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 27, 1996

( ) 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 ____ No X

Indicate  the  Number  of  shares  of  the  issuer's  classes  of  common  stock
outstanding as of the latest practicable date: 11,479,430 shares of common stock
were outstanding as of October 31, 1996.


<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 29, 1995, September 27, 1996 and
              September 27, 1996  (as adjusted)                        3

              Condensed Consolidated Statements of Operations
              for the three months and nine months ended
              September 27, 1996 and September 29, 1995                4

              Condensed Consolidated Statements of Cash Flows
              for the three months and nine months ended
              September 27, 1996 and September 29, 1995                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                                                     16

SIGNATURES                                                             18


<PAGE>
<TABLE>
<CAPTION>


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

<S>                                                 <C>                 <C>                   <C>   
                                                                                                September 27,
                                                                         September 27,             1996
                                                      December 29,           1996               as adjusted
                                                          1995            (unaudited)           (unaudited)
                                                    -----------------   ----------------      -----------------
Assets
Current assets:
  Cash and cash equivalents                                  $53,859           $239,955               $539,955
  Marketable securities                                          ---          3,000,000             43,848,200
  Accounts receivable, net of allowance of
  $44,000 and $144,000 for December 29, 1995 and
  September 27, 1996, respectively                         4,304,536          3,606,521              3,606,521
  Unbilled receivables                                     1,401,418            929,919                929,919
  Prepaid expenses and other current assets                  258,438          1,252,307              1,252,307
  Deferred financing costs                                       ---          1,021,462                    ---
  Refundable income taxes                                        ---          1,233,910              1,233,910
  Deferred income taxes                                      426,390                ---                    ---
                                                     ----------------   ----------------      ----------------
Total current assets                                       6,444,641         11,284,074             51,410,812
                                                    -----------------   ----------------      ----------------
Property and equipment, net                                3,715,090          6,419,898              6,419,898
Other assets                                                  62,072             56,788                 56,788
                                                    -----------------   ----------------      ----------------
Total assets                                             $10,221,803        $17,760,760            $57,887,498
                                                    =================   ================      ================

Liabilities and shareholders' equity
Current liabilities:
  Accounts payable                                         $ 689,537          $ 630,374               $630,374
  Accrued Payroll and related expenses                     1,384,738          2,904,257              2,904,257
  Other accrued expenses                                   1,342,421          2,252,244              1,752,244
  Income taxes payable                                       122,174                ---                    ---
  Deferred income taxes                                          ---            743,117                743,117
  Deferred revenue                                         1,011,992          1,257,762              1,257,762
  Short-term borrowings                                    1,523,000          3,423,700                    ---
  Notes payable, current portion                             160,662            538,878                243,878
                                                    -----------------   ----------------      ----------------
Total current liabilities                                  6,234,524         11,750,332              7,491,815
Notes payable, net of current portion                      1,580,000          2,815,619              1,510,619
                                                    -----------------   ----------------      -----------------
Total liabilities                                          7,814,524         14,565,951              9,002,434
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; 6,933,611, 7,552,341 and
    11,462,341 shares issued and outstanding as of
    December 29, 1995, September 27, 1996 and "as                        
    adjusted", respectively                                   69,336             75,523                114,623
  Additional paid-in capital                                     ---          1,409,725             47,021,063
  Unrealized gains, net of income taxes of $1,206,528            ---          1,793,472              1,793,472
  Foreign currency translation adjustment                    (5,121)            (6,931)                (6,931)
  Retained earnings                                        2,343,064            936,396                936,396
  Deferred stock compensation                                    ---        (1,013,376)            (1,013,376)
                                                    ----------------    ---------------       ----------------
Total shareholders' equity                                 2,407,279          3,194,809             48,845,247
                                                    ----------------    ---------------       ----------------
Total liabilities and shareholders' equity               $10,221,803        $17,760,760            $57,887,498
                                                   =================    ===============       ================

             See notes to unaudited condensed consolidated financial
                                  statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

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

                                        For the Three Months Ended                For the Nine Months Ended
                                      September 29,     September 27,         September 29,        September 27,
                                          1995              1996                  1995                 1996
                                    ------------------ ----------------     ------------------   ------------------
Revenues:
  Government contracts  .......             $3,424,806       $2,881,138             $9,466,603           $8,232,814
  Commercial products.........               1,218,569        3,958,832              2,630,280            7,690,874
  Commercial consulting services...            285,081          504,935              1,120,085            1,038,912
                                    ------------------ ----------------     ------------------   ------------------
                                             4,928,456        7,344,905             13,216,968           16,962,600

Cost of revenues:
  Government contracts.........              2,505,639        1,979,092              7,026,389            5,843,475
  Commercial products..........                277,821          929,439                687,310            2,127,316
  Commercial consulting services...            201,650          266,784                628,749              596,434
                                    ------------------ ----------------     ------------------   ------------------
                                             2,985,110        3,175,315              8,342,448            8,567,225
                                    ------------------ ----------------     ------------------   ------------------
Gross profit..................               1,943,346        4,169,590              4,874,520            8,395,375

Operating expenses:
  Selling, general and
    administrative............                 835,641        3,667,763              2,403,219            8,345,411
  Research and development.....                244,503        1,177,944                820,581            2,184,696
                                    ------------------ ----------------     ------------------   ------------------
                                             1,080,144        4,845,707              3,223,800           10,530,107
                                    ------------------ ----------------     ------------------   ------------------
Income (loss) from operations....              863,202         (676,117)             1,650,720           (2,134,732)
Other income (expense):
  Interest income..............                 12,850            8,152                 25,090               21,867
  Interest expense.............                (32,519)        (171,970)               (98,392)            (334,880)
                                    ------------------ ----------------     ------------------   ------------------
                                               (19,669)        (163,818)               (73,302)            (313,013)
                                    ------------------ ----------------     ------------------   ------------------
Income (loss) before income taxes              843,533         (839,935)             1,577,418           (2,447,745)
Income tax provision (benefit)...              355,152         (353,484)               617,611           (1,041,077)
                                    ------------------ ----------------     ------------------   ------------------
Net income (loss)...............              $488,381        $(486,451)              $959,807          $(1,406,668)
                                    ================== ================     ==================   ==================

Net income (loss) per share......                $0.06           $(0.06)                 $0.11               $(0.18)
                                    ================== ================     ==================   ==================

Weighted average shares
  outstanding...................             8,611,428        7,540,849              9,008,068            7,915,561
                                    ================== ================     ==================   ==================

             See notes to unaudited condensed consolidated financial
                                  statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>


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

                                                 Three months ended                     Nine  months  ended
                                          September 29        September 27        September 29        September 27
                                             1995                1996                1995                1996
Operating Activities
Net income (Loss)                         $    488,381        $   (486,451)       $    959,807        ($ 1,406,668)
Adjustments
    Depreciation                                72,017             177,453             193,314             340,171
    Deferred Income Taxes                       70,217             (29,671)            (52,460)            (26,141)
    Amortization of Stock compensation                              69,093                                  92,124

Changes in:
    Accounts receivable and unbilled           
      receivables                             (739,030)           (795,804)         (1,846,948)          1,169,514
    Prepaid expenses and other
      current assets                           (44,123)           (357,207)            (56,410)           (993,869)
    Other assets                                (2,217)           (537,922)             52,837          (1,016,178)
    Accounts payable                            45,669            (268,928)             69,309             (59,163)
    Accrued payroll and related
      expenses                                 109,113             418,376             816,207            1,519,519
    Other accrued expenses                     (12,020)            782,477             (63,910)             909,823
    Income taxes payable/refundable              5,761            (326,611)           (315,139)          (1,356,084)
    Deferred revenues                           42,073             339,057             133,052              245,770

 Net cash provided by (used in)        ------------------  -----------------   ------------------  -----------------
     operating activities                       35,841             575,470            (110,341)            (581,182)
                                       ------------------  -----------------   ------------------  -----------------

Investing Activities
Purchases of property and equipment           (383,288)           (500,524)           (717,278)          (3,044,979)
Purchases of marketable securities                 ---                ---                  ---              (10,880)
Cash provided by (used in)             ------------------  -----------------   ------------------  -----------------
   investing activities                       (383,288)           (500,524)           (717,278)          (3,055,859)
                                       ------------------  -----------------   ------------------  -----------------
Financing activities
Proceeds from exercise of stock options          3,233               5,094               3,233              310,412
Repurchase of common stock                    (407,520)                               (407,520)
Net borrowings (repayments) of
    short-term borrowings                     (269,000)           (255,800)            782,000            1,900,700
Proceeds from issuance of notes payable        221,235             309,752             321,234            1,757,219
Repayments of notes payable                    (22,849)            (74,298)            (66,875)            (143,384)

Net Cash provided by (used in)         ------------------  -----------------   ------------------  -----------------
       financing activities                     63,099             (15,252)             632,072           3,824,947
                                       ------------------  -----------------   ------------------  -----------------
Effect of exchange rate changes on cash         (4,264)              2,575               (7,000)             (1,810)
                                       ------------------  -----------------   ------------------  -----------------
Net Change in cash and cash equivalents       (288,612)             62,269             (202,547)            186,096

Cash and cash equivalents at
       beginning of period                     347,603             177,686              261,538              53,859
                                       ------------------  -----------------   ------------------  -----------------

Cash and cash equivalents at           ------------------  -----------------   ------------------  -----------------
       end of period                           $58,991            $239,955              $58,991            $239,955
                                       ------------------  -----------------   ------------------  -----------------
Supplemental disclosures of
     cash flow information
                                       ------------------  -----------------   ------------------  -----------------
Interest paid during the period                $34,480            $173,849              $98,392            $334,880
                                       ------------------  -----------------   ------------------  -----------------
                                       ------------------  -----------------   ------------------  -----------------
Income Taxes paid during the period           $284,060           $     ---             $957,946            $325,537
                                       ------------------  -----------------   ------------------  -----------------

             See notes to unaudited condensed consolidated financial
                                  statements.
</TABLE>
<PAGE>


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

Basis of Presentation

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 29, 1995, 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.

These unaudited condensed  consolidated  financial  statements should be read in
conjunction with Company's  audited  financial  statements and footnotes thereto
which are included in Amendment No. 3 to the Company's registration statement on
Form S-1 that was  filed  with the SEC on  October  4,  1996.  The  accompanying
unaudited   condensed   consolidated   financial   statements  reflect  all  the
adjustments  that,  in the  opinion  of  management,  are  necessary  for a fair
presentation of the results for the interim periods  presented.  The results for
interim periods are not necessarily indicative of the results for the full year.


Initial Public Offering and Related Matters

In June 1996, the Company filed a registration statement with the SEC permitting
the  Company  to sell  3,910,000  shares  of its  common  stock  to the  public,
including  up to  510,000  shares  to cover  over-allotments.  The  registration
statement  became  effective  on October 9, 1996.  The initial  public  offering
resulted  in  proceeds  to the  Company of  approximately  $45.6  million net of
approximately  $1.6  million in  underwriting  fees and offering  expenses.  The
effects of the initial public offering, including the repayment of approximately
$5,000,000 of the Company's  short-term  borrowings and notes payable out of the
proceeds  thereof,  are reflected in the "as adjusted"  column  contained in the
unaudited condensed consolidated balance sheet.

<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 exportable  cryptography  enabling products.  During the three months
ended  September  27,  1996,  revenues  from the  Commercial  Division  exceeded
revenues from the AR&E Division for the first time and 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 has more than
80 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  has begun to incur and  expects to  continue 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 in 1996:
the Gauntlet  Intranet  Firewall,  the Gauntlet  Net  Extender,  the Gauntlet PC
Extender and the RecoverKey(TM)  exportable  cryptography enabling products. The
Company  began  shipping  the Gauntlet  Net  Extender,  Gauntlet PC Extender and
RecoverKey  exportable  cryptography  enabling  products during the three months
ended September 27, 1996. In addition, the Company expects to further expand its
research and development  organization and efforts,  particularly with regard to
its RecoverKey exportable  cryptography  enabling products,  and make additional
investments  in its general and  administrative  infrastructure.  

<PAGE>

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  obtained export licenses during 1996 for its RecoverKey  exportable
cryptography  enabling products.  These products,  which enable U.S. and foreign
corporations  to establish  Global Virtual  Private  Networks,  are based on the
Company's  RecoverKey(TM)  technology.  The Company received two patents for its
Gauntlet Firewall products and its RecoverKey technology during September 1996.

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 12
persons who average more than 15 years of  information  security  experience  in
both commercial and government organizations.

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,  currently
including  major  contracts  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 increased consistently
through  1995,  but decreased in the nine months ended  September 27, 1996.  The
aggregate award value of the Company's nine major active government contracts is
approximately $36,135,000. In October 1993, the Company began providing services
under the largest of these current  contracts,  with the NSA, which is valued at
$14,823,000  and is expected to expire in early 1997. Of the five contracts with
ARPA, which range in value from $741,000 to $9,114,000 and have all commenced in
the preceding  four years,  one expires during 1997 and four expire during 1998.
While the Company  expects to continue to obtain  government  contracts  for its
AR&E  Division,  it does not  anticipate  that revenues from such contracts will
attain the levels realized in 1995.

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 

<PAGE>

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 1990 without any  significant  disallowances  and is
currently performing a similar audit of the Company's cost accounting system for
the years 1991 through 1994.  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.

<PAGE>
<TABLE>
<CAPTION>

Results of Operations

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

<S>                                  <C>                   <C>                   <C>                     <C>    

                                       Three months          Three months           Nine months            Nine months
                                          ended                  ended                ended                   ended
                                      September 29,          September 27,         September 29,          September 27,
Consolidated Statement of                  1995                  1996                   1995                   1996
Operations                             (unaudited)            (unaudited)           (unaudited)            (unaudited)
  as a Percentage of Revenues:
                                     -----------------     ------------------    -------------------     -----------------

Revenues:
  Government contracts.........                  69.5%                  39.2%                  71.6%                 48.6%
  Commercial products..........                  24.7%                  53.9%                  19.9%                 45.3%
  Commercial consulting services...               5.8%                   6.9%                   8.5%                  6.1%
                                     -----------------     ------------------    -------------------     -----------------
        Total Revenues                          100.0%                 100.0%                 100.0%                100.0%
                                     -----------------     ------------------    -------------------     -----------------
Cost of Revenues:
  Government contracts.........                  50.9%                  26.9%                  53.2%                 34.5%
  Commercial products..........                   5.6%                  12.7%                   5.2%                 12.5%
  Commercial consulting services...               4.1%                   3.6%                   4.8%                  3.5%
                                     -----------------     ------------------    -------------------     -----------------
        Total Costs of revenues                  60.6%                  43.2%                  63.1%                 50.5%
                                     -----------------     ------------------    -------------------     -----------------

Gross profit..................                   39.4%                  56.8%                  36.9%                 49.5%

Operating expenses:
  Selling, general and administrative..          16.9%                  50.0%                  18.2%                 49.2%
  Research and development..........              5.0%                  16.0%                   6.2%                 12.9%
                                     -----------------     ------------------    -------------------     -----------------
        Total Operating expenses                 21.9%                  66.0%                  24.4%                 62.1%
                                     -----------------     ------------------    -------------------     -----------------

Income (loss) from operations.......             17.5%                  -9.2%                  12.5%                -12.6%

Interest and other income and expense..          -0.4%                  -2.2%                  -0.6%                 -1.8%
                                     -----------------     ------------------    -------------------     -----------------

Income (loss) before income taxes                17.1%                 -11.4%                  11.9%                -14.4%
Income tax provision (benefit).......             7.2%                  -4.8%                   4.6%                 -6.1%
                                     -----------------     ------------------    -------------------     -----------------
Net income (loss).................                9.9%                  -6.6%                   7.3%                 -8.3%
                                     -----------------     ------------------    -------------------     -----------------



Selected Information as a
  Percentage of Related Revenues:

Gross profit by product line:
  Government contracts............               26.8%                  31.3%                  25.8%                 29.0%
  Commercial products.............               77.2%                  76.5%                  73.9%                 72.3%
  Commercial consulting services...              29.3%                  47.2%                  43.9%                 42.6%
                                     -----------------     ------------------    -------------------     -----------------
    Total Gross profit                           39.4%                  56.8%                  36.9%                 49.5%
                                     -----------------     ------------------    -------------------     -----------------

</TABLE>
<PAGE>

Three Months Ended  September 27, 1996 Compared to Three Months Ended  September
29, 1995

Revenues.  The Company's  total  revenues  increased  49.0% to $7,344,905 in the
three  months  ended  September  27,  1996 ("the  third  quarter of 1996")  from
$4,928,456 in the three months ended  September 29, 1995 ( "the third quarter of
1995" ). Commercial product revenues increased 224.9% to $3,958,852 in the third
quarter of 1996 from  $1,218,569  in the third  quarter  of 1995,  because of an
increase in 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 77.1% to
$504,935  in the third  quarter of 1996 from  $285,081  in the third  quarter of
1995,  primarily  because  of the  Company's  increased  efforts  in  commercial
consulting and the completion of a substantial  number of commercial  consulting
contracts in the third quarter of 1996.  Government  contract revenues decreased
15.9% to $2,881,138  in the third  quarter of 1996 from  $3,424,806 in the third
quarter of 1995,  primarily because of the Company's  reallocation of personnel,
including government contract research personnel, to its commercial activities.

Gross Profit.  Gross profit  increased 114.6% to $4,169,590 in the third quarter
of 1996 from $1,943,346 in the third quarter of 1995, due to the increase in the
Company's  commercial  product  sales.  The gross profit on commercial  products
increased 222.2% to $3,029,393 in the third quarter of 1996 from $940,748 in the
third quarter of 1995 because of the increase in shipments of Gauntlet  firewall
products.  Gross  profit  from  the  Company's  commercial  consulting  services
increased  185.4% to $238,151 in the third  quarter of 1996 from  $83,431 in the
third  quarter of 1995,  because of both  increased  revenues and an increase in
opportunities  for  contracts  with higher  margins,  and gross  profit from the
Company's  government  contracts decreased 1.9% to $902,046 in the third quarter
of 1996 from $919,167 in the third quarter of 1995,  primarily  because of lower
related revenues.

As a  percentage  of  related  revenues,  gross  profit on  commercial  products
remained virtually unchanged at 76.5% in the third quarter of 1996 from 77.2% in
the third quarter of 1995. As a percentage of related revenues,  gross profit on
commercial  consulting  services increased to 47.2% in the third quarter of 1996
from 29.3% in the third  quarter of 1995,  because of the  substantially  higher
margin on a number of contracts in the third quarter of 1996. As a percentage of
related revenues, gross profit on government contracts increased to 31.3% in the
third  quarter  of 1996 from  26.8% in the third  quarter  of 1995,  because  of
greater  revenues  received in 1996 from contracts with  proportionately  higher
fees.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative  expenses  increased 338.9% to $3,667,763 in the third quarter of
1996  from  $835,641  in  the  third  quarter  of  1995,  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.

<PAGE>

Research and  Development  Expenses.  The  Company's  research  and  development
expenses,   which  do  not  include  such  expenses  directly  reimbursed  under
government  contracts,  increased  381.8% to  $1,177,944 in the third quarter of
1996 from  $244,503  in the  third  quarter  of 1995.  This  increase  primarily
resulted  from the Company's  efforts in developing  new members of the Gauntlet
family of firewall  products  announced in April 1996,  the  development  of its
Microsoft Windows NT and Sun Microsystems' Solaris firewall product versions and
its RecoverKey exportable cryptography enabling products.

Other Income and Expense.  Other income and expense increased 732.9% to $163,818
in expense in the third  quarter  of 1996 from  $19,669 in the third  quarter of
1995,  due  primarily  to  the  increase  in  interest  expense  from  increased
borrowings  under the  Company's  revolving  and other credit  lines,  which the
Company  used to finance its  operating  growth  while it sought  public  equity
funding.

Nine Months Ended September 27, 1996 Compared to Nine Months Ended September 29,
1995

Revenues.  The Company's  total revenues  increased  28.3% to $16,962,600 in the
nine months ended  September 27, 1996 from  $13,216,968 in the nine months ended
September 29, 1995.  Commercial  product revenues increased 192.4% to $7,690,874
in the nine months ended  September 27, 1996 from  $2,630,280 in the nine months
ended  September 29, 1995,  because of an increase in 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
revenues  decreased  7.2% to $1,038,912  in the nine months ended  September 27,
1996 from  $1,120,085  in the nine months ended  September  29, 1995,  primarily
because  of the  Company's  completion  of a  substantial  number of  commercial
consulting  contracts in the nine months ended  September  29, 1995.  Government
contract  revenues  decreased  13.0%  to  $8,232,814  in the nine  months  ended
September 27, 1996 from  $9,466,603 in the nine months ended September 29, 1995,
primarily  because  of  the  Company's  reallocation  of  personnel,   including
government contract research personnel, to its commercial activities.

Gross  Profit.  Gross profit  increased  72.2% to  $8,395,375 in the nine months
ended  September 27, 1996 from $4,874,520 in the nine months ended September 29,
1995, due to the increase in the Company's  commercial  product sales. The gross
profit on commercial  products increased 186.3% to $5,563,558 in the nine months
ended  September 27, 1996 from $1,942,970 in the nine months ended September 29,
1995 because of the increase in shipments of Gauntlet firewall  products.  Gross
profit from the  Company's  commercial  consulting  services  decreased  9.9% to
$442,478 in the nine months ended  September  27, 1996 from $491,336 in the nine
months ended September 29, 1995, and gross profit from the Company's  government
contracts  decreased  2.1% to $2,389,339 in the nine months ended  September 27,
1996 from  $2,440,214 in the nine months ended  September 29, 1995, in each case
primarily because of lower related revenues.

As a  percentage  of  related  revenues,  gross  profit on  commercial  products
decreased  slightly to 72.3% in the nine months  ended 

<PAGE>

September 27, 1996 from 73.9% in the nine months ended  September 29, 1995. As a
percentage of related revenues,  gross profit on commercial  consulting services
decreased to 42.6% in the nine months ended September 27, 1996 from 43.9% in the
nine months ended September 29, 1995,  because of the lower revenues in the nine
months ended  September  29, 1995. As a percentage  of related  revenues,  gross
profit on  government  contracts  increased  to 29.0% in the nine  months  ended
September  27,  1996 from 25.8% in the nine months  ended  September  29,  1995,
because of greater revenues received in 1996 from contracts with proportionately
higher fees.

Selling General and Administrative Expenses. Selling, general and administrative
expenses  increased  247.3% to $8,345,411 in the nine months ended September 27,
1996 from  $2,403,219 in the nine months ended September 29, 1995, 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  166.2% to $2,184,696 in the nine months ended
September  27, 1996 from  $820,581 in the nine months ended  September 29, 1995,
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  and  Sun  Microsystems'  Solaris  firewall  product
versions,   its  RecoverKey  exportable   cryptography  enabling  products,  the
Company's   reallocation  of  government  contract  research  personnel  to  its
commercial activities, and the further development and evaluation of its Trusted
Mach(TM) technology.

Other Income and Expense.  Other income and expense increased 327.0% to $313,013
in expense in the nine months ended  September 27, 1996 from $73,302 in the nine
months  ended  September  29,  1995,  due  primarily to the increase in interest
expense from increased borrowings under the Company's revolving and other credit
lines,  which the Company used to finance its  operating  growth while it sought
public equity funding.


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 $53,859 at
December 29, 1995 and $239,955 at September  27, 1996.  The Company used cash in
operating  activities of $581,182 for the nine months ended  September 27, 1996,
as compared to a use of cash in operating  activities  for the nine months ended
September 29, 1995, but provided cash from operating  activities of $575,470 for
the three months ended September 27, 1996, as compared to a provision of cash by
operating  activities for the three months ended  September 29, 1995 of $35,841.
Net cash  provided by or used in 

<PAGE>

operations  for the three month periods  ended  September 29, 1995 and September
27, 1996  consisted  primarily of net income,  plus growth in the  Company's net
working capital components.  For the nine month periods ended September 29, 1995
and September 27, 1996, the Company used cash to fund its net losses,  offset by
increases in its working capital components.

During the three and nine month periods  ended  September 29, 1995 and September
27, 1996, the Company used cash in investing  activities of $383,288,  $717,278,
$500,524, and $3,055,859,  respectively, to purchase property and equipment. The
Company used cash in financing  activities  in the three months ended  September
29, 1995 of $15,252  primarily to repurchase  stock from a former officer offset
by an increase in net  borrowings.  The Company  generated  cash from  financing
activities  for the three month period ending  September 27, 1996 of $63,099 and
for the nine month periods  ending  September 29, 1995 and September 27, 1996 of
$632,072 and $3,824,947,  respectively,  primarily through short term borrowings
and long  term  debt  related  to the  construction  of its  Glenwood,  Maryland
facilities.

At December 29, 1995 and September  27, 1996 the Company had various  short-term
line of credit  arrangements  with  Mercantile-Safe  Deposit  and Trust  Company
("Mercantile  Bank")  aggregating  $2,000,000 and $5,500,000,  respectively,  of
which  $477,000  and  $2,076,300,   respectively,  were  available  for  further
borrowing.  As of September 27, 1996, the Company's bank borrowings were secured
by substantially all of the Company's  tangible assets.  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.

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
locations.  At the end of May 1996,  the Company had completed its expansion and
substantially drawn down the total amount of its construction loan.

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 through December 1997.

<PAGE>

                        TRUSTED INFORMATION SYSTEMS, INC.
                                   FORM 10 - Q


PART II.   OTHER INFORMATION
<TABLE>
<CAPTION>

Item 6.   Exhibits and Reports on Form 8-K

(a)   Exhibits
<S>               <C>    

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

<PAGE>
                  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.
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.
11.1**            Statement of computation of earnings 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.
**       Filed herewith.

(b)   Reports on Form 8-K

Not applicable.

</TABLE>
<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 20, 1996            By:     /s/ Stephen T. Walker
                                       --------------------------
                                                Stephen T. Walker,
                                                President and CEO


Date:  November 20, 1996                    /s/ Ronald W. Kaiser
                                    ----------------------------
                                                Ronald W. Kaiser,
                                          Chief Financial Officer


<PAGE>
<TABLE>
<CAPTION>

                                  EXHIBIT INDEX
<S>               <C>    
Exhibit No.       Description                                                                          Page

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).
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

<PAGE>
                  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.
11.1**            Statement of computation of earnings 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.
**       Filed herewith.

</TABLE>