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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 10-Q/A
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended March 31, 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 16,420,434
at April 30, 1996.
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NETWORK COMPUTING DEVICES, INC.
The Registrant hereby amends Part I. Item 2 to read in its entirety as follows:
PART I: FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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, AND 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 INCORPORATES CERTAIN CORRECTIONS TO HISTORICAL
FINANCIAL DATA BUT IS NOT INTENDED TO UPDATE ANY OTHER INFORMATION THAT WAS
PRESENTED IN THIS REPORT WHEN IT WAS ORIGINALLY FILED. THE FOLLOWING DISCUSSION
INCLUDES FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION THAT MAY BE INACCURATE
AS OF THE DATE OF THIS AMENDMENT IN LIGHT OF SUBSEQUENT EVENTS, CHANGES IN
CIRCUMSTANCES OR INFORMATION THAT HAS COME TO LIGHT SINCE THE ORIGINAL FILING OF
THIS REPORT. FOR A MORE RECENT DISCUSSION OF THE MATTERS ADDRESSED IN THIS
ITEM, SEE "PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION" SET FORTH IN THE COMPANY'S FORM 10-Q REPORT
FOR THE QUARTER ENDED JUNE 30, 1996.
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 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.
OVERVIEW
The Company designs, develops, manufactures and markets hardware and 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,
electronic messaging software and, initially, 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.
During the third quarter of 1995, the Company began implementing a plan to
restructure its Systems 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
devoted to the conduct of the Systems business, and a reduction in the number of
employees engaged in Systems business activities. During the third quarter of
1995, the Company recognized charges totaling $7.5 million for the
implementation of this plan, which will continue into 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. The Company anticipates that approximately $1.7 million in
additional revenues associated with the AT&T Agreement will be recognized in
1996. 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 its core business of providing desktop information
access solutions for network computing environments. In February 1996, the
Company sold
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NETWORK COMPUTING DEVICES, INC.
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.
In February 1994, the Company acquired all 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 is currently part of the Company's Software business unit. In
light of disappointing recent operating results, intensifying competition in
this market and other factors, the Company is evaluating various options
including the sales or discontinuation of the Z-Mail product line.
RESULTS OF OPERATIONS
TOTAL NET REVENUES
Total net revenues for the first quarter of 1996 were $30.4 million,
representing a decrease of 19% when compared with $37.5 million for the same
period of 1995. The proportion of international revenues to total net revenues
has remained relatively comparable for the periods presented.
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 6% and 7% of the Company's total net revenues in the first quarters 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 as
as-needed basis to satisfy the requirements of its own customers as well as
internal requirements. The Company believes that sales to Motorola may decline
further during 1996, but is unable to predict 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.
SYSTEMS REVENUES
Systems revenues consist primarily of revenues from the sale of network
computers, or X terminals, and to a lesser extent, revenues from the
licensing of related network computing system software, and the sale of
customer support services. Systems revenues were $26.6 million for the first
quarter of 1996, compared to $32.6 million for the first quarter of 1995 and
$26.5 million for the fourth quarter of 1995. The decline in Systems
revenues from the first quarter of 1995 to the first quarter of 1996 was due
to a combination of factors, including a decline in the overall market demand
for network computer products during 1995, a decline in the average selling
prices ("ASPs") of the Company's Systems products due to intense price
competition, the introduction of lower-priced EXPLORA-Registered Trademark-
network computers, and new product introductions by certain of the Company's
competitors. The slight increase in systems revenues between the fourth
quarter of 1995 and the first quarter of 1996 was related to volume.
However, the volume increases were substantially offset by lower ASPs due to
changes in product mix reflecting increased sales of lower-priced Explora
network computers. The ASPs of these products are significantly lower than
the ASPs of the Company's other Systems products, and the proportion of
EXPLORA units shipped to total units shipped increased significantly from
the fourth quarter of 1995. The Company believes that this trend may
continue in the future.
SOFTWARE REVENUES
Software revenues consisted primarily of revenues from the licensing of PC
connectivity software and electronic mail and messaging software. Prior to 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). Software
revenues were $3.8 million for the first quarter of 1996, a decrease of 23%
compared to the first quarter of 1995, and a decrease of 43% compared to the
fourth quarter of 1995. The decline in software revenues between the first
quarter of 1995 and the first quarter of 1996 was due to significant declines in
shipments across all Software product lines. First quarter 1996 net revenues
included $426,000 associated with the AT&T Agreement, while no revenues related
to the AT&T Agreement were recognized during the first quarter of 1995. The
Company anticipates that approximately $1.3 million in revenues associated with
the AT&T Agreement will be recognized throughout the remainder of 1996.
Although unit shipments of Software products increased from the fourth quarter
of 1995 to the first quarter of 1996, first quarter Software revenues declined
due to a larger proportion of sales to OEMs, which generally carry lower ASPs.
Revenues related to the Z-Mail electronic messaging product line, which the
Company is contemplating selling or discontinuing, were $784,000 in the
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NETWORK COMPUTING DEVICES, INC.
first quarter of 1996, a 30% decrease from the comparable quarter of 1995 and
a 34% decrease from the fourth quarter of 1995. Exclusive of revenues
related to the AT&T Agreement and the Mariner and Z-mail product lines,
Software revenues would have declined by 32% compared to the first quarter of
1995 and by 7% compared to the fourth quarter of 1995.
GROSS MARGIN ON SYSTEMS REVENUES
The Company's gross profit margin on Systems revenues were 24%, 30% and 30% for
the first quarter of 1996, and the first and fourth quarters of 1995,
respectively. The decline in Systems gross margin was primarily due to heavier
price discounting as a result of intense price competition, the increased sale
of lower priced, lower-margin EXPLORA network computers, and increases in
certain component costs. The Company expects Systems gross margins to continue
to be affected by these factors during the balance of 1996.
GROSS MARGIN ON SOFTWARE REVENUES
The Company's gross profit margin on Software revenues was 78% for the first
quarter of 1996, compared to 88% for the first quarter of 1995, and 89% for the
fourth quarter of 1995, reflecting lower revenues taken over proportionately
greater costs, primarily related to the amortization of capitalized software
development costs.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development ("R&D") expenses were $4.1 million and $3.0 million for
the first quarters of 1996 and 1995, respectively. The increase represented
increases in personnel and facilities costs for the Company's Software business
units. Fourth quarter 1995 R&D expenses were $3.6 million. The increase from
the fourth quarter of 1995 to the first quarter of 1996 was attributable to
increases in the engineering staff in all Software product lines. Approximately
$525,000 of such expenses related to the Company's former Internet connectivity
business unit that was sold during the first quarter of 1996, and the expenses
incurred related to this business unit will not continue in the future. As a
percentage of net revenues, R&D expenses increased to 14% for the first quarter
of 1996 from 8% for the first quarter of 1995, reflecting the combined impact of
increased spending and lower net revenues. The Company also plans to continue
investing in research and development in order to improve its competitive
position in the market. However, the amount of such expenses may fluctuate in
future periods.
MARKETING AND SELLING
Marketing and selling expenses were $9.6 million, $8.9 million, and $8.7 million
for the first quarters of 1996 and 1995, and the fourth quarter of 1995,
respectively. The increases in the first quarter of 1996 were primarily related
to higher staffing costs associated with increased personnel, and to higher
promotional costs. As a percentage of total net revenues, marketing and selling
expenses were 31%, 24%, and 26% for the first quarters of 1996 and 1995, and the
fourth quarter of 1995, respectively, reflecting the combined effects of
increased spending and lower net revenues.
GENERAL AND ADMINISTRATIVE
General and administrative ("G&A") expenses were $2.5 million and $2.0 million
for the first quarters of 1996 and 1995, respectively, and $2.4 million for the
fourth quarter of 1995. The increase from the fourth quarter of 1995 to the
first quarter of 1996 was primarily related to the write-off in the first
quarter of 1996 of a note receivable from a customer for approximately $450,000,
and this was partially offset by reductions in the use of outside consultants
and a reduction in staffing costs. When compared to the first quarter of 1995,
the increase in first quarter 1996 expenses was due primarily to the
aforementioned write off of a customer note receivable. As a percentage of net
revenues, G&A expenses increased to 8% in the first quarter of 1996 from 5% in
the first quarter of 1995, and 7% in the fourth quarter of 1995, and resulted
from the combined impact of increased expenses and lower revenues.
OTHER INCOME
Other income includes interest income, net of interest expense. The increase in
first quarter 1996 interest income, net, over first quarter 1995 was due
primarily to lower interest expense incurred on declining capital lease
obligation balances.
GAIN ON SALE OF PRODUCT LINE
The gain on the sale of the product line for the first quarter of 1996
represents the net gain recognized on the Company's sale of the Mariner product
line.
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NETWORK COMPUTING DEVICES, INC.
INCOME TAXES
The Company recorded an income tax benefit during the first quarter of 1996 of
$189,000 due to a loss incurred during that quarter. This compares to an income
tax provision of $163,000 during the first quarter of 1995.
FINANCIAL CONDITION
Total assets as of March 31, 1996 increased by $1.5 million, or two percent,
from December 31, 1995. The change in total assets principally reflects an
increase in inventories of $5.3 million. The increase in inventories was
partially offset by a decrease in accounts receivable of $2.0 million, and
decreases in the combined balances of cash and short-term investments used for
inventory purchases. Cash balances were positively affected by $7.3 million
related to the sale of the Company's Mariner product line.
Total liabilities as of March 31, 1996 increased by $0.7 million, or two
percent, from December 31, 1995. The increase was primarily associated with
higher accounts payable balances related to increased inventories, partially
offset by slight decreases in accrued expenses and capital lease obligations.
LIQUIDITY
At March 31, 1996, the Company's primary sources of liquidity consisted of
combined cash and equivalents and short-term investments totaling $33.5
million. The Company has a $7.0 million bank line of credit; however, as a
result of its loss for the year ended December 31, 1995, the Company is in
default under certain financial covenants in its agreement as of March 31,
1996, and accordingly, its line of credit was unavailable. 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, or X terminals, 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 Pro 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.
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, reduced profit margins and the loss of the
Company's leading market share position in the X terminal market. This
competition has adversely affected the Company's operating results. In addition,
intense competition from alternative desktop computing products, particularly
personal computers, has
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resulted in a reduction in demand for X terminal products. 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 "ltem 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
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 an increasingly
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 insure 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 - Research and Development" in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.
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 late 1995
and early 1996, the Company has experienced significant returns of its Software
products from its distributors. There can be no assurance that the Company will
not continue to experience similar problems. 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
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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 in 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.
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, Robert
G. Gilbertson was appointed to the position of President and Chief Executive
Officer of the Company. 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 also 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.
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NETWORK COMPUTING DEVICES, INC.
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.
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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: August 22, 1996
By:
/s/ Rudolph G. Morin
------------------------------------------------
Rudolph G. Morin
Executive Vice President, Operations and Finance
(Duly Authorized and Principal Financial and
Accounting Officer)
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