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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K

/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended DECEMBER 31, 2000

/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
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Commission File Number 0-20124

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

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

301 RAVENDALE DRIVE, MOUNTAIN VIEW, CALIFORNIA 94043
(Address of principal executive offices) (Zip Code)

(650) 694-0650
(Registrant's telephone number, including area code)

Securities registered pursuant to 12(b) of the Act: None

Securities registered pursuant to 12(g) of the Act:

COMMON STOCK, $0.001 PAR VALUE
(Title of class)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this form 10-K or any amendment to this
form 10-K. / /

The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the Common Stock on February
28, 2001, as reported on the Nasdaq Stock Market, was approximately $4,313,645.
Shares of Common Stock held by each officer, director and holder of 5% or more
of the outstanding Common Stock have been excluded in that such persons may be
deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.

As of February 28, 2001, 17,613,237 shares of the registrant's Common Stock and
220,000 shares of Convertible Preferred Stock, Series B, were outstanding.

Documents Incorporated by Reference

Portions of the Proxy Statement for the Annual Meeting of Stockholders of
Network Computing Devices, Inc. (the "Proxy Statement") scheduled to be held on
or about May 23, 2001, are incorporated by reference in Part III of this Report
on Form 10-K.

PART I

THIS REPORT INCLUDES A NUMBER OF FORWARD-LOOKING STATEMENTS, WHICH REFLECT
OUR CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE. THESE
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES,
INCLUDING THOSE DISCUSSED IN "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--FUTURE PERFORMANCE AND RISK
FACTORS" AND ELSEWHERE IN THIS REPORT, THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM HISTORICAL RESULTS OR THOSE CURRENTLY ANTICIPATED. IN THIS
REPORT, THE WORDS "ANTICIPATES," "BELIEVES," "EXPECTS," "INTENDS," "FUTURE" AND
SIMILAR EXPRESSIONS IDENTIFY FORWARD-LOOKING STATEMENTS. READERS ARE CAUTIONED
NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK
ONLY AS OF THE DATE HEREOF.

ITEM 1. BUSINESS.

GENERAL

Network Computing Devices, Inc. provides thin client hardware and
software that delivers simultaneous, high-performance, easy-to-manage and
cost effective access to all of the information on enterprise intranets and
the Internet from thin client, UNIX and PC desktops. Our product line
includes the NCD THINSTAR line of Windows-based terminals, the NCD EXPLORA,
NC200, NC400 AND NC900 network computers. On the software side we offer the
NCD THINPATH family of client and server software, developed to enhance the
connectivity, management and features of the NCD thin clients as well as PCs
in accessing information and applications on Windows servers. Some of the
software products were part of the NCD THINSTAR software family in 1998; they
have been re-named and were announced in March 1999 as part of the THINPATH
software family. Our thin clients, THINPATH software, and installation and
support services are a combination that delivers a fully integrated desktop
solution to companies seeking a low-cost, easy to manage, simple to use, high
performance user experience. Since introducing our first product in 1989, we
have installed over 1,000,000 thin clients worldwide.

Network Computing Devices, Inc. is a Delaware corporation. We were
originally incorporated in California in February 1988 and were reincorporated
in Delaware in October 1998. Unless the context otherwise requires, the terms
"the Company" and "NCD" refer to Network Computing Devices, Inc. and its
consolidated subsidiaries.

INDUSTRY BACKGROUND

THIN CLIENT COMPUTING

Computing environments made a pendulum-like swing from the highly
centralized mainframe and minicomputer systems of the 1970s to the fully
distributed personal computer- and workstation-based systems of the 1980s. While
the earlier approach benefited from centralized system administration and
security, users had to compete for under-powered, centralized processors on a
timesharing basis, using low-performance, character-based "dumb" terminals.

During the 1980s, microprocessor-based systems improved in price and
performance, and graphical user interfaces ("GUIs") with easy-to-use windows,
menus, and icons, became widely available. User groups within large
organizations began implementing their own solutions, using personal computers
and workstations on the desktop to give each individual user a dedicated
computing resource. The need to interconnect these computing resources led to
the development of local area networks ("LANs"), which resulted in processing,
data and applications being spread across many desktops. This approach brought
with it new problems: the high cost of installing, maintaining and upgrading a
computer on every desktop; under-utilization of individual computing resources;
and complex system management requiring large IT staffs.

As the 1990s approached, businesses developed networks and highly efficient
networked servers that could provide the information required to remain
competitive. Since this data was being accessed and used by unsophisticated
non-technical individuals, it became important to provide simple,
high-performance graphics devices to access the data, and the tools that made it
easy to manage the information and the devices that accessed it. A new computing
environment evolved and came to be referred to as "thin client computing" which
combines the cost-effectiveness, manageability and security of the original
centralized model with the performance, GUIs and network accessibility of the
later distributed model.

The original development of thin client computing came in the UNIX
environment using the X Windows System (often simply called X). It was followed
in the Microsoft Windows environment by Citrix's Independent Computing
Architecture ("ICA") and then by Microsoft's Remote Desktop Protocol ("RDP").
All three technologies allow applications to run on centrally-administered
servers, taking advantage of enterprise-level resources. The applications'
graphical user interface ("GUI") is then sent over the network to the user's
desktop or viewing appliance. This separation of the display of applications
from the computing they require enables organizations to deploy, manage and
upgrade one or a small number of servers instead of hundreds or thousands of
individual personal computers. The result is faster access to new technology,
higher productivity, longer use of both client and server capital investments,
and greatly improved use of information technology staff resources.

Over the last several years, a number of important developments occurred
which expanded the potential markets for network computing systems. First,
the availability of the powerful Pentium microprocessor enabled the
development of complex Windows-based systems. The thin client model was
solidified by the introduction of the "lean client" initiative, Intel's thin
client architecture, demonstrating its support for thin clients and its
investment in us to work on the realization of the lean client initiative.
Second, Microsoft NT Server software, combined with Microsoft-authorized
multi-user software such as Citrix MetaFrame and NCD THINPATH, became
available to support multi-user Windows applications. In September 1998,
Microsoft demonstrated its support of the thin client computing model with
its introduction of Windows NT 4.0 server, Terminal Server Edition (Windows
Terminal Server) and its support of the development of Windows CE-based thin
clients to access these servers. This has been followed and significantly
enhanced by their subsequent integration of Terminal Services into Windows
2000, enabling thin clients to more easily access Windows applications from
any Windows server. Third, the rapid growth of the Internet and
Internet-based computing has popularized the concept of remote computing and
created new interest in the thin client computing model.

With the centralization of applications in this client computing model,
much greater emphasis is placed on the management of servers that support
increasing numbers of users for their mission critical applications. This has
created new market opportunities for server monitoring and management software
products.

Looking further forward, the emphasis on development of a "web services"
model for computing where programs and objects are distributed across the
internet will allow a new class of desktop device based on a browser to
become a dominant force in the access device market and provide opportunities
for the NCD ThinSTAR and NC products which contain a local browser.

With the rapid evolution of the internet, more companies are looking at
deploying thin client applications through web-based interfaces which is
driving the deployment of distributed web servers based on various
technologies such as Intel and National Semiconductor microprocessors,
operating systems from Microsoft and Sun, as well as the Linux operating
system.

With the move of applications to the server in thin client computing,
there has been a rapid rise in the interest in Application Service Providers
("ASPs"), companies that rent application time to end users to save them the
administrative costs of running their own IT department.

INFORMATION ACCESS AND INFRASTRUCTURE MANAGEMENT SOFTWARE

Software is key to information access and infrastructure management. The
physical connection to the intranet or Internet is relatively simple; but the
simple, well managed, cost-effective operation of network-wide computing
resources requires sophisticated software.

The market for enterprise information access and infrastructure management
software is large and comprised of a number of segments, many of which are
expanding rapidly. Segments of the information access market include: PC
software for accessing remote UNIX and Windows applications and Internet
integration software. The server management software market is also large, with
the Windows server management segment experiencing the highest rate of growth.

With the continuing proliferation of increasingly powerful and low-cost PCs
in large organizations, we identified a demand for software products to enable
DOS-based and Windows-based PCs to emulate X terminals for use in predominantly
UNIX environments. In order to address this market, in 1992 we acquired Graphic
Software Systems, a pioneer in the development of X software for PCs. In 1993,
we introduced PC-XWARE, its initial PC-UNIX integration software product.
PC-XWARE is based on our NCDWARE X terminal operating environment and provides
network connectivity using an NCD-developed TCP/IP software stack. NCD now
offers versions of PC-XWARE for WINDOWS 3.1 through WINDOWS 2000 as well as
WINDOWS NT users in addition to its new version, NCD THINPATH X-WARE, a part of
its NCD THINPATH software family.

In 1995, we introduced NCD WINCENTER software that included Microsoft
Windows NT as its basic operating system and WinFrame, Microsoft-authorized
multi-user software that we licensed from Citrix Systems, Inc. NCD WINCENTER
also included NCD-developed graphics and network features that make it
compatible with the X Windows protocol supported by our thin clients and UNIX
workstations. NCD WINCENTER allowed a single server to provide Windows
applications to many users simultaneously. In September of 1998, the
licensing agreement with Citrix was terminated.

Building on this core competency, in 1999 we introduced the NCD THINPATH
family of software that includes three types of functionality--connectivity,
management and desktop support. The software includes emulators that allow any
desktop to access virtually any host environment, management tools to remotely
administer desktops and to optimize server performance and support of local
printers, peripheral devices and audio input/output. These products deliver
features that enhance the performance of Microsoft's Windows Terminal Server
without adding a layer of protocol software.

In January 2000, we acquired Multiplicity LLC, a provider of strategic
performance, capacity and service level management software for Windows NT
server environments.

In August 2000, we repositioned our ThinPATH software to concentrate on
client-side management and feature extension, re-establishing a strategic
relationship with Citrix Systems. As a result, we deemphasized products which
were centered on a server-based software strategy, including the Multiplicity
product, and we discontinued Multiplicity's operations in September 2000.

MARKETS AND APPLICATIONS

Our thin clients are used in a broad range of industries for a wide variety
of applications. Thin clients are widely used in task-based applications like
order-entry and point-of-sale. Our main target industries are healthcare,
retail, finance and education.

Initially, our X-terminal systems were sold as alternatives to
high-priced UNIX workstations required to

access applications on UNIX servers. Later, emulators were added to give them
the additional functionality of an ASCII terminal or IBM 3270 terminal
replacement. By mid-1996, server software existed that made them an
enhancement of, or alternative to, personal computer networks.

X-terminals were developed to allow multiple users to access UNIX
applications on servers without the burden of expensive UNIX workstations on
their desktop. When Windows applications became a requirement, these users were
required to add a bulky and expensive PC to their desk space. We introduced NCD
WINCENTER to provide Windows NT access from the already existing X-terminal of
the UNIX users. With Microsoft Windows NT Server 4.0, Terminal Server Edition
("TSE"), UNIX users can still access Windows applications through Citrix
Metaframe protocol with NCD WINCENTER for Metaframe.

Microsoft's Terminal Services in Windows 2000 includes the Remote Desktop
Protocol ("RDP") that allows Windows CE-based desktop devices to access Windows
NT applications without the addition of Citrix MetaFrame. While the integrated
RDP protocol does not include many of the features supported by Citrix MetaFrame
(the ICA protocol), NCD THINPATH software includes enhancements to Terminal
Services with RDP that gives it the most important features required by major
implementers of Windows-based terminals in a Windows 2000 environment. This
delivers a low cost solution without the expense and complexity of adding a
non-Microsoft protocol layer of software.

TERMINAL REPLACEMENT. A principal market for X-based thin clients is
replacement of character-based terminals, such as ASCII and 3270 terminals.
Many commercial users in transaction processing applications are upgrading
their centralized systems to achieve the productivity advantages of GUIs and
windowing as well as the flexibility of "open" systems based on
industry-standard operating systems such as UNIX. Our thin client products
offer such customers the ability to have a single desktop device that gives
them access to both existing legacy applications as well as new GUI-based
versions while maintaining the central administration they have come to
depend upon.

WORKSTATION ENVIRONMENTS. Many of the early buyers of X-terminals were
also early users of workstation technology and viewed X-based thin clients
primarily as a low-cost alternative for expanding their workstation networks.
In these environments, thin clients can access the excess processing power of
existing workstations, supplying users with a GUI at a considerably lower
cost than a workstation with equivalent display characteristics. Thus,
organizations can provide windowing and graphics for uses that previously
could not justify the cost of a full workstation. Many users of X-terminals
in UNIX workstation or minicomputer environments have developed an optimized
configuration of workstations and X-terminals. In these environments, rather
than providing some users with workstations and others with X-terminals,
every user is given an X-terminal, and compute servers based on
high-performance workstations (without monitors) that are shared among all
users. The organization thereby realizes cost advantages by centralizing
processing, memory and disk requirements into fewer, high-performance servers.

PERSONAL COMPUTER ENVIRONMENTS. With Microsoft's introduction of Windows
NT Server 4.0, Terminal Server Edition, we introduced the NCD THINSTAR family
of thin clients that are optimized to access Windows NT and NCD THINPATH
software that enhances the capabilities of TSE. For task-based users, like
data entry clerks and call center specialists, we believe that this
integration of thin client hardware and software is a viable alternative to
PCs. With the addition of NCD THINPATH emulators, these Windows-oriented
desktops can also access legacy systems environments like AS/400s and
mainframes.

INTRANET ENVIRONMENTS. Many companies employ multiple operating
environments on their corporate network, including intranet and Internet
connectivity. This capability facilitates employee collaboration and allows
access to the enormous information resources that exist around the company
and around the world. NCD thin clients and NCD THINPATH software are offered
as a means of providing cost-effective, easy to maintain access to all of
these resources. NCD THINSTAR Windows-based terminals are optimized to access
all resources through

Microsoft Windows Terminal Server, while the NCD NC200 and NCD NC400 network
computers are optimized for browser access. The NCD EXPLORA class of network
terminals provide cost-effective access to X-based applications. The NCD
THINPATH family of software provides emulators to permit PCs and NCD THINSTAR
terminals to access virtually any server, to permit easy network management
and to provide support for local peripheral devices on NCD THINSTAR and
desktop PCs.

PRODUCTS

THIN CLIENT HARDWARE PRODUCTS

We offer a broad line of thin client products that provide businesses and
other enterprises with an open systems approach to network computing based on
our Network Computing Architecture. Our thin client devices include NCD THINSTAR
Windows-based terminals, NC200, NC400 AND NC900 network computers and EXPLORA
network terminals.

THIN CLIENTS. Our thin client products are desktop devices that are used
to access information and applications residing on compute servers in a local
area network or wide area network. With our thin clients, applications can be
executed on the powerful networked servers, and the results displayed on
simple, cost-effective desktop devices. As discussed above, the thin clients
were initially introduced to access UNIX applications; later the software was
added to allow these same devices to access mainframes and other non-UNIX
servers. With the growing popularity of Windows environments, we have
introduced the NCD THINSTAR Windows-based terminals and NCD THINPATH software
to optimize access to networked Windows NT servers.

Our thin client product line includes models with various performance
characteristics, various screen sizes and a range of software extensions and
network interfaces. Hardware platforms are based on different microprocessors,
addressing a wide range of price and performance requirements. Custom ASICs used
in the design of most of our products help reduce the cost of connection logic
and provide hardware acceleration for certain graphics functions. Our thin
clients feature single-board electronics and incorporate current ergonomic
standards in monitor technology. Our thin clients come with a full line of
peripherals, including mouse and several keyboard options.

NCD THINSTAR 200, THINSTAR 300 AND THINSTAR 400. Windows-based terminals
were the first family of thin clients introduced with the Windows CE
operating system kernel. The THINSTAR 300 was the first thin client to employ
the Intel lean client architecture that we developed under an agreement with
Intel. This model provides higher performance than the THINSTAR 200, and can
support a greater number of peripheral devices. THINSTAR 400 is the first
Windows-based terminal to provide an internal PCI slot for expendability and
offers increased performance over the THINSTAR 300. The THINSTAR 450 PRO will
support Microsoft WBT Professional with Windows NT Embedded. In January 2001,
we announced plans to bring a new family of Windows-based terminal products
to market based on the National Semiconductor Geode integrated chipset.

Our NCD NC200, NC400, AND NC900 network computers, and the
EXPLORA 700 devices, are high-performance network computers that are targeted
at customers who want browser access to the network or who have a Java
requirement. The NC200/400 are a line of network computers acquired in the
1998 acquisition of the Tektronix Network Displays business unit. In June
2000, we introduced the NC900 to be a replacement and upgrade for the NC200
and NC400 products. This new product is intended to consolidate and simplify
our NC product offering while providing improved performance to the user. All
of these models are based on powerful MIPS processors.

The NCD EXPLORA 400/450 family are our entry level network terminal
product. They target the low end UNIX workstation replacement market. They are
based on the 32-bit PowerPC RISC processor.

SOFTWARE PRODUCTS

NCDWARE AND NCD NCBRIDGE. Our UNIX based thin clients run NCDWARE and
NCD NCBRIDGE, our proprietary operating systems. These products incorporate
extensive enhancements to the basic X server software to improve performance,
system manageability and robustness.

NCD THINPATH SOFTWARE. We offer a family of client-based and
server-based software products that deliver capabilities that are important to
enterprises deploying the emerging thin client computing model. The series of
software modules allows Windows-based terminals and PCs to emulate virtually
any desktop device so that they can access any server on the network,
regardless of its operating system. This software is designed to make
centralized management and support of the network easier, and to permit
support of local printers and other peripheral devices on Windows-based
terminals and PCs without adding protocol software to Microsoft's Terminal
Server.

NCD PC-XWARE. NCD PC-XWARE is software for Windows PCs that provides
connectivity to X Windows applications running on UNIX host systems. We offer
versions of NCD PC-XWARE for WINDOWS 3.1, WINDOWS 95 and WINDOWS NT. NCD
PC-XWARE is based on our NCDWARE network computing software and offers many
of the same local applications and network management features.

PRODUCT DEVELOPMENT

We believe that we must simplify and enhance our existing line of thin
client and software products and continue developing new hardware and
software products that incorporate the latest improvements in technology in
order to maintain our position as a major supplier of thin client solutions
and expand the market for this class of computing and information access
products. Accordingly, we are committed to investing resources in software
and hardware development activities.

Our current development programs include:

o Server and client software for making thin client devices and PCs easy
to deploy and manage in multi-user Windows NT environments,

o Server and client software for connecting thin client devices and PCs
to a broad range of applications running on Windows NT and legacy
systems,

o Windows-based terminals with and without integrated browsers based on
the National Semiconductor Geode chipset,

o Extension of the browser capability on the ThinSTAR Windows-based
terminals and support for future Microsoft embedded operating systems
including Windows CE 3.0, 4.0 and NT Embedded, and

o Continued feature enhancements of network computer platforms.

There can be no assurance that any of these development efforts will result
in the introduction of new products or that any such products will be
commercially successful. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations--Future Performance and Risk
Factors--New Product Development and Timely Introduction of New and Enhanced
Products."

During 2000, 1999 and 1998, the Company's research and development
expenditures were $8,393,000, $12,935,000, and $13,213,000, respectively. The
significant decrease in R&D expenses resulted from our reduction in R&D
personnel. We expect to spend approximately $3.3 million in R&D in 2001.

THE FOREGOING DISCUSSION CONCERNING OUR PRODUCT DEVELOPMENT PROGRAM
INCLUDES FORWARD-LOOKING STATEMENTS. ACTUAL PRODUCT DEVELOPMENT RESULTS MAY
DIFFER SUBSTANTIALLY DEPENDING UPON A VARIETY OF FACTORS, INCLUDING THOSE
DESCRIBED UNDER "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--FUTURE PERFORMANCE AND RISK FACTORS."

MARKETING AND SALES

Our marketing and sales objectives are two-fold. The first is to position
thin client computing within enterprise IT architectures as an approach that is
easy-to-implement and support and meets users' performance goals and the
corporate desire for centralized management. Equally important is our aim to
maintain our position as a recognized leader in the thin client industry and
differentiate our integrated hardware and software offerings from competitors'
products. Both of these objectives need to be addressed through our focus on
indirect channels of distribution.

A key strategy is the education of our channel partners regarding our value
proposition of making access simple and making our integrated hardware and
software solution easy to sell.

Other significant strategies are our work in cooperation with industry
leaders like Intel and Microsoft, and greater focus on vertical industries and
applications like healthcare, retail and call centers.

Our marketing team is organized around our channel market program,
participation in selected trade shows, conferences and seminars, significant
press and analyst contacts both in the technology and business areas,
telemarketing activities and an increasing focus on web-based activities,
including electronic commerce.

International sales, including sales to foreign OEM customers, represented
approximately 40%, 40% and 35% of our net revenues during 2000, 1999 and 1998,
respectively. International sales may be subject to government controls and
other risks, including export licenses, federal restrictions on the export of
critical technology, changes in demand resulting from currency exchange
fluctuations, political instability, trade restrictions and changes in tariffs.
To date, we have experienced no material difficulties due to these factors.

We also sell our products to OEMs who combine our products with computers
and peripherals, add application software and sell complete computer systems to
end-users. OEM sales represented approximately 2%, 9%, and 29% of our revenues
for the years ended December 31, 2000, 1999 and 1998, respectively.

In 2000 Adtcom and Tech Data accounted for 31% and 11%, respectively of our
net revenues. In 1999 Adtcom and Tech Data accounted for 18% and 15%,
respectively of our net revenue. IBM accounted for 29% of our net revenues in
1998.

SERVICE AND SUPPORT

We believe that our ability to provide service and support is and will
continue to be an important element in the marketing of our products. We
maintain in-house repair facilities and also provide telephone and e-mail
access to our technical support staff. Our six technical support engineers
not only provide assistance in diagnosing problems but work closely with
customers to address system integration issues and to assist customers in
increasing the efficiency and productivity of their systems. We provide
system level software support through our factory-based technical maintenance
organization and field system engineers, and also offer software update
services that allow customers to purchase subsequent releases of our software
products. Teleplan, a leading European service organization, provide repair
services for our European customers. Cybersource, a leading Australian
service organization, provides certain repair services for our Australian
customers.

COMPETITION

The market for thin client products and similar products is
characterized by rapidly changing technology and by evolving industry
standards. Although we are a major supplier of thin client computing systems
and software, we experience significant competition from other thin client
manufacturers, suppliers of personal computers and workstations and from
software developers.

In the Windows-based terminal area, our major competitor is Wyse
Technology, Inc. We believe that our principal competitive advantages are our
integrated hardware and software offerings and our networking core competence
and our recognized product reliability. Server manufacturers who offer thin
client products may have advantages over independent thin client vendors,
including us, based on their ability to "bundle" their thin clients, personal
computers and servers in certain large sales opportunities. We are addressing
this competitive threat by forming marketing partnerships with suppliers of
the various pieces of such solutions not provided by us. We also compete with
private label products based on the Wyse offering from Compaq Computer Corp.
Other competitors selling windows-based terminals include Boundless
Technologies and Neoware.

At the low end of the commercial segment of the computer market, we
compete with suppliers of lower-cost ASCII and 3270 terminals. These products
do not offer the graphics and windowing capabilities offered by our thin
client systems, but are still appealing to certain price sensitive customers.
Moreover, PC networks offer an alternate means of upgrading from ASCII and
3270 terminal systems in many commercial applications.

Our NCD ThinPATH family of products faces competition from Microsoft and
Citrix, which have added functionality such as printing and audio to their thin
client software products, as well as from other terminal vendors that have
enhanced their [network] management offerings. While we believe that our
products' features give them a competitive advantage over these other
companies' products, we believe this gap is narrowing and are seeking to add
capabilities in additional areas to maintain our competitive advantage.

NCD PC-XWARE software products face direct competition from several
software companies that offer similar products, including Hummingbird
Communications, Ltd., a Canadian company, Visionware, a subsidiary of The Santa
Cruz Operation, Inc., NetManage, Inc., and Walker, Ritchie, Quinn, a
privately-held company.

In general, competition in the thin client computing market has
intensified over the past few years, resulting in price reductions, reduced
profit margins and increased efforts to maintain market share, which have
adversely affected our operating results. In addition, intense competition
from alternative desktop computing products, particularly personal computers,
has slowed the growth of the thin client computing market. We expect this
intense competition to continue. There can be no assurance that we will be
able to continue to compete successfully against current and future
competitors as the desktop computer market evolves and competition increases.

MANUFACTURING AND SUPPLIES

We conduct certain thin client production activities at our Mountain
View, California facility. These operations consist primarily of final
reconfiguration of systems and shipping consolidation and logistics. With
respect to early production of new products, we also conduct assembly and
configuration, testing and quality control of material, components,
sub-assemblies and systems on a small scale to monitor and ensure product
quality and ease of manufacture of a new design. NCD ships its product to a
third party logistics center located in The Netherlands who in turn ships to
our European distributors.

We currently obtain substantially all of our thin client products from a
single supplier located in Thailand. That manufacturer tests our thin clients in
a network environment using a NCD internally developed, computer integrated
manufacturing ("CIM") system. In addition, they employ a statistical process
control system ("SPC") to maintain quality control

Our products incorporate memory components, such as video random access
memory chips ("VRAMs") that are available from multiple sources but have been
subject to substantial fluctuations in availability and price. Certain other
components, including microprocessors and ASICs, though generally available from
multiple sources, are subject to industry-wide demand that could result in
limited availability or significant fluctuations in pricing. To date, these
fluctuations have not had a material effect on our operating results and we have
been able to obtain an adequate supply of such components.

We currently outsource the reproduction and packaging of our software to
vendors located in California.

BACKLOG

We schedule the manufacture of our thin client products based upon our
projections of near-term demand. Orders from large end-users and OEMs are
generally placed by the customer on an as-needed basis, and we typically ship
products within 45 days after receipt of a firm purchase order. We do not
generally have a significant backlog, and our backlog at any particular time, or
fluctuations in backlog from time to time, may not be representative of actual
sales for any succeeding period.

Because of the ease of manufacturing software products, we are able to
effect the manufacture and shipment of these products quickly in response to
customer orders without maintaining significant inventories, and, as a result,
have historically had little, if any, backlog at any particular time. We do not,
therefore, consider backlog for these products to be a significant measure of
actual sales for any succeeding period.

INVENTORY

We sell our products primarily through channels and thus have placed
inventory of our products into distribution. Efforts are made to have the
inventory in distribution reflect the expected pattern of near-term demand from
reseller partners. The Company provides its distributors with certain programs
including stock rotation and sales protection. Under these programs, the
distributor, for a limited time may return a limited amount of inventory to the
Company for replacement or obtain credits for inventory still on hand in the
event of a price change. In addition, it is possible that the inventory mix will
not be correct, causing a delay in the shipment of products to end user
customers and possible loss of orders.

PROPRIETARY RIGHTS AND LICENSES

We rely primarily on a combination of copyright, trademark and trade secret
laws, employee and third-party non-disclosure agreements and other intellectual
property protection methods to protect our proprietary technology. We hold ten
U.S. patents. Although we intend to pursue a policy of obtaining patents for
appropriate inventions, we believe that our success will depend primarily on the
innovative skills, technical competence and marketing abilities of our personnel
rather than upon the ownership of patents. There can be no assurance that
patents will issue from any pending or future patent applications or that any
claims allowed will be sufficiently broad to protect our technology. In
addition, there can be no assurance that any patents issued to us will not be
challenged, invalidated or circumvented, or that any rights granted thereunder
will provide adequate protection to us.

Certain technology used in our product is licensed from third parties on a
royalty-bearing basis. The costs associated with such royalties were a
significant component of total software cost of sales through 1998. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations." Generally, such licenses grant to us non-exclusive, worldwide
rights with respect to the subject technology and terminate only in the event of
material breach.

Our software products are generally licensed on a right-to-use basis. We
rely primarily on "shrink wrap" or "break the seal" licenses. Certain provisions
of such licenses, including provisions protecting against unauthorized copying
and reverse engineering, may not be enforceable under the laws of some
jurisdictions. In addition, the laws of some foreign countries in which our
software products are distributed do not protect our intellectual property
rights to the same extent as U.S. law.

There can be no assurance that third parties will not assert infringement
claims against us or our suppliers with respect to current or future products.
Although we have historically been able to resolve all asserted claims on terms
which have not had a material effect on our operations, there is no assurance
that any future claims may not require us to enter into unfavorable royalty
arrangements or result in costly litigation.

EMPLOYEES

As of December 31, 2000, we had 138 full-time employees, of whom 10 were
primarily engaged in research and development, 21 in service and technical
support, 50 in marketing and sales, 33 in operations and 24 in administration
and finance. None of our employees are represented by a collective bargaining
agent. We have experienced no work stoppages and believe that our employee
relations are good.

Competition for employees in the computer and software industries is
intense. We believe that our future success will depend, in part, on our ability
to continue to attract and retain highly skilled technical, marketing and
management personnel.

EXECUTIVE OFFICERS OF THE COMPANY

The following sets forth certain information with respect to our executive
officers, and their ages as of March 30, 2001:

NAME AGE POSITION

Rudolph G. Morin......................... 63 President and Chief Executive Officer
Michael A. Garner........................ 54 Chief Financial Officer

Mr. Morin has served as President and Chief Executive Officer since August
1999. Prior to that Mr. Morin had served as Executive Vice President, Operations
& Finance and Chief Financial Officer since joining us in May 1996. Prior to
joining us, Mr. Morin served as Senior Vice President, Finance and
Administration for Memorex Telex Corporation from 1993 to 1996. Prior thereto,
he worked at Data Switch, where he was Executive Vice President. Mr. Morin's
background also includes more than ten years with Thyssen Bornemisza Inc. as
head of corporate development and general manager of several of its
subsidiaries. Mr. Morin holds MBAs from INSEAD and Harvard.

Mr. Garner joined us as Chief Financial Officer in November 2000. He is
also a partner with Tatum CFO Partners, LLP. From 1990 to 1999, Mr. Garner
served as Senior Vice President, CFO and member of the Board of Directors for
Direct Energy, Inc., a high technology manufacturer of lasers for medical and
industrial applications. Prior to this, he served in various executive level
capacities at several high tech companies. His earlier experience includes
positions with KPMG LLP, in both Orange County, California and Kansas City,
Missouri offices. Mr. Garner graduated with honors from Northwest Missouri State
University with a BS in Accounting and a minor in Economics. He is a CPA and a
member of the American Institute of Certified Public Accountants.

ITEM 2. PROPERTIES.

During the second quarter of 2000 we consolidated our principal
administrative, marketing, manufacturing and research and development
operations to a single location in Mountain View, California. The facility,
which comprises 67,000 square feet, is under a lease which provides for a
gross rent of approximately $651,000 and expires February 2003. During the
second quarter of 2000 we also consolidated our software operations to a
single location in Portland, Oregon. The facility, which comprises 16,817
square feet, is under a lease which provides for an annual gross rent of
approximately $164,000 and expires in October 2003. We also lease a 20,000
square foot facility in Novato, California which expires in July 2001. The
entire facility which is currently being subleased to third parties, provides
for an annual gross rent of approximately $564,000. We believe that our
existing facilities are adequate for our present requirements and that
suitable additional space will be available as needed. Our field sales and
service offices worldwide consist of leased office space totaling
approximately 14,000 square feet, with current aggregate gross rents of
approximately $530,000.

ITEM 3. LEGAL PROCEEDINGS.

None.

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

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.

MARKET PRICE DATA

Our Common Stock was traded on the Nasdaq Stock Market under the symbol
"NCDI" since our initial public offering in June 1992 through March 20, 2001.
Our Common Stock is currently traded over-the-counter and is listed on the OTC
Bulletin Board. The following table sets forth, for the periods indicated, the
high and low sale prices for the Common Stock on such market:

HIGH LOW
---- ---

2000:

First Quarter $ 8.8750 $ 4.6250
Second Quarter 5.1875 1.2500
Third Quarter 2.5320 0.8125
Fourth Quarter 0.8750 0.1250

1999:

First Quarter $ 8.00 $ 4.50
Second Quarter 7.00 4.25
Third Quarter 5.4375 4.25
Fourth Quarter 9.00 3.875

The closing sale price for the Common Stock on February 28, 2001 was $0.2812.

As of February 28, 2001, we had 189 holders of record and approximately
4,500 beneficial holders of our Common Stock and 17,613,237 shares of Common
Stock were outstanding.

On March 20, 2001, our Common Stock was delisted from the Nasdaq
National Market due to the failure to maintain a minimum bid price of $1.00
per share. Our Common Stock is now trading on the OTC Bulletin Board, which
is considered to be less liquid and more volatile than the Nasdaq National
Market.

The market price of our Common Stock has fluctuated significantly and is
subject to significant fluctuations in the future. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations--Future
Performance and Risk Factors."

RECENT SALES OF UNREGISTERED SECURITIES

In September 2000 we issued a $3,300,000 convertible promissory note to SCI
Technology, Inc. in exchange for SCI's cancellation of a like amount of accounts
receivable owed by us. The note is due and payable in October 2001, and the
principal is convertible into shares of our Common Stock at the holder's
election at the rate of one share for each $1.00 in principal converted.

In December 2000 we issued 750,000 shares of Common Stock to Tektronix,
Inc. as part of a mutual settlement of claims.

Also in December 2000, we sold 220,000 shares of Series B Preferred Stock
and warrants to purchase 600,000 shares of Common Stock to Guenther Pfaff for an
aggregate sale price of $1,500,000 in cash. Each share

of Preferred Stock is convertible into 10 shares of our Common Stock at any time
upon the election of the holder. The warrants have an exercise price of $.75 per
share and expire in December 2005.

No underwriters were involved in any of the foregoing transactions. All of
the foregoing issuances were deemed exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act as transactions
by an issuer not involving a public offering.

DIVIDEND POLICY

We have never paid cash dividends on our Common Stock. We currently expect
that we will retain our future earnings for use in the operation and expansion
of our business and do not anticipate paying any cash dividends in the
foreseeable future on Common Stock.

On December 28, 2000, we issued 220,000 shares of Series B Preferred
Stock which calls for an annual cumulative dividend of $.41 per share.
Dividends are payable when and as declared by the Board of Directors but
accrue semi-annually if not paid.

ITEM 6. SELECTED FINANCIAL DATA.

The following selected consolidated financial data should be read in
conjunction with "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
and the notes thereto included in "Item 8. Financial Statements and
Supplementary Data."

YEARS ENDED DECEMBER 31,
------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(in thousands, except per share data)

CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenues ...................................... $ 49,263 $ 109,030 $ 105,596 $ 133,400 $ 120,608
Operating income (loss) ........................... (32,697) (9,707) (13,446) 1,736 (17,241)
Income (loss) before income taxes ................. (32,377) (9,143) (9,761) 3,831 (8,721)
Net income (loss) ................................. (32,652) (16,259) (9,103) 2,681 (5,232)
Net income (loss) per share--basic ................ (1.96) (1.00) (0.56) 0.16 (0.32)
Net income (loss) per share--diluted .............. (1.96) (1.00) (0.56) 0.15 (0.32)
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments.. $ 1,758 $ 8,339 $ 21,359 $ 31,480 $ 35,671
Working capital ................................... 3,641 31,052 41,097 53,811 60,981
Total assets ...................................... 26,852 56,764 75,146 86,514 85,693
Capital lease obligations, less current portion ... -- -- 69 160 314
Total shareholders' equity ........................ 7,773 37,876 52,523 60,519 67,425

ITEM 7. 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 OUR 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."

Network Computing Devices, Inc. provides thin client hardware and software
that delivers simultaneous, high-performance, easy-to-manage and cost effective
access to all of the information on enterprise intranets and the Internet from
thin client, UNIX and PC desktops. Our product line includes the NCD THINSTAR
line of Windows-based terminals, the NCD EXPLORA network terminals and NCD NC
200 and NCD NC400 network computers. On the software side, our products are the
NCD THINPATH family of client and server software, developed to enhance the
connectivity, management and features of the NCD thin clients as well as PCs in
accessing information and applications on Windows servers. Some of the software
products were part of the NCD THINSTAR software family in 1998; they have been
re-named and were announced in March 1999 as part of the NCD THINPATH software
family. These products are sold through OEMs, system integrators and
distributor/VAR channels worldwide.

RECENT DEVELOPMENTS

In prior years significant revenues were generated under an Agreement
with IBM. In 1999, the Agreement was modified to reduce sales to IBM and
fiscal year 2000 saw continuing declines in the revenue generated under the
IBM Agreement as that relationship wound down.

In January 2000, we acquired the assets of Multiplicity LLC, a privately
held developer of advanced server management software for Microsoft's Windows NT
and Windows 2000 operating systems. The acquisition was accounted for using the
purchase method. The purchase price was approximately $2.2 million plus a stream
of future payments based on revenue for the four year period following the
acquisition. $1.8 million of the purchase price was allocated to purchased
in-progress research and development and $.4 million was allocated to other
intangible assets.

On March 30, 2000, we finalized a working capital line of credit with a
major financial institution, which provides us with up to $15.0 million of
available credit. Our line of credit is secured by substantially all of our
assets. Under the terms of the agreement borrowings bear interest at a rate
of prime plus 0.75% (10.25% on December 31, 2000). The amount that can be
borrowed at any given time is determined by the balance of aging, location
and other factors of our accounts receivable. The total available and total
outstanding loan was approximately $4.6 million at December 31, 2000.

On March 31, 2000 we announced a restructuring plan involving a general
reduction in workforce affecting all classes of employees and exiting certain
leased facilities. In connection with the plan, we recorded a restructuring
charge of $2.6 million consisting of $2.4 million for employee separation costs
and $0.2 million for facility exit costs.

During the third quarter of 2000 we undertook additional restructuring
actions involving a general reduction in workforce affecting all classes of
employees, exiting certain leased facilities and discontinuing development
activities related to several product lines. In connection with these
actions, we recorded restructuring charges of $1.6 million consisting of cash
charges of $1.0 million for employee separation costs and $0.2 million for
facility exit costs, and non cash charges of $0.4 million related to the
discontinued product lines, including the recognition of an impairment loss
of $0.3 million on certain intangibles attributable to our purchase of
Multiplicity LLC. During the year ended December 31, 2000 we paid $2.9
million of the accrued restructuring liability leaving unpaid cash charges of
$0.4 million included in accrued liabilities as of December 31, 2000. After a
revaluation of the remaining cash liability, a credit to restructuring
expense of $.5 million was recorded in the fourth quarter. The restructuring
plan is expected to be completed by the fourth quarter of 2001.

In April 2000, we finalized an alliance agreement with Hewlett- Packard
Company (HP) whereby HP will sell our products through its indirect sales
channel and direct sales force worldwide. HP will market our network computers,
our line of Windows-based terminal and related software.

In August 2000, we concluded an agreement with SCI Technology, Inc.,
("SCI") a subsidiary of SCI Systems, Inc., to convert $3.3 million of our
accounts payable to SCI into a thirteen-month note. This note bears interest at
6.5% per annum and the outstanding principal can be converted into shares of our
common stock at the rate of $1.00 per share at the option of SCI anytime during
the note period.

In December 2000, we raised $1,500,000 in capital through a private
placement of 220,000 shares of Series B Convertible Preferred Stock with an
investor who was elected a member of the Company's board of directors on
January 11, 2001. The Preferred shares are entitled to dividends of $.41 per
annum, which accrue semi-annually if not paid. Each share of Preferred Stock
is convertible into ten shares of Common Stock at the election of the holder.
In connection with this private placement, the purchaser also received
warrants to purchase 600,000 shares of Common Stock at $.75 per share. The
warrants expire on December 28, 2005. The fair value of the warrants was
clearly not significant and the entire $1,500,000 was

allocated to the fair value of the Preferred Stock.

In December 2000, we entered into a mutual settlement of all claims with
Tektronix. The claims represented unpaid commitments for both parties. As part
of the settlement, we issued 750,000 shares of Common Stock to Tektronix (as a
vendor). A gain on the settlement of $821,000 was recorded in December 2000.

RESULTS OF OPERATIONS

The following table sets forth certain items in our consolidated statements
of operations as a percentage of net revenues for the periods indicated. Figures
are rounded to the nearest whole percentage, and line items presenting subtotal
and total percentages may therefore differ, due to rounding, from the sum of the
percentages for each line item.

YEARS ENDED DECEMBER 31,
-------------------------
2000 1999 1998
---- ---- ----

Net revenues:
Hardware products and services....................................................... 90% 90% 77%
Software licenses and services....................................................... 10% 10% 23%
--- --- ---

Total net revenues................................................................ 100% 100% 100%
---- ---- ----
Cost of revenues:
Hardware products and services....................................................... 78% 58% 56%
Software licenses and services....................................................... 2% 3% 7%
-- -- --

Total cost of revenues............................................................ 80% 61% 63%
--- --- ---

Gross profit............................................................................ 20% 39% 37%
Operating expenses:
Research and development............................................................. 17% 12% 13%
Marketing and selling................................................................ 43% 30% 29%
General and administrative........................................................... 15% 6% 5%
Business restructuring............................................................... 7% -- 1%
Acquired in-process research and development......................................... 4% -- 1%
Gain on settlement................................................................... (2%) -- --
---- -- --

Total operating expenses.......................................................... 84% 48% 49%
--- --- ---

Operating loss......................................................................... (65)% (9)% (13)%
Non-operating income, gains and (losses), net......................................... (1)% 1% 3%
---- -- --

Income (loss) before income taxes....................................................... (66)% (8)% (9)%
Provision for income taxes (income tax benefit)......................................... -- 7% (1)%
-- -- ----

Net loss................................................................................ (66)% (15)% (9)%
===== ===== ====

TOTAL NET REVENUES

Total net revenues for 2000 were $49.3 million, a decrease of 55% from 1999
net revenues of $109.0 million. Net revenues for 1999 increased by 3% compared
to 1998 net revenues of $105.6 million. International revenues were 40% of total
net revenues for 2000 and 1999, representing an increase from 35% in 1998. Sales
to Adtcom and Tech Data accounted for 31% and 11% in 2000 and for 18% and 15% in
1999 revenues, respectively. Sales to IBM accounted for 29% of revenues in 1998.

HARDWARE REVENUES

Hardware revenues consist primarily of revenues from the sale of thin
client products, related hardware, and to a lesser extent, fees for related
hardware service activities. Hardware revenues were $44.6 million in 2000, a
decrease of 55% from $98.5 million for 1999. The decrease in hardware revenues
is due to a significant drop in the demand for our network computers, reduced
sales of Windows-based terminals to distributors, and continued decline in sales
to IBM. 1999 hardware revenues represented an increase of 21% compared to
revenues of $81.2 million in 1998. The increase in revenues in 1999 compared to
1998 reflects increased shipments of Windows-based terminals and NC's partially
offset by a decrease in shipments under the IBM Agreement. The increase in
shipments of NC's was a result of the acquisition of product lines acquired from
Tektronix.

SOFTWARE REVENUES

Software revenues consist primarily of revenues from the licensing of
software products and related support services. Software products that are
included in revenue for the periods presented are (i) NCD THINPATH, (ii) NCD
WINCENTER, our multi-user WINDOWS NT application server software, (iii) NCD
PC-XWARE, our thin client software for PCs, and (iv) NCDWARE, our proprietary
thin client software. Revenues from software and related services were $4.7
million in 2000, a decrease of 55% compared to $10.5 million for 1999. 1999
software revenues decreased by 57% compared to revenues of $24.4 million in
1998. The most significant decrease in 2000 and 1999 was in the NCD WINCENTER
product line because of the loss of our OEM relationship with Citrix ended on
September 30, 1998.

GROSS MARGIN ON HARDWARE REVENUES

Our gross margin percentages on hardware revenues were 14%, 36% and 27% for
the years ended December 31, 2000, 1999 and 1998, respectively. The decrease in
gross margin percentages in 2000 is attributed to lower revenues, and continued
pricing pressures on our Windows-based terminals. The increase in margin in 1999
primarily reflects the decrease in sales of products to IBM on an OEM basis, and
an increase in sales of higher margin NCD branded products.

GROSS MARGIN ON SOFTWARE REVENUES

Our gross margin percentages on software revenues were 77%, 75% and 68% for
the years ended December 31, 2000, 1999 and 1998, respectively. The increase in
2000 and 1999 when compared to 1998 is the result of a move to our branded
products that do not rely on licensed technology and therefore have lower costs.
We still have a few products that use technology licensed from third parties on
a royalty-bearing basis. Software cost of sales includes royalties, packaging,
materials and shipping costs.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development ("R&D") expenses were $8.4 million, $12.9 million
and $13.2 million for the years ended December 31, 2000, 1999 and 1998,
respectively. The decrease in R&D spending was the result of reduced salary and
employee benefit expenses associated with the reduction in our R&D personnel. As
a percentage of net revenues, R&D expenses were 17%, 12% and 13% for 2000, 1999
and 1998, respectively. The higher percentage in 2000 resulted from the
significant decline in net revenues.

MARKETING AND SELLING EXPENSES

Marketing and selling expenses were $21.2 million, $33.0 million and $31.1
million for the years ended December 31, 2000, 1999 and 1998, respectively. The
decrease in 2000, resulted from our cost reduction plans and

the closure of a number of our U.S. and foreign sales offices. The increase of
$1.9 million in 1999 compared to 1998 was the result of increased employee based
expenses that resulted from the Tektronix acquisition. As a percentage of net
revenues, marketing and selling expenses were 43%, 30% and 29% for 2000, 1999
and 1998, respectively. The higher percentage in 2000 resulted from the
significant decline in net revenues.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative ("G&A") expenses were $7.2 million, $6.9
million and $5.2 million for the years ended December 31, 2000, 1999 and
1998, respectively. As a percentage of net revenues, G&A expenses were 14%,
6%, and 5% for the years ended December 31, 2000, 1999 and 1998,
respectively. The higher percentage in 2000 resulted from the significant
decline in net revenues coupled with a $0.8 million loss on foreign currency
translation due to the weakening of the Euro in comparison to the US dollar
and a $0.2 million loss on the disposal of assets in connection with the
downsizing of our operations.

BUSINESS RESTRUCTURING

On December 31, 1998, we acquired the Network Displays business unit of
Tektronix Inc ("NWD"). As a result of the acquisition, we reduced its workforce
and discontinued certain activities that were overlapping with the acquired
business. Accordingly, during the fourth quarter of 1998, we recorded a charge
of $1.0 million for costs of employee severance benefits and to discontinue
overlapping activities. See Note 5 of the "Notes to Consolidated Financial
Statements" contained herein.

During the third quarter of 2000 we undertook additional restructuring
actions involving a general reduction in workforce affecting all classes of
employees, exiting certain leased facilities and discontinuing development
activities related to several product lines. In connection with these actions,
we recorded restructuring charges of $1.6 million consisting of cash charges of
$1.0 million for employee separation costs and $0.2 million for facility exit
costs, and non cash charges of $0.4 million related to the discontinued product
lines, including the recognition of an impairment loss of $0.3 million on the
intangibles attributable to our purchase of Multiplicity LLC. After a
revaluation of the remaining cash liability, a credit to restructuring expense
of $.5 million was recorded in the fourth quarter of 2000. During the year ended
December 31, 2000 we paid $2.9 million of the accrued restructuring liability
leaving unpaid cash charges of $0.4 million included in accrued liabilities as
of December 31, 2000. The restructuring plan is expected to be completed by the
fourth quarter of 2001. As a result of the restructuring, We reduced our
workforce by over 200 employees and our leased facilities in Mountain View,
California were reduced by approximately 86,000 square feet.

CHARGE FOR ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT

In connection with our acquisition of NWD on December 31, 1998,
approximately $1.4 million of the total purchase consideration was allocated to
the value of in-process research and development. The amounts allocated were
determined through established valuation techniques in the high-technology
industry and were expensed upon acquisition because technological feasibility
had not been established and no alternative uses exist. Research and development
costs to bring the products to technological feasibility are not expected to
have a material impact on our future operating results.

The in-process research and development projects acquired in the
acquisition of NWD consisted of

development of a Windows-based terminal and related software, browser terminal
software and token ring support for the NC line of network computers. Further
development on the Windows-based terminal was discontinued during 1999 since the
project overlapped with existing products. There was no significant impact on
operating results as a result of this action. The Windows-based terminal
software was integrated into our existing line of THINPATH software and is
currently being shipped. A new version of browser terminal software was released
and is being shipped as part of the NCBRIDGE software product family. Token ring
support was added to our NC line of network computers and began shipping in
1999.

During the first quarter of 2000, we incurred a charge of $1.8 million
of in-progress research and development associated with the acquisition of
Multiplicity LLC in January, 2000. The amount allocated to in-progress
research and development was determined by a third party assessment using
established techniques for the high-technology industry.

INTEREST INCOME (EXPENSE), NET

Interest income, net of interest expense, was $(500,000), $600,000 and
$1,600,000 for the years ended December 31, 2000, 1999 and 1998, respectively.
The continuing decrease in interest income relates primarily to decreased
average balances in interest-earning accounts. Interest expense increased to
$600,000 in 2000 as a result of our working capital line of credit and
convertible note payable while interest income decreased to $100,000.

OTHER INCOME, NET

Other income includes non-operating income, net of non-operating expense. A
$0.8 million gain on the settlement of claims and counter claims with Tektronix
was recorded in the year ended December 31, 2000. Other income for 1998 reflects
the sale of our interest in Precept Software, Inc. after Precept was acquired by
Cisco Systems in March 1998, resulting in a net gain of approximately $2.1
million.

INCOME TAXES AND INCOME TAX BENEFIT

We recognized an income tax provision of $.3 million and $7.1 million in
2000 and 1999, respectively, compared to an income tax benefit of $0.7 million
in 1998. During 2000 and 1999, we increased the valuation allowance to provide a
full reserve against all of our gross deferred tax assets because operating
losses created uncertainty about our ability to generate sufficient taxable
income to utilize our deferred tax assets. This charge, which was recorded in
2000 and 1999 and foreign income taxes, comprise the 2000 and 1999 tax
provision. See Note 8 of the "Notes to Consolidated Financial Statements."

FINANCIAL CONDITION

Total assets of $26.9 million at December 31, 2000 decreased $29.9 million
from $56.8 million at December 31, 1999. The change in total assets reflects
decreases in cash and equivalents of $3.4 million, short-term investments of
$3.2 million, accounts receivable of $12.8 million, inventory of $7.4 million,
prepaid assets of $1.9 million and property and equipment of $2.1 million. Total
liabilities as of December 31, 2000 increased by $200,000 to $19.1 million from
$18.9 million at December 31, 1999.

CAPITAL REQUIREMENTS

Capital spending requirements for 2001 are estimated at equal to or less
than $0.4 million, and at December 31, 2000, we had no commitments for
capital expenditures. We expect to finance these capital additions with
financing leases.

LIQUIDITY

As of December 31, 2000, we had combined cash and equivalents and
short-term investments totaling $1.8, and $7.9 million in bank ($4.6 million)
and other debt ($3.3 million). Cash used in operations was $11.3 million and
$10.9 million in 2000 and 1999, respectively, compared to cash used in
operations of $5.8 million in 1998. Cash used in operations in 2000 primarily
reflects our net loss of $32.7 million plus decreases in accrued expenses and
deferred service revenue totaling $3.2 million offset in part by decreases in
accounts receivable, inventories and prepaid expenses totaling $21.8 million,
an increase in accounts payable of $2.3 million, non-cash expenditures for
depreciation and amortization of $2.8 million, and a write-off of acquired
in-process R&D of $1.8 million. Cash used in operations in 1999 primarily
reflects our net loss of $16.3 million plus decreases in accrued expenses and
deferred revenues of $3.9 million, deferred income taxes of $6.6 million and
depreciation and amortization of $3.6 million. Cash used in operations in
1998 reflects our net loss of $9.1 million and decreases in accrued expenses
and deferred revenues of $3.2 million and $2.2 million, respectively,
partially offset by decreases in inventories and accounts receivable of $5.8
million and $3.6 million net of provisions, respectively. Cash flows from
investing activities in 2000 came from the net sales of short-term securities
offset by the purchase of property and equipment of $0.7 million. Cash
provided by investing activities in 1999 of $4.1 million primarily came from
the net sales of short-term investments offset by purchases of property and
equipment of $2.7 million. Cash used in investing activities in 1998 of $3.6
million primarily reflects the cash portion of the acquisition of NWD of $3.0
million. Cash from financing activities in 2000 result from the working
capital line of credit of $4.6 million and proceeds from the issuance of
Common Stock of $0.8 million. The proceeds from the sale of Preferred Stock
of $1.5 million was received on January 2, 2001 and is included as a
receivable in other current assets as of December 31, 2000. Cash provided by
financing activities of $1.5 million in 1999 were provided mainly from the
proceeds from the issuance of common stock. Cash used in financing activities
in 1998 of $1.7 million reflects repurchases of $10.7 million of our common
stock, partially offset by investments in our common stock.

On March 30, 2000, we finalized a working capital line of credit with a
major financial institution, which provides us with up to $15.0 million of
available credit. Our line of credit is secured by substantially all of our
assets. Under the terms of the agreement borrowings bear interest at a rate
of prime plus 0.75% (10.25% at December 31, 2000). The amount that can be
borrowed at any given time is determined by the balance of our aging,
location and other factors of accounts receivable. The outstanding loan was
approximately $4.6 million, which represented the maximum available to borrow
at December 31, 2000. We are currently negotiating its draw down terms with
the lender to provide additional funds.

Our capital requirements will depend on many factors, including but not
limited to the market acceptance of our product, the response of our
competitors to our product and our ability to continue to grow software
revenue. In addition to the financing we received in March 2000 and January
2001, we may be required to seek additional financing before we achieve
positive cash flow. In that event, no assurance can be given that additional
financing will be available, or that if available, it will be available on
terms acceptable to us, or our shareholders. If adequate funds are not
available to satisfy our short-term or long-term capital requirements we may
be required to limit our operations significantly. Our auditors have included
a paragraph in their report indicating that substantial doubt exists as to
our ability to continue as a going concern. Our line of credit requires that
at and only at June 30, 2000 we meet certain financials covenants for which
we were not in compliance. The lender waived compliance at that date. Based
on the factors discussed above, among other things, there is substantial
doubt about our ability to continue as a going concern. Our ability to
continue as a going concern is dependent on our ability to raise additional
capital or enhanced or additional financing, and ultimately achieve
profitability and/or positive cash flow.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement as amended by SFAS No. 137,
"Deferral of the Effective Date of FASB Statement No. 133," established
accounting and reporting standards for derivative instruments and requires
recognition of all

derivatives as assets or liabilities in the statement of financial position
and measurement of those instruments at fair value. The statement is
effective for fiscal years beginning after June 15, 2000. We will adopt the
standard no later than the first quarter of fiscal year 2001 and we have
determined that the impact will not have a material effect on our financial
statements.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements," as amended by SAB 101A and SAB 101B, which provides guidance on
the recognition, presentation, and disclosure of revenue in financial
statements filed with the SEC. SAB 101 outlines the basic criteria that must
be met to recognize revenue and provides guidance for disclosure related to
revenue recognition policies. In June 2000, the SEC issued SAB 101B that
delayed the implementation date of SAB 101. We adopted SAB 101 in the fourth
quarter of 2000. We determined that SAB 101 had no impact on our financial
statements.

In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation (FIN 44)." The provisions of
FIN 44 are effective July 1, 2000. The adoption of this standard did not impact
the accounting for any stock-based awards granted to date.

FUTURE PERFORMANCE AND RISK FACTORS

OUR FUTURE BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION ARE SUBJECT
TO VARIOUS RISKS AND UNCERTAINTIES, INCLUDING THOSE DESCRIBED BELOW.

EVOLVING THIN CLIENT COMPUTING MARKET

We derive substantially all of our revenues from the sale of thin client
network computing products and related software. Until several years ago, our
thin client product offerings primarily focused on the UNIX marketplace using
our X protocol. Our introduction of WINCENTER multi-user Windows NT application
server software and new, lower-priced thin client network computing devices
allowed us to offer thin client network computing systems that provide users
with access to Windows applications. Our expansion of our thin client computing
model into the Windows-based environment was limited because of our inability to
offer an endorsed Microsoft solution within the Windows market prior to the
introduction of the Windows-based terminal in June 1998 and intense competition
from alternative desktop systems, particularly personal computers, whose selling
prices are at historic lows for relatively high performance configurations. Our
future success will depend substantially upon increased acceptance of the thin
client computing model and the successful marketing of our new thin client
computing hardware and software products. There can be no assurance that our new
thin client computing products will compete successfully with alternative
desktop solutions or that the thin client computing model will be widely adopted
in the rapidly evolving desktop computer market. The failure of new markets to
develop for our thin client computing products would have a material, adverse
effect on our business, operating results and financial condition.

COMPETITION

The market for thin client products and similar products that facilitate
access to data over networks are characterized by rapidly changing technology
and evolving industry standards. We experience significant competition from
other network computer manufacturers, suppliers of personal computers and
workstations and software developers. Competition within the thin client
computing market has intensified over the past several quarters, resulting in
price reductions and reduced profit margins. We expect this intense competition
and pricing pressure to continue, and there can be no assurance that we will be
able to continue to compete successfully against current and future competitors
as the desktop computer market evolves and competition increases. There is the
possibility that competition in the future could come from companies not
currently in the market or with greater resources than ours which would
adversely affect our operating results.

FLUCTUATIONS IN OPERATING RESULTS

Our 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 us and our 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. Our operating results may fluctuate in the future
as a result of these and other factors, including our success in developing and
introducing new products, our product and customer mix, licensing costs, the
level of competition which we experience and our ability to develop and maintain
strategic business alliances.

We operate 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. Our expense levels are based in part on our forecast of
future revenues. If revenues are below expectations, our operating results may
be adversely affected. We have experienced a disproportionate amount of
shipments occurring in the last month of our fiscal quarters. This trend
increases the risk of material quarter-to-quarter fluctuations in our revenues
and operating results.

NEW PRODUCT DEVELOPMENT AND TIMELY INTRODUCTION OF NEW AND ENHANCED PRODUCTS

The markets for our products are characterized by rapidly changing
technologies, evolving industry standards, frequent new product introductions
and short product life cycles. Our future results will depend to a considerable
extent on our ability to continuously develop, introduce and deliver in quantity
new hardware and software products that offer our 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, we 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 us 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 we are continuously
engaged in this product development and transition process, our 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 our operating results.

RELIANCE ON INDEPENDENT DISTRIBUTORS AND RESELLERS

We rely significantly on independent distributors and resellers for the
distribution of our products. In early 1996, we experienced significant
returns of our software products from our distributors. Although controls
have since been improved, there can be no assurance that we will not
experience some level of returns in the future. In addition, there can be no
assurance that our distributors and resellers will continue their current
relationships with us or that they will not give higher priority to the sale
of other products, which could include products of our competitors. A
reduction in sales effort or discontinuance of sales of our products by our
distributors and resellers

could lead to reduced sales and could adversely affect our operating results. In
addition, there can be no assurance as to the continued viability or the
financial stability of our distributors and resellers, our ability to retain our
existing distributors and resellers or our ability to add distributors and
resellers in the future.

RELIANCE ON INDEPENDENT CONTRACTORS

We rely on independent contractors for virtually all of the manufacture of
our thin client computing products and accessories. Our reliance on these
independent contractors limits our control over delivery schedules, quality
assurance and product costs. In addition, a number of our independent suppliers
are located abroad. Our reliance on these foreign suppliers subjects us to risks
such as the imposition of unfavorable governmental controls or other trade
restrictions, changes in tariffs and political instability. We currently obtain
all of our thin client computing products from a single supplier located in
Thailand. Any significant interruption in the supply of products from this
contractor would have a material, adverse effect on our business and operating
results. Disruptions in the provision of components by our other suppliers, or
other events that would require us to seek alternate sources of supply, could
also lead to supply constraints or delays in delivery of our products and
adversely affect our operating results. However, the manufacturing process could
be relocated to one of their other factories if necessary within a few weeks.
The operations of certain of our foreign suppliers were briefly disrupted during
1992 due to political instability in Thailand.

A number of components and parts used in our products, including certain
semiconductor components, also are currently available from single or limited
sources of supply. We have no long-term purchase agreements or other guaranteed
supply arrangements with suppliers of these single or limited source components.
We have generally been able to obtain adequate supplies of parts and components
in a timely manner from existing sources under purchase orders and endeavor to
maintain inventory levels adequate to guard against interruptions in supplies.
However, our inability to obtain sufficient supplies of these parts and
components from existing suppliers or to develop alternate supply sources would
adversely affect our operating results.

INTERNATIONAL SALES

During 2000 substantially all of our international sales were denominated
in Euros. These sales were subject to exchange rate fluctuations which adversely
affected our operating results. 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 our 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 our future
international sales and, consequently, on our operating results.

Beginning in 2001, all of our international sales are denominated in U.S.
dollars.

The following represents international sales, through our
international distribution channels to end-users in each of the following
countries:

2000 1999
---- ----

France 20% 26%
Germany 17% 14%
United Kingdom 12% 18%
Switzerland 11% 3%
Scandanavia 10% 9%
Netherlands 8% 6%
Australia and New Zealand 6% 11%
Other countries 16% 13%
---- ----
Total 100% 100%
==== ====

DEPENDENCE ON KEY PERSONNEL

Our success depends to a significant degree upon the continuing
contributions of our senior management and other key employees. We believe that
our future success will depend in large part on our 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 we
will be successful in attracting, integrating and retaining such personnel.
Failure to attract and retain key personnel could have a material, adverse
effect on our business, operating results or financial condition.

VOLATILITY OF STOCK PRICE

On March 20, 2001, our Common Stock was delisted from the Nasdaq National
Market due to the failure to maintain a minimum bid price of $1.00 per share.
Our Common Stock is now trading on the OTC Bulletin Board, which is considered
to be less liquid and more volatile than the Nasdaq National Market.

The market price of our common stock has fluctuated significantly over the
past several years and is subject to material fluctuations in the future in
response to announcements concerning us or our competitors or customers,
quarterly variations in operating results, announcements of technological
innovations, the introduction of new products or changes in product pricing
policies by us or our competitors, general conditions in the computer industry,
developments in the financial markets and other factors. In particular,
shortfalls in our 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. We 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 our common stock.

LIQUIDITY

aging, location and other factors of accounts receivable. The outstanding
balance and maximum availability on the loan was approximately $4.6 million
at December 31, 2000. In addition to the financing we received in March 2000,
we may be required to seek additional financing before we can achieve
positive cash flow. In that event, no assurance can be given that additional
financing will be available or that, if available, it will be available on
terms acceptable to us, or our shareholders. If adequate funds are not
available to satisfy our short-term or long-term capital requirements, we may
be required to limit our operations significantly.

ITEM 7A. MARKET RISK

Our market risk sensitive instruments as of December 31, 2000 are primarily
exposed to interest rate risks. Because of the short-term maturities of these
instruments, a 100 basis point change in related interest rates would not have a
material effect on their fair value.

Effective January 2001 all of our international sales are denominated in US
dollars. We have Euro denominated accounts receivable as of December 31, 2000
which are subject to exchange rate fluctuations when the customer pays in Euros.
This will affect our operating results negatively or positively, depending on
the value of the U.S. dollar against the Euro.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
----

Reports of Independent Public Accountants .......................................................... 28
Consolidated Balance Sheets as of December 31, 2000 and 1999 ....................................... 30
Consolidated Statements of Operations for the Years Ended December 31, 2000, 1999 and 1998 ......... 31
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2000, 1999 and 1998 32
Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998 ......... 33
Notes to Consolidated Financial Statements ......................................................... 34
Supplementary Data: Quarterly Financial Data (Unaudited) ........................................... 46

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
Network Computing Devices, Inc. and Subsidiaries
Mountain View, California

We have audited the accompanying consolidated balance sheet of Network
Computing Devices, Inc. and subsidiaries as of December 31, 2000, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year ended December 31, 2000. We have also audited Item 14 -
Valuation and Qualifying Accounts and Reserves (the Schedule). These
consolidated financial statements and the Schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements and the Schedule based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. These standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the financial statements and Schedule. We believe that our audit
provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Network
Computing Devices, Inc. and subsidiaries at December 31, 2000, and the results
of its operations and its cash flows for the year ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States of
America.

Also, in our opinion, the Schedule presents fairly in all material respects the
information set forth therein.

As discussed in Note 9 in the consolidated financial statements, the Company has
one significant vendor that manufacturers a substantial majority of the
Company's inventory.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has sustained recurring losses from operations
and net capital deficiencies at December 31, 2000. These conditions raise
substantial doubt about the ability of the Company to continue as a going
concern. Management's plans as to these matters are also discussed in Note 1.
The consolidated financial statements do not include any adjustments related to
the recoverability and classification of reported asset amounts or the amount
and classification of liabilities that might result from the outcome of this
uncertainty.

/s/ BDO Seidman, LLP

San Francisco, California
February 28, 2001

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Network Computing Devices, Inc.

We have audited the accompanying consolidated balance sheet of Network
Computing Devices, Inc. and subsidiaries as of December 31, 1999, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the years in the two-year period ended December 31, 1999.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Network Computing Devices, Inc. and subsidiaries as of December 31, 1999
and 1998, and the results of their operations and their cash flows for each
of the years in the two-year period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and has net capital deficiency that raise substantial doubt
about its ability to continue as a going concern. Management's plans as to
these matters are also described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.

/s/ KPMG LLP

Mountain View, California
February 10, 2000

NETWORK COMPUTING DEVICES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

December 31,
--------------------------------------
2000 1999
----------------- ----------------

Current assets:
Cash and cash equivalents $ 1,419 $ 4,781
Short-term investments 339 3,558
Accounts receivable, net of allowances of $5,629 and
$5,301 as of December 31, 2000 and 1999,
respectively 9,160 21,987
Inventories 7,635 15,082
Prepaid assets 2,667 4,332
Other current assets 1,500 200
----------------- ----------------
Total current assets 22,720 49,940
Property and equipment, net 1,530 3,651
Other assets 2,602 3,173
----------------- ----------------
$ 26,852 $ 56,764
================= ================
Current liabilities:
Accounts payable $ 5,545 $ 10,419
Accrued expenses 4,047 4,739
Deferred revenue 1,297 3,384
Notes payable 7,947 -
Income taxes payable 243 277
Current portion of capital lease obligations - 69
----------------- ----------------
Total current liabilities 19,079 18,888
Commitments
Shareholders' equity:
Undesignated preferred stock: 3,000,000 shares authorized;
no shares issued and outstanding - -
Convertible preferred stock, $0.001 par value: 290,000 shares
authorized; 220,000 shares issued and outstanding as of
December 31, 2000 1,500 -
Common stock, $0.001 par value: 30,000,000 shares authorized;
17,613,237 and 16,432,921 shares issued and outstanding as of
December 31, 2000 and 1999, respectively 18 16
Capital in excess of par value 91,027 89,980
Treasury stock (28,647) (28,647)
Accumulated deficit (56,125) (23,473)
----------------- ----------------
Total shareholders' equity 7,773 37,876
----------------- ----------------
$ 26,852 $ 56,764
================= ================

See accompanying notes to consolidated financial statements.

NETWORK COMPUTING DEVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Years Ended December 31,
----------------------------------------------------
2000 1999 1998
--------------- ---------------- ---------------

Net revenues:
Hardware products and services $ 44,578 $ 98,500 $ 81,194
Software licenses and services 4,685 10,530 24,402
--------------- ---------------- ---------------
Total net revenues 49,263 109,030 105,596
Cost of revenues:
Hardware products and services 38,583 63,402 59,337
Software licenses and services 1,063 2,626 7,693
--------------- ---------------- ---------------
Total cost of revenues 39,646 66,028 67,030
--------------- ---------------- ---------------
Gross profit 9,617 43,002 38,566
Operating expenses:
Research and development 8,393 12,935 13,213
Marketing and selling 21,245 33,027 31,124
General and administrative 7,197 6,885 5,231
Business restructuring 3,679 (138) 996
Acquired in-process research and development 1,800 - 1,448
--------------- ---------------- ---------------
Total operating expenses 42,314 52,709 52,012
--------------- ---------------- ---------------
Operating loss (32,697) (9,707) (13,446)
Interest income 100 564 1,609
Interest expense (601) - (14)
Other income, net 821 - 2,090
--------------- ---------------- ---------------

Loss before income taxes (32,377) (9,143) (9,761)
Provision for income taxes (income tax benefit) 275 7,116 (658)
--------------- ---------------- ---------------
Net loss $ (32,652) $ (16,259) $ (9,103)
=============== ================ ===============

Basic and diluted earnings per share:
Net loss per share $ (1.96) $ (1.00) $ (0.56)
=============== ================ ===============
Weighted average shares used in per share computations 16,686 16,192 16,393
=============== ================ ===============

See accompanying notes to consolidated financial statements.

NETWORK COMPUTING DEVICES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)

Retained
Preferred Stock Common Stock Capital Earnings Total
---------------------------------- In Excess Treasury (Accumulated Shareholders'
Shares Amount Shares Amount Of Par Stock Deficit) Equity
------ ------- ------ ------ --------- --------- ------------ ------------

Balances as of December 31, 1997 - $ - 16,284 $ 16 $ 75,887 $ (17,273) $ 1,889 $ 60,519

Issuance of common stock under Stock
Option Plan and Employee Stock
Purchase Plan, including related tax
benefit - - 384 - 2,150 - - 2,150

Sale of common stock - - 750 1 6,937 - - 6,938

Fair value of warrants issued for
business acquisition - - - - 2,690 - - 2,690

Repurchase and retirement
of common stock for treasury - - (1,369) (1) - (10,670) - (10,671)

Net loss - - - - - - (9,103) (9,103)
------ ------- ------ ------ --------- ---------- ----------- ------------

Balances as of December 31, 1998 16,049 16 87,664 (27,943) (7,214) 52,523

Issuance of common stock under Stock
Option Plan and Employee Stock
Purchase Plan - - 335 - 1,560 - - 1,560

Sale of common stock - - 184 - 756 - - 756

Repurchase and retirement
of common stock for treasury - - (135) - - (704) - (704)

Net loss - - - - - - (16,259) (16,259)
------ ------- ------ ------ --------- ---------- ----------- ------------

Balances as of December 31, 1999 16,433 16 89,980 (28,647) (23,473) 37,876

Sale of Convertible Preferred Stock 220 1,500 - - - - - 1,500

Issuance of common stock under Stock
Option Plan and Employee Stock
Purchase Plan - - 430 1 837 - - 838

Issuance of common stock in
Tektronix settlement - - 750 1 210 - - 211

Net loss - - - - - - (32,652) (32,652)
------ ------- ------ ------ --------- ---------- ----------- ------------
Balances as of December 31, 2000 220 $1,500 17,613 $ 18 $ 91,027 $ (28,647) $ (56,125) $ 7,773

See accompanying notes to consolidated financial statements.

NETWORK COMPUTING DEVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

Years Ended December 31,
---------------------------------------------------
2000 1999 1998
-------------- --------------- --------------

Cash flows from operating activities:
Net loss $ (32,652) $ (16,259) $ (9,103)
Reconciliation of net loss to net cash used in
operating activities:
Non-cash restructuring charges (credit) 389 (138) 96
Depreciation and amortization 2,830 3,618 3,022
Deferred income taxes - 6,622 (820)
Gain on settlement (821)
Gain on sale of investment - - (2,090)
Loss on disposal of fixed assets 543
Impairment charge on notes receivable - 300 -
Acquired in-process research and development 1,800 - 1,448
Provision for doubtful accounts, sales returns &
allowances, net 328 1,751 (734)
Changes in:
Accounts receivable, net 12,499 (2,148) 4,292
Inventories 7,447 (720) 5,782
Prepaid expenses 1,865 (71) (278)
Accounts payable (2,342) (19) (1,729)
Accrued expenses (1,081) (2,081) (3,195)
Deferred revenue (2,087) (1,765) (2,182)
Income taxes payable (34) 3 (323)
-------------- --------------- --------------
Net cash used in operating activities (11,316) (10,907) (5,814)
-------------- --------------- --------------

Cash flows from investing activities:
Purchases of short-term investments (1,359) (26,010) (16,229)
Sales and maturities of short-term investments 4,578 33,766 15,155
Changes in other assets (135) (230)
Issuance of notes receivable (839)
Net proceeds from sale of investment - 2,402
Acquisition of business - (3,037)
Property and equipment purchases (681) (2,661) (1,704)
-------------- --------------- --------------

Net cash provided by (used in) investing activities 2,538 4,121 (3,643)
-------------- --------------- --------------

Cash flows from financing activities:
Principal payments on capital lease obligation
(69) (90) (155)
Repurchases of common stock (704) (10,671)
Proceeds from line of credit 37,676
Payments on line of credit (33,029)
Proceeds from issuance of stock, net 838 2,316 9,088
-------------- --------------- --------------
Net cash provided by (used in) financing activities 5,416 1,522 (1,738)
-------------- --------------- --------------

Decrease in cash and cash equivalents (3,362) (5,264) (11,195)
Cash and cash equivalents:
Beginning of year 4,781 10,045 21,240
-------------- --------------- --------------
End of year $ 1,419 $ 4,781 $ 10,045
============== =============== ==============

Noncash investing and financing activities:
Fair value of warrants issued for acquisition of business $ - $ - $ 2,690
============== =============== ==============
Income tax benefit from employee stock transactions $ - $ - $ 263
============== =============== ==============
Exchange of inventory for note receivable $ - $ 160 $ -
============== =============== ==============
Issuance of preferred stock for subscriptions receivable $ 1,500 $ - $ -
============== =============== ==============
Conversion of accounts payable to note payable $ 3,300 $ - $ -
============== =============== ==============
Issuance of common stock to extinguish liability $ 221 $ - $ -
============== =============== ==============

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

GOING CONCERN UNCERTAINTY Network Computing Devices, Inc. (the "Company") has
incurred losses from continuing operations for the year ended December 31,
2000 of approximately $32.7 million. If the Company fails to maintain
profitable operations, the Company will need to obtain additional financing.
If additional financing is necessary, there is no assurance that the Company
will be able to obtain the necessary funds, resulting in an adverse effect on
the Company's financial condition. The financial statements do not include
any adjustments relating to the recoverability and classification of reported
asset amounts or the amount and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern. The
Company's continuation as a going concern is dependent upon its ability to
obtain additional financing or refinancing as may be required and ultimately
to attain profitability. The Company is actively marketing its existing and
new products, which it believes will ultimately lead to profitable
operations. However, no assurance can be given that these available funds
will meet the Company's cash requirements in the future.

DESCRIPTION OF BUSINESS The Company was incorporated on February 17, 1988. We
provide thin client hardware and software that delivers simultaneous,
high-performance, easy-to-manage and cost effective access to any application
from thin client, UNIX and PC desktops. Our product line includes the NCD
ThinSTAR Windows-based terminals and NCD Explora, NC200, NC400 and NC900
network computers. On the software side we offer the NCD ThinPath family of
client and server software, developed to enhance the connectivity,
management and features of the NCD thin clients as well as PCs in accessing
information and applications on Windows servers.

CONSOLIDATION The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. The functional
currency for the Company and its subsidiaries is the U.S. dollar. All
significant intercompany balances and transactions have been eliminated in
consolidation.

CASH EQUIVALENTS We consider all highly liquid investments purchased with a
maturity date of three months or less to be cash equivalents. Cash equivalents
at December 31, 2000 and 1999 consist of bank deposits and commercial paper.

SHORT-TERM INVESTMENTS We have classified all of our short-term investments as
"available-for-sale" securities. The carrying value of such securities equals
the fair market value. The fair value of all securities equals the cost basis,
consequently, there are no unrealized gains or losses.

INVENTORIES Inventories are stated at the lower of standard cost, which
approximates actual cost on a first-in, first-out basis, or market (net
realizable value).

PROPERTY AND EQUIPMENT Property and equipment are stated at cost.
Depreciation and amortization are computed using the straight-line method.
Useful lives of two to five years are used for equipment and furniture;
demonstration equipment is depreciated over an 18-month period. Leasehold
improvements are amortized over the shorter of the lease term or the useful
lives of the respective assets.

INTANGIBLE ASSETS Intangible assets are included in other assets and are
amortized over the economic life of the asset, which is assumed to be a seven
year period, on a straight-line basis. Intangible assets include customer lists,
workforce in place, non-compete agreements and goodwill associated with
acquisitions accounted for under the purchase method.

REVENUE RECOGNITION Revenues on the sale of hardware products and from the
licensing of software products are recognized when the title to the products has
passed to the customer, generally upon shipment, provided that

no significant obligations remain and collection of the resulting receivable is
deemed probable. Software license revenues are recognized when a non-cancelable
license agreement is in force, the product has shipped, the license fee is
determinable and collectibility is reasonably assured. A provision for estimated
product returns and warranty costs is established at the time of the sale based
on historical return rates adjusted for current economic conditions. Service
contract revenues are recognized ratably over the contract period.

RESEARCH AND DEVELOPMENT COSTS Research and development costs are charged to
expense when incurred. Costs incurred in the development of new software
products and enhancements to existing software products are also expensed as
incurred until the technological feasibility of the product has been
established. After technological feasibility has been established, any
additional costs are capitalized in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 86, and included in other assets.
Capitalized software is amortized to operations over eighteen months to three
years, based on the expected life of the product. Capitalization ceases when
the product is available for release to customers. We had unamortized
software licenses of $0 and $126,000 at December 31, 2000 and 1999,
respectively. Amortization expense of capitalized software licenses was
$126,000, $150,000, and $215,000 for the years ended December 31, 2000, 1999
and 1998, respectively.

INCOME TAXES Under the asset and liability method of SFAS No. 109,
"Accounting for Income Taxes," deferred tax assets and liabilities are
established to recognize the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be recovered or settled. Under SFAS No. 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.

USE OF ESTIMATES Our management has made a number of estimates and
assumptions relating to the valuation and reporting of assets and liabilities
and the disclosure of contingent assets and liabilities to prepare these
consolidated financial statements in conformity with generally accepted
accounting principles. Significant items subject to such estimates include
the valuation of allowances for receivables, inventories, warranties and
deferred tax assets. Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions
were used by the Company in estimating its fair value disclosures for
financial instruments: Cash and cash equivalents- the carrying amount
approximates the fair value Accounts receivable- the carrying amount
approximates the fair value Notes payable- the fair value of notes payable
approximates cost due to the short period until maturity At December 31, 2000
and 1999, the fair value of the Company's instruments approximate their
historical carrying amounts.

IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF We
evaluate our long-lived assets and certain identifiable intangible assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an
asset to future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower
of the carrying amount or fair value less costs to sell. Recoverability of
intangible assets is measured by a comparison of the carrying amount to the
assets' fair value calculated using discounted future cash flows with a
discount rate commensurate with the risks involved with the cash flow stream.

NET LOSS PER SHARE Basic net income (loss) per share is computed using the
weighted-average number of common shares outstanding during the period. Diluted
net income (loss) per share is computed using the weighted-average number of
common shares and potential common shares from stock options and warrants

outstanding, when dilutive, using the treasury stock method. At December 31,
2000, 1999 and 1998 there were 4,724,498, 4,676,490 and 4,757,098 options and
warrants outstanding, respectively, that could potentially dilute earnings per
share ("EPS") in the future that were not included in the computation of diluted
EPS because to do so would have been antidilutive for those years.

STOCK-BASED COMPENSATION We account for our stock-based compensation plans using
the intrinsic value method. As such, compensation expense is recorded on the
date of grant if the current market price of the underlying stock exceeded the
exercise price.

RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards for derivative instruments and
requires recognition of all derivatives as assets or liabilities in the
statement of financial position and measurement of those instruments at fair
value. The statement is effective for fiscal quarters of all fiscal years
beginning after June 15, 2000. We will adopt the standard no later than the
first quarter of fiscal year 2001 and we have determined that the impact will
not have a material effect on our financials statements.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements," as amended by SAB 101A and SAB 101B, which provides guidance on the
recognition, presentation, and disclosure of revenue in financial statements
filed with the SEC. SAB 101 outlines the basic criteria that must be met to
recognize revenue and provides guidance for disclosure related to revenue
recognition policies. In June 2000, the SEC issued SAB 101B that delayed the
implementation date of SAB 101. We adopted SAB 101 in the fourth quarter of
2000. We determined that SAB 101 had no impact on our financial statements

RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform
with current year presentation.

NOTE 2. ACQUISITIONS

On December 31, 1998, we acquired Tektronix' Network Displays Business unit
("NWD") for $3.0 million in cash and warrants to purchase one million shares of
our common stock over a term of five years at an exercise price of $8.00 per
share. The fair value of the warrants issued in the acquisition was calculated
using the Black-Scholes pricing model with the following assumptions:
contractual life of 5 years, dividend yield of 0%, risk free interest rate of
4.85% and expected volatility of 61.5%. Direct costs of the acquisition totaled
approximately $200,000. The acquisition was accounted for as a purchase business
combination with a total purchase price of $5.9 million. The purchase price was
allocated to $1.7 million of net assets acquired (primarily inventory), $1.4
million to in-process research and development and $2.8 million to other
intangible assets are being amortized over a 7 year useful life. In addition to
acquiring certain assets of NWD, approximately 83 former NWD employees,
primarily in sales, marketing and engineering roles, joined NCD. In conjunction
with this acquisition, we undertook various restructuring activities to
eliminate redundancies with the acquired business. During 1998, we recorded a
charge of approximately $1.0 million related to these restructuring activities.
NWD's results of operations have been included in the accompanying financial
statements from December 31, 1998. See Note 5 contained herein.

been accounted for using the purchase method. The purchase price was $2.2
million plus a stream of future payments based on revenue for the four year
period following the acquisition. Of the purchase price, $1.8 million was
allocated to purchased in-process research and development and $0.4 million
was allocated to other intangible assets. Multiplicity LLC provided strategic
performance analysis and capacity planning solutions for networked Windows NT
and Windows 2000 servers. These solutions gave customers system measurement
and management that enabled troubleshooting, analysis, administration and
planning to help IT organizations improve end-user service levels. During the
third quarter of 2000, due to a change in strategic direction and cash
constraints, we discontinued development efforts on the Multiplicity product
line and recorded a related restructuring charge for the impairment of the
purchased intangibles. We expect no additional payments to be made for the
acquisition resulting from the contingencies on future revenues.

NOTE 3. SHORT-TERM INVESTMENTS

The fair value of short-term investments consisted of the following as of
December 31 (in thousands):

2000 1999
---- ----

Corporate debt securities $ 339 $3,558
------ ------
$ 339 $3,558
====== ======

There were no material unrealized gains or losses at December 31, 2000 and
1999.

All investments are available-for-sale securities as of December 31, 2000
and mature within one year.

NOTE 4. CONSOLIDATED BALANCE SHEET AND STATEMENT OF CASH FLOWS COMPONENTS

2000 1999
---- ----

Inventories as of December 31 consisted of (in thousands):
Purchased components and sub-assemblies $ 5,642 $ 9,825
Work in process 657 826
Finished goods 1,336 4,431
------- -------
$ 7,635 $15,082
======= =======

2000 1999
------- -------
Property and equipment as of December 31 consisted of (in thousands):
Office equipment $ 7,204 $10,039
Machinery and equipment 3,300 5,718
Demonstration equipment 1,785 3,008
Furniture and fixtures 1,105 1,757
Leasehold improvements 439 1,552
------- -------
13,833 22,074

Less accumulated depreciation
and amortization 12,303 18,423
------- -------
$ 1,530 $ 3,651
======= =======

2000 1999
---- ----

Accrued expenses as of December 31 consisted of (in thousands):
Payroll-related costs $1,388 $2,465
Royalties 234 215
Warranty 493 760
Restructuring reserve 390 --
Other accrued expenses 1,542 1,299
------- -----
$4,047 $4,739
====== ======

Income taxes paid were $308,000, $496,000 and $283,000 for 2000, 1999 and
1998, respectively. Interest paid was $601,000, $13,000 and $14,400 for 2000,
1999 and 1998, respectively.

NOTE 5. BUSINESS RESTRUCTURING

On December 31, 1998, we acquired the Network Displays Business unit of
Tektronix, Inc. ("NWD"). As a result of this acquisition, we reduced our
workforce and discontinued certain activities that were redundant with the
acquired business. As a result of the restructuring action, a charge to
operations of $1.0 million was recorded for 1998. The charge, comprising
employee severance benefits ($546,000), facility exit costs ($153,000), the
write-off of prepaid royalties ($96,000) and the termination of a sales
consulting agreement ($201,000), has been reported as an operating expense
for 1998. The restructuring plan included the termination of approximately 40
employees, primarily in sales and engineering roles, and the closure of four
of our offices in the United States. Total cash charges amounted to $900,000,
none of which had been paid as of December 31, 1998 and are included in
accrued expenses. By the end of 1999 it was determined that the plan was
substantially complete, and an operating credit of $138,000 was recorded.

During the third quarter of 2000 we undertook additional restructuring
actions involving a general reduction in workforce affecting all classes of
employees, exiting certain leased facilities and discontinuing development
activities related to several product lines. In connection with these actions,
we recorded restructuring charges of $1.6 million consisting of cash charges of
$1.0 million for employee separation costs and $0.2 million for facility exit
costs, and non cash charges of $0.4 million related to the discontinued product
lines, including the recognition of an impairment loss of $0.3 million on the
intangibles attributable to our purchase of Multiplicity LLC. During the year
ended December 31, 2000 we paid $2.9 million of the accrued restructuring
liability leaving unpaid cash charges of $0.4 million included in accrued
liabilities as of December 31, 2000. After a revaluation of the remaining cash
liability, a credit to restructuring expense of $0.5 million was recorded in the
fourth quarter. As a result of the restructuring, we reduced our workforce by
over 200 employees and our leased manufacturing and office space in Mountain
View, California by approximately 86,000 square feet. The restructuring plan is
expected to be completed by the fourth quarter of 2001.

NOTE 6. NOTES PAYABLE

In August 2000 we concluded an agreement with SCI Technology, Inc., ("SCI")
a subsidiary of SCI Systems, Inc., to convert $3.3 million of our accounts
payable to them into a thirteen-month note. The note was issued in September
2000. This note bears interest at 6.5% per annum and the outstanding principal
can be converted into shares of our common stock at the option of SCI anytime
during the note period. The conversion price is $1.00 per share.

On March 30, 2000 we secured a working capital line of credit with Wells
Fargo Bank's Foothill Capital subsidiary. Our line of credit is secured by
substantially all of our assets. Under the terms of the agreement borrowings
bear interest at a rate of prime plus 0.75% (10.25% at December 31, 2000 and
throughout the period). The amount that can be borrowed at any given time is
determined by the balance of our accounts receivable as well as our
compliance with specified financial covenants. Accordingly, this line of
credit may not be sufficient to enable us to continue as a going concern. As
of December 31, 2000, the total amount available and outstanding to Foothill
Capital was approximately $4.6 million. The lender waived breaches in
covenants that were in effect at and only at June 30, 2000. We were in
compliance with established covenants at December 31, 2000.

NOTE 7. SHAREHOLDERS' EQUITY

CONVERTIBLE PREFERRED STOCK In December 2000, through a private placement,
220,000 shares of Convertible Preferred Stock, Series B, were purchased for a
$1,500,000 receivable from an investor who was elected to the board of directors
on January 11, 2001. The proceeds from the receivable were received by the
Company on January 2, 2001. . The Preferred shares are entitled to cumulative
dividends of $.41 per annum, which accrue semi-annually if not paid. Each share
of Preferred Stock is convertible into ten shares of Common Stock at the
election of the holder. In connection with this private placement, 600,000
warrants to purchase share of Common Stock at $.75 per share were issued to the
investor. The warrants expire on December 28, 2005.

TEKTRONIX SETTLEMENT In December 2000, we entered into a mutual settlement of
all claims with Tektronix. As part of the settlement, we issued 750,000 shares
of our Common Stock to Tektronix. A gain on the settlement of $821,000 was
recorded in December 2000.

STOCK REPURCHASE PROGRAM In April 1997, our Board of Directors adopted a program
to repurchase up to 1,000,000 shares of our common stock during the 12-month
period ended April 30, 1998. Repurchases were made under the program using our
cash resources. Shares repurchased are available for issuance under our stock
plans and for other corporate purposes. In September 1997, the repurchase
program was completed with an aggregate of 1,000,000 shares repurchased at
prices ranging from $8.38 to $12.00 per share for a total purchase price of
$10.7 million. In November 1997, our Board of Directors adopted an additional
program to repurchase up to 1,000,000 shares of our common stock during the
12-month period ended October 31, 1998. In July 1998, the second repurchase
program was completed with an aggregate of 1,000,000 shares repurchased at
prices ranging from $6.50 to $9.63 at a total aggregate price of $8.5 million.
In June 1998, we announced an additional program to repurchase up to 750,000
shares of our common stock. Repurchases of 694,800 shares had been made as of
December 31, 1999 under the third program at prices ranging from $4.94 to $8.25
at a total aggregate price of $4.4 million. Total repurchases of 2,694,800
shares were made under all three programs at prices ranging from $4.94 to $12.00
per share for a total purchase price of $23.6 million.

STOCK PURCHASE PLAN In 1992, we established the 1992 Employee Stock Purchase
Plan and have reserved 1,650,000 shares of common stock for issuance thereunder.
During 2000, our Board of Directors increased the amount of shares reserved to
1,850,000. The plan permits eligible employees to purchase common stock through
payroll deductions of up to 10 percent of their base earnings. The purchase
price of the stock is equal to the lesser of 85% of the fair market value of
such shares at the beginning of each six-month offering period (or the

commencement of the employee's participation, if later) or the end of such
offering period. As of December 31, 2000, 1,752,507 had been issued under this
Plan from inception and 284,066 shares were issued in 2000.

The per share weighted-average fair value of employee stock purchase rights
during 2000, 1999 and 1998 was $1.87, $3.10 and $4.95, respectively, on the date
of grant using the Black-Scholes model with the following weighted-average
assumptions: 2000 - dividend yield of 0%, expected volatility of 124%, risk-free
interest rate of between 5.92% and 6.25%, and an expected life of 1 year; 1999 -
dividend yield of 0%, expected volatility of 83%, risk-free interest rate of
between 4.53% and 5.99%, and an expected life of 1 year; 1998 - dividend yield
of 0%, expected volatility of 84%, risk-free interest rate of between 4.53% and
5.85%, and an expected life of 1 year.

STOCK OPTION PLANS As of December 31, 2000, we had reserved 1,098,000 shares,
800,000 shares and 300,000 shares of common stock for issuance under our 1999
Stock Option Plan, the 1999 Non-Qualified Stock Option Plan and the 1994 Outside
Directors' Stock Option Plan, respectively ("the Plans"). During 1999 the 1989
Stock Option Plan expired and was replaced by the 1999 Stock Option Plan. A
total of 548,000 shares that were still available for grant at the time the 1989
Stock Option Plan expired were used to fund the 1999 Stock Option Plan. Under
the 1999 Stock Option Plan, options are granted to employees, officers,
directors and consultants to purchase shares of our common stock at not less
than the fair market value of common stock at the grant date (for incentive
stock options) or 85% of the fair market value of such common stock (for
nonstatutory stock options). Options generally vest and become exercisable to
the extent of 25% one year from grant date with the remainder vesting ratably
over the 36-month period thereafter. Prior to August 1994, the options generally
expired five years from grant date. Since August 1994, the options expire ten
years from grant date. Under the 1994 Outside Directors' Stock Option Plan,
options are granted to outside directors to purchase shares of our common stock
at not less than the fair market value of common stock at the grant date.
Options vest and become exercisable to the extent of 25% three months from the
grant date, 25% on the first anniversary of the grant date with the remainder
vesting ratably over the 24 month period thereafter. As of December 31, 2000,
1,999,847 options were exercisable under the Plans.

The per share weighted-average fair value of stock options granted during
2000, 1999 and 1998 was $1.64, $5.91, and $7.96, respectively, on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions: 2000 - dividend yield of 0%, expected volatility
of 124%, risk-free interest rate of between 5.17% and 6.69%, and an expected
life of 5 years; 1999 - dividend yield of 0%, expected volatility of 83%,
risk-free interest rate of between 4.68% and 6.41%, and an expected life of 5
years; 1998 - dividend yield of 0%, expected volatility of 84%, risk-free
interest rate of between 4.68% and 4.71%, and an expected life of between 3 and
5 years.

We apply Accounting Principles Board ("APB") Opinion No. 25 in accounting
for our stock options issued to employees and, accordingly, no compensation cost
has been recognized for our stock plans in the accompanying consolidated
financial statements. Had we determined compensation cost based on the fair
value at the grant dates for the Plans under SFAS No. 123, our net loss and loss
per share would have been changed to the pro forma amounts indicated below:

2000 1999 1998
--------- --------- ---------

Net loss (in thousands):
As reported $ (32,652) $ (16,259) $ (9,103)
Pro forma (34,655) (19,056) (12,396)

Basic and diluted loss per share:
As reported $ (1.96) $ (1.00) $ (0.56)
Pro forma (2.08) (1.18) (0.76)

The effects of applying SFAS No. 123 in this pro forma disclosure is not
indicative of the effects on reported results for future years. SFAS No. 123
does not apply to awards prior to 1995, and additional awards in future years
are anticipated.

A summary of option transactions under the Plans follows:

Weighted-
Options Average
Available Options Exercise
For Grant Outstanding Price
---------- ---------- -------------

Balances as of December 31, 1997 234,781 3,597,286 $ 5.18
Options authorized 500,000 -- --
Options granted (594,100) 594,100 7.96
Options cancelled 217,899 (217,899) 8.29
Options exercised -- (216,389) 3.98
---------- ---------- -------------

Balances as of December 31, 1998 358,580 3,757,098 $ 5.50

Options authorized 1,098,000 -- --
Options granted (1,029,400) 1,029,400 5.91
Options expired (841,979) -- --
Options cancelled 765,259 (765,259) 7.30
Options exercised -- (344,749) 4.17
---------- ---------- -------------

Balances as of December 31, 1999 350,460 3,676,490 $ 5.37

Options authorized 800,000 -- --
Options granted (1,450,990) 1,450,990 1.64
Options expired (885,887) -- --
Options cancelled 1,856,732 (1,856,732) 5.82
Options exercised -- (146,250) 4.22
---------- ---------- -------------

Balances as of December 31, 2000 670,315 3,124,498 $ 3.43

The following table summarizes information about options outstanding as of
December 31, 2000:

Options Outstanding Options Exercisable
- ------------------------------------------------------------ -------------------------
Weighted- Weighted-
Range of Average Average
Exercise Remaining Exercise Exercise
Prices Number Contractual Life Price Number Price
- ------ ------ ---------------- ----- ------ -----

$0.88 to 1.00 70,500 9.86 $ 0.99 0 $0.00
1.09 to 1.09 948,400 9.72 1.09 249,288 1.09
1.63 to 3.50 1,249,289 5.52 3.46 1,216,889 3.50
3.88 to 5.47 438,286 7.07 4.65 226,712 4.39
5.50 to 7.98 271,010 7.17 7.08 171,661 7.10
8.25 to 9.88 134,613 6.69 8.77 126,388 8.79
9.88 to 12.63 12,400 6.74 11.76 8,909 11.82
--------- ---- ----- --------- -----

$0.88 to 12.63 3,124,498 7.31 $3.43 1,999,847 $3.98
========= =========

WARRANTS We have warrants outstanding to purchase up to 1,000,000 shares of
our common stock at an exercise price of $8.00. The warrants are exercisable
until they expire on December 31, 2003. On December 28, 2000, in connection with
the sale of 220,000 shares of Convertible Preferred Stock, we issued 600,000
warrants to purchase shares of our Common Stock at $.75 per share. The warrants
are exercisable until they expire December 28, 2005. NOTE 8. INCOME TAXES

The components of our provision for income taxes (income tax benefit) for
the years ended December 31 are as follows (in thousands):

2000 1999 1998
---- ---- ----

Current
Federal $ -- $ -- $ (202)
State and other 275 494 101
------- ------- -------

Total current 275 494 (101)
------- ------- -------

Deferred
Federal -- 5,433 (710)
State and other -- 1,189 (110)
------- ------- -------

Total deferred -- 6,622 (820)
------- ------- -------
Charge in lieu of income taxes associated with
the exercise of stock options -- -- 263
------- ------- -------

$ 275 $ 7,116 $ (658)
======= ========= ==========

Total income tax expense (benefit) differs from the expected tax expense
(benefit) (computed by applying the U.S. federal income tax rate of 34% to loss
before income taxes) as follows (in thousands):

Tax expense (benefit) at federal statutory rate $(11,102) $ (3,109) $ (3,319)
State income taxes, net of federal benefit 20 805 67
Tax exempt investment income -- -- --
Research and experimental credit (37) (342) (438)
Net operating losses and temporary differences for which
No tax benefit is recognized 11,419 9,799 2,995

Other (25) (37) 37
-------- -------- --------

$ 275 $ 7,116 $ (658)
======== ======== ========

The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities as of December 31 are as follows
(in thousands):

2000 1999
---- ----

Deferred tax assets:
Accruals, allowances and reserves $ 6,017 $ 5,534
Net operating loss and tax credit carryforwards 22,391 12,453
Property and equipment, principally due to differences
in depreciation and capitalized leases 182 196

Intangible assets 674 627
------- -------

Total gross deferred tax assets 29,264 18,810

Less valuation allowance 29,264 18,810
------- -------

Deferred tax asset, net -- --
------- -------

Deferred tax liabilities -- --
------- -------

Net deferred tax assets $ -- $ --
======= =======

In light of our recent history of operating losses, we continue to provide
a valuation allowance for all of our deferred tax assets as we are unable to
conclude that it is more likely than not that the deferred tax assets will be
realized. Accordingly, the deferred tax valuation allowance increased by $11.4
million from 1999. As of December 31, 2000, we have a net operating loss
carryover for federal and California income tax purposes of approximately $48.1
million and $10.0 million, respectively. These amounts reflect the tax net
operating losses incurred in 2000 less the utilization of prior year net
operating losses in settlement of an audit by the Internal Revenue Service. The
audit was completed through the tax year 1997 and identified approximately $7.2
million in adjustments which have no impact to future periods. In addition, we
have federal and California research and development credit carryforwards of
$1.7 million and $1.6 million, respectively. Our federal net operating loss and
research and development credit carryforwards will expire in the years 2010
through 2020 if not utilized. Our California net operating loss carryovers will
expire in the years 2001 through 2005. The California research and development
credit can be carried forward indefinitely. Pursuant to Federal income tax rules
and regulations, utilization of the tax net operating loss carryovers may also
be subject to annual limitation due to any greater than 50% change in ownership
of the Company within a three year period.

NOTE 9. CREDIT AND OTHER CONCENTRATIONS

Financial instruments that potentially subject us to concentrations of
credit risk consist principally of cash equivalents, short-term investments and
trade receivables. We place our cash equivalents and short-term investments with
high-credit qualified financial institutions and, by policy, limits the amount
of credit exposure to any one financial institution. Concentrations of credit
risk with respect to trade receivables have increased as we have moved to a two
tier distribution model. Three customers, Adtcom (39%), Tech Data (15%) and,
Ingram Micro (11%) comprise approximately 65% of our gross trade receivables as
of December 31, 2000.

A majority of our manufacturing is performed by SCI Inc., Thailand. Should
SCI breach performance requirements under terms of our agreement, we could be
adversely effected and unable to deliver our products.

NOTE 10. COMMITMENTS AND CONTINGENCIES

We lease our principal facilities under noncancellable operating lease
agreements that expire through 2003. We also lease office facilities in several
locations in the United States, and in locations in Australia, Canada, France,
Germany, Japan, Sweden and the United Kingdom, which are used as sales offices.
During 2000, we closed our offices in Canada and Japan. Rent expense was
approximately $2,607,000, $2,440,000 and $2,377,000 for the years ended December
31, 2000, 1999 and 1998, respectively.

As of December 31, 2000, minimum lease payments under all noncancellable
lease agreements were as follows (in thousands):

Operating

Year Ending December 31,

2001 $1,329
2002 870
2003 314
2004 130
Thereafter 10
------

Total minimum lease payments $2,653
======

The above future operating lease payments are anticipated to be offset by
the following sublease contract income:

2001 307
---

Total sublease income $307
======

NOTE 11. SEGMENT REPORTING AND GEOGRAPHIC INFORMATION

We have adopted the provisions of SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information." SFAS No. 131 establishes standards
for the reporting by public business enterprises of information about operating
segments, products and services, geographic areas and major customers. The
method for determining what information to report is based on the way management
organizes data for making operating decisions and assessing financial
performance. Our chief operating decision maker is considered to be its
executive staff, consisting of the Chief Executive Officer and the Chief
Financial Officer. Primarily because we operate in one industry, thin client
computing, including related hardware and software, the executive staff reviews
financial information presented on a basis consistent with that presented in the
Consolidated Statements of Operations.

Sales to Adtcom represented 31% and 18% and sales to Tech Data represented
11% and 15%, respectively, of net revenue for the years ended December 31, 2000
and 1999, respectively. Sales to IBM accounted for 29% of net revenues for the
year ended December 31, 1998.

Original Equipment Manufacturers (OEM) sales represented approximately 12%,
9% and 29% of the Company's net revenues for the years ended December 31, 2000,
1999 and 1998, respectively.

Export sales to our international customers outside North America,
primarily Europe, comprised approximately 40%, 40% and 35% of net revenues for
the years ended December 31, 2000, 1999 and 1998, respectively.

International revenues by country are as follows as a percentage of total
international revenues:

2000 1999 1998
---- ---- ----

Germany* 63% 51% 23%
France 4% 16% 15%
United Kingdom 4% 12% 40%
Other 29% 21% 22%
--- --- ---

Total 100% 100% 100%
=== === ===

Net property and equipment by region are as follows:

2000 1999
---- ----

United States $1,154 $2,841
Europe 348 754
Other 28 56
------ ------

Total $1,530 $3,651
====== ======

* Includes sales to Adtcom, our largest European distributor.

NOTE 12. RELATED PARTY TRANSACTIONS.

On December 28, 2000, in a private placement, Dr. Guenther Pfaff
purchased 220,000 shares of Convertible Preferred Stock, Series B, plus
warrants and options for additional preferred shares and warrants for $1.5
million. Each share of Preferred Stock is convertible to 10 shares of Common
Stock. Shares may be converted in the event of a Qualified Public Offering.
Each share is entitled to an annual dividend of $.41 and dividends are paid
semi-annually. In connection with this purchase, Dr. Pfaff was issued 600,000
warrants to acquire shares of Common Stock at $.75 per share. As the value of
the warrants was not significant, the entire proceeds of $1.5 million was
allocated to the Preferred Stock. The warrants expire December 28, 2005.

On January 11, 2001 Dr. Pfaff was appointed to the Board of Directors.

Dr. Pfaff is the principal owner of GTS Gral which is one of several
resellers to which our products are sold to through our major European
distributors. In the year ended December 31, 2000, sales to GTS Gral
accounted for 4% of our total net revenue. Management believes that all
transactions between the Company and GTS Gral are done on an arms'-length
basis.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

On January 16, 2001 a Form 8-K was filed with the Securities and Exchange
Commission reporting our dismissal of KPMG LLP and appointment of BDO Seidman
LLP as our independent auditors.

Quarterly Financial Data
(Unaudited - in thousands, except per share data)

Quarters Ended
-------------------------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------

2000
- ----
Hardware products and services $ 12,820 $ 12,036 $ 9,611 $ 10,112
Software licenses and services 927 1,117 1,467 1,173
-------- ------- ------------ -----------
Total net revenues 13,747 13,153 11,078 11,285

Gross profit 1,168 3,292 3,168 1,989

Operating loss (16,960) (7,379) (5,584) (1,890)

Loss before income taxes (16,951) (7,511) (5,775) (2,140)

Net loss (17,194) (7,619) (5,872) (1,967)

Net loss per share (1):
Basic and diluted (1.00) (0.46) (0.35) (0.12)
Shares used in per share computations:
Basic and diluted weighted average 17,233 16,667 16,710 16,927

1999
- ----
Hardware products and services $ 22,785 $ 25,341 $ 26,859 $ 23,515
Software licenses and services 3,639 2,533 2,433 1,925
-------- ------- ------------ -----------
Total net revenues 26,424 27,874 29,292 25,440

Gross profit 11,250 11,513 11,545 8,694

Operating loss (2,232) (1,879) (588) (5,008)

Loss before income taxes (1,988) (1,783) (463) (4,909)

Net loss (1,988) (1,783) (7,414) (5,074)

Net loss per share (1):
Basic and diluted (0.12) (0.11) (0.46) (0.31)
Shares used in per share computations:
Basic and diluted weighted average 16,054 16,135 16,219 16,356

(1) Loss per share is computed independently for each quarter presented. The sum
of the quarterly loss in 2000 does not equal the total computed for the year
because the weighted average shares are specific to each quarter.

PART III

Item 10. Directors and Executive Officers of the Registrant.

Information with respect to our directors is incorporated by reference to
the information under the caption "Election of Directors - Nominees" in our
Proxy Statement.

Information with respect to our executive officers is set forth in "Item 1.
Business - Executive Officers" in this Annual Report on Form 10-K.

Information required by Item 405 of Regulation S-K is incorporated by
reference to the information under the caption "Section 16(a) Beneficial
Ownership Reporting Compliance" in our Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION.

The information required by this Item is incorporated by reference to the
information under the captions "Executive Compensation - Summary of Cash and
Certain other Compensation," Executive Compensation - Stock Option Grants, "
"Executive Compensation - Option Exercises and Year-End Holdings," Executive
Compensation - Compensation Directors" and "Executive Compensation - Employment,
Severance and Change of Control Arrangements' contained in our Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information required by this Item is incorporated by reference
to the information under the caption "Principal Shareholders and Share Ownership
by Management" contained in our Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is incorporated by reference
to the information under the caption "Executive Compensation - Employment,
Severance and Change of Control Agreements" and "Certain Transactions" contained
in our Proxy Statement.

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a) The following documents are filed as a part of this Report:

(1) Financial Statements:

See Index to Consolidated Financial Statements at page 27 of
this Report.

(2) Financial Statement Schedule:

Page Schedule Title

S-1 II Valuation and Qualifying Accounts and Reserves

All other financial statement schedules are omitted because they
are not applicable or not required, or because the required
information is included in the Consolidated Financial Statements
and Notes thereto which are included herein.

(3) Exhibits:

The exhibits listed on the accompanying Exhibit Index are filed as
part of, or are incorporated by reference into, this Report.

(b) Reports on Form 8-K during the quarter ended December 31, 2000:

None.

SIGNATURES

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

Network Computing Devices, Inc.
By:

Rudolph G. Morin
President and Chief Executive Officer

Dated: March 30, 2001

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

Signature Title Date

President, Chief Executive Officer and Director
Rudolph G. Morin (Principal Executive Officer) March 30, 2001

Chief Financial Officer and Secretary (Principal
Michael A. Garner Financial and Accounting Officer) March 30, 2001

Robert G. Gilbertson Chairman of the Board of Directors March 30, 2001

Douglas Klein Director March 30, 2001

Stephen A. MacDonald Director March 30, 2001

Guenther Pfaff Director March 30, 2001

SCHEDULE II

NETWORK COMPUTING DEVICES, INC.

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Years Ended December 31, 2000, 1999 and 1998
(in thousands)

Additions
------------------------------
Charged to Charged to
Balance at Gross Other Balance
Beginning Revenues and Accounts - Deductions - at End
of Period Expenses Describe Describe of Period
-------------- ------------- --------------- ---------------- -------------

2000
- ----
Allowance for doubtful accounts $ 485 $ 318 $ - $ 103 (1) $ 700
Sales returns and allowances 4,816 9,294 - 9,181 (2) 4,929
Warranty reserve 760 923 - 1,190 (3) 493

1999
- ----
Allowance for doubtful accounts $ 487 $ - $ 2 (4) $ 485
Sales returns and allowances 3,063 8,871 - 7,118 (5) 4,816
Warranty reserve 906 1,009 - 1,155 (3) 760

1998
- ----
Allowance for doubtful accounts $ 646 $ 203 $ - $ 362 (6) $ 487
Sales returns and allowances 3,638 3,196 $ - 3,771 (7) 3,063
Warranty reserve 631 389 - 114 (3) 906

(1) Includes accounts written off of $103
(2) Includes amounts credited to income of $1,800 and accounts written off of
$7,381
(3) Warranty costs incurred
(4) Includes accounts written off of $2
(5) Includes amounts credited to income of $3,062 and accounts written off of
$4,056
(6) Includes amounts credited to income of $210 and accounts written off of $152
(7) Includes amounts credited to income of $2,396 and accounts written off of
$1,375

S-1

INDEX TO EXHIBITS

Exhibit Description
Number

3.1(1) Certificate of Incorporation of Registrant.
3.2(1) Bylaws of Registrant.
4.1(2) Convertible Promissory Note dated August 31, 2000 with SCI Technology, Inc.
4.2(2) Registration Rights Agreement dated August 31, 2000 with SCI Technology, Inc.
4.3 Certificate of Designations, Preferences and Rights of the Series B Preferred Stock.
10.8(3) Lease Agreement dated August 18, 1988, as amended, between Registrant and Mountain View
Industrial Associates for premises at 350-360 North Bernardo Avenue, Mountain View, California.
10.9(3) Lease Agreement dated September 21, 1989, as amended, between Registrant and Mountain View
Industrial Associates for premises at 380 North Bernardo Avenue, Mountain View, California.
10.11(4)* 1989 Stock Option Plan, as amended.
10.12(3)* Form of Stock Option Agreements for use with the 1989 Stock Option Plan.
10.13(3)* Employee Stock Purchase Plan (revised).
10.14(3)* Form of Indemnification Agreement between the Registrant and its officers and directors.
10.15(3)* Registrant's 401(k) Retirement Plan.
10.23(3) Form of Registrant's standard purchase order.
10.24(6)* Registrant's Incentive Bonus Plan.
10.29(3) Full Service Lease dated October 20, 1993 between Z-Code and Novato Gateway Associates for
premises at 101 Rowland Way, Suite 300, Novato, California.
10.31(4)* 1994 Outside Directors Stock Option Plan.
10.32(4)* Form of Nonstatutory Stock Option Agreement for Outside Directors.
10.34(5) Lease agreement by and between Registrant and Ravendale Investments dated September 20, 1995.
10.36(5)+ Client/Server Software License Agreement dated March 29, 1996 between Registrant and Citrix Systems, Inc.
10.37(5)+ Software Licensing Agreement dated as of June 30, 1995 between Registrant and Evans &
Sutherland Computer Corporation.
10.38(5)+ License and Development Agreement dated December 18, 1995 between Registrant and Software.com, Inc.
10.39(5)+ Cooperative Hardware Marketing Agreement dated November 29, 1995 between Registrant and
International Business Machines Corporation ("IBM"), as amended December 20, 1995.
10.40(5)+ X-Station Terminal Transition Agreement dated November 29, 1995 between Registrant and IBM,
as amended December 13, 1995.
10.42(6)+ Alliance Agreement dated June 27, 1996 by and between the Registrant and IBM.
10.44(7) IBM Letter of Intent and Funding Agreement.
10.45(7)+ Attachment 2 to Article 1--Development of the Alliance Agreement dated November 4, 1997
between Registrant and IBM.
10.46(7) Attachment 3 to Article 2--Manufacturing of the Alliance Agreement dated November 4, 1997
between Registrant and IBM.
10.47(8)+ Development and License Agreement dated March 6, 1998 between Registrant and Intel
Corporation.
10.48(9) Asset Purchase Agreement dated December 31, 1998 between Registrant and Tektronix, Inc.
10.49(10) Asset Purchase Agreement dated January 7, 2000 by and between the Registrant and Multiplicity
LLC
10.50(10) Global Procurement Agreement dated January 30, 2000 by and between Registrant and Hitachi

10.51(10)* Incentive Stock Option Agreement.
10.52(10)* 1999 Stock Option Plan.
10.53(11) Loan and Security Agreement by and between Network Computing
Devices, Inc. and Foothill Capital Corporation dated as of March
31, 2000, Copyright Security Agreement, General Continuing
Guarantee, Guarantor Security Agreement, Intercompany
Subordination Agreement, Patent Security Agreement, Stock Pledge
Agreement and Trademark Security Agreement.
10.54(12) Convertible Promissory Note dated August 31, 2000 with SCI Technology, Inc. (Reference is
made to Exhibit 4.1)
10.55(12) Registration Rights Agreement dated August 31, 2000 with SCI Technology, Inc. (Reference is
made to Exhibit 4.2)
10.56 Tektronix Settlement Agreement and Mutual Release dated December 8, 2000
10.57 Tektronix- Amendment 1 to Registration Rights Agreement dated December 8, 2000
10.58 Securities Purchase Agreement with Dr. Guenther Pfaff dated December 28, 2000
10.59 Warrant Agreement with Dr. Guenther Pfaff dated December 28, 2000
10.60 Registration Rights Agreement with Dr. Guenther Pfaff dated December 28, 2000
11.1 Statement Regarding Computation of Shares
21.1 List of subsidiaries of Registrant.
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of KPMG LLP
- -----------

* Constitutes a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14(c) of Form 10-K.

+ Confidential treatment has been granted as to a portion of this exhibit.

(1) Incorporated by reference to identically numbered exhibit to Registrant's
Form 8-A Registration Statement filed on January 14, 1999.

(2) Incorporated by reference to identically numbered exhibit to Registrant's
Form S-1 Registration Statement (No. 33-47246) which became effective on
June 4, 1992 (the "1992 Registration Statement").

(3) Incorporated by reference to identically numbered exhibit to Registrant's
Form 10-K Report for the year ended December 31, 1993.

(4) Incorporated by reference to identically numbered exhibit to Registrant's
Form 10-K Report for the year ended December 31, 1994.

(5) Incorporated by reference to identically numbered exhibit to Registrant's
Form 10-K Report for the year ended December 31, 1995.

(6) Incorporated by reference to identically numbered exhibit to Registrant's
Form 10-K Report for the year ended December 31, 1996.

(7) Incorporated by reference to identically numbered exhibit to Registrant's
Form 10-K Report for the year ended December 31, 1997.

(8) Incorporated by reference to identically numbered exhibit to Registrant's
Form 10-Q Report for the quarter ended March 31, 1998.

(9) Incorporated by reference to identically numbered exhibit to Registrant's
Form 10-K Report for the year ended December 31, 1998.

(10) Incorporated by reference to identically numbered exhibit to Registrant's
Form 10-K Report for the year ended December 31, 1999.

(11) Incorporated by reference to identically numbered exhibit to Registrant's
Form 10-Q Report for the quarter ended March 31, 2000.

(12) Incorporated by reference to identically numbered exhibit to Registrant's
Form 10-Q Report for the quarter ended September 30, 2000.