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

                ------------------ FORM 10-Q ------------------

(Mark One)

(X)       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

          For the quarterly period ended June 27, 1997

(   )    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

          For the transition period from _____ to _____.


                        Commission File Number: 000-21067

                        TRUSTED INFORMATION SYSTEMS, INC.
             (Exact Name of Registrant as specified in its charter)

               Delaware                                 51-0375640
    (State or other jurisdiction of                  (I.R.S. Employer
     incorporation or organization)                   Identification No.)


                          3060 Washington Road (Rt. 97)
                            Glenwood, Maryland 21738
              (Address of Principal Executive Offices and Zip Code)

                                 (301) 854-6889
              (Registrant's telephone number, including area code)

Indicate by check mark whether the issuer (1) has filed all reports  required to
be filed by Section 13 or 15(d) of the  Exchange  Act  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 last 90
days.

                                    Yes X No

Indicate  the  number  of  shares  of  the  issuer's  classes  of  common  stock
outstanding as of the latest practicable date: 11,611,851 shares of common stock
were outstanding as of July 31, 1997.

                                      -1-
<PAGE>


                        TRUSTED INFORMATION SYSTEMS, INC.
                                    FORM 10-Q

                                      Index

                                                                        Page
PART I   FINANCIAL INFORMATION                                         Number

Item 1.       Financial Statements (Unaudited)

              Condensed Consolidated Balance Sheets as of
              December 27, 1996 and June 27, 1997                        3

              Condensed Consolidated Statements of Operations
              for the three and six months ended June 28, 1996 and       4
              June 27, 1997

              Condensed Consolidated Statements of Cash Flows
              for the six months ended June 28, 1996 and June 27, 1997   5

              Notes to Condensed Consolidated
              Financial Statements                                       6

Item 2.       Management's Discussion and Analysis of
              Financial Condition and Results of Operations              7

PART II   OTHER INFORMATION

Item 4.       Submission of Matters to a Vote of Security Holders        15

Item 6.       Exhibits and Reports on Form 8-K                           16

SIGNATURES                                                               18



                                      -2-
<PAGE>


PART I.   FINANCIAL INFORMATION
Item 1.   Financial Statements
 
<TABLE>
<CAPTION>
                       Trusted Information Systems, Inc.
                     Condensed Consolidated Balance Sheets

<S>                                        <C>                   <C>   
                                               December 27,          June 27,
                                                 1996                  1997
                                                                    (unaudited)                            
Assets
Current assets:
  Cash and cash equivalents                    $1,838,787          $2,709,429
  Marketable securities                        39,127,069          32,529,229
  Accounts receivable, net of allowance
      of $174,592 and $416,589 for
      December 27, 1996 and June 27, 1997,     5,803,361           7,665,152
      respectively
  Unbilled receivables                         1,746,370           1,256,787
  Prepaid expenses and other current assets      952,822           1,557,460
  Refundable income taxes                      1,507,121           2,811,845
  Deferred income taxes                               --             179,115
Total current assets                          50,975,530          48,709,017
Property and equipment, net                    6,695,524           7,067,453
Other assets                                     332,539             312,710
                                            ------------        ------------
                                                                                          
Total assets                                $ 58,003,593        $ 56,089,180
                                            =============       =============

Liabilities and shareholders' equity 
Current liabilities:
  Accounts payable                              $906,706            $203,256
  Other accrued expenses                       4,332,077           6,480,682
  Deferred income taxes                          403,324                  --
  Deferred revenue                             2,072,266           2,902,270
  Notes payable, current portion                 150,857             150,857
                                             -----------          ----------
Total current liabilities                      7,865,230           9,737,065
Notes payable, net of current portion          2,424,355           2,343,378
Other non-current liabilities                     47,365              46,693
                                             -----------          ----------
                                                                                       
Total liabilities                             10,336,950          12,127,136
Commitments
Shareholders' equity:
  Preferred stock, $.01 par value;
     5,000,000 shares authorized;
     no shares issued or outstanding                 ---                 ---
  Common stock, $.01 par value;
      40,000,000 shares uthorized;
      11,489,704 and 11,607,833 shares
      issued and outstanding at December 27,
      1996 and June 27, 1997 respectively        114,897             116,078
  Additional paid-in capital                  46,809,343          46,902,472
  Unrealized gains, net of income taxes of
      $932,838 nd $349,519 at December 27,
      1996 and June 27, 1997, respectively     1,495,162             739,601
  Foreign currency translation adjustment         12,663            (37,702)
  Retained earnings (deficit)                    178,861         (2,952,309)
  Deferred stock compensation                  (944,283)           (806,096)
                                             -----------         -----------
Total shareholders' equity                    47,666,643          43,962,044
                                             ------------        -----------
Total liabilities and shareholders' equity   $58,003,593         $56,089,180
                                             ============        ============
</TABLE>

      See notes to unaudited condensed consolidated financial statements.


                                      -3-
<PAGE>

<TABLE>
<CAPTION>
                        Trusted Information Systems, Inc.
                 Condensed Consolidated Statements of Operations
                                   (unaudited)

                                          For the Three Months Ended             For the Six Months Ended
<S>                                       <C>              <C>                  <C>               <C>
                                           June 28,         June 27,             June 28,          June 27,
                                             1996             1997                 1996             1997
                                             ----             ----                 ----             ----
Revenues:
  Government contracts                   $2,919,403         $2,200,008         $5,351,676        $4,766,288
  Commercial products                     2,235,587          5,904,504          3,732,042        11,014,594
  Commercial consulting services            286,827            914,520            533,977         1,711,705
                                        -----------        -----------        -----------       -----------
                                          5,441,817          9,019,032          9,617,695        17,492,587
Cost of revenues:
  Government contracts                    2,089,529          1,461,003          3,864,383         3,279,545
  Commercial products                       725,780            763,716          1,197,877         1,863,316
  Commercial consulting services
                                            164,222            551,654            329,650           946,485
                                         ----------        -----------        -----------       -----------

                                          2,979,531          2,776,373          5,391,910         6,089,346
                                         ----------        -----------        -----------       -----------
Gross profit                              2,462,286          6,242,659          4,225,785        11,403,241

Operating expenses:
  Selling, general and                    2,633,789          6,736,777          4,677,648        13,025,016
     administrative
  Research and development                  631,565          1,973,176          1,006,752         3,888,411
                                         ----------        -----------        -----------       -----------
                                          3,265,354          8,709,953          5,684,400        16,913,427
                                         ----------        -----------        -----------       -----------
Loss from operations                      (803,068)        (2,467,294)        (1,458,615)       (5,510,186)

Other income (expense):
  Interest income                             8,735            518,694             13,715         1,005,608
  Interest expense                         (74,027)           (55,743)          (162,910)         (106,316)
                                        -----------       ------------        -----------       -----------

                                           (65,292)            462,951          (149,195)           899,292
                                        -----------       ------------        -----------       ------------
Loss before income taxes                  (868,360)        (2,004,343)        (1,607,810)       (4,610,894)
Income tax benefit                          371,843            643,233            687,593         1,479,724
                                        -----------       ------------        -----------       ------------
Net loss                                 $(496,517)       $ (1,361,110)       $  (920,217)      $(3,131,170)
                                        ===========       =============       ============      ============

Net loss per share                          $(0.06)            $(0.12)            $(0.11)            $(0.27)
                                        ===========       =============       ============      ============

Weighted average shares
  outstanding                             8,364,491         11,565,188          8,110,496        11,536,372
                                        ===========       ============        ===========       ===========
</TABLE>

       See notes to unaudited condensed consolidated financial statements.

                                      -4-
<PAGE>

<TABLE>
<CAPTION>
                        Trusted Information Systems, Inc.
                 Condensed Consolidated Statements of Cash Flows
                                   (unaudited)
    
                                                For the Six Months Ended
<S>                                           <C>              <C>
                                               June 28,          June 27,
                                                  1996              1997
                                               --------          --------
OPERATING ACTIVITIES
Net Loss                                      $(920,217)       $(3,131,170)
Adjustments:
    Depreciation                                162,718            700,450
    Deferred income taxes                         3,530                 --
    Amortization of stock compensation           23,031            138,187

Changes in operating assets and liabilities:
    Accounts receivable and unbilled            373,710        (1,372,208)
     receivables
    Prepaid expenses and other                (636,662)          (604,638)
     current assets
    Other assets                              (478,256)             19,829
    Accounts payable                            209,765          (703,450)
    Other accrued expenses                    1,228,489          2,148,605
    Other non-current liabilities                    --              (672)
    Income taxes refundable                 (1,029,473)        (1,304,724)
    Deferred revenues                          (93,287)            830,004                                        
                                         --------------     --------------
Net cash used in operating activities       (1,156,652)        (3,279,787)

INVESTING ACTIVITIES
Purchases of property and equipment         (2,544,455)        (1,072,379)
Net (purchase)/ redemption of
     marketable securities                     (10,880)          5,259,840
                                         --------------     --------------
Cash provided by (used in) investing
activities                                  (2,555,335)          4,187,461

FINANCING ACTIVITIES
Proceeds from exercise of stock                 305,318             94,310
options
Net short-term borrowings                     2,156,500                 --
Proceeds from issuance of notes               1,447,467                 --
payable
Repayments of notes payable                    (69,086)           (80,977)
                                         --------------    ---------------
Net cash provided by  financing
activities                                    3,840,199             13,333

Effect of foreign exchange rate
changes on cash                                 (4,385)           (50,365)
                                         --------------    ---------------
Net change in cash and cash
equivalents                                     123,827            870,642

Cash and cash equivalents at
       beginning of period                       53,859          1,838,787
                                         --------------    ---------------

Cash and cash equivalents at
       end of period                      $     177,686     $    2,709,429
                                          =============     ==============

SUPPLEMENTAL DSICLOSURES OF
     CASH FLOW INFORMATION
Interest paid during the period           $     161,031    $       111,444
                                          =============    ===============

Income taxes paid during the period       $     325,537    $           --
                                          =============    ==============
</TABLE>

      See notes to unaudited condensed consolidated financial statements.

                                      -5-
<PAGE>


                        Trusted Information Systems, Inc.
              Notes to Condensed Consolidated Financial Statements
                                   (unaudited)
                                  June 27, 1997

Basis of Presentation

Trusted   Information   Systems,   Inc.  (the   "Company"  or  "TIS")   provides
comprehensive  security  solutions  for the  protection  of  computer  networks,
including  global  Internet-based  systems,  internal  networks  and  individual
workstations and laptops. The Company develops,  markets, licenses, and supports
the Gauntlet family of firewall  products and other network security products as
well as TIS' patented RecoverKey[TM]  technology which is the first and only key
recovery system to meet current U.S.  government  requirements  for exporting of
strong  cryptography  with key  recovery  technology.  In addition to  providing
leading edge information security products, TIS performs an array of services in
the areas of cryptography,  security consulting, training, and advanced research
and engineering for commercial and government customers on a worldwide basis.

The accompanying  unaudited condensed  consolidated financial statements include
the accounts of Trusted Information Systems,  Inc. and its subsidiaries,  all of
which are wholly owned  (collectively,  "TIS" or the "Company").  Such financial
statements,  including  comparative  information  for the  three  and six  month
periods ended June 28, 1996, where  applicable,  have been prepared  pursuant to
the rules and  regulations of the Securities  and Exchange  Commission  ("SEC").
Certain information and footnote  disclosures  normally included in consolidated
financial  statements  prepared in accordance with generally accepted accounting
principles  have  been  condensed  or  omitted  pursuant  to such SEC  rules and
regulations.  All  material  intercompany  accounts and  transactions  have been
eliminated in consolidation.

In February 1997, the Financial  Accounting Standards Board issued Statement No.
128,  Earnings per Share,  which is required to be adopted on December 31, 1997.
At that time,  the Company will be required to change the method  currently used
to compute  earnings per share and to restate all prior  periods.  Under the new
requirements for calculating  primary earnings per share, the dilutive effect of
stock  options  will  be  excluded.  The  impact  of  Statement  No.  128 on the
calculation of basic earnings per share and fully diluted earnings per share for
these quarters is not expected to be material.

These unaudited condensed  consolidated  financial  statements should be read in
conjunction with Company's  audited  financial  statements and footnotes thereto
which are included in the Company's  report on form 10-K that was filed with the
SEC on  March  27,  1997.  The  accompanying  unaudited  condensed  consolidated
financial  statements  reflect  all the  adjustments  that,  in the  opinion  of
management,  are  necessary for a fair  presentation  of results for the interim
periods  presented.   The  results  for  interim  periods  are  not  necessarily
indicative of the results for the full year.

                                      -6-
<PAGE>

Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations   contains   forward-looking   statements  which  involve  risks  and
uncertainties.  The Company's  actual results could differ  materially  from the
results discussed in forward-looking statements.

Overview

Trusted  Information  Systems,  Inc.,  founded in 1983,  provides  comprehensive
security  solutions  for  protection  of  computer  networks,  including  global
Internet-based  systems,  internal  networks  and  individual  workstations  and
laptops and is a leading provider of firewall  products.  The Company  currently
has two operating  divisions:  the Commercial Division and the Advanced Research
and Engineering ("AR&E") Division.

The Commercial Division

The Commercial Division derives revenues from the Company's  Gauntlet[TM] family
of firewall  products,  from its  commercial  consulting  services  and from its
RecoverKey[TM]  exportable  cryptography  enabling  products.  Revenues from the
Commercial  Division  accounted for  approximately 73% of total company revenues
for the six months ended June 27, 1997 versus 44% of total Company  revenues for
the six months ended June 28,  1996.  The Company  expects  that the  Commercial
Division  will account for an increased  percentage  of total  revenues over the
remainder of the current year and in future years.

Prior to 1996, the Company  distributed its only revenue producing product,  the
Gauntlet  Internet  Firewall which was introduced in 1994,  exclusively  through
resellers and a sales  administration  staff. The Company  presently employs 103
persons to develop,  promote, sell and deliver its network security products and
services,  including  the Gauntlet  family of firewall  products.  The Company's
Gauntlet  Internet  Firewall is licensed as software or as software and hardware
on one platform and was  previously  frequently  combined  (or  "bundled")  with
installation for pricing  purposes.  Since April 15, 1996,  installation for the
Gauntlet  family  of  firewall  products  has been  offered  as a  separate  (or
"unbundled") optional service provided to customers.

During 1996 the Company  began to incur and has  continued to incur  substantial
increases in its selling,  general and administrative  expenses as it builds its
commercial  marketing and sales efforts to support the  introduction of sales of
the Gauntlet Internet  Firewall product and of its other products:  the Gauntlet
Intranet  Firewall,  the Gauntlet Net  Extender,  the Gauntlet PC Extender,  the
Gauntlet  Internet  Firewall for Solaris,  the  Gauntlet  Internet  Firewall for
Windows  NT,  The  Gauntlet  Forcefield,   and  certain  of  its  RecoverKey[TM]
exportable  cryptography products for multiple platforms such as Windows, NT and
Unix.  In addition,  the Company  expects to continue to expand its research and
development   organization  and  efforts,   particularly  with

                                      -7-
<PAGE>

regards  to  its RecoverKey[TM] exportable cryptography enabling products,
including key recovery centers  ("KRC's") and  cryptographic  service  providers
("CSP") tool kits. The amount  and  timing of these  additional  expenditures
are  likely to result in fluctuations in operating margins.  Any material
reduction in gross or operating margins could materially adversely affect the
Company's operating results.

The Company offers a full range of consulting in information  security  planning
and product support. The Company's commercial  consulting practice offers expert
technology  research  services,  consultation on security issues associated with
products  and  services,  corporate  information  security  policy  development,
architectural and diagnostic security analysis services,  firewall configuration
and  maintenance  support,  and  training  for  corporate  network and  security
administration  personnel.  These  services  are  carried  out by a staff  of 26
persons with extensive  information  security  experience in both commercial and
government organizations.

The Advanced Research and Engineering Division

The Advanced Research and Engineering  Division conducts  research,  development
and consulting in computer and related security  systems.  Revenues for the AR&E
Division  accounted for 27% of total Company  revenues for the six monthes ended
June 27, 1997 versus 56% of total Company revenues for the six months ended June
28, 1996. The Division currently has major contracts that are with or are funded
by three agencies of the U.S. government:  the National Security Agency ("NSA"),
Air Force Rome Laboratories ("RL") and Defense Advanced Research Projects Agency
("DARPA"),  formerly the Advanced  Research  Projects Agency ("ARPA").  Revenues
from the AR&E  Division  decreased 11% in the first half of 1997 versus the same
period of 1996,  primarily due to  completion of a major  contract with the NSA,
partially  offset by revenues from other  contracts of  approximately  $600,000.
This contract had an aggregate award value of approximately $14.8 million. Total
revenues from this contract were $.9 million and $2.2 million for the six months
ending June 27, 1997 and June 28, 1996, respectively.

The  aggregate  award  value  of the  Company's  nine  major  active  government
contracts  is  approximately  $24.3  million as of June 27,  1997.  Six of these
contracts  are  funded  by DARPA and range in value  from $1.5  million  to $9.1
million.  One of these  contracts  expires during 1997,  four will expire during
1998,  and one will expire in 2000.  The  Company  expects to continue to obtain
government  contracts  for its AR&E  Division.  Excluding the major NSA contract
which ended on March 31, 1997,  the Company  anticipates  revenues from such new
contracts  will  attain the level  realized in 1996.  The  Company was  recently
notified  that  several of its pending  proposals  with DARPA were  selected for
contract award.  Specific  contract terms and values will be negotiated  between
the  Company  and DARPA  over the next  several  months  and are  subject to the
successful completion of such negotiations and the availability of funding.

                                      -8-
<PAGE>

Most of the  Company's  government  contracts  provide for  compensation  to the
Company in the form of  reimbursement  of costs plus a fee.  Gross  profit under
government  contracts  generally  represents  the fee plus  recovered  operating
expenses.  Under these government contracts,  the Company is entitled to recover
associated direct labor costs, overhead and selling,  general and administrative
expenses,  including  allowable  research  and  development  expenses.  Selling,
general and administrative expenses allowable under government contracts include
salaries  and  benefits,   marketing,   bid  and  proposal  costs,   management,
accounting,  legal and contract  administration and certain other administrative
expenses.

Under its  government  contracts,  the Company  bears the risk that  recoverable
expenses  billed by the  Company  are subject to review and audit by the Defense
Contract  Audit Agency (the  "DCAA").  The DCAA has audited the  Company's  cost
accounting  system  through 1993 without any  significant  disallowances  and is
currently performing a similar audit of the Company's cost accounting system for
the years 1994 and 1995.  Pursuant  to their  terms,  these  contracts  are also
subject to termination at the convenience of the applicable governmental agency.
If the contract is terminated, the Company would typically be reimbursed for its
costs to the date of termination  plus the cost of any orderly  termination  and
would be paid a portion of the fee.

Results of Operations

The  following  tables  present  for the  periods  indicated  certain  unaudited
Statements of Operations' data as a percentage of the Company's revenues:
<TABLE>
<CAPTION>
                     Consolidated Statements of Operations
                          as a Percentage of Revenues

<S>                                    <C>                   <C>                 <C>                 <C>
                                       Three months          Three months        Six months          Six months
                                          ended                 ended              ended               ended
                                         June 28,              June 27,           June 28,            June 27,
                                          1996                   1997              1996                1997
                                       (unaudited)            (unaudited)       (unaudited)         (unaudited)
 
Revenues:
  Government contracts                    53.7%                   24.4%             55.6%                27.2%
  Commercial products                     41.1%                   65.5%             38.8%                63.0%
  Commercial consulting services           5.2%                   10.1%              5.6%                 9.8%
        Total Revenues                   100.0%                  100.0%            100.0%               100.0%

        Total Costs of revenues           54.8%                   30.8%             56.1%                34.8%

Gross profit                              45.2%                   69.2%             43.9%                65.2%

Operating expenses:
  Selling, general and                    48.4%                   74.7%             48.6%                74.5%
     administrative
  Research and development                11.6%                   21.9%             10.5%                22.2%
        Total Operating expenses          60.0%                   96.6%             59.1%                96.7%

Loss from operations                    (14.8)%                 (27.4)%           (15.2)%              (31.5)%

Interest and other income and            (1.2)%                    5.2%            (1.6)%                 5.1%
expense

Loss before income taxes                (16.0)%                 (22.2)%           (16.8)%              (26.4)%
Income tax benefit                         6.9%                    7.1%              7.1%                 8.5%
                                     ----------               ---------         ---------           ----------
Net loss                                 (9.1)%                 (15.1)%            (9.7)%              (17.9)%
                                     ==========               =========         =========           ==========
</TABLE>

                                      -9-
<PAGE>
<TABLE>
<CAPTION>
                              Selected Information
                      as a Percentage of Related Revenues                  

<S>                                    <C>                   <C>                 <C>               <C>
                                       Three months          Three months        Six months        Six months
                                          ended                  ended              ended             ended
                                         June 28,               June 27,           June 28,          June 27,
                                           1996                   1997               1996              1997
                                        (unaudited)            (unaudited)       (unaudited)        (unaudited)

Cost of revenues:
  Government contracts                   71.6%                    66.4%             72.2%              68.8%
  Commercial products                    32.5%                    12.9%             32.1%              16.9%
  Commercial consulting services         57.3%                    60.3%             61.7%              55.3%
Gross profit:
  Government contracts                   28.4%                    33.6%             27.8%              31.2%
  Commercial products                    67.5%                    87.1%             67.9%              83.1%
  Commercial consulting services         42.7%                    39.7%             38.3%              44.7%
</TABLE>

 Three Months Ended June 27, 1997 Compared to Three Months Ended June 28, 1996

Revenues.  The Company's total revenues increased 66% to $9,019,032 in the three
months ended June 27, 1997 ("the second quarter of 1997") from $5,441,817 in the
three months ended June 28, 1996 ("the second  quarter of 1996"),  primarily due
to strong performance by the Company's Commercial  Division.  Commercial product
revenues  increased  164% to  $5,904,504  in the  second  quarter  of 1997  from
$2,235,587 in the second  quarter of 1996 as a result of increased  shipments of
the  Company's  Gauntlet  firewall  products  and sales of  licenses of Gauntlet
Internet  Firewalls  directly to customers and through the Company's  resellers.
Commercial consulting services revenues increased 219% to $914,520 in the second
quarter of 1997 from $286,827 in the second quarter of 1996 primarily because of
the Company's  increased  dedication of resources to its  commercial  consulting
business and the  completion  of a substantial  number of commercial  consulting
contracts in the second quarter of 1997.  Government contract revenues decreased
25% to  $2,200,008  in the second  quarter of 1997 from  $2,919,043  in the same
period last year primaily due to completion of a major contract with the NSA.

Gross Profit. Gross profit increased 154% to $6,242,659 in the second quarter of
1997 from  $2,462,286 in the second  quarter of 1996, due to the increase in the
Company's  commercial product and consulting services sales. The gross profit on
commercial  products  increased 240% to $5,140,788 in the second quarter of 1997
from  $1,509,807  in the  second  quarter  of 1996  because  of an  increase  in
shipments of Gauntlet  firewall  products and increased  sales of licenses which
are higher margin products. As a percentage of related revenues, gross profit on
commercial  products increased to 87.1% in the second quarter of 1997 from 67.5%
in the same period in 1996.

Gross profit from the Company's commercial consulting services increased 196% to
$362,866 in the second  quarter of 1997 from  $122,605 in the second  quarter of
1996,  because of  increased  revenues  and an  increase  in  opportunities  for
contracts with higher margins. As a percentage of related revenues, gross profit
on commercial  consulting  services  decreased to 39.7% in the second quarter of
1997 from  42.7% in the  second  quarter  of 1996  because  of  slightly  higher
contract costs in the second quarter of 1997.

                                      -10-
<PAGE>

Gross profit from the Company's  government  contracts decreased 11% to $739,005
in the second  quarter  of 1997 from  $829,874  in the  second  quarter of 1996,
primarily due to lower revenues  associated with completion of a major contract.
As a  percentage  of related  revenues,  gross  profit on  government  contracts
increased  to 33.6% in the  second  quarter  of 1997  from  28.4% in the  second
quarter of 1996 primaily due to the  recognition  of revenues from award fees in
the second quarter of 1997 which bear no related costs.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative  expenses  increased  156% to $6,736,777 in the second quarter of
1997 from  $2,633,789  in the  second  quarter  of 1996,  due  primarily  to the
substantial  increase in personnel and related  operating costs  associated with
the  increase  in the  Company's  commercial  products  sales,  as  well  as the
Company's  efforts  towards  developing  the  infrastructure  to support  future
commercial product revenue growth.

Research and  Development  Expenses.  The  Company's  research  and  development
expenses,   which  do  not  include  such  expenses  directly  reimbursed  under
government contracts, increased 212% to $1,973,176 in the second quarter of 1997
from  $631,565  in the second  quarter of 1996.  This  increase  reflects  costs
associated  with  development of the next  generation of the Gauntlet  Firewall,
Gauntlet Firewall Version 4.0, the Gauntlet Internet for Firewalls on NT version
1.1,  RecoverKey[TM]  exportable  cryptography enabling products and technology,
and additional members of the Gauntlet family of firewall products.

Other Income and Expense.  Other income totalled  $462,951 in the second quarter
of 1997 and  consists  of interest  income  generated  from the  proceeds of the
Company's  initial public offering,  offset by interest expense on the Company's
long-term debt associated with its Glenwood,  Maryland headquarters  facilities.
The Company's other expense totalled $65,292 in 1996 and consisted  primarily of
interest expense from borrowings under the Company's  revolving and other credit
lines prior to the Company's initial public offering.

Six Months Ended June 27, 1997 Compared to Six Months Ended June 28, 1996

Revenues.  The Company's total revenues  increased 82% to $17,492,587 in the six
months  ended June 27,  1997 from  $9,617,695  in the six months  ended June 28,
1996,  primarily due to strong performance by the Company's Commercial Division.
Commercial product revenues increased 195% to $11,014,594 in the six months
ended June 27, 1997 from $3,732,042 in the six months ended June 28, 1996,
primarily because product revenues from direct customers doubled and reseller
revenues grew by over  520% in the first half of 1997 over the first half of
1996.  Commercial  consulting  revenues increased 221% to $1,711,705 in the six
months ended June 27, 1997 from $533,977 in the six  months  ended June 28,
1996,  primarily  because  of the  Company's completion of a substantial number
of commercial consulting contracts in the six months  ended June 27,  1997.
Government  contract  revenues  decreased  11% to $4,766,288  in the six months
ended June 27, 1997 from  $5,351,676  in the same period last year primarily due
to reallocation of government  contract  research personnel to the Company's
Commercial  Division  activities and completion of a major contract with the
NSA.

                                      -11-
<PAGE>

Gross Profit. Gross profit increased 170% to $11,403,241 in the six months ended
June 27, 1997 from  $4,225,785 in the six months ended June 28, 1996,  primarily
due to  increased  commercial  product  sales.  The gross  profit on  commercial
products increased 261% to $9,151,278 in the six months ended June 27, 1997 from
$2,534,165  in the six months  ended June 28,  1996  because of an  increase  in
shipments of Gauntlet  firewall  products.  As a percentage of related revenues,
gross profit on commercial  products  increased to 83.1% in the six months ended
June 27, 1997 from 67.9% in the six months ended June 28, 1996.

Gross profit from the Company's commercial consulting services increased 275% to
$765,220 in the six months  ended June 27, 1997 from  $204,327 in the six months
ended June 28,  1996.  As a  percentage  of related  revenues,  gross  profit on
commercial  consulting  services increased to 44.7% in the six months ended June
27, 1997 from 38.3% in the six months  ended June 28, 1996  because of increased
revenues from higher margin consulting business in the six months ended June 28,
1996.

Gross  profit from the  Company's  government  contracts  decreased  slightly to
$1,486,743  in the six months  ended June 27,  1997 from  $1,487,293  in the six
months ended June 28, 1996. As a percentage of related revenues, gross profit on
government  contracts  increased  to 31.2% in the six months ended June 27, 1997
from 27.8% in the six months  ended June 28,  1996  because of greater  revenues
received in 1997 from contracts with proportionately higher fees.

Selling General and Administrative Expenses. Selling, general and administrative
expenses  increased  178% to  $13,025,016  in the six months ended June 27, 1997
from  $4,677,648  in the six months  ended June 28, 1996,  due  primarily to the
substantial  increase in personnel and related  operating costs  associated with
the  increase  in the  Company's  commercial  products  sales,  as  well  as the
Company's  efforts  towards  developing  the  infrastructure  to support  future
commercial product revenue growth.

Research and  Development  Expenses.  The  Company's  research  and  development
expenses,   which  do  not  include  such  expenses  directly  reimbursed  under
government contracts,  increased 286% to $3,888,411 in the six months ended June
27, 1997 from $1,006,752 in the six months ended June 28, 1996, due primarily to
the Company's  efforts in developing  the new members of the Gauntlet  family of
firewall  products  announced in April 1996,  the  development  of its Microsoft
Windows  NT,  Sun  Microsystems'  Solaris  firewall  product  versions,  and its
RecoverKey[TM]   exportable   cryptography  enabling  products,   the  Company's
reallocation  of  government  contract  research  personnel  to  its  Commercial
Division  activities,  and the further development and evaluation of its Trusted
Mach[TM] technology.

Other Income and Expense. Other income totalled $899,292 in the six months ended
June 27, 1997 and consisted  primarily of interest  income on cash  generated in
the Company's  initial public offering.  Other expense totalled $149,195 for the
six months ended June 28, 1996 and consisted  primarily of interest expense from
borrowings  under the  Company's  revolving  and other credit lines prior to the
Company's initial public offering.

                                      -12-
<PAGE>

Liquidity and Capital Resources

Since its inception, the Company has financed its operations and the purchase of
property and equipment  through the issuance of common stock,  borrowings  under
short-term lines of credit,  secured notes payable,  and stockholder  loans, and
the  generation  of  cash  from  operations.  Cash  and  cash  equivalents  were
$2,709,429 at June 27, 1997 and  $1,838,787 at December 27, 1996, and marketable
securities  were  $32,529,229  at June 27, 1997 and  $39,127,069 at December 27,
1996. The Company used cash in operating activities of $3,279,787 and $1,156,652
in the six  months  ended June 27,  1997 and June 28,  1996,  respectively.  The
increase in cash used in operating  activities  in 1997 is primarily  due to the
use of funds for selling,  general and administrative  expenses  associated with
Company expansion of commercial activities and introduction of new products. The
Company financed these operating  activities primarily through the redemption of
marketable  securities.  In the  six  months  ended  June  28,  1996,  operating
activities were financed  primarily by proceeds from  short-term  borrowings and
notes payable.

Capital expenditures  totalled $1,072,379 and $2,544,455 in the six months ended
June 27, 1997 and June 28, 1996, respectively.  Higher expenditures in 1996 were
due to construction  costs associated with expansion of the Company's  Glenwood,
Maryland headquarters facility.

At  December  29,  1995,  the  Company  had  various  short-term  line of credit
arrangements with Mercantile-Safe  Deposit and Trust Company ("Mercantile Bank")
aggregating $2 million.  During 1996, the Company arranged for additional credit
agreements and modified  existing  credit  agreements  with  Mercantile  Bank to
provide  for  additional  borrowings  to fund the  Company  prior to its initial
public  offering.  Subsequent  to September 27, 1996,  in  conjunction  with the
Company's  initial public  offering,  the Company paid off and terminated  these
line of credit arrangements.

As of June 27,  1997,  the  Company  had no  material  commitments  for  capital
expenditures.

In 1995 the Company negotiated a construction loan in the amount of $1.8 million
to  provide  for the  expansion  of its  facilities  at its  Glenwood,  Maryland
location.  At the end of May 1996,  the Company had  completed its expansion and
substantially  drawn down the total  amount of its  construction  loan which was
converted in December,  1996 into mortgage notes payable to Mercantile Bank with
a fixed interest rate. In conjunction  with these mortgage notes, the Company is
required to meet a minimum  liquidity level of $5 million and a minimum tangible
net worth of $20 million.

                                      -13-
<PAGE>

The Company  intends  from time to time to evaluate  potential  acquisitions  of
businesses,  products  and  technologies  that  could  complement  or expand the
Company's business. At the current time, the Company has no plans, agreements or
commitments  for any such  acquisitions  and is not engaged in any  negotiations
with respect thereto.

The Company has not engaged in any hedging activities to date.

While the Company may require  additional  financing to fund  development of new
products and expansion of its domestic and international operations, it believes
that the net proceeds from its initial public  offering,  together with existing
cash and cash  equivalents,  cash generated  from  operations and cash available
through its credit and note payable arrangements,  will be sufficient to finance
its product development and operating needs at least through December 1998.

                                      -14-

<PAGE>



                        TRUSTED INFORMATION SYSTEMS, INC.
                                   FORM 10 - Q


PART II.   OTHER INFORMATION


Item 4.  Submission of Matters to a Vote of Security Holders

(a)  The Company held its Annual Meeting of Stockholders on May 27, 1997.

(b)  At the Annual Meeting of Stockholders, Harvey L. Weiss, an Executive Vice
President of the Company, President of the Commercial Division and a Director
of the Company since March 1996, was elected to serve until the 2000 Annual
Meeting of Stockholders.  The following directors continued their terms of
office after the Meeting: Martha A. Branstad; Charles W. Stein; Stephen T.
Walker, and Gerald J. Popek.

(c)  The following matters were voted upon at the Annual Meeting of
Stockholders:

     (i)  Election  of Harvey L.  Weiss as a  director  to serve  until the 2000
Annual  Meeting of  Stockholders,  and until his  successor  is elected and duly
qualified.  Votes for: 8,683,146;  votes against or withheld:  74,733; number of
abstentions and broker non-votes: 0.

     (ii) Adoption of the Trusted Information Systems,  Inc. 1997 Employee Stock
Purchase Plan and the reservation of 400,000 shares of Common Stock for issuance
thereunder.  Votes for: 8,710,049;  votes against or withheld: 44,320; number of
abstentions and broker non-votes:  3,510.  (iii) Ratification of the appointment
of Ernst & Young L.L.P.  as the  Company's  independent  auditors for the fiscal
year ending December 26, 1997. Votes for: 8,755,579;  votes against or withheld:
2,000; number of abstentions and broker non-votes: 300.

                                      -15-
<PAGE>



Item 6.   Exhibits and Reports on Form 8-K

(a)   Exhibits

3.1*      Certificate  of  Incorporation  of  the  Company.
3.1.1*    Certificate of Amendment to Certificate  of  Incorporation,  as
          filed with the Delaware Secretary of State on October 2, 1996.
3.2*      Amended and Restated Bylaws of the Company.
4.1*      Specimen stock certificate for shares of Common Stock of the Company.
10.1*     Amended and Restated  Employee Stock Option Plan.
10.2*     Amended and  Restated  1996 Stock  Option  Plan.
10.2.1*   Form of Incentive Stock Option Agreement  pursuant to 1996 Stock 
          Option Plan.
10.2.2*   Form of Non-Qualified  Stock Option  Agreement  pursuant to 1996 Stock
          Option Plan.
10.3*     Amended and Restated 1996 Directors'Stock Option Plan.
10.3.1    1997 Employee Stock Purchase Plan.*** 
10.4*     Form of Employee Agreement Regarding Confidentiality and Inventions. 
10.5*     Form of Software License and Reseller Agreement.
10.6*     Form of  Consulting  Services  Agreement.
10.7*     Form of Indemnification  Agreement by and between the Company and its
          directors and officers.
10.8*     Construction  Loan Agreement  dated July 26, 1995, by and between the
          Company and  Mercantile-Safe Deposit and Trust Company.
10.9*     Construction  Loan  Promissory Note dated July 26, 1995, by and
          between the Company and Mercantile-Safe Deposit and Trust Company.
10.10*    Deed of Trust and Security  Agreement dated July 26, 1995, by and
          between the Company and Mercantile-Safe Deposit and Trust Company.
10.11*    Security Agreement, dated July 26, 1995, by and among the Company,
          Mercantile-Safe Deposit and Trust Company and Stephen T. Walker.
10.12*    Personal  Guaranty  Agreement dated July 26, 1995, by and between
          Stephen T. Walker and Mercantile-Safe Deposit and Trust Company.
10.13*    Revolving Note issued by the Company on April 4, 1996,  to
          Mercantile-Safe  Deposit  and  Trust  Company.
10.14*    Security Agreement   dated   April  4,  1996,   by  and   between  the
          Company  and Mercantile-Safe  Deposit and Trust Company.
10.15*    Revolving Note issued by the Company on April 4, 1996, to
          Mercantile-Safe Deposit and Trust Company.
10.16.1*  Security  Agreement  as of August 27,  1996,  by and  between the
          Company and Mercantile-Safe  Deposit and Trust Company.
10.16.2*  Revolving Note  issued by the  Company  as of August  27,  1996,
          to  Mercantile-Safe Deposit and Trust Company.
10.17*    Office  Building Lease dated February 1, 1990,  by and between the
          Company and Perini  Investment  Properties,  Inc.
10.18*    Lease Amendment I dated May 26, 1994, by and between the Company and
          Robert R.  Walker,  Jr.,  Receiver  (relating  to  exhibit  10.17).
10.19*    Standard  Lease  dated April 12,  1989,  by and between the Company
          and R&B Property Holding Company.
10.20*    Amendment to Lease effective  November 1, 1992, by and between the
          Company and R&B Property Holding Company (relating to exhibit  10.19).
10.21*    Lease Agreement dated as of October 3, 1995, by and between  Trusted
          Information  Systems (UK) Limited and Theale  Estates Limited.

                                      -16-
<PAGE>

10.22*    Deed dated July 17,  1996, by and between the Company and Glenwood
          Associates Limited Partnership.
10.22.1*  Promissory Note issued by the Company on July 17, 1996, to Glenwood
          Associates Limited  Partnership.
10.22.2*  Deed of Trust and Security  Agreement  dated  December 1, 1993, by
          and between Glenwood  Associates  Limited  Partnership and
          Mercantile-Safe Deposit  and Trust  Company.  
10.22.3*  Promissory  Note issued by Glenwood Associates  Limited  Partnership
          on December 1, 1993 to  Mercantile-Safe Deposit and Trust Company.
10.23*    Deed and Confirmatory Deed dated July 26, 1995,  by and between the
          Company and Stephen T. Walker.
10.24*    Agreement and Plan of Merger dated May 30, 1996.
10.25**+  Patent and Software License Agreement   dated  January  24,  1997,
          by  and  between  the  Company  and International Business Machine
          Corporation.
11.1      Statement of computation of earnings per share.
21.1*     Subsidiaries of the Registrant.
27        Financial Data Schedule.

-------------------

*        Previously filed as an exhibit to the Company's Registration Statement
         Number 333-5419 on Form S-1 and incorporated herein by reference.
**       Previously  filed as an exhibit to the  Company's  Form 10-K for the
         fiscal year ended  December  27, 1996 and incorporated herein by
         reference.
***      Previously  filed on April 24, 1997 as an exhibit to the Company's
         Schedule 14A and  incorporated  herein by reference.
+        Portions of this Exhibit  were  omitted and have been filed  separately
         with the Secretary of the  Commission on March 27, 1997 pursuant to the
         Registrant's  Application Requesting  Confidential Treatment under Rule
         24b-2 of the Securities Exchange Act of 1934, as amended.

(b)   Reports on Form 8-K

None.

                                      -17-
<PAGE>


                                   SIGNATURES


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

                                            TRUSTED INFORMATION SYSTEMS, INC.

Date:  August 11, 1997                      By:      Stephen T. Walker
                                               -----------------------
                                                     Stephen T. Walker,
                                                     President and CEO


Date:  August 11, 1997                      By:      Ronald W. Kaiser
                                               ----------------------
                                                     Ronald W. Kaiser,
                                                     Chief Financial Officer


                                      -18-
<PAGE>


                                  EXHIBIT INDEX



3.1*              Certificate of Incorporation of the Company.
3.1.1*            Certificate of Amendment to Certificate of  Incorporation,  as
                  filed with the Delaware Secretary of State on October 2, 1996.
3.2*              Amended and Restated Bylaws of the Company.
4.1*              Specimen stock certificate for shares of Common Stock of the
                  Company.
10.1*             Amended and Restated Employee Stock Option Plan.
10.2*             Amended and Restated 1996 Stock Option Plan.
10.2.1*           Form of Incentive Stock Option Agreement pursuant to 1996
                  Stock Option Plan.
10.2.2*           Form of Non-Qualified Stock Option Agreement pursuant to 1996
                  Stock Option
                  Plan.
10.3*             Amended and Restated 1996 Directors' Stock Option Plan.
10.3.1            1997 Employee Stock Purchase Plan.***
10.4*             Form of Employee Agreement Regarding Confidentiality and
                  Inventions.
10.5*             Form of Software License and Reseller Agreement.
10.6*             Form of Consulting Services Agreement.
10.7*             Form of Indemnification Agreement by and between the Company
                  and its
                  directors and officers.
10.8*             Construction Loan Agreement dated July 26, 1995, by and
                  between the Company and Mercantile-Safe Deposit and Trust
                  Company.
10.9*             Construction Loan Promissory Note dated July 26, 1995, by and
                  between the Company and Mercantile-Safe Deposit and Trust
                  Company.
10.10*            Deed of Trust and Security Agreement dated July 26, 1995, by
                  and between the Company and Mercantile-Safe Deposit and Trust
                  Company.
10.11*            Security Agreement, dated July 26, 1995, by and among the
                  Company, Mercantile-Safe Deposit and Trust Company and
                  Stephen T. Walker.
10.12*            Personal Guaranty Agreement dated July 26, 1995, by and
                  between Stephen T. Walker and Mercantile-Safe Deposit and
                  Trust Company.
10.13*            Revolving Note issued by the Company on April 4, 1996, to
                  Mercantile-Safe Deposit and Trust Company.
10.14*            Security Agreement dated April 4, 1996, by and between the
                  Company and Mercantile-Safe Deposit and Trust Company.
10.15*            Revolving Note issued by the Company on April 4, 1996, to
                  Mercantile-Safe Deposit and Trust Company.
10.16.1*          Security Agreement as of August 27, 1996, by and between the
                  Company and Mercantile-Safe Deposit and Trust Company.
10.16.2*          Revolving Note issued by the Company as of August 27, 1996,
                  to Mercantile-Safe Deposit and Trust Company.
10.17*            Office Building Lease dated February 1, 1990, by and between
                  the Company and Perini Investment Properties, Inc.
10.18*            Lease Amendment I dated May 26, 1994, by and between the
                  Company and Robert R. Walker, Jr., Receiver (relating to
                  exhibit 10.17).
10.19*            Standard Lease dated April 12, 1989, by and between the
                  Company and R&B Property Holding Company.
10.20*            Amendment to Lease effective  November 1, 1992, by and between
                  the Company and R&B  Property  Holding  Company  (relating  to
                  exhibit 10.19).
10.21*            Lease  Agreement  dated as of October 3, 1995,  by and between
                  Trusted  Information  Systems (UK) Limited and Theale  Estates
                  Limited.
10.22*            Deed dated July 17, 1996, by and between the Company and
                  Glenwood Associates Limited Partnership.

                                      -19-
<PAGE>

10.22.1*          Promissory Note issued by the Company on July 17, 1996, to
                  Glenwood Associates Limited Partnership.
10.22.2*          Deed of Trust and Security Agreement dated December 1, 1993,
                  by and between Glenwood Associates Limited Partnership and
                  Mercantile-Safe Deposit and Trust Company.
10.22.3*          Promissory Note issued by Glenwood Associates Limited
                  Partnership on December 1, 1993 to Mercantile-Safe Deposit
                  and Trust Company.
10.23*            Deed and Confirmatory Deed dated July 26, 1995, by and between
                  the Company and Stephen T. Walker.
10.24*            Agreement and Plan of Merger dated May 30, 1996.
10.25**+          Patent and Software Agreement dated January 24, 1997, by and
                  between the Company and International Business Machines
                  Corporation.
11.1              Statement of computation of earnings per share.
21.1*             Subsidiaries of the Registrant.
27                Financial Data Schedule.
-------------------

*        Previously filed as an exhibit to the Company's  Registration Statement
         Number 333-5419 on Form S-1 and incorporated herein by reference.
**       Previously filed as an exhibit to the Company's form 10-K for the
         fiscal year ended December 27, 1996 and incorporated herein by
         reference.
***      Previously  filed on April 24, 1997 as an exhibit to the Company's
         Schedule 14A and  incorporated  herein by reference.
+        Portions of this Exhibit  were  omitted and have been filed  separately
         with the Secretary of the  Commission on March 27, 1997 pursuant to the
         Registrant's  Application Requesting  Confidential Treatment under Rule
         24b-2 of the Securities Exchange Act of 1934, as amended.

                                      -20-
<PAGE>

Exhibit 11.1

<TABLE>
<CAPTION>
                        Trusted Information Systems, Inc.
              Statement of Computation of Earnings (Loss) Per Share

                                 For the Three Months Ended             For the Six Months Ended
<S>                              <C>                 <C>                <C>                 <C>
                                 June 28,            June 27,           June 28,            June 27,
                                   1996                1997               1996                1997
                                ---------------------------------------------------------------------- 

Common Stock Outstanding          7,498,315          11,565,188          7,244,320          11,536,372

Issuance of Cheap Stock             866,176                  --            866,176                  --
                                 ----------          ----------         ----------          ----------

     Weighted average
     shares outstanding           8,364,491          11,565,188          8,110,496          11,536,372
                                 ==========          ==========         ==========          ==========
</TABLE>

                                      -21-
<PAGE>

Exhibit 27

THIS  SCHEDULE  CONTAINS  SUMMARY  FINANCIAL   INFORMATION  EXTRACTED  FROM  THE
UNAUDITED  CONSOLIDATED  FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTH PERIOD
ENDED JUNE 27,  1997 AND IS  QUALIFIED  IN ITS  ENTIRETY  BY  REFERENCE  TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY.

PERIOD TYPE                                                               6-MOS
FISCAL YEAR END                                                     DEC-26-1997
PERIOD START                                                        DEC-28-1996
PERIOD END                                                          JUN-27-1997
CASH                                                                  2,709,429
SECURITIES                                                           32,529,229
RECEIVABLES                                                           8,081,741
ALLOWANCES                                                              416,589
INVENTORY                                                                     0
CURRENT ASSETS                                                       48,709,017
PP&E                                                                  9,433,097
DEPRECIATION                                                          2,365,644
TOTAL ASSETS                                                         56,089,180
CURRENT LIABILITIES                                                   9,737,065
BONDS                                                                 2,343,378
PREFERRED -  MANDATORY                                                        0
PREFERRED                                                                     0
COMMON                                                                  116,078
OTHER - SE                                                           43,845,966
TOTAL LIABILITIES AND EQUITY                                         56,089,180
SALES                                                                17,492,587
TOTAL REVENUES                                                       17,492,587
COGS                                                                  6,089,346
TOTAL COSTS                                                           6,089,346
OTHER EXPENSES                                                       16,913,427
LOSS PROVISION                                                                0
INTEREST EXPENSE                                                        106,316
INCOME PRETAX                                                       (4,610,894)
INCOME TAX                                                          (1,479,724)
INCOME CONTINUING                                                   (3,131,170)
DISCONTINUED                                                                  0
EXTRAORDINARY                                                                 0
CHANGES                                                                       0
NET INCOME                                                          (3,131,170)
EPS PRIMARY                                                               (.27)
EPS DILUTED                                                               (.27)

                                      -22-