and 87% for the nine-month 
periods ended September 30, 1996 and 1995, respectively.  The decline was due 
primarily to a higher mix of WINCENTER revenues, which carry a lower margin 
because of higher third party royalty costs, and reduced revenues of other 
software products, including revenues associated with the AT&T Agreement.

                                      10
<PAGE>

                          NETWORK COMPUTING DEVICES, INC.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development ("R&D") expenses were $3.2 million and $3.5 million 
for the third quarters of 1996 and 1995, respectively, and $11.3 million and 
$9.5 million for the first nine months of 1996 and 1995, respectively.  The 
slight quarter-to-quarter decrease was primarily related to the absence of 
Z-Mail and Mariner R&D expenses in the third quarter of 1996, partially 
offset by an increase in R&D expenses related to the network computing area.  
Included in R&D expenses in the third quarter of 1996 was $0.5 million in 
costs and expenses associated with the agreement with IBM for the joint 
development of a network application terminal.  Included in R&D expenses in 
the third quarter of 1995 was $0.8 million in costs and expenses associated 
with the software development and licensing agreement with AT&T. As a 
percentage of net revenues, R&D expenses were 11% and 10% for the third 
quarters of 1996 and 1995, respectively, and 13% and 9% for the nine months 
ended September 30, 1996 and 1995, respectively, reflecting the impact of 
increased spending or lower net revenues.  The Company plans to increase its 
investment in research and development, primarily in the area of network 
computers and related software.

MARKETING AND SELLING EXPENSES

Marketing and selling expenses were $6.2 million and $8.4 million for the 
third quarters of 1996 and 1995, respectively, and $25.1 million and $25.5 
million for the first nine months of 1996 and 1995, respectively.  The 
decreases in 1996 compared to the corresponding periods of the previous year 
reflect the reconsolidation of the Company's remaining business units, which 
commenced in June of 1996.  As a percentage of net revenues, marketing and 
selling expenses were 22% and 25% for the third quarters of 1996 and 1995, 
respectively, and 29% and 24% for the first nine months of 1996 and 1995, 
respectively, and resulted from the combined impact of decreased spending and 
lower net revenues.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative ("G&A") expenses were $2.2 million and $2.1 
million for the third quarters of 1996 and 1995, respectively, and $8.3 
million and $6.1 million for the first nine months of 1996 and 1995, 
respectively.  The slight quarter-to-quarter increase was primarily related 
to increased legal costs and higher performance-related bonuses, offset by 
the decrease in expenses related to Z-Mail, as well as the elimination of 
certain redundant functions.  The increase in expenses for the nine months 
ended September 30, 1996 compared to the same period in 1995 was due to both 
severance costs associated with the elimination of certain positions within 
the Company and increased personnel costs during early 1996 that resulted 
from the division of the Company into two separate business units (Systems 
and Software).  As mentioned above under "Marketing and Selling," in June of 
1996, the Company determined to recombine its remaining business units.  As a 
percentage of net revenues, G&A expenses were 8% and 6% for the third 
quarters of 1996 and 1995, respectively, and 9% and 6% for the nine months 
ended September 30, 1996 and 1995, respectively, reflecting the combined 
impact of increased expenses and lower net revenues.

BUSINESS RESTRUCTURING

During the third quarter of 1995, the Company created and began implementing 
a plan to restructure the business in order to improve the Company's 
operating performance potential.  The plan included substantial modifications 
to the Company's manufacturing processes, phasing out the activities related 
to less profitable products, a reduction in facilities, and a reduction in 
the number of employees.  During the third quarter of 1995, the Company 
recognized charges totaling $7.5 million for the implementation of this plan, 
which is anticipated to continue through 1996.  See "Business Restructuring" 
in the Notes to Condensed Consolidated Financial Statements contained in this 
Form 10-Q.

OTHER INCOME

Other income primarily includes interest income, net of interest expense.  
The slight increase in interest income, net, in the third quarter and first 
nine months of 1996 over the comparable periods of 1995 was due primarily to 
lower interest expense incurred on declining capital lease obligation 
balances.

                                      11

<PAGE>
                          NETWORK COMPUTING DEVICES, INC.

GAIN ON SALE OF PRODUCT LINES

The gain on the sale of product lines for the first nine months of 1996 
represents the net gain on the sale of the Mariner product line in February 
1996, offset slightly by the loss on the sale of the Z-Mail product line in 
June 1996.

INCOME TAXES

The Company recorded an income tax provision of $13,000 during the third 
quarter of 1996.  This compared to an income tax benefit of $1.9 million on 
pretax losses incurred during the third quarter of 1995.

FINANCIAL CONDITION

Total assets as of September 30, 1996 decreased by $13.6 million, or 14%, 
from December 31, 1995.  The change in total assets primarily reflected 
decreases in combined cash and short-term investments and accounts receivable 
of $4.9 million and $9.6 million, respectively.  The decline in combined cash 
and short-term investments was primarily the result of operating losses, 
partially offset by cash received from the sale of product lines.  The 
reduction in accounts receivable was primarily caused by a reduction in sales 
volumes coupled with increased customer collection efforts during the 
quarter.  The aforementioned decreases were partially offset by an increase 
in prepaid and other expenses of $5.4 million which was primarily related to 
deferred income tax assets generated by net operating losses.

Total liabilities as of September 30, 1996 decreased by $10.2 million, or 
34%, from December 31, 1995.  The decrease was primarily associated with 
lower accounts payable and income taxes payable balances.  The reduction in 
accounts payable was associated with lower inventory receipts, while the 
reduction in income taxes payable was caused by significant operating losses 
during 1996.

LIQUIDITY

As of September 30, 1996, the Company had combined cash and equivalents and 
short-term investments totaling $31.2 million, with no significant debt.  The 
Company believes that its existing sources of liquidity are sufficient to 
meet operating cash requirements and capital lease repayment obligations at 
least through the next twelve months.  

FUTURE PERFORMANCE AND RISK FACTORS

THE COMPANY'S FUTURE BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION ARE 
SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES, INCLUDING THOSE DESCRIBED BELOW. 

EVOLVING NETWORK COMPUTING MARKET

The Company derives a majority of its revenues from the sale of network 
computer products and related software.  During the past several years, the 
Company and other manufacturers of network computing systems and products 
have experienced intense competition from alternative desktop computing 
products, particularly personal computers, which has slowed the growth and 
development of the network computing market.  Until recently, the absence of 
X protocol support from Microsoft Corporation ("Microsoft"), combined with 
the proliferation of off-the-shelf Windows-based application software, 
constituted an obstacle to the expansion of the network computing model into 
Windows-based environments.  The introduction of the Company's WINCENTER 
multi-user Windows application server software and new, lower-priced network 
computers have allowed the Company to offer network computing systems that 
provide users with access to Windows applications, although sales of these 
new products have been limited to date. The Company's future success will 
depend in substantial part upon increased acceptance of the network computing 
model and the successful marketing of the Company's new network computing 
products.  There can be no assurance that the Company's new network computing 
products will compete successfully with alternative desktop solutions or that 
the network computing model will be widely adopted in the rapidly evolving 
desktop computer market.  The failure of new markets to develop for the 
Company's network computing products would have a material, adverse effect on 
the Company's business, operating results and financial condition.  See "Item 
1. Business - Industry Background" and "Business - Markets and Applications" 
in the Company's Annual Report on Form 10-K for the year ended December 31, 
1995. 

                                      12
<PAGE>
                          NETWORK COMPUTING DEVICES, INC.
COMPETITION

The desktop computer and information access markets are characterized by 
rapidly changing technology and evolving industry standards.  The Company 
experiences significant competition from other network computer 
manufacturers, suppliers of personal computers and workstations and software 
developers.  Competition within the network computing market has intensified 
over the past several years, resulting in price reductions and reduced profit 
margins.  The Company expects this intense competition to continue and there 
can be no assurance that the Company will be able to continue to compete 
successfully against current and future competitors as the desktop computer 
market evolves and competition increases.  The Company's software products 
also face substantial competition from software vendors that offer similar 
products, including several large software companies.  See "Item 1. Business 
- Competition" in the Company's Annual Report on Form 10-K for the year ended 
December 31, 1995. 

FLUCTUATIONS IN OPERATING RESULTS 

The Company's operating results have varied significantly, particularly on a 
quarterly basis, as a result of a number of factors, including general 
economic conditions affecting industry demand for computer products, the 
timing and market acceptance of new product introductions by the Company and 
its competitors, the timing of significant orders from and shipments to large 
customers, periodic changes in product pricing and discounting due to 
competitive factors, and the availability and pricing of key components, such 
as DRAMs, video monitors, integrated circuits and electronic sub-assemblies, 
some of which require substantial order lead times.  The Company's operating 
results may fluctuate in the future as a result of these and other factors, 
including the Company's success in developing and introducing new products, 
its product and customer mix, the level of competition which it experiences 
and its ability to develop and maintain strategic business alliances.  In 
addition, the Company operates with a relatively small backlog.  Revenues and 
operating results therefore generally depend on the volume and timing of 
orders received, which are difficult to forecast and which may occur 
disproportionately during any given quarter or year.  The Company's expense 
levels are based in part on its forecast of future revenues.  If revenues are 
below expectations, the Company's operating results may be adversely 
affected.  The Company has experienced a disproportionate amount of shipments 
occurring in the last month of its fiscal quarters.  This trend increases the 
risk of material quarter-to-quarter fluctuations in the Company's revenues 
and operating results.  In the past, the Company has experienced reduced 
orders during the first and third quarters due to buying patterns common in 
the computer industry.  In addition, sales in Europe have been adversely 
affected in the third calendar quarter, when many European customers reduce 
their business activities. 

NEW PRODUCT DEVELOPMENT AND TIMELY INTRODUCTION OF NEW AND ENHANCED PRODUCTS

The markets for the Company's products are characterized by rapidly changing 
technologies, evolving industry standards, frequent new product introductions 
and short product life cycles.  The Company's future results will depend to a 
considerable extent on its ability to continuously develop, introduce and 
deliver in quantity new hardware and software products that offer its 
customers enhanced performance at competitive prices.  The development and 
introduction of new products is a complex and uncertain process requiring 
substantial financial resources and high levels of innovation, accurate 
anticipation of technological and market trends and the successful and timely 
completion of product development.  Once a hardware product is developed, the 
Company must rapidly bring it into volume production, a process that requires 
accurate forecasting of customer requirements in order to achieve acceptable 
manufacturing costs.  The introduction of new or enhanced products also 
requires the Company to manage the transition from older, displaced products 
in order to minimize disruption to customer ordering patterns, avoid 
excessive levels of older product inventories and ensure that adequate 
supplies of new products can be delivered to meet customer demand.  As the 
Company is continuously engaged in this product development and transition 
process, its operating results may be subject to considerable fluctuation, 
particularly when measured on a quarterly basis.  The inability to finance 
important research and development projects, delays in the introduction of 
new and enhanced products, the failure of such products to gain market 
acceptance, or problems associated with new product transitions could 
adversely affect the Company's operating results.  See "Item 1. Business 
-Industry Background" and "Business - Product Development" in the Company's 
Annual Report on Form 10-K for the year ended December 31, 1995. 


                                      13
<PAGE>

                          NETWORK COMPUTING DEVICES, INC.

RELIANCE ON INDEPENDENT DISTRIBUTORS AND RESELLERS

The Company relies substantially on independent distributors and resellers 
for the marketing and distribution of its products, particularly its Software 
products.  During 1995, the Company consolidated its Software sales 
operations by creating a single organization devoted to the sale of the 
Company's PC connectivity and messaging software and re-oriented its Software 
sales strategy toward the increased use of distributors, VARs and other 
resellers.  In early 1996, the Company experienced significant returns of its 
Software products from its distributors.  There can be no assurance that the 
Company will not experience similar levels of returns in the future.  In 
addition, there can be no assurance that the Company's distributors and 
resellers will continue their current relationships with the Company or that 
they will not give higher priority to the sale of other products, which could 
include products of the Company's competitors.  A reduction in sales effort 
or discontinuance of sales of the Company's products by its distributors and 
resellers could lead to reduced sales and could adversely affect the 
Company's operating results.  In addition, there can be no assurance as to 
the continued viability or the financial stability of the Company's 
distributors and resellers, the Company's ability to retain its existing 
distributors and resellers or the Company's ability to add distributors and 
resellers in the future.  See "Item 1. Business - Marketing and Sales" in the 
Company's Annual Report on Form 10-K for the year ended December 31, 1995. 

RELIANCE ON INDEPENDENT CONTRACTORS 

The Company relies on independent contractors for virtually all of the 
sub-assembly of the Company's network computer products.  The Company's 
reliance on these independent contractors limits its control over delivery 
schedules, quality assurance and product costs.  In addition, a number of the 
Company's independent suppliers are located abroad.  The Company's reliance 
on these foreign suppliers subjects the Company to risks such as the 
imposition of unfavorable governmental controls or other trade restrictions, 
changes in tariffs and political instability.  The Company currently obtains 
all of the sub-assemblies used for its network computer products (consisting 
of all major components except monitors and cables) from a single supplier 
located in Thailand.  Any significant interruption in the supply of 
sub-assemblies from this contractor would have a material adverse effect on 
the Company's business and operating results.  Disruptions in the provision 
of components by the Company's other suppliers, or other events that would 
require the Company to seek alternate sources of supply, could also lead to 
supply constraints or delays in delivery of the Company's products and 
adversely affect its operating results.  The operations of certain of the 
Company's foreign suppliers were briefly disrupted during 1992 due to 
political instability in Thailand.  See "Item 1. Business - Manufacturing 
and Supplies" in the Company's Annual Report on Form 10-K for the year ended 
December 31, 1995. 

INTERNATIONAL SALES 

A majority of the Company's international sales are denominated in U.S. 
dollars, and an increase in the value of the U.S. dollar relative to foreign 
currencies could make the Company's products less competitive in those 
markets.  Over the past two years, a significant portion of international 
revenues have been derived from sales to a customer in the United Kingdom 
that have been denominated in pound sterling and sales denominated in foreign 
currencies may increase in the future.  These sales are subject to exchange 
rate fluctuations which could affect the Company's operating results 
negatively or positively, depending on the value of the U.S. dollar against 
the other currency.  Where the Company believes foreign currency-denominated 
sales could pose significant exposure to exchange rate fluctuations, the 
Company acquires forward exchange contracts in an effort to reduce such 
exposure.  International sales and operations may also be subject to risks 
such as the imposition of governmental controls, export license requirements, 
restrictions on the export of technology, political instability, trade 
restrictions, changes in tariffs and difficulties in staffing and managing 
international operations and managing accounts receivable.  In addition, the 
laws of certain countries do not protect the Company's products and 
intellectual property rights to the same extent as the laws of the United 
States.  There can be no assurance that these factors will not have an 
adverse effect on the Company's future international sales and, consequently, 
on the Company's operating results. 


                                      14

<PAGE>

                          NETWORK COMPUTING DEVICES, INC.

DEPENDENCE ON KEY PERSONNEL 

The Company's success depends to a significant degree upon the continuing 
contributions of its senior management and other key employees.  Recently, 
the Company experienced turnover of certain senior management positions.  
Robert G. Gilbertson was appointed to the position of President and Chief 
Executive Officer and Rudolph G. Morin was appointed as Executive Vice 
President of Operations and Finance.  Moreover, partially as a consequence of 
the restructuring of its business in 1995, the Company has experienced 
significant turnover of management personnel, particularly in its finance, 
procurement, manufacturing, and sales organizations.  The Company believes 
that its future success will depend in large part on its ability to attract 
and retain highly-skilled engineering, managerial, sales and marketing 
personnel.  Competition for such personnel is intense, and there can be no 
assurance that the Company will be successful in attracting, integrating and 
retaining such personnel.  Failure to attract and retain key personnel could 
have a material adverse effect on the Company's business, operating results 
or financial condition. 

VOLATILITY OF STOCK PRICE 

The market price of the Company's common stock has fluctuated significantly 
over the past several years and is subject to material fluctuations in the 
future in response to announcements concerning the Company or its competitors 
or customers, quarterly variations in operating results, announcements of 
technological innovations, the introduction of new products or changes in 
product pricing policies by the Company or its competitors, general 
conditions in the computer industry, developments in the financial markets 
and other factors.  In particular, shortfalls in the Company's quarterly 
operating results from historical levels or from levels forecast by 
securities analysts could have an adverse effect on the trading price of the 
common stock.  The Company may not be able to quantify such a quarterly 
shortfall until the end of the quarter, which could result in an immediate 
and adverse effect on the common stock price. In addition, the stock market 
has, from time to time, experienced extreme price and volume fluctuations 
that have particularly affected the market prices for technology companies 
and which have been unrelated to the operating performance of the affected 
companies.  Broad market fluctuations of this type may adversely affect the 
future market price of the Company's common stock.


                                      15

<PAGE>

                          NETWORK COMPUTING DEVICES, INC.

                            PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Reference is made to "Item 3. Legal Proceedings" in the Company's Annual 
Report on Form 10-K for the year ended December 31, 1995 for a description of 
litigation pending against the Company and certain of its officers and 
directors.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Annual Meeting of Shareholders of the Company was held on July 30, 1996.

(a)     The following five persons nominated by management were elected as
        directors at the meeting:

        Robert G. Gilbertson
        Philip Greer
        Paul Low
        Stephen A. MacDonald
        Peter Preuss

(b)     A proposal to increase the number of shares of Common Stock reserved for
        issuance under the Company's 1989 Stock Option Plan by 1,000,000 shares
        was approved by a vote of 5,555,106 shares for, 2,119,517 shares
        against, 99,881 shares abstaining, and 7,507,490 broker non-votes.

(c)     A proposal to increase the number of shares of Common Stock reserved for
        issuance under the Company's Employee Stock Purchase Plan by 350,000
        shares was approved by a vote of 7,508,646 shares for, 1,054,301 shares
        against, 104,114 shares abstaining, and 6,614,933 broker non-votes.

(d)     A proposal to ratify the selection of KPMG Peat Marwick LLP as
        independent auditors of the Company for the current fiscal year was
        approved by a vote of 15,189,855 shares for, 47,248 shares against, and
        44,891 shares abstaining.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)     The following exhibits are filed herewith:

Exhibit 11.1      Statement Regarding Computation of Shares Used in Income
                  (Loss) Per Share Computations. 

Exhibit 27        Financial Data Schedule.

(b)     The Company filed no reports on Form 8-K during the three-month period
        ended September 30, 1996.


                                      16


<PAGE>

                          NETWORK COMPUTING DEVICES, INC.


                                   SIGNATURE


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

                                Network Computing Devices, Inc.
                                (Registrant)

Date:  November 12, 1996

                                By:



                               /s/ Rudolph G. Morin
                               ------------------------------------------------
                               Rudolph G. Morin
                               Executive Vice President, Operations and Finance
                               (Duly Authorized and Principal Financial and
                               Accounting Officer)


                                      17