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

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

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

(Mark One)

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

For the quarterly period ended September 26, 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                                    52-1281786
(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: 13,759,705 shares of common stock
were outstanding as of November 4, 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 September 26, 1997                  3

              Condensed Consolidated Statements of Operations
              for the three months and nine months ended
              September 27, 1996 and September 26, 1997                 4

              Condensed Consolidated Statements of Cash Flows
              for the nine months ended September 27, 1996 and
              September 26, 1997                                        5

              Notes to Unaudited 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 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
<CAPTION>
<S>                                                            <C>                        <C>

                                                                    December 27,          September 26,
                                                                       1996                   1997
                                                                                           (unaudited)
                                                               ------------------         --------------
Assets
Current assets:
  Cash and cash equivalents                                      $     1,838,787               $864,185
  Marketable securities                                               39,127,069             32,997,374
  Accounts receivable, net of allowance of $174,592
       and $512,140 for December 27, 1996 and September 26,
       1997, respectively                                              5,803,361              8,854,161
  Unbilled receivables                                                 1,746,370              2,085,473
  Prepaid expenses and other current assets                              952,822              1,624,998
  Refundable income taxes                                              1,507,121              2,204,926
  Deferred income taxes                                                                         528,634
                                                               -----------------           ------------
                                                                             
Total current assets                                                  50,975,530             49,159,751
Property and equipment, net                                            6,695,524              7,691,785
Other assets                                                             332,539                373,818
                                                                    ------------           ------------
Total assets                                                      $   58,003,593           $ 57,225,354
                                                                  ==============           ============

Liabilities and shareholders' equity
Current liabilities:
  Accounts payable                                               $       906,706          $     537,025
  Other accrued expenses                                               4,332,077              6,595,544
  Deferred income taxes                                                  403,324                     --
  Deferred revenue                                                     2,072,266              3,118,529
  Notes payable, current portion                                         150,857                150,857
                                                                    ------------           ------------
Total current liabilities                                              7,865,230             10,401,955
Notes payable, net of current portion                                  2,424,355              2,316,602
Other non-current liabilities                                             47,365                 43,894
                                                                    ------------           ------------
Total liabilities                                                     10,336,950             12,762,451
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 authorized;
      11,489,704, and 11,653,210 shares issued and outstanding
      as of December 27, 1996 and September 26, 1997,
      respectively                                                       114,897                116,532
  Additional paid-in capital                                          46,809,343             47,036,156
  Unrealized gains, net of income taxes of $932,838 at
     December 27, 1996                                                 1,495,162                     --
  Foreign currency translation adjustment                                 12,663                (62,799)
  Retained earnings (deficit)                                            178,861             (1,889,983)
  Deferred stock compensation                                           (944,283)              (737,003)
Total shareholders' equity                                            47,666,643             44,462,903
                                                                   -------------           ------------
Total liabilities and shareholders' equity                          $ 58,003,593          $  57,225,354
                                                                    ============          =============
</TABLE>


       See notes to unaudited condensed consolidated financial statements.




                                       3
<PAGE>

<TABLE>
<CAPTION>

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

                                                For the Three Months Ended        For the Nine Months Ended
<S>                                          <C>                 <C>               <C>             <C>
                                                September 27,      September 26,   September 27,   September 26,
                                                    1996               1997            1996            1997
                                             ------------------------------------------------------------------

Revenues:
  Government contracts                          $  2,881,138    $   2,402,128    $   8,232,814   $   7,168,416
  Commercial products                              3,958,832        7,656,439        7,690,874      18,671,033
  Commercial consulting services                     504,935          930,116        1,038,912       2,641,821
                                             -----------------  --------------  ---------------  -------------
                                                   7,344,905       10,988,683       16,962,600      28,481,270

Cost of revenues:
  Government contracts                             1,979,092        1,684,975        5,843,475       4,964,520
  Commercial products                                929,439        1,057,629        2,127,316       2,920,945
  Commercial consulting services                     266,784          512,472          596,434       1,458,957
                                             ----------------  ---------------  ---------------  -------------
                                                   3,175,315        3,255,076        8,567,225       9,344,422
                                             ---------------   ---------------  ---------------  -------------
                                                                                                  
Gross profit                                       4,169,590        7,733,607        8,395,375      19,136,848

Operating expenses:
  Selling, general and administrative              3,667,763        6,090,669        8,345,411      19,115,685
  Research and development                         1,177,944        1,984,884        2,184,696       5,873,295
                                             ----------------   --------------  ---------------  -------------
                                                   4,845,707        8,075,553       10,530,107      24,988,980
                                             ----------------   --------------  ---------------  -------------
Loss from operations                                (676,117)        (341,946)      (2,134,732)     (5,852,132)

Other income (expense):
  Interest and other income                            8,152          447,248           21,867       1,452,856
  Interest expense                                  (171,970)         (55,872)        (334,880)       (162,188)
  Non-recurring gain on sale of marketable
  securities                                              --        1,670,377               --       1,670,377
                                             ----------------  ---------------  ---------------  -------------
                                                    (163,818)       2,061,753         (313,013)      2,961,045
                                             ----------------  ---------------  ---------------  -------------
Income (loss) before income taxes                   (839,935)       1,719,807       (2,447,745)     (2,891,087)
Income tax provision (benefit)                      (353,484)         657,481       (1,041,077)       (822,243)
                                             ----------------  ---------------  ---------------  --------------
Net income (loss)                                $  (486,451)     $ 1,062,326    $  (1,406,668)  $  (2,068,844)
                                             ================  ===============  ===============  ==============

Net income (loss) per share                   $       (0.06)   $          .09    $       (0.18)  $       (0.18)
                                             ================  ===============  ===============  ==============

Weighted average shares
  outstanding                                     7,540,849        12,309,565        7,915,561      11,569,109
                                             ===============  ================  ===============  ==============

</TABLE>

       See notes to unaudited condensed consolidated financial statements.


                                       4
<PAGE>
<TABLE>
<CAPTION>

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

                                                            For the Nine Months Ended
<S>                                                 <C>                    <C>
                                                     September 27,          September 26,
                                                          1996                  1997
                                                    ------------------     ---------------
Operating Activities
Net Loss                                             $     (1,406,668)      $  (2,068,844)
Adjustments:
    Depreciation                                              340,171             642,229
    Deferred income taxes                                     (26,141)                 --
    Amortization of stock compensation                         92,124             207,280
Gain on sale of marketable securities                              --          (1,670,377)
Changes in operating assets and liabilities:
    Accounts receivable and unbilled receivables            1,169,514          (3,389,903)
    Prepaid expenses and other current assets                (993,869)           (672,176)
    Other Assets                                           (1,016,178)            (41,279)
    Accounts payable                                          (59,163)           (369,681)
    Other accrued expenses                                  2,429,342           2,263,467
    Other non-current liabilities                                  --              (3,471)
    Income taxes refundable                                (1,356,084)           (697,805)
    Deferred revenue
                                                              245,770            1,046,263
                                                             --------           ---------

 Net cash used in operating activities                       (581,182)          (4,754,297)
                                                            ----------         -----------

Investing Activities
Purchases of property and equipment                        (3,044,979)          (1,638,490)
Sale of marketable securities                                      --            1,681,258
(Purchase) redemption of marketable securities                (10,880)           3,691,695
                                                            ---------            ---------
Cash provided by (used in)
   investing activities                                    (3,055,859)           3,734,463
                                                           -----------            ---------
Financing Activities
Proceeds from exercise of stock options                       310,412              228,447
Net short-term borrowings                                   1,900,700                   --
Proceeds from issuance of notes payable                     1,757,219                   --
Repayments of notes payable                                  (143,384)            (107,753)
                                                           -----------          -----------
                                                           
Net cash provided by financing activities                   3,824,947              120,694
                                                           ----------             --------
Effect of exchange rate changes on cash                        (1,810)             (75,462)
                                                              --------             --------
Net change in cash and cash equivalents                       186,096             (974,602)

Cash and cash equivalents at
       beginning of period                                     53,859            1,838,787
                                                              -------            ---------
Cash and cash equivalents at
       end of period                                     $    239,955          $   864,185
                                                         =============        ============
                                                            
Supplemental disclosures of
     cash flow information
Interest paid during the period                          $    334,880           $  166,949
                                                         ============         ============
                                                              
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 Unaudited Condensed Consolidated Financial Statements
                               September 26, 1997

Basis of Presentation and Subsequent Events

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[R]  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 nine  month
periods ended September 27, 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 the  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>


On October 16, 1997, the Company completed a merger with Haystack  Laboratories,
Inc.  ("Haystack").  Haystack is a developer of information  security  intrusion
detection and monitoring  products.  In connection with the merger,  the Company
issued  approximately  2.1  million  shares  of its  common  stock  to  Haystack
shareholders.  Pending completion of a registration statement and declaration of
its  effectiveness  by the  SEC,  the  shares  issued  in  connection  with  the
transaction  will be restricted  shares.  The merger will be accounted for under
the pooling of interest method,  and accordingly,  historical  financial data in
future reports will be restated to include Haystack.

In the third  quarter of 1997,  TIS sold all if its common  stock in  CyberCash,
Inc.  acquired in connection with the formation of CyberCash,  Inc. at a gain of
approximately $1.7 million before income taxes.
 
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  enterprise-wide  networks.  Focusing on
full-service  security that enables  organizations  to take  advantage of secure
networking,  the  Company  develops,  markets  and  licenses  and  supports  the
Gauntlet[R]   family  of   network   security   solutions   and   RecoverKey[TM]
user-controlled  key recovery  systems.  The Company  intends to  integrate  the
Stalker[R] and WebStalker[TM] software technology,  acquired in its October 1997
merger with Haystack  Laboratories,  Inc. with the Company's  Gauntlet family of
products to provide customers with a single firm for multi-dimensional solutions
that  prevent,  detect and  respond to threats  from both  outside  and inside a
company's network.

The Company also performs  comprehensive  services in the areas of cryptography,
security  policy  management,   penetration   testing,   training,   and  custom
engineering for commercial and government customers.

The Company currently has two operating divisions:  the Commercial Division
and the Advanced Research and Engineering ("AR&E") Division.

                                       7
<PAGE>

The Commercial Division

The Commercial  Division derives revenues from the Company's  Gauntlet family of
firewall  products,  from  its  commercial  consulting  services  and  from  its
RecoverKey  exportable   cryptography  enabling  products.   Revenues  from  the
Commercial  Division  accounted for  approximately 75% of total Company revenues
for the nine  months  ended  September  26,  1997  versus  51% of total  Company
revenues for the nine months ended  September 27, 1996. The Company expects that
the Commercial Division will continue to 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   exclusively   through  resellers  and  a  sales
administration  staff.  The  Company  presently  employs 115 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.

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 sales of the Gauntlet Internet
Firewall  product and of its other products  introduced:  the Gauntlet  Intranet
Firewall,  the Gauntlet Net  Extender[TM],  the  Gauntlet PC  Extender[TM],  the
Gauntlet  Internet  Firewall for Solaris,  the  Gauntlet  Internet  Firewall for
Windows  NT, the  Gauntlet  ForceField[TM],  and  certain of its  RecoverKey[TM]
exportable  cryptography  enabling  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 regard to
its RecoverKey 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 28
persons with extensive  information  security  experience in both commercial and
government organizations.

                                       8
<PAGE>

The Advanced Research and Engineering Division

The Advanced Research and Engineering  Division consists  primarily of research,
development and consulting in computer and related  security  systems.  Revenues
for the AR&E Division  accounted for 25% of total Company  revenues for the nine
months ended  September 26, 1997 versus 49% for the nine months ended  September
27, 1996.  The Division  currently has major  contracts  that are funded through
programs  with 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 13% in the first nine months
of 1997 versus the same period in 1996,  primarily  due to completion of a major
contract  with the NSA on March 31,  1997.  The  completed  NSA  contract had an
aggregate  initial award value of  approximately  $14.8 million.  Total revenues
from this  contract were $.9 million and $3.6 million for the nine months ending
September 26, 1997 and September 27, 1996, respectively.

In the third quarter of 1997,  the Company was awarded ten new contracts with an
aggregate  award  value of  $12.9  million.  The  aggregate  award  value of the
Company's sixteen major active government contracts is approximately $35 million
as of September  26, 1997.  Thirteen of these  contracts are funded by DARPA and
range in value from $.8 million to $8.2 million.  Three of these  contracts will
expire during 1998,  eight will expire in 1999 and two 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.

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 1995 without any significant  disallowances.  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 an  orderly  termination  and  would be paid a
portion of the fee.



                                       9
<PAGE>


Results of Operations

The  following  table  presents  for the  periods  indicated  certain  unaudited
Statements of Operations' data as a percentage of the Company's revenues:

<TABLE>
<S>                                           <C>             <C>              <C>              <C>    
                                              Three months     Three months     Nine months      Nine months
                                                  ended           ended            ended            ended
                                              September 27,   September 26,    September 27,    September 26,
Consolidated Statements of Operations             1996             1997            1996             1997
  as a Percentage of Revenues:                 (unaudited)     (unaudited)      (unaudited)      (unaudited)

Revenues:
  Government contracts                              39.2%           21.9%           48.6%             25.2%
  Commercial products                               53.9%           69.7%           45.3%             65.5%
  Commercial consulting services                     6.9%            8.4%            6.1%              9.3%
                                                  -------         -------         -------           -------
        Total Revenues                             100.0%          100.0%          100.0%            100.0%
                                                  -------         -------         -------           -------
        Total Costs of revenues                     43.2%           29.6%           50.5%             32.8%
                                                  -------         -------         -------           -------

Gross profit                                       56.8%            70.4%           49.5%             67.2%

Operating expenses:
  Selling, general and administrative              50.0%            55.4%           49.2%             67.1%
  Research and development                         16.0%            18.1%           12.9%             20.6%
                                                 -------          -------         -------           -------
        Total Operating expenses                   66.0%            73.5%           62.1%             87.7%
                                                 -------          -------         -------           -------

Loss from operations                               -9.2%            -3.1%          -12.6%            -20.5%

Interest and other income and expense              -2.2%             3.6%           -1.8%              4.5%
Non-recurring gain on sale of
 marketable securities                               --             15.2%             --               5.9%
                                                 -------          -------         -------           ------- 
Income (loss) before income taxes                 -11.4%            15.7%          -14.4%            -10.1%
Income tax provision (benefit)                    - 4.8%             6.0%          - 6.1%             -2.8%
                                                 -------          -------         -------           -------
Net income (loss)                                  -6.6%             9.7%           -8.3%             -7.3%
                                                 -------          -------         -------           -------

Selected Information as a
  Percentage of Related Revenues:

Cost of revenues:

  Government contracts                            68.7%            70.1%            71.0%            69.3%
  Commercial products                             23.5%            13.8%            27.7%            15.6%
  Commercial consulting services                  52.8%            55.1%            57.4%            55.2% 

Gross profit:
  Government contracts                            31.3%            29.9%            29.0%            30.7%
  Commercial products                             76.5%            86.2%            72.3%            84.4%
  Commercial consulting services                  47.2%            44.9%            42.6%            44.8%


</TABLE>


                                       10
<PAGE>




Three Months Ended  September 26, 1997 Compared to Three Months Ended
September 27, 1996

Net Income. The Company reported net income of $1,062,326, or $.09 per share, in
the  third  quarter  of  1997.  Net  income  included  the  effect  of a gain of
approximately  $1,032,000  on the sale of shares the Company  acquired  upon the
formation  of  CyberCash,  Inc.  Excluding  the one time  gain,  net  income was
approximately  $30,000,  or  break-even on a per share basis,  representing  the
Company's  first  profitable  quarter  since going public in October  1996.  The
profit  compares to a loss of $486,451,  or $.06 per share, in the third quarter
of 1996.

Revenues. The Company's total revenues increased 50% to $10,988,683 in the three
months ended September 26, 1997 ("the third quarter of 1997") from $7,344,905 in
the three  months  ended  September  27,  1996 ( "the third  quarter of 1996" ),
primarily  due to  strong  performance  by the  Company's  Commercial  Division.
Commercial  product revenues increased 93% to $7,656,439 in the third quarter of
1997 from  $3,958,832 in the third quarter of 1996 as a result of a 48% increase
in  sales  to  direct  customers  and a  251%  increase  in  reseller  revenues.
Commercial  consulting  services revenues increased 84% to $930,116 in the third
quarter of 1997 from $504,935 in the third 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 third quarter of 1997.  Government  contract revenues decreased
17% to  $2,402,128  in the third  quarter of 1997 from  $2,881,138  in the third
quarter of 1996, primarily because 1996 results included $1.3 million in revenue
from a major contract with the NSA, which was completed on March 31, 1997.

Gross Profit.  Gross profit  increased 85% to $7,733,607 in the third quarter of
1997 from  $4,169,590  in the third  quarter of 1996  primarily due to increased
commercial product and commercial consulting service revenues.  The gross profit
on commercial products increased 118% to $6,598,810 in the third quarter of 1997
from  $3,029,393 in the third quarter of 1996  reflecting  the Company's  higher
sales as well as an increase in gross profit margins. As a percentage of related
revenues,  gross profit on commercial  products  increased to 86.2% in the third
quarter of 1997 from 76.5% in the same period in 1996  primarily due to a higher
percentage of 1997 third quarter  revenues  resulting from higher margin license
products from reseller sources.

Gross profit from the Company's commercial  consulting services increased 75% to
$417,644 in the third quarter of 1997 from $238,151 in the third quarter of 1996
reflecting higher  commercial  consulting  revenues.  As a percentage of related
revenues,  gross profit on commercial  consulting services decreased to 44.9% in
the third  quarter of 1997 from 47.2 % in the third  quarter of 1996  because of
slightly higher contract costs in the third quarter of 1997.


                                       11
<PAGE>


Gross profit from the Company's  government  contracts decreased 21% to $717,153
in the  third  quarter  of 1997 from  $902,046  in the  third  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
decreased to 29.9% in the third  quarter of 1997 from 31.3% in the third quarter
of 1996  because  of  greater  revenues  received  in 1996 from  contracts  with
proportionately higher fees.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative expenses increased 66% to $6,090,669 in the third quarter of 1997
from  $3,667,763  in the third  quarter of 1996.  Increased  costs  reflect  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 and expansion of the Company's  international
operations.

Research and  Development  Expenses.  The  Company's  research  and  development
expenses,   which  do  not  include  such  expenses  directly  reimbursed  under
government  contracts,  increased 69% to $1,984,884 in the third quarter of 1997
from  $1,177,944 in the third  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 exportable  cryptography  enabling products and technology,  and
additional members of the Gauntlet family of firewall products.

Other Income and Expense.  In the third quarter of 1997, the Company  realized a
gain of $1,670,377 on the sale of its 100,000 shares of CyberCash,  Inc.  common
stock.  Excluding  the gain on  CyberCash,  Inc.  stock,  other  income  totaled
$391,376 in the third 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 totaled  $163,818 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.

Nine Months Ended September 26, 1997 Compared to Nine Months Ended
September 27, 1996

Net Loss. In the nine months ended  September 26, 1997,  the Company  reported a
net loss of $2,068,844,  or $.18 per share.  Excluding the non-recurring gain on
the sale of  CyberCash,  Inc.,  stock,  the  Company's  loss  was  approximately
$3,100,000,  or $.27 per share,  compared to a loss of  $1,406,668,  or $.18 per
share for the nine months ended September 27, 1996.

                                       12
<PAGE>

Revenues.  The Company's total revenues increased 68% to $28,481,270 in the nine
months  ended  September  26, 1997 from  $16,962,600  in the nine  months  ended
September  27,  1996  primarily  due to  strong  performance  by  the  Company's
Commercial  Division.  Commercial product revenues increased 143% to $18,671,033
in the nine months ended  September 26, 1997 from  $7,690,874 in the nine months
ended  September  27,  1996  primarily  because  product  revenues  from  direct
customers  nearly  doubled and reseller  revenues  grew by  approximately  350%.
Commercial  consulting  revenues increased 154% to $2,641,821 in the nine months
ended  September 26, 1997 from $1,038,912 in the nine months ended September 27,
1996,  primarily because of the Company's  completion of a substantial number of
commercial  consulting  contracts in the nine months ended  September  27, 1997.
Government  contract  revenues  decreased  13% to  $7,168,416 in the nine months
ended  September 26, 1997 from $8,232,814 in the same period last year primarily
because of the Company's  reallocation of government  research  personnel to its
Commercial  Division  activities and completion of a major contract with the NSA
on March 31, 1997.

Gross Profit.  Gross profit  increased  128% to  $19,136,848  in the nine months
ended  September 26, 1997 from $8,395,375 in the nine months ended September 27,
1996 primarily due to increased  commercial  product sales.  The gross profit on
commercial  products  increased  183% to  $15,750,088  in the nine months  ended
September 26, 1997 from  $5,563,558 in the nine months ended  September 27, 1996
because of the  increase  in  shipments  of  Gauntlet  firewall  products.  As a
percentage of related revenues, gross profit on commercial products increased to
84.4% in the nine months ended  September 26, 1997 from 72.3% in the nine months
ended September 27, 1996 because of a higher  percentage of sales in 1997 coming
from higher margin reseller revenues.

Gross profit from the Company's commercial consulting services increased 167% to
$1,182,864 in the nine months ended September 26, 1997 from $442,478 in the nine
months ended  September  27, 1996. As a percentage  of related  revenues,  gross
profit on commercial  consulting  services increased to 44.8% in the nine months
ended  September 26, 1997 from 42.6% in the nine months ended September 27, 1996
because of increased revenues from higher margin consulting business in the nine
months ended September 26, 1997.

Gross profit from the Company's  government contracts decreased 8% to $2,203,896
in the nine months ended  September 26, 1997 from  $2,389,339 in the nine months
ended September 27, 1996. As a percentage of related  revenues,  gross profit on
government  contracts  increased to 30.7% in the nine months ended September 26,
1997 from 29.0% in the nine months ended  September  27, 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 129% to  $19,115,685 in the nine months ended  September 26,
1997 from  $8,345,411 in the nine months ended  September 27, 1996 primarily due
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.

                                       13
<PAGE>

Research and  Development  Expenses.  The  Company's  research  and  development
expenses,   which  do  not  include  such  expenses  directly  reimbursed  under
government  contracts,  increased  169% to  $5,873,295  in the nine months ended
September 26, 1997 from  $2,184,696 in the nine months ended September 27, 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 exportable  cryptography enabling products, and the Company's
reallocation  of  government  contract  research  personnel  to  its  commercial
activities.

Other Income and Expense.  Results for the nine months ended  September 26, 1997
include a $1,670,377 gain on the sale of CyberCash,  Inc. common stock which had
been purchased in connection with the formation of CyberCash, Inc. Excluding the
gain on the sale of CyberCash Inc. stock, other income totaled $1,290,668 in the
nine months ended September 26, 1997 and consisted  primarily of interest income
on cash  generated in the  Company's  initial  public  offering.  Other  expense
totaled  $313,013  in the nine months  ended  September  27, 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.

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 $864,185 at
September 26, 1997 and $1,838,787 at December 27, 1996 and marketable securities
were $32,997,374 at September 26, 1997 and $39,127,069 at December 27, 1996. The
Company used cash in operating activities of $4,754,297 and $581,182 in the nine
months  ended  September  26, 1997 and  September  27, 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
the Company's  expansion of commercial  activities and the  introduction  of new
products.  The Company financed these operating activities primarily through the
redemption  of  marketable  securities.  In the nine months ended  September 27,
1996,  operating  activities were financed primarily by proceeds from short-term
borrowings and notes payable.

Capital  expenditures totaled $1,638,490 and $3,044,979 in the nine months ended
September 26, 1997 and September 27, 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 $2,000,000.  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.

                                       14
<PAGE>

As of September 26, 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.  The
construction  loan was converted into mortgage notes payable to Mercantile  Bank
with a fixed interest rate in December, 1996. 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.

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.  On October 16, 1997,  the Company  completed a merger with
Haystack  Laboratories,  Inc.  ("Haystack").  In connection with the merger, the
Company issued  approximately 2.1 million shares of its common stock to Haystack
shareholders. Pending completion of an effective registration statement with the
SEC, the shares issued in  connection  with the  transaction  will be restricted
shares.

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 31, 1998.



                                       15
<PAGE>




                        TRUSTED INFORMATION SYSTEMS, INC.
                                   FORM 10 - Q


PART II.   OTHER INFORMATION

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.
10.4*             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).


                                       16
<PAGE>

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.
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**           Agreement and Plan of Merger among Trusted Information
                  Systems, Inc., Trusted Acquisitions, Inc. and Haystack
                  Laboratories, Inc., dated as of October 3, 1997.
11.1***           Statement of computation of earnings (loss) per share.
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 Exhibit 2 to the Company's  Current  Report on Form 8-K,
submitted October 24, 1997 and incorporated herein by reference.

***      Filed herewith.

(b)      On  October  24,  1997,  the  Company  filed a report  on Form 8-K 
         regarding  its  merger  with  Haystack Laboratories, Inc. on
         October 16, 1997.





                                       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:  November 10, 1997            By:     Stephen T. Walker
                                         ----------------------
                                            Stephen T. Walker,
                                            President and CEO


Date:  November 10, 1997                    Ronald W. Kaiser
                                         ------------------------
                                            Ronald W. Kaiser,
                                            Chief Financial Officer




                                       18
<PAGE>


                                  EXHIBIT INDEX

Exhibit No.       Description

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.
10.4*             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).


                                       19
<PAGE>

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.
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**           Agreement and Plan of Merger among Trusted Information
                  Systems, Inc., Trusted Acquisitions, Inc. and Haystack
                  Laboratories, Inc., dated as of October 3, 1997.
11.1***           Statement of computation of earnings (loss) per share.
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 Exhibit 2 to the Company's  Current  Report on Form 8-K,
submitted October 24, 1997 and incorporated herein by reference.

***      Filed herewith.




                                       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 Nine Months Ended
<S>                          <C>               <C>                <C>               <C>
                             September 27,     September 26,      September 27,     September 26,
                                  1996             1997               1996               1997
                            ------------------------------------------------------------------------
Common Stock Outstanding       7,540,849        11,634,583          7,343,885         11,569,109

Dilutive effects of Stock      
Options                               --           674,982                 --                 --

Issuance of Cheap Stock               --                --            571,676                 --
                              ----------        ----------         ----------         ----------

Weighted average shares
    outstanding                7,540,849        12,309,565          7,915,561         11,569,109
                              ==========        ==========         ==========         ==========
</TABLE>
                




                                       21
<PAGE>