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 29, 2002

                                       or

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

               For the transition period from ________ to ________

                           Commission File No. 0-27742


                               CYLINK CORPORATION
             (Exact name of registrant as specified in its charter)

           California                                            95-3891600
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)


                                 3131 Jay Street
                          Santa Clara, California 95054
                    (Address of principal executive offices)


                          (408) 855-6000 (Registrant's
                     telephone number, including area code)


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

         As  of  November  11,  2002,  there  were  33,016,000   shares  of  the
Registrant's common stock outstanding.

<PAGE>

<TABLE>
                                      CYLINK CORPORATION
                      FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 29, 2002
                                            INDEX

<CAPTION>
                                                                                        Page
                                                                                        ----

                               PART I FINANCIAL INFORMATION

<S>      <C>                                                                            <C>
Item 1   Financial Statements

         a) Condensed  Consolidated  Balance  Sheets at  September  29, 2002 and
            December 31, 2001                                                            1

         b) Condensed  Consolidated  Statements of Operations  for the three and
            nine months ended September 29, 2002 and September 30, 2001                  2

         c) Condensed Consolidated  Statements of Cash Flows for the nine months
            ended September 29, 2002 and September 30, 2001                              3

         d) Notes to Condensed Consolidated Financial Statements                         4

Item 2   Management's Discussion and Analysis of Financial Condition and Results
         of Operations                                                                   9

Item 3   Quantitative and Qualitative Disclosures about Market Risk                     22

Item 4   Controls and Procedures                                                        22


                               PART II OTHER INFORMATION                                23

Item 1.  Legal Proceedings                                                              23

Item 2.  Changes in Securities and Use of Proceeds                                      23

Item 3.  Defaults upon Senior Securities                                                23

Item 4.  Submission of Matters to a Vote of the Security Holders                        23

Item 5.  Other Information                                                              24

Item 6.  Exhibits and Reports on Form 8-K                                               24

         Signatures                                                                     26


Exhibits Index                                                                          29

2.1
4.1
10.1
10.2
10.3
10.4
99.1
99.2
</TABLE>


<PAGE>

PART I.  FINANCIAL INFORMATION
Item 1.    Financial Statements

CYLINK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and par value data; unaudited)


<TABLE>
<CAPTION>
                                                                                                      Sep 29,             Dec 31,
                                                                                                       2002                 2001
                                                                                                     ---------            ---------
<S>                                                                                                  <C>                  <C>
Assets
Current assets:
   Cash and cash equivalents                                                                         $   8,175            $   9,606
   Accounts receivable, net of allowances of $516 and $984                                               5,425               10,102
   Income tax receivable                                                                                   475                   50
   Inventories                                                                                           3,565                4,832
   Other current assets                                                                                  1,171                2,026
                                                                                                     ---------            ---------
            Total current assets                                                                        18,811               26,616

Restricted cash                                                                                          1,400                1,400
Property and equipment, net                                                                              4,553                6,075
Acquired technology and other intangibles, net                                                           8,996               10,426
Goodwill, net                                                                                             --                  6,222
Note receivable from employee                                                                            1,074                1,021
Other assets                                                                                               552                  932
                                                                                                     ---------            ---------
                                                                                                     $  35,386            $  52,692
                                                                                                     =========            =========
Liabilities and Shareholders' Equity
Current liabilities:
   Equipment line of credit                                                                          $      35            $     139
   Accounts payable                                                                                      1,583                2,757
   Accrued liabilities                                                                                   6,808                5,439
   Income taxes payable                                                                                    410                  412
   Deferred revenue                                                                                      1,824                2,130
                                                                                                     ---------            ---------
         Total current liabilities                                                                      10,660               10,877
                                                                                                     ---------            ---------

Deferred revenue, less current portion                                                                       9                  214
Deferred rent and other accruals, less current portion                                                   1,140                1,713
                                                                                                     ---------            ---------
         Total long-term liabilities                                                                     1,149                1,927

Shareholders' equity:
   Preferred stock, $0.01 par value; 5,000,000 shares authorized;
       none issued and outstanding
   Common stock, $0.01 par value; 55,000,000 shares authorized;                                            331                  329
        33,002,000 and 32,872,000 shares issued and outstanding
   Additional paid-in capital                                                                          158,449              158,359
   Accumulated other comprehensive loss                                                                      5                  (18)
   Accumulated deficit                                                                                (135,208)            (118,782)
                                                                                                     ---------            ---------
            Total shareholders' equity                                                                  23,577               39,888
                                                                                                     ---------            ---------
                                                                                                     $  35,386            $  52,692
                                                                                                     =========            =========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       1
<PAGE>


CYLINK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data; unaudited)


<TABLE>
<CAPTION>
                                                                              Three Months Ended               Nine Months ended
                                                                           ------------------------        ------------------------
                                                                            Sep 29,         Sep 30,         Sep 29,         Sep 30,
                                                                             2002            2001            2002            2001
                                                                           --------        --------        --------        --------
<S>                                                                        <C>             <C>             <C>             <C>
Revenue                                                                    $  7,101        $ 10,345        $ 21,572        $ 36,528
Cost of revenue                                                               2,280           4,905           7,552          15,203
                                                                           --------        --------        --------        --------
Gross profit                                                                  4,821           5,440          14,020          21,325
                                                                           --------        --------        --------        --------

Operating expenses:
   Research and development                                                   2,419           3,716           8,305          14,851
   Selling and marketing                                                      2,208           3,133           8,038          13,895
   General and administrative                                                 1,679           2,838           5,149           8,581
   Amortization of acquired intangibles                                         477             768           1,431           2,447
   Loss from divestiture of Algorithmic Research, Ltd.                         --               294            --             2,797
   Impairment of goodwill                                                     6,193            --             6,193            --
   Restructuring charges                                                        181            --             2,043            --
                                                                           --------        --------        --------        --------
            Total operating expenses                                         13,157          10,749          31,159          42,571
                                                                           --------        --------        --------        --------

Loss from operations                                                         (8,336)         (5,309)        (17,139)        (21,246)

Other income (expense):
   Interest income, net                                                           5             223              95             596
   Other income, net                                                            466             580             506             417
   Write-down of investment in unaffiliated company                            --              (253)           (222)           (253)
                                                                           --------        --------        --------        --------
         Total other income                                                     471             550             379             760
                                                                           --------        --------        --------        --------

Loss before income taxes                                                     (7,865)         (4,759)        (16,760)        (20,486)
Income tax benefit                                                             --              --              (334)         (1,177)
                                                                           --------        --------        --------        --------
Net loss                                                                   $ (7,865)       $ (4,759)       $(16,426)       $(19,309)
                                                                           ========        ========        ========        ========

Loss per share - basic & diluted:                                          $  (0.24)       $  (0.15)       $  (0.50)       $  (0.60)
                                                                           ========        ========        ========        ========

Shares used in per share calculation - basic & diluted                       32,970          32,623          32,912          32,437
                                                                           ========        ========        ========        ========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       2
<PAGE>


CYLINK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands; unaudited)


<TABLE>
<CAPTION>
                                                                                                           Nine months ended
                                                                                                       ----------------------------
                                                                                                       Sep 29,             Sep 30,
                                                                                                         2002                2001
                                                                                                       --------            --------
<S>                                                                                                    <C>                 <C>
Cash flows from operating activities:
   Net loss                                                                                            $(16,426)           $(19,309)
   Adjustments to reconcile net loss to net
      cash used in operating activities:
         Impairment of goodwill                                                                           6,193                --
         Loss on divestiture of Algorithmic Research, Ltd.                                                 --                 2,797
         Loss on disposition of fixed assets                                                                112                  31
         Write-down of investment in unaffiliated company                                                   222                --
         Depreciation                                                                                     2,014               2,597
         Amortization of acquired intangibles                                                             1,430               2,447
         Deferred income taxes                                                                             --                   800
         Amortization of imputed interest on note receivable                                                (53)               (211)
         Deferred compensation related to stock options                                                    --                   528
         Changes in assets and liabilities:
            Accounts receivable                                                                           4,677               6,415
            Inventories                                                                                   1,267               4,722
            Income tax receivable                                                                          (425)               (109)
            Other assets                                                                                     13                 309
            Accounts payable                                                                             (1,174)             (2,427)
            Accrued liabilities                                                                             825              (1,939)
            Income taxes payable                                                                             (2)                 (7)
            Deferred revenue                                                                               (511)                509
                                                                                                       --------            --------
         Net cash used in operating activities                                                           (1,838)             (2,847)

Cash flows from investing activities:
   Acquisition of property and equipment                                                                   (604)               (605)
   Collections of employee notes receivable                                                               1,000                 560
   Cash transferred with divestiture of Security Design International                                      --                   (28)
   Cash transferred with divestiture of Algorithmic Research, Ltd.                                         --                (1,900)
                                                                                                       --------            --------
        Net cash provided by (used in) investing activities                                                 396              (1,973)

Cash flows from financing activities:
   Proceeds from issuance of common stock, net                                                               92                  82
   Other                                                                                                   (104)               (109)
                                                                                                       --------            --------
         Net cash used in financing activities                                                              (12)                (27)
                                                                                                       --------            --------
Effect of exchange rate changes on
   cash and cash equivalents                                                                                 23                 (10)
                                                                                                       --------            --------
Net decrease in cash and cash equivalents                                                                (1,431)             (4,857)
Cash and cash equivalents at beginning of period                                                          9,606              15,250
                                                                                                       --------            --------
Cash and cash equivalents at end of period                                                             $  8,175            $ 10,393
                                                                                                       ========            ========

Supplemental disclosures
   Cash refunds of income tax                                                                              --              $  3,342
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

CYLINK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


1. Basis of Presentation

         The unaudited  condensed  consolidated  financial  statements  included
herein contain all adjustments, consisting only of normal recurring adjustments,
which,  in the  opinion  of  management,  are  necessary  to  state  fairly  the
consolidated financial position,  results of operations and cash flows of Cylink
Corporation  ("Cylink") for the periods  presented.  These financial  statements
should be read in  conjunction  with  Cylink's  audited  consolidated  financial
statements  included in Cylink's  Annual  Report on Form 10-K for the year ended
December 31, 2001. Interim results of operations are not necessarily  indicative
of the results to be expected for the full year.

         The accompanying  condensed consolidated financial statements have been
prepared in accordance  with  generally  accepted  accounting  principles in the
United States of America for interim financial  information and the instructions
to Form 10-Q and  Article  10 of  Regulation  S-X.  The  condensed  consolidated
financial  statements  have  been  prepared  on a  going  concern  basis,  which
contemplates  the  realization of assets and the  satisfaction of liabilities in
the normal  course of  business.  As shown in  Cylink's  consolidated  financial
statements,  Cylink  experienced  declining  annual revenues and incurred losses
from  continuing  operations  of $16.4 million in the first nine months of 2002,
and $20.1 million in 2001. These factors,  among others, raise substantial doubt
that Cylink will be able to continue as a going concern for a reasonable  period
of time.  The  condensed  consolidated  financial  statements do not include any
adjustments  relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that might be necessary
should Cylink be unable to continue as a going concern. To address these issues,
Cylink  effected  significant  cost  cutting  measures  beginning  in the fourth
quarter of 2000 and continuing into 2002,  including staff  reductions and field
office consolidations,  divestiture of unprofitable operations,  and has entered
into  a  modification  of its  lease  on its  corporate  headquarters  facility;
however,  no  assurances  can be given that these  measures will allow Cylink to
attain profitable operations.  Additionally, on October 30, 2002, Cylink entered
into a definitive  agreement with SafeNet,  Inc. to be acquired through a merger
of Cylink with a  wholly-owned  subsidiary of SafeNet,  Inc.  Please see Note 11
"Definitive  Merger  Agreement."  In the event the  merger  with  SafeNet is not
consummated for any reason,  Cylink may find it necessary to seek debt or equity
financing; however, no assurances can be given that additional financing will be
available to Cylink on acceptable terms, or at all.

Critical Accounting Policies and Estimates

         Cylink's discussion and analysis of its financial condition and results
of  operations  are  based  upon  Cylink's  condensed   consolidated   financial
statements,  which have been prepared in accordance with  accounting  principles
generally  accepted in the United States.  The preparation of these consolidated
financial statements requires Cylink to make estimates and judgments that affect
the reported amounts of assets, liabilities,  revenues and expenses, and related
disclosure of contingent liabilities.  On an ongoing basis, Cylink evaluates its
estimates,   including  those  related  to  allowance  for  doubtful   accounts,
inventories,  investments, deferred tax assets, intangible assets, income taxes,
warranty obligations,  restructuring,  and contingencies and litigation.  Cylink
bases its estimates on historical  experience  and on various other  assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for  making  judgments  about the  carrying  values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.

         A description  of those  accounting  policies that Cylink  believes are
critical is contained in Cylink's  Annual Report on Form 10-K for the year ended
December 31, 2001.

         Certain 2001 financial  statement  amounts were reclassified to conform
with 2002 classifications.  These reclassifications had no effect on net loss or
shareholders' equity previously reported.

2. Recent Accounting Pronouncements

         In June 2001, the Financial  Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  Standards  No. 141 ("SFAS  141"),  "Business
Combinations",  which was effective for business  combinations  initiated  after
September 29, 2001. In October 2001,  the FASB issued SFAS 144,  "Impairment  or
Disposal of Long-Lived

                                       4
<PAGE>

Assets",  which is effective for fiscal years beginning after December 15, 2001.
In June 2001, the FASB issued SFAS 143, "Accounting for Retirement Obligations,"
which is effective for Cylink's  fiscal year beginning  January 1, 2003.  Cylink
has not yet  assessed  the impact that the  adoption of FAS 143 will have on its
financial condition or results of operations.  The adoption of SFAS 141 and SFAS
144 did not have a material effect on Cylink's financial condition or results of
operations.

         In  June  2002,  the  FASB  issued  SFAS  146,  "Accounting  for  Costs
Associated with Exit or Disposal  Activities,"  which  addresses  accounting for
restructuring  and  similar  costs.  SFAS  146  supersedes  previous  accounting
guidance,  principally  Emerging  Issues Task Force Issue No. 94-3.  Cylink will
adopt  the  provisions  of SFAS 146 for the  restructuring  activities,  if any,
initiated  after  December 31, 2002.  SFAS 146 requires  that the  liability for
costs  associated  with an exit or  disposal  activity  be  recognized  when the
liability  is  incurred.  Under  Issue 94-3,  a  liability  for an exit cost was
recognized  at the date of Cylink's  commitment  to an exit plan.  SFAS 146 also
established that the liability should initially be measured and recorded at fair
value.  Accordingly,  SFAS 146 may  affect  the  timing  of  recognizing  future
restructuring costs as well as the amounts recognized.

3. Inventories

         Inventories   are  stated  at  the  lower  of  standard   costs  (which
approximates actual costs on a first-in,  first-out basis) or market and consist
of:

                                                 September 29,      December 31,
                                                      2002              2001
                                                     ------            ------
                                                         (in thousands)
Inventories:
   Raw materials                                     $1,471            $2,482
   Work in process and subassemblies                  1,256             1,171
   Finished goods                                       838             1,179
                                                     ------            ------
                                                     $3,565            $4,832
                                                     ======            ======

4. Loss Per Share

         Basic loss per share is based on the weighted-average  number of common
shares  outstanding.  Diluted  loss per  share is based on the  weighted-average
number of shares outstanding and dilutive  potential common shares  outstanding.
Cylink's only potentially dilutive securities are stock options. As of September
29, 2002 and  September  30, 2001,  Cylink had  7,052,000  and  8,452,000  stock
options  outstanding with a weighted-average  exercise price of $3.11 and $4.05,
respectively.   These  options   expire  on  various  dates  through  2008.  All
potentially  dilutive  securities  have been  excluded from the  computation  of
diluted loss per share, as their effect is anti-dilutive on the net loss for the
periods presented.

5. Comprehensive Loss

         The components of comprehensive  loss,  consisting of Cylink's reported
net  loss  and  unrealized  gains  or  losses  in  the  translation  of  foreign
currencies, are as follows:

<TABLE>
<CAPTION>
                                                               Three months ended:                      Nine months ended:
                                                           ----------------------------            ----------------------------
                                                         September 29,       September 30,       September 29,       September 30,
                                                             2002                2001                2002                2001
                                                           --------            --------            --------            --------
                                                                  (in thousands)                          (in thousands)
<S>                                                        <C>                 <C>                 <C>                 <C>
Net loss                                                   $ (7,865)           $ (4,759)           $(16,426)           $(19,309)
Other comprehensive income (loss)                                 9                 (67)                 23                 (10)
                                                           --------            --------            --------            --------
Total comprehensive loss                                   $ (7,856)           $ (4,826)           $(16,403)           $(19,319)
                                                           ========            ========            ========            ========
</TABLE>

6. Litigation

         Cylink is currently engaged in litigation.  See Part II, Item 1. "Legal
Proceedings."

                                       5
<PAGE>

7. Restructuring Charge

         In the fourth quarter of 2001, Cylink recorded a $1.4 million charge to
accrue a reserve for the  estimated  costs of excess office space in Santa Clara
and related  furniture  and  equipment,  net of estimated  proceeds from planned
subleasing.  In the first nine months of 2002,  Cylink increased its estimate by
an  additional  $1.3  million  based  on  a  continued  weak  sublease   market.
Approximately  $0.4 million of the reserves have been utilized through September
29, 2002. The reserves will be utilized for excess lease costs  associated  with
Cylink's headquarters in future periods.

         The  following   table   summarizes  the  activity   representing   the
restructuring  charge liability in the condensed  consolidated balance sheet for
the periods presented:

                                            Current      Long-term       Total
                                            -------      ---------       -----
                                                      (in thousands)

Balance at December 31, 2001                $   478       $   881       $ 1,359
Additions                                       448           871         1,319
Utilization                                     --           (364)         (364)
Reclassifications                             1,388        (1,388)          --
                                            -------       -------       -------
Balance at September 29, 2002               $ 2,314       $     0       $ 2,314
                                            =======       =======       =======

         Subsequent to the end of the quarter,  Cylink entered into an agreement
to terminate a portion of the lease arrangement with the landlord (see Note 12).
As a result of that lease termination, Cylink reclassified the long-term portion
of it's restructuring liability to current.

8. Goodwill and Other Intangible Assets

         Cylink  adopted  SFAS  142,  "Goodwill  and  Other  Intangible  Assets"
effective Jan 1, 2002.  SFAS 142 requires that goodwill is no longer  amortized,
but tested for  impairment  at least  annually,  or more  frequently  if certain
indications arise. As a result of the adoption of SFAS 142, $333,000 relating to
acquired workforce was  reclassified  from  identified  intangibles to goodwill.
Cylink  completed its initial  goodwill  impairment tests on January 1, 2002 and
determined that no impairment of goodwill had occurred as of that date.

         For the quarter ended  September  29, 2002, a  significant  decrease in
market value of Cylink's  publicly  traded shares  reduced the fair value of the
company  well  below its  carrying  amount.  As a result,  Cylink  conducted  an
additional  impairment test and determined that all of its goodwill is impaired.
The resulting  impairment loss of $6.2 million is reflected in the  accompanying
condensed consolidated statement of operations.

         Changes in the  carrying  amount of goodwill  for the nine months ended
September 29, 2002 are as follows (in thousands):

Balance as of December 31, 2001                                         $ 6,222
Write-off of Cylink-Belguim                                                 (29)
Write-off of Cylink-ATM-TC                                               (6,193)
                                                                        -------
Balance as of September 30, 2002                                        $  --
                                                                        =======

         A reconciliation of the previously reported net income and earnings per
share  to the  amounts  adjusted  for the  exclusion  of  goodwill  amortization
follows:

                                       6
<PAGE>

<TABLE>
<CAPTION>
                                                         Three months ended:                           Nine months ended:
                                                   ---------------------------------           ----------------------------------
                                                   September 29,       September 30,           September 29,        September 30,
                                                       2002                2001                    2002                 2001
                                                   ------------        -------------           -------------        -------------
                                                (in thousands, except per share data)        (in thousands, except per share data)
<S>                                                <C>                 <C>                     <C>                  <C>
Reported net loss                                  $     (7,865)       $      (4,759)          $     (16,426)       $     (19,309)
Add back goodwill amortization,
 net of income taxes                                       --                    360                   --                   1,019
                                                   ------------        -------------           -------------        -------------
Adjusted net loss                                  $     (7,865)       $      (4,399)          $     (16,426)       $     (18,290)
                                                   ============        =============           =============        =============

Adjusted basic and diluted
  net loss per share                               $      (0.24)       $       (0.13)          $       (0.50)       $       (0.56)
                                                   ============        =============           =============        =============
</TABLE>

         Information  regarding  Cylink's other intangible  assets is as follows
(in thousands):

<TABLE>
<CAPTION>
                                                      September 29, 2002                                 December 31, 2001
                                          -----------------------------------------        -----------------------------------------
                                          Carrying       Accumulated                       Carrying       Accumulated
                                           Amount        Amortization           Net         Amount        Amortization           Net
                                          --------       ------------       -------        --------       ------------       -------
<S>                                       <C>             <C>              <C>             <C>              <C>              <C>
Developed Technology                       $12,077         $(3,600)         $ 8,477         $12,077          $(2,305)        $ 9,772
Customer Base                                  894            (375)             519             894             (240)            654
                                           -------         -------          -------         -------          -------         -------
Total                                      $12,971         $(3,975)         $ 8,996         $12,971          $(2,545)        $10,426
                                           =======         =======          =======         =======          =======         =======
</TABLE>


         Amortization  expense  of other  intangible  assets was  $477,000,  and
$1,430,000  for the three months and the nine months ended  September  29, 2002,
respectively.

         The estimated amortization for each of the five fiscal years subsequent
to December 31, 2001 is as follows:

             Year Ended                    Amortization
             December 31,                     Expense
             ------------                     -------
                2002                          $ 1,908
                2003                            1,908
                2004                            1,908
                2005                            1,842
                2006                            1,728
                Thereafter                      1,132
                                             --------
                     Total                   $ 10,426
                                             ========

9. Working Capital Loan

         Cylink's $7.5 million  revolving  working capital loan facility matured
on June 27,  2002,  and was  renewed  during  the third  quarter of 2002 at $5.0
million through July 27, 2003. This loan is secured by all of Cylink's  tangible
assets and contains a covenant to maintain a minimum  tangible net worth. Due to
restructuring  costs associated with  modification of Cylink's Santa Clara lease
and  professional  fees  incurred with respect to Cylink's  pending  merger with
SafeNet's  subsidiary,  Cylink  fell out of  compliance  with this  covenant  in
November 2002. There have been no borrowings under the loan since its inception.

                                       7
<PAGE>

10. Move to NASDAQ Small Cap Market

         On June 27, 2002,  the Company  received a notice from the staff of The
Nasdaq  National Market that its Common Stock had failed to maintain the minimum
bid price of $1.00  over the prior 30 trading  days as  required  for  continued
listing on The Nasdaq National Market.  On October 3, 2002,  Cylink  Corporation
moved trading of its common stock from The Nasdaq  National Market to The Nasdaq
Small Cap Market. Cylink continues to be traded under the symbol, "CYLK".

11. Definitive Merger Agreement

         On October  30,  2002,  Cylink  announced  that it had  entered  into a
definitive  agreement to be acquired by SafeNet,  Inc.  ("SafeNet"),  a publicly
traded Delaware corporation.  SafeNet trades on The Nasdaq National market under
the symbol "SFNT". Cylink will be acquired by SafeNet through a merger of Cylink
with a wholly-owned  subsidiary of SafeNet.  If the merger is  consummated  each
share of Cylink  common stock  outstanding  as of the date of the closing of the
merger will be  converted  into the right to receive  0.05 of a share of SafeNet
common stock on a fixed exchange ratio basis.  The transaction will be accounted
for using the purchase  method of  accounting,  whereby  Cylink's net assets and
operating results will be included in the consolidated  financial  statements of
SafeNet  from the date of the closing of the merger,  and is intended to qualify
as a tax-free reorganization under applicable U.S. tax laws and regulations.  As
of October 30, 2002,  this  represented an issuance by SafeNet of  approximately
1.839 million of its shares,  or approximately  16% of the outstanding  stock of
SafeNet,  and, in  accordance  with  purchase  accounting,  based on the closing
prices of Cylink and SafeNet common stock on October 30, 2002,  the  transaction
has an implied value of  approximately  $35.4 million.  The merger agreement has
been  approved  by the Boards of  Directors  of both  Cylink and SafeNet and the
merger is  expected  to formally  close in the first  quarter of 2003;  however,
there can be no assurances that the merger will be completed in that quarter, or
at all.  If the merger is  consummated,  Cylink  will  continue  to operate as a
wholly-owned subsidiary of SafeNet. The consummation of the merger is subject to
the satisfaction of customary closing  conditions,  including the declaration by
the Securities and Exchange  Commission of the effectiveness of the registration
statement to be filed by SafeNet in connection  with the merger and the approval
of both Cylink's and SafeNet's shareholders.

12. Subsequent Events

Lease Modification

         On October 30, 2002, Cylink entered into a lease modification agreement
with its landlord for its Santa Clara headquarters and manufacturing facility to
terminate its lease  obligations on  approximately  46,724 square feet effective
November 1, 2002,  and another  49,104  square feet  effective  March 1, 2003 in
exchange for the payment of $3.2 million,  $1.0 million to come from an existing
security deposit held by the landlord,  and a warrant to purchase 500,000 shares
of Cylink  common  stock at a price of $0.3838  per share (the  average  closing
price of Cylink's  common stock for the 15 business  days prior to the effective
date of the lease  modification  agreement).  This modification will result in a
restructuring  charge of  approximately  $ 2.2 million in the fourth  quarter of
2002, including the $189,000 value of the warrant. Cylink will continue to lease
approximately 46,724 square feet as its headquarters and manufacturing  facility
from the  existing  landlord  at the  previous  rates  set  forth  in its  lease
agreement.

Class Action Settlement

         On October 16, 2002, Cylink entered into an agreement to settle a class
action suit,  stemming from a 1998 restatement of revenues,  for $6.2 million to
be paid entirely from insurance proceeds. The settlement agreement is subject to
approval  by the United  States  District  Court for the  Northern  District  of
California.

                                       8
<PAGE>

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

Forward Looking Statements

         This Quarterly Report on Form 10-Q contains forward-looking  statements
within the "safe harbor" provisions of the Private Securities  Litigation Reform
Act of 1995.  All  statements  included or  incorporated  by  reference  in this
Quarterly  Report,  other  than  statements  that  are  purely  historical,  are
forward-looking  statements.  Words such as "anticipates," "expects," "intends,"
"plans,"  "believes," "seeks," "estimates" and similar expressions also identify
forward-looking  statements.  Forward-looking statements in this Report include,
without  limitation,  statements  regarding:  implementation  by  Cylink  of its
financial  plan; Cylink's  plans to  continue  cost  reducing  measures in 2002;
Cylink's  intentions to raise  additional funds through public or private equity
or debt  financing,  sales  of  assets,  or from  other  sources  if  necessary;
expectations  that  Cylink  will  consummate  its  merger  with  a  wholly-owned
subsidiary of SafeNet  during the first  quarter of 2003 and other  expectations
regarding the status of completion of the merger; and Cylink's beliefs regarding
when  the  court  will  approve  the  settlement  agreement  in the  shareholder
litigation actions.

         These  forward-looking  statements and any  expectations  based on such
forward-looking  statements  are not  guarantees of future  performance  and are
subject to risks and  uncertainties  that could cause  actual  results to differ
materially from the results contemplated by the forward-looking  statements. Any
of Cylink's  actual results could differ  materially from those included in such
forward-looking  statements. The above forward-looking statements are subject to
the risks and  uncertainties  further  discussed  under "Risk  Factors  That May
Affect Future Results" beginning on page 13.

         All  forward-looking  statements included in this document are based on
information  available  to Cylink on the date  hereof,  and  Cylink  assumes  no
obligation  to update  any such  forward-looking  statements.  Shareholders  are
cautioned not to place undue reliance on such statements, which speak only as of
the  date  of this  Report.  The  reader  should  also  consult  the  cautionary
statements  and risk  factors  listed from time to time in  Cylink's  Reports on
Forms 10-Q, 8-K, 10-K and its Annual Reports to  Shareholders  for other trends,
risks or  uncertainties  which could cause Cylink's results to differ from those
expressed in such forward looking statements.

         The  following  Management's   Discussion  and  Analysis  of  Financial
Condition  and  Results of  Operations  should be read in  conjunction  with the
unaudited condensed consolidated financial statements and notes thereto included
in  Part I Item 1 of  this  Quarterly  Report  on  Form  10-Q  and  the  audited
consolidated financial statements and notes thereto and Management's  Discussion
and  Analysis  of  Financial  Condition  and Results of  Operations  included in
Cylink's Annual Report on Form 10-K for the year ended December 31, 2001.

Critical Accounting Policies and Estimates

         Cylink's discussion and analysis of its financial condition and results
of  operations  are  based  upon  Cylink's  condensed   consolidated   financial
statements,  which have been prepared in accordance with  accounting  principles
generally  accepted in the United States.  The preparation of these consolidated
financial statements requires Cylink to make estimates and judgments that affect
the reported amounts of assets, liabilities,  revenues and expenses, and related
disclosure of contingent liabilities.  On an ongoing basis, Cylink evaluates its
estimates,   including  those  related  to  allowance  for  doubtful   accounts,
inventories,  investments, deferred tax assets, intangible assets, income taxes,
warranty obligations,  restructuring,  and contingencies and litigation.  Cylink
bases its estimates on historical  experience  and on various other  assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for  making  judgments  about the  carrying  values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.

         A description  of those  accounting  policies that Cylink  believes are
critical is contained in Cylink's  Annual Report on Form 10-K for the year ended
December 31, 2001.

                                       9
<PAGE>

RESULTS OF OPERATIONS

         The  following  table  sets forth  certain  consolidated  statement  of
operations data as a percentage of revenue for the periods indicated:

<TABLE>
<CAPTION>
                                                                  Three months ended               Nine months ended
                                                                ----------------------           ---------------------
                                                                Sep 29,         Sep 30,          Sep 29,        Sep 30,
                                                                 2002             2001            2002            2001
                                                                -----            -----           -----           -----
<S>                                                             <C>              <C>             <C>             <C>
 Revenue                                                        100.0%           100.0%          100.0%          100.0%
 Cost of revenue                                                 32.1             47.4            35.0            41.6
                                                                -----            -----           -----           -----

 Gross profit                                                    67.9             52.6            65.0            58.4

 Operating expenses:
   Research and development                                      34.1             35.9            38.5            40.7
   Selling and marketing                                         31.1             30.3            37.3            38.0
   General and administrative                                    23.6             27.4            23.9            23.5
   Amortization of acquired intangibles                           6.7              7.4             6.6             6.7
   Loss from divestiture of Algorithmic Research Ltd.               -              2.8               -             7.7
   Impairment of Goodwill                                        87.2                             28.7               -
   Restructuring charges                                          2.6                -             9.5               -
                                                                -----            -----           -----           -----

      Total operating expenses                                  185.3            103.8           144.5           116.6
                                                                -----            -----           -----           -----

 Loss from operations                                          (117.4)           (51.2)          (79.5)          (58.2)

 Other income, net                                                6.6              5.3             1.8             2.1
                                                                -----            -----           -----           -----

 Loss before income taxes                                      (110.8)           (45.9)          (77.7)          (56.1)
 Income tax benefit                                                 -                -            (1.6)           (3.2)
                                                                -----            -----           -----           -----

 Net loss                                                      (110.8)%          (45.9)%         (76.1)%         (52.9)%
                                                                =====            =====           =====           =====
</TABLE>


         Revenue.  Revenue decreased 31% from $10.3 million for the three months
ended  September  30, 2001 to $7.1 million for the three months ended  September
29,  2002,  and  decreased  41% from $36.5  million  for the nine  months  ended
September  30, 2001 to $21.6  million for the nine months  ended  September  29,
2002. The decreases in revenue are primarily due to the recent general weakening
of the  global  economy  as well as due to lower  than  anticipated  information
technology spending by Cylink's existing and prospective customers,  and loss of
business to competitors.  International  revenue  comprised 32% and 29% of total
revenue for the third quarter of 2001 and 2002, respectively.

         Gross Profit.  Gross profit  decreased  from $5.4 million for the three
months  ended  September  30, 2001 to $4.8  million for the three  months  ended
September 29, 2002,  and decreased  from $21.3 million for the nine months ended
September  30, 2001 to $14.0  million for the nine months  ended  September  29,
2002. This decrease in dollars primarily was a result of the overall decrease in
revenue  for the same  period.  As a  percentage  of  sales,  gross  profit  was
approximately  53% and 68%  for  the  quarters  ended  September  30,  2001  and
September  29,  2002,  respectively,  and 58% and 65% for the nine months  ended
September 30, 2001 and September 29, 2002,  respectively.  The increase in gross
profit as a percentage of revenue was due to higher service  revenue margins due
to benefits realized from cost reduction programs implemented by Cylink in 2002,
reduced excess and obsolete inventory and warranty adjustments,  offset by lower
product margins  resulting from the spread of fixed  manufacturing  and facility
costs over a much lower revenue base.

                                       10
<PAGE>

         Research and  Development.  Research and development  expenses  consist
primarily of salaries and other  personnel  related  expenses,  depreciation  of
development  equipment,   facilities  and  supplies.  Research  and  development
expenses  decreased  35% from $3.7 million for the three months ended  September
30,  2001 to $2.4  million for the three  months  ended  September  29, 2002 and
decreased 44% from $14.8 million for the nine months ended September 30, 2001 to
$8.3  million  for the nine  months  ended  September  29,  2002.  Research  and
development  expenses as a percentage  of revenue were 36% for the third quarter
of 2001 and 34% for the third quarter 2002, and 41% for the first nine months of
2001 and 39% for the first nine months of 2002. The dollar  decrease in research
and development expenses was a result of reduced project spending and headcount,
due to cost savings  initiatives  implemented by Cylink. The decrease in expense
as a  percentage  of revenue  for the third  quarter of each period was due to a
greater  decline in  product  development  expenditures  than the  reduction  in
revenues.

         Selling and Marketing. Selling and marketing expenses consist primarily
of personnel expenses, including sales commissions and bonuses, and expenses for
public  relations,  seminars and trade  shows.  Selling and  marketing  expenses
decreased 30% from $3.1 million for the three months ended September 30, 2001 to
$2.2 million for the three months ended  September  29, 2002 and  decreased  42%
from $13.9 million for the nine months ended  September 30, 2001 to $8.0 million
for the nine months ended September 29, 2002.  Selling and marketing expenses as
a percentage  of revenue were 30% for the third  quarter of 2001 and 31% for the
third quarter of 2002, and 38% for the first nine months of 2001 and 37% for the
first nine months of 2002. The dollar decrease in selling and marketing expenses
was a result of lower  commission  spending  due to  decreased  revenues,  lower
headcount  spending  driven by the  reduction in workforce  actions taken during
2002, and lower marketing and bonus spending due to the  implementation  of cost
savings  initiatives  by Cylink.  The  decrease  in expense as a  percentage  of
revenue  for the third  quarter of each  period was due to a greater  decline in
selling and marketing expenditures than the reduction revenues.

         General and Administrative. General and administrative expenses consist
primarily of personnel and related costs,  information systems costs, and audit,
legal and other professional  service fees. General and administrative  expenses
decreased 41% from $2.8 million for the three months ended September 30, 2001 to
$1.7 million for the three months ended  September  29, 2002 and  decreased  40%
from $8.6 million for the nine months ended  September  30, 2001 to $5.1 million
for the nine  months  ended  September  29,  2002.  General  and  administrative
expenses as a percentage  of revenue were 27% for the third  quarter of 2001 and
24% for the third  quarter  2002,  and 24% for the first nine months of 2001 and
24% for the first nine  months of 2002.  The  dollar  decrease  in  general  and
administrative  expenses  was due to  lower  headcount  spending  driven  by the
reduction in workforce  actions taken during 2002,  and lower bonus spending due
to the  implementation  of cost  savings  initiatives  by  Cylink,  offset by an
increase in professional fees associated with the acquisition by SafeNet.

         Restructuring  Charges.  Restructuring  charges  consist  of  severance
expenses due or paid to former employees and the estimated cost of excess leased
facilities and related furniture and equipment,  net of estimated  proceeds from
planned  subleasing of excess office space. In the third quarter of 2002, Cylink
increased  its  estimate  of the loss  from  excess  leased  facilities  by $0.2
million.

         Amortization of Acquired Intangibles. Amortization of intangible assets
declined from $0.8 million for the three months ended September 30, 2001 to $0.5
million for the three months  ended  September  29, 2002 and declined  from $2.4
million for the nine months  ended  September  30, 2001 to $1.4  million for the
three months  ended  September  29, 2002.  The decline in the expense in 2002 as
compared  to 2001 was due to the  adoption  of SFAS  142,  "Goodwill  and  Other
Intangibles," on January 1, 2002, pursuant to which Cylink ceased amortizing its
goodwill.

         Other  Income  (Expense),  Net.  Other income  (expense),  net consists
primarily of interest  income and interest  expense,  foreign  exchange gains or
losses,  royalty income, and impairment losses from investments in non-operating
companies.  Other income,  net decreased from $0.6 million for the quarter ended
September  30, 2001 to $0.5 million for the quarter  ended  September  29, 2002,
principally  due to a decline in foreign  exchange gains and net interest income
offset by the  absence  of a  write-down  of an  investment  in an  unaffiliated
company taken in the third quarter of 2001.  Other  income,  net decreased  from
income of $0.8  million for the nine  months  ended  September  30, 2001 to $0.4
million for the nine months  ended  September  29,  2002,  principally  due to a
decline in foreign exchange gains and net interest income.

         Provision  for Income  Taxes.  No provision  for or benefit from income
taxes was  recognized in the either the quarter ended  September 30, 2001 or the
quarter ended  September 29, 2002, as Cylink  incurred a net operating  loss for
income tax purposes.

                                       11
<PAGE>

         Material  Contracts.  On October 30, 2002 Cylink  entered  into a lease
modification  agreement with its landlord for its Santa Clara  headquarters  and
manufacturing  facility to  terminate  its lease  obligations  on  approximately
46,724 square feet  effective  November 1, 2002,  and another 49,104 square feet
effective  March 1, 2003 in  exchange  for the  payment  of $3.2  million,  $1.0
million to come from an existing  security  deposit held by the landlord,  and a
warrant to purchase  500,000 shares of Cylink common stock at a price of $0.3838
per  share  (the  average  closing  price of  Cylink's  common  stock for the 15
business days prior to the effective date of the lease modification  agreement).
This  modification  will  result  in  an  additional   restructuring  charge  of
approximately  $ 2.2  million  in the  fourth  quarter  of 2002,  including  the
$189,000  value of the  warrant.  Cylink will  continue  to lease  approximately
46,724  square feet as its  headquarters  and  manufacturing  facility  from the
existing landlord at the previous rates set forth in its lease agreement.

         Pending Acquisition.  On October 30, 2002, Cylink announced that it had
entered into a definitive agreement to be acquired by SafeNet,  Inc., a publicly
traded Delaware corporation.  SafeNet trades on The Nasdaq National market under
the symbol "SFNT". Cylink will be acquired by SafeNet through a merger of Cylink
with a wholly-owned  subsidiary of SafeNet.  If the merger is  consummated  each
share of Cylink  common stock  outstanding  as of the date of the closing of the
merger will be  converted  into the right to receive  0.05 of a share of SafeNet
common stock on a fixed exchange ratio basis.  The transaction will be accounted
for using the purchase  method of  accounting,  whereby  Cylink's net assets and
operating results will be included in the consolidated  financial  statements of
SafeNet  from the date of the closing of the merger,  and is intended to qualify
as a tax-free reorganization under applicable U.S. tax laws and regulations.  As
of October 30,  2002 this  represented  an issuance by SafeNet of  approximately
1.839 million of its shares,  or approximately  16% of the outstanding  stock of
SafeNet.  The merger  agreement  has been approved by the Boards of Directors of
both Cylink and  SafeNet  and the merger is  expected  to formally  close in the
first quarter of 2003; however,  there can be no assurances that the merger will
be completed in that quarter,  or at all. If the merger is  consummated,  Cylink
will  continue  to  operate  as  a  wholly-owned   subsidiary  of  SafeNet.  The
consummation of the merger is subject to the  satisfaction of customary  closing
conditions,  including the declaration by the Securities and Exchange Commission
of the  effectiveness  of the  registration  statement to be filed by SafeNet in
connection  with the merger and the  approval  of both  Cylink's  and  SafeNet's
shareholders.  Please see Item 5-Other  Information on page 24 of this Quarterly
Report on Form 10-Q.


LIQUIDITY AND CAPITAL RESOURCES

         At  September  29,  2002,  Cylink had working  capital of $8.2  million
(including  cash and cash  equivalents  of $8.2  million)  and $1.1  million  of
long-term  obligations.  For the nine months ended  September  29, 2002,  Cylink
recorded a net loss of $16.4 million.  Net cash used by operating activities for
the first nine months of 2002 was $1.8 million, consisting primarily of the loss
from   operations,   offset  by  $3.4  million  of  non-cash   depreciation  and
amortization,   $6.2  million  non-cash  write-off  of  goodwill,  $0.2  million
write-down of an investment in an  unaffiliated  company,  and a net decrease in
working capital. The decrease in working capital included a decrease in accounts
receivable  of $4.7  million,  a decrease in  inventories  of $1.3  million,  an
increase in accrued liabilities of $0.8 million,  partially offset by a decrease
in accounts  payable of $1.2  million,  an increase in income tax  receivable of
$0.4 million,  and a decrease in deferred revenues of $0.5 million. The decrease
in accounts  receivable  was due to lower  shipments  during  2002 and  improved
collection  activities.  The decrease in inventories was due to continued strict
purchasing  controls.  The increase in accrued liablities was due principally to
the reclassification of long-term  restructuring accruals to short-term accruals
as a  result  of  the  Santa  Clara  lease  modification,  offset  by  decreased
commission, bonus and warrant liabilities,  along with decreased payroll related
liabilities  resulting from reduced headcount.  The decrease in accounts payable
is due to the settlement of certain royalty  obligations  and reduced  inventory
purchasing.

         Net cash used in operating activities for the first nine months of 2001
was $2.8  million  consisting  primarily  of the loss from  operations  of $19.3
million,  partially  offset by a decrease in working  capital  which  included a
decrease in accounts  receivable of $6.4 million,  a decrease in  inventories of
$4.7 million,  an increase in deferred  revenue of $0.5  million,  a decrease in
other assets of $0.3 million  partially offset by a decrease in accounts payable
and accrued  liabilities of $4.6 million,  an increase in income tax receivables
of $0.1  million,.  The  decrease in accounts  receivable  was due to lower than
average shipments during the year supported by improved  collection  activities.
The decrease in inventories and the decrease in accounts payable were the result
of stricter  purchasing  controls.  The decrease in accrued  liabilities was due
principally to decreased commission, bonus, and legal liabilities.

         Cash  provided by  investing  activities  was $0.4 million for the nine
months ended September 29, 2002 as compared to cash used by investing activities
of $2.0 million for the nine months ended  September 30, 2001.  Cash provided by
investing  activities  for the  first  nine  months  of 2002  resulted  from the
collection  of  a  $1.0  million  note

                                       12
<PAGE>

receivable,  partially  offset by the  acquisition  of $0.6 million of property,
plant and equipment. Cash used in investing activities for the first nine months
of 2001  consisted  primarily  of the  acquisition  of $0.6 million of property,
plant and  equipment,  cash  transferred in connection  with the  divestiture of
Cylink's  Algorithmic  Research,  Ltd subsidiary,  offset by the collection of a
$0.6 million note receivable.

         Cash used in financing  activities for the nine months ended  September
29, 2002 and September 30, 2001, respectively, was not material in both periods.

         Cylink's $7.5 million  revolving  working capital loan facility matured
on June 27,  2002,  and was  renewed  during  the third  quarter of 2002 at $5.0
million through July 27, 2003. This loan is secured by all of Cylink's  tangible
assets and contains a covenant to maintain a minimum tangible net worth.  Cylink
fell out of compliance  with this covenant on October 30, 2002.  There have been
no borrowings under the loan since its inception.

         In conjunction  with the  acquisition of Celotek  Corporation in August
2000,  Cylink  assumed an  equipment  loan with an  outstanding  balance of $0.3
million. This loan matures December 1, 2002 and bears interest at the prime rate
plus 1%. As of September 29, 2002, the  outstanding  balance under the equipment
line was  $35,000.  The  equipment  line  requires  Cylink to  maintain  certain
liquidity and profitability covenants, with which it was not in compliance as of
September 29, 2002.

         In  connection   with  the  lease   modification  on  its  Santa  Clara
headquarters  and  manufacturing  facility,  Cylink  paid a $3.2  million  lease
termination  fee to the  landlord  in the  fourth  quarter  of  2002,  of  which
approximately  $1.0 million came from the security  deposit  already held by the
landlord.  Thus, Cylink's cash and cash equivalents were further reduced by $2.2
million in the fourth quarter of 2002.

         As of the date of filing of this Quarterly Report on Form 10Q, Cylink's
revenue to date for 2002 is significantly  below the revenue  anticipated  under
its current  financial plan for fiscal 2002.  Under Cylink's  financial plan for
2002,  Cylink had  projected a positive  operating  cashflow for the 2002 fiscal
year,  but as of September 29, 2002,  Cylink's  operations  are not generating a
positive cash flow.  Due to this continued  decrease in Cylink's  revenues below
the amounts  anticipated by its management under its 2002 financial plan, Cylink
undertook  certain  actions to reduce  operating costs in its core businesses in
both 2001 and 2002,  including a workforce  reduction in June 2002. In addition,
on October 30,  2002,  Cylink  entered into a  modification  of its lease on its
corporate headquarters facility. In 2002 Cylink began to realize the benefits of
the actions taken in the fourth quarter of 2000,  throughout  2001 and the first
nine months of 2002 to reduce  operating  costs.  Cylink plans to continue  such
cost reducing  measures in the fourth quarter of 2002 to the extent necessary or
advisable. However, there can be no assurance that cost cutting measures already
implemented,  either  alone or in  combination  with  such  other  cost  cutting
measures as the management of Cylink determines are necessary or advisable would
be sufficient  for Cylink to achieve  profitability,  or that Cylink's  existing
cash balances and  available  borrowing  will be  sufficient to fund  operations
through 2002. And, although Cylink has entered into a definitive agreement to be
acquired by SafeNet, there can be no assurance that the acquisition of Cylink by
SafeNet will be successfully concluded.

         In the event Cylink  continues to  experience a decline in revenues and
cannot successfully  implement additional effective cost cutting measures or its
financial plan is otherwise  unsuccessful,  or if the  acquisition by SafeNet is
not consummated for any reason,  Cylink may require additional funds in the near
term to support its working  capital  requirements or for other purposes and may
seek to raise such  additional  funds through  public or private  equity or debt
financing,  sales of assets,  or from other  sources.  No assurance can be given
that  additional  financing will be available or that, if available,  will be on
terms  favorable to Cylink or its  shareholders.  If Cylink is  unsuccessful  in
implementing  it's revised  financial plan, and cannot raise  additional  funds,
Cylink may not have the resources to maintain its operations.


RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

Cylink  has a  history  of  losses,  and may not be able to meet its  needs  for
working capital.

         Cylink  incurred  significant net losses in the nine month period ended
September 29, 2002,  in the fiscal year 2001 and in prior fiscal  years.  Cylink
had an accumulated  deficit of $135.2 million as of September 29, 2002. Cylink's
prior losses may also  adversely  impact  Cylink's  ability to raise  additional
capital if required to sustain its operations.

                                       13
<PAGE>

         As of the  date  of  filing  of this  Quarterly  Report  on Form  10-Q,
Cylink's revenue to date for 2002 is significantly below the revenue anticipated
under its current  financial plan for such year.  Under Cylink's  financial plan
for 2002,  Cylink  had  projected  a positive  operating  cash flow for the 2002
fiscal  year,  but  as of  September  29,  2002,  Cylink's  operations  are  not
generating a positive  cash flow.  Due to the  decrease in Cylink's  revenues in
2001 and the continued  decrease in Cylink's  revenues in 2002 below the amounts
anticipated by its management under its internal financial plan for 2002, Cylink
undertook  certain  actions to reduce  operating costs in its core businesses in
2001 and 2002,  including a workforce  reduction in June 2002.  In addition,  on
October  30,  2002,  Cylink  entered  into a  modification  of its  lease on its
corporate  headquarters  facility in Santa Clara,  CA. In 2002,  Cylink began to
realize the benefits of the actions taken in the fourth quarter of 2000, through
2001 and the first nine months of 2002 to reduce operating  costs.  Cylink plans
to continue such cost reducing measures in the fourth quarter 2002 to the extent
necessary or advisable.  However,  there can be no assurance  that Cylink's cost
cutting  measures as it's management  determines are necessary or advisable,  if
implemented,  would be sufficient  for Cylink to achieve  profitability  or that
Cylink  will be able to  continue  reducing  costs at a pace that  reflects  any
further reduction in its revenues below  anticipated  levels or that Cylink will
not need to raise  additional  capital to fund its operations or that additional
financing could be obtained by Cylink on acceptable terms, or at all.

         There also can be no  assurances  that  Cylink's  principal  sources of
liquidity,  which  include  cash  and cash  equivalents  of $8.2  million  as of
September 29, 2002,  will satisfy its current  anticipated  working  capital and
capital expenditure  requirements  through at least the next twelve months. As a
result of the lease termination fees resulting from the modification of Cylink's
Santa Clara lease on October 30, 2002,  Cylink's cash and cash  equivalents were
further  reduced by $2.2 million in the fourth  quarter of 2002.  Cylink's  $7.5
million revolving working capital loan facility matured on June 27, 2002. During
the third  quarter of 2002,  the bank renewed  Cylink's  line of credit for $5.0
million  through July 27, 2003. The loan is secured by all of Cylink's  tangible
assets and the loan  agreement  for such  credit  line  contains  a covenant  to
maintain a minimum tangible net worth. In February 2002, Cylink breached certain
financial covenants  contained in this loan agreement.  The minimum tangible net
worth  covenant  was  reset  at the time of the loan  renewal;  however,  due to
restructuring  costs associated with  modification of Cylink's Santa Clara lease
and  professional  fees  incurred with respect to Cylink's  pending  merger with
SafeNet's  subsidiary,  Cylink  fell out of  compliance  with this  covenant  on
October 30, 2002. There is no guarantee that Cylink will satisfy those covenants
or other covenants in the loan agreement in the future.  If Cylink fails to meet
such  financial  covenants,  the line of  credit  may not be  available  to fund
Cylink's operations if needed.

         Further,  if additional funds are raised by issuing equity  securities,
dilution  to Cylink's  shareholders  may result.  If  adequate  funds  needed to
sustain Cylink's  operations are not available,  Cylink,  its business,  and the
price of its Common Stock will be adversely affected.

Cylink's quarterly operating results vary from period to period and may vary in
the future.

         Cylink has  historically  experienced  significant  fluctuations in its
operating results on a quarterly basis and could experience such fluctuations in
the future.  Cylink's revenues and operating results are affected by a number of
factors outside of Cylink's control, including the following:

         o        Cylink's inability to accurately forecast revenues and respond
                  in a timely manner to changes in revenue levels;

         o        the timing of the introduction by Cylink or by its competitors
                  of new or enhanced products;

         o        market  acceptance  of Cylink's  new products and those of its
                  competitors;

         o        the  timing,   cancellation  or  delay  of  customer   orders,
                  including cancellation or delay in anticipation of new product
                  introductions or enhancements;

         o        changes  in  Cylink's   pricing   policies  or  those  of  its
                  competitors;

         o        changes  in  operating  costs and  expenses,  including  those
                  resulting  from  changes in available  production  capacity of
                  independent foundries and other suppliers and the availability
                  of raw materials;

         o        changes in the revenue mix from products or services sold;

         o        changes in the  percentage of products  sold through  Cylink's
                  direct sales force;

         o        loss of an important customer;

         o        failure to grow  Cylink's  customer  base in  accordance  with
                  market expectations;

                                       14
<PAGE>

         o        customer discounts and credits;

         o        Cylink's  limited  ability  to reduce  expenses  to offset any
                  unexpected shortfall in revenue growth or decrease in revenue;

         o        delays in  manufacturing  due to  shortages in  components  or
                  unanticipated revisions in product design;

         o        expenses  incurred in seeking to enforce or defend claims with
                  respect to intellectual property rights;

         o        changes in the economy that affect the purchasing decisions of
                  Cylink's customers; and

         o        disruption in Cylink's  operations caused by reductions in its
                  workforce.

         Many of these factors are outside of Cylink's  control.  It is possible
that in the future Cylink's  operating results will be below the expectations of
securities  analysts  and  investors.  In such an event,  or in the  event  that
adverse conditions prevail or are perceived to prevail generally or specifically
with respect to Cylink's business or the market sector in which Cylink operates,
the price of its common stock may be adversely affected.

If the merger with SafeNet, Inc. is not completed Cylink's stock price and
future business and operations could be harmed.

         If the merger with SafeNet is not completed,  Cylink will be subject to
the following material risks, among others:

                  o        The price of Cylink's  common stock may change to the
                           extent  that the  current  market  price of  Cylink's
                           common stock  reflects an assumption  that the merger
                           will be completed;

                  o        Cylink's costs related to the merger,  such as legal,
                           accounting  and  some of the  fees  of its  financial
                           advisors,  must be paid  even  if the  merger  is not
                           completed; and

                  o        Under some  circumstances  Cylink may be  required to
                           pay SafeNet a cash termination fee.

         Further,  if the merger is terminated  or otherwise is not  consummated
and Cylink's  board of directors  determines to seek another  merger or business
combination, it is not certain that Cylink will be able to find a merger partner
or that the new merger  partner  would be willing to pay an  equivalent  or more
attractive  price than that which would be paid by SafeNet in the merger.  While
the  reorganization  agreement is in effect,  subject to  specified  exceptions,
Cylink  is  prohibited   from  entering  into  or   soliciting,   initiating  or
intentionally encouraging any inquiries or proposals that may lead to a proposal
or offer for a merger, consolidation,  business combination, sale of substantial
assets,  tender  offer,  sale of  shares  of  capital  stock  or  other  similar
transactions with any person other than SafeNet.  These restrictions could limit
Cylink's ability to enter into an alternative transaction at a favorable price.

Cylink is currently involved in litigation.

         Several  securities  class action  complaints were filed against Cylink
and certain of its current and former  directors and officers in federal  courts
in  California.  These  complaints  allege,  among other  things,  that Cylink's
previously issued financial  statements were materially false and misleading and
that the defendants  knew or should have known that these  financial  statements
caused its common stock price to rise  artificially.  The complaints also allege
violations of Section 10(b) of the Securities  Exchange Act of 1934, as amended,
and Rule 10b-5 promulgated  thereunder,  and Section 20 of the Exchange Act. The
securities  class action lawsuits have been ordered  consolidated  into a single
action pending in the United States District Court for the Northern  District of
California,  captioned In Re Cylink Securities  Litigation,  No. C98-4292 (VRW).
For more information on this lawsuit,  see Part II, Item 1. "Legal Proceedings."
On October 16, 2002,  Cylink  entered into an agreement  with all  plaintiffs to
settle the class action for $6.2  million.  The  settlement  amount will be paid
entirely from insurance  proceeds under insurance  policies held by Cylink.  The
settlement  agreement is subject to approval by the United States District Court
for the Northern District of California,  and Cylink expects that the settlement
agreement will be approved in March 2003.

                                       15
<PAGE>

Cylink's sales cycles are long and unpredictable,  which makes  period-to-period
revenues difficult to predict.

         Sales of Cylink's products  generally involve a significant  commitment
of capital by its customers,  with the attendant  delays  frequently  associated
with large capital  expenditures.  For these and other reasons,  the sales cycle
associated with Cylink's  products is typically  lengthy and subject to a number
of significant risks over which Cylink has little or no control. Cylink is often
required  to ship  products  shortly  after  it  receives  the  orders  from its
customers.  Consequently,  order  backlog at the beginning of any period has, at
times in the past,  represented  only a small portion of that period's  expected
revenue. Furthermore, increases in backlog from quarter to quarter may be due to
placement  of orders  calling for  delivery  dates  extended  over a much longer
period of time into future periods. Consequently, Cylink's order backlog becomes
more vulnerable to customer cancellations.  As a result of these fluctuations in
its sales cycle and because of order backlog,  Cylink's  product  revenue in any
period has been and will continue to be substantially dependent on orders booked
and shipped in that period.

         Cylink  typically  plans its production  and inventory  levels based on
internal  forecasts of customer demand,  which are highly  unpredictable and can
fluctuate  substantially.  In  particular,  market  forces  beyond its  control,
including  a general  economic  recession  and limits or  changes in  government
spending  may have a material  affect on customer  demand for its  products.  In
addition,  Cylink's operating  expenses are based on anticipated  revenue levels
and a high  percentage  of its expenses are  generally  fixed in the short term.
Based on these  factors,  a small  fluctuation  in the timing of sales can cause
operating  results to vary  significantly  from period to period. It is possible
that in the future Cylink's  operating results will be below the expectations of
securities  analysts  and  investors,  as  they  have  in the  past.  If  Cylink
disappoints  the  expectations of securities  analysts and investors,  or in the
event  that  adverse  market  conditions  prevail  or are  perceived  to prevail
generally or with respect to the market  sector in which  Cylink  operates,  the
price of its common  stock  would  likely be  adversely  affected.  All of these
factors make it difficult to predict Cylink's financial  performance from period
to period.  As Cylink's  quarterly  results  fluctuate,  they may fall below the
expectations  of the public market  analysts or investors.  If this occurs,  the
price of Cylink's  Common Stock may drop and Cylink's  financial  condition  and
results of operations may be materially and adversely affected.

The overall economic climate continues to be weak.

         Cylink's products typically  represent  substantial capital commitments
by its customers,  and potentially  involve a long sales cycle. As a result, its
customers'  purchase  decisions  may be  significantly  affected by a variety of
factors  outside  of  Cylink's  control,  including  downward  trends in capital
spending for  communication  networks,  increased  market  competition,  and the
availability  or announcement  of alternative  technologies by its  competitors.
Continued recent weakness in general economic conditions has resulted in many of
Cylink's  customers  delaying and/or reducing their capital  spending related to
information  systems.  If the economy  continues to be weak or further  weakens,
demand for Cylink's  products could decrease,  resulting in lower revenues and a
decline in the overall rate of its revenue growth.

Cylink is dependent on recently introduced and new network security products.

         Cylink's future results of operations  will be highly  dependent on the
successful  marketing and manufacture of Cylink's  NetHawk  product,  as well as
successful  marketing and  manufacture  of the Cylink Link  Encryptors,  PrivaCy
Manager,  Cylink ATM and Cylink  Frame  Encryptor  products.  Through  the third
quarter  of 2002,  Cylink  has made only  limited  commercial  shipments  of its
NetHawk  product,  which began shipping in mid-year 2000. This product  requires
additional  development  work,  enhancement,  and testing to achieve  widespread
commercial  success.  If this or other new or recently  introduced products have
performance,  reliability,  quality or other  shortcomings,  such products could
fail to achieve  adequate  market  acceptance.  The failure of  Cylink's  new or
existing  products to achieve or enjoy market  acceptance,  whether for these or
other  reasons,   could  cause  Cylink  to  experience  reduced  orders,  higher
manufacturing  costs,  delays in collecting  accounts  receivable and additional
warranty and service expenses,  which in each case could have a material adverse
effect on Cylink's business, financial condition and results of operations.

         Due to  insufficient  market  acceptance  of  stand  alone  public  key
infrastructure (PKI) products generally,  such as Cylink's Net Authority product
and similar products of its competitors,  Cylink revised its marketing  approach
in the second half of 2001 by  discontinuing  efforts to sell Net Authority as a
stand alone product.  Instead, Cylink focused its efforts on potential customers
seeking to embed its PKI product as part of their  application  or  service.  In
addition,  on February 8, 2002,  Cylink  received  notice from the United States
Postal  Service  (USPS) that it was  terminating  its  license to  Cylink's  Net
Authority  product as of March 17,  2002,  noting that its  decision  was "not a
reflection of the quality of work performance provided by Cylink" but was due to
"USPS'  immediate  need to reduce

                                       16
<PAGE>

cost" and downsize its non core  businesses  following the anthrax attack on its
operations  in  October  of  2001.  At  its  request,   Cylink  granted  USPS  a
continuation  of its  license  through  May  30,  2002.  On May 31,  2002,  this
Cylink/USPS license terminated and all revenue earned under the contract expired
in the second  quarter of 2002.  Revenue for the second quarter of 2002, and for
the first nine months of 2002  resulting from the USPS license was $0.2 million,
and $0.5  million,  respectively.  Cylink  completely  discontinued  all further
development of its PKI technology and products in July 2002.

Cylink faces  significant  competition  from other providers of network security
systems

         Competition is intense among providers of network security systems, and
Cylink expects that such  competition  will increase in the future.  Significant
competitive factors in these markets include:

         o        the rapid  development  of new products and features by market
                  participants;

         o        product quality and performance;

         o        customer   perception   regarding  the  adequacy  of  security
                  provided by existing software and routers;

         o        adoption  of embedded  security  solutions  in other  vendors'
                  hardware and software products;

         o        the quality and  experience of Cylink's  sales,  marketing and
                  service organizations;

         o        Cylink's  products'  prices and the prices of similar products
                  of its competitors;

         o        name recognition of Cylink versus its competitors; and

         o        customers'  perception  of Cylink's  stability  and  long-term
                  viability.

         Many of these competitive factors are beyond Cylink's control.

         Cylink's  competitors in the information  security  markets,  including
companies that offer products similar to, or are perceived as an alternative to,
Cylink's  products,   are  Checkpoint  Software   Technologies,   Ltd.,  Network
Associates,  Inc., SafeNet,  Inc., Secure Computing  Corporation,  RSA Security,
Inc.,  Symantec  Corporation,  and Thales e-Security,  Inc. Cylink's NetHawk VPN
appliance  competes with numerous  other  products,  including  those offered or
under  development  by Cisco  Systems,  Inc.,  Newbridge  Networks  Corporation,
Netscreen  Technologies,  Inc.,  Nokia Corp,  and Sonic  Wall,  Inc. A number of
significant vendors,  including Microsoft  Corporation,  and Cisco Systems, Inc.
have embedded  security  solutions in their  software.  To the extent that these
embedded  or  optional  security  capabilities  provide  all or a portion of the
functionality provided by Cylink's products,  Cylink's products may no longer be
required by its customers to attain network security.

         Many of Cylink's  competitors  have  substantially  greater  financial,
technical,  marketing,  distribution  and  other  resources,  and  greater  name
recognition and longer standing  relationships  with customers than possessed by
Cylink.  Competitors with greater financial  resources are better able to engage
in more aggressive  marketing  campaigns and sustained price reductions in order
to gain market  share.  However,  any period of sustained  price  reductions  in
Cylink products would have a material adverse effect on its financial  condition
and results of operations. Cylink may not be able to compete successfully in the
future and competitive pressures may result in price reductions,  loss of market
share or otherwise have a material adverse effect on its financial condition and
results of operations.

Cylink  faces the risks from tort and  warranty  claims that may be made against
it.

         Cylink faces risks from tort and warranty claims that third parties may
make against it. Customers rely on Cylink's network security products to prevent
unauthorized access to their networks and data  transmissions.  A malfunction or
the  inadequate  design of a Cylink  product  could  result in tort or  warranty
claims from its customers. Additionally, a breach of a Cylink customer's network
by an unauthorized  party,  which is determined to be attributable to an alleged
defect in its products,  may cause substantial damages due to loss or compromise
of the customer's valuable information.  Furthermore,  there is inadequate legal
precedent for allocating  responsibility  for such losses caused by the wrongful
acts of third  parties.  Although  Cylink  attempts  to reduce  the risk of such
losses and claims through warranty  disclaimers and liability limitation clauses
in its standard forms of sales and license agreements and by maintaining product
liability  insurance,  there  can be no  assurance  that such  measures  will be
effective in limiting Cylink's liability for any such damages. Any liability for
damages resulting from security

                                       17
<PAGE>

breaches or other alleged  product defects could be substantial and could have a
material adverse effect on Cylink's business, financial condition and results of
operations.

         In addition,  a  well-publicized  actual or perceived  security  breach
could adversely affect the market's  perception of security products in general,
or  Cylink's  products  in  particular,  regardless  of whether  such  breach is
attributable to Cylink's products.  Such negative  perceptions could result in a
decline in demand for Cylink's  products,  which, in turn, would have a material
adverse  effect  on  Cylink's  business,  financial  condition  and  results  of
operations.

         On August 2, 2001, Cylink determined that a hardware design could cause
a premature  failure of the backup battery on its Cylink Frame  Encryptor  (CFE)
product.  Shortly  thereafter,  Cylink announced a program to give its customers
the option of updating  their CFE units by  returning  them to the  factory,  or
receiving an extended  warranty covering the battery through the end of December
2002.  Cylink  accrued  approximately  $1.0 million in warranty costs during the
third  quarter of 2001  associated  with this program.  While Cylink  management
believes  that this  reserve  was based on  reasonable  estimates  derived  from
information available at the time the reserve was accrued, Cylink's actual costs
resulting from this program could exceed these reserves.  After Cylink announced
this  program,  two of its major  customers  stated  their  intention  to submit
substantial  claims  to  Cylink  related  to  their  costs of  avoiding  product
failures;  however, neither of these customers (nor any other Cylink customer of
this product  line) has made a claim against  Cylink for damages  related to the
failure of the backup  battery.  Although Cylink believes any such claims may be
barred or  significantly  reduced by the limitations and exclusions set forth in
the governing  contracts of sale, there can be no assurance that Cylink would be
found free from liability or any obligation to reimburse these customers  should
such customers  bring such a claim against  Cylink.  If such claims were brought
against Cylink and Cylink were found to be liable for these customers'  damages,
Cylink's  operations  and financial  condition  may be materially  and adversely
affected.

Cylink may be unable to retain  executive  officers and key  personnel  that are
critical to its business.

         Cylink's  future success  depends in large part on the abilities of its
executive  officers,  key management and technical  personnel and its ability to
retain qualified and competent  individuals  following its recent  reductions in
the  employee  workforce  and the  announcement  on October 30, 2002 of Cylink's
agreement to be acquired by SafeNet,  Inc.  There is no guarantee  that Cylink's
present  executive  management  and  technical  staff will remain  with  Cylink,
particularly if Cylink's performance is not up to the executive's  expectations,
if  there  is  prolonged  uncertainty  concerning  the  effect  of  the  SafeNet
transaction on individual positions, and if a general economic recovery leads to
expanded alternative  opportunities for such employees. The loss of the services
of one or more of Cylink's executive officers or key personnel, or the inability
to attract and retain additional executives and other qualified personnel, could
delay product  development cycles or otherwise have a material adverse effect on
Cylink's business and operating results.

Cylink may not be able to hire and retain  sufficient  technical,  marketing and
management personnel that it needs to succeed.

         Cylink  may  not be  able  to hire  and  retain  sufficient  technical,
marketing and management  personnel that it needs to succeed  because Cylink has
limited resources to expand its work force. Cylink recently experienced, and may
continue to experience,  substantial fluctuations in the number of employees and
the scope of its operations in the network security business. These fluctuations
resulted in increased responsibilities for the Cylink management team. To manage
Cylink's   businesses   effectively,   Cylink  must   continue  to  improve  its
operational,  financial  and  management  information  systems and must  retain,
motivate  and  manage  its  employees.  In the recent  past,  competition  among
companies has been intense for  qualified  technical,  marketing and  management
personnel.  Furthermore,  the  recent  reductions  in  Cylink's  workforce,  the
recently  announced  transaction  with SafeNet,  and the fluctuation in Cylink's
stock price, may create greater uncertainty amongst Cylink's existing employees.
There can be no  assurance  that Cylink will be able to  effectively  achieve or
manage  future  growth in its work  force,  and its failure to do so could delay
product  development  cycles or otherwise have a material  adverse effect on its
financial condition and results of operations.

Cylink's intellectual property is critical to the success of its business.

         Cylink relies on patents,  trademarks,  copyrights,  licenses and trade
secret law to establish and preserve its intellectual  property  rights.  Cylink
owns a number of U.S.  patents  covering  certain  features of Cylink's  network
security product designs,  and has additional U.S. patent applications  pending.
However,  there can be no  assurance

                                       18
<PAGE>

that any patent,  trademark,  copyright or license  owned or held by Cylink will
not  be  invalidated,  circumvented  or  challenged,  that  the  rights  granted
thereunder will provide competitive advantages to Cylink or that any of Cylink's
pending  or future  patent  applications  will be  issued  with the scope of the
claims sought by it, if at all.  Further,  there can be no assurance that others
will  not  develop  technologies  that  are  similar  or  superior  to  Cylink's
technology, duplicate Cylink's technology,  misappropriate its trade secrets, or
design  around  the  patents  owned by it.  Resorting  to the  courts to protect
Cylink's   intellectual   property  would  require  significant   financial  and
management  resources.  In  addition,  the laws of  certain  countries  in which
Cylink's products are or may be developed,  manufactured or sold may not protect
those products and  intellectual  property rights to the same extent as the laws
of the United States.  Cylink's  inability to protect its intellectual  property
rights  adequately  could  have a  material  adverse  effect  on  its  financial
condition and results of operations.

         The computer, communications,  software and network security industries
are  characterized  by  substantial   litigation   regarding  patent  and  other
intellectual  property rights. In the past,  Cylink has received  communications
from third parties asserting that its patents, features or content of certain of
its products  infringe upon the  intellectual  property rights of third parties,
and  Cylink may  receive  such  communications  in the  future.  There can be no
assurance  that these third parties will not assert claims  against  Cylink that
result in  litigation.  Any  litigation,  whether or not  determined in Cylink's
favor,  could  result in  significant  expense  to Cylink  and could  divert its
management's attention and other resources from the day-to-day operations of the
company.  In the event of an adverse ruling in any such  litigation  involving a
dispute over Cylink's  intellectual property rights, Cylink might be required to
discontinue the use of certain processes, cease the manufacture, use and sale of
infringing  products,  expend  significant  resources to develop  non-infringing
technology or obtain licenses to the infringing technology and Cylink may suffer
significant monetary damages,  which could include treble damages.  There can be
no  assurance  that under such  circumstances  a license  would be  available to
Cylink on reasonable terms or at all. In the event of a successful claim against
Cylink,  combined with its failure to develop or license a substitute technology
on commercially  reasonable terms,  Cylink's financial  condition and results of
operations would be adversely affected.

If Cylink is unable to adapt its services to rapidly changing technology,  or if
the market for its network  security  products  fails to grow,  its business and
operating results could suffer.

         The market for Cylink's network  security  products is characterized by
rapidly  changing   technology,   emerging  industry   standards,   new  product
introductions  and changes in customer  requirements and  preferences.  Cylink's
future  success will depend in part upon end users' demand for network  security
products in general,  and upon Cylink's ability to enhance its existing products
and to develop and  introduce new products and  technologies  that meet customer
requirements.  Cylink faces continuing challenges to educate potential customers
as to the value of its security products. Many potential customers prefer not to
disclose  significant  security  breaches of their  networks or are reluctant to
invest in the  development of a professional  security  architecture  to protect
their networks because of the expense.  Cylink also believes that many potential
customers do not appreciate the need for its security  products unless and until
they have faced a major security breach.  This general market  resistance to the
purchase of security  products is  compounded by Cylink's  limited  resources to
invest in marketing campaigns to promote its products and services. In addition,
a portion of the sales of Cylink's network security  products will depend upon a
robust  industry and  infrastructure  for  providing  access to public  switched
networks,  such as the Internet.  The  infrastructure or complementary  products
necessary to turn these  networks into viable  commercial  marketplaces  may not
fully  develop,  or once  fully  developed,  may not  become  viable  commercial
marketplaces.

         If Cylink is unable  successfully to educate potential  customers as to
the value of its products and  services,  it is unlikely  that its products will
gain broad market  acceptance.  Without broad market acceptance for its products
and services, Cylink will continue to rely primarily on selling new and existing
products to its base of existing  customers,  which will significantly limit any
opportunity  for  real  growth.   In  addition,   any  significant   advance  in
technologies  for  attacking  cryptographic  systems could render some or all of
Cylink's existing and new products obsolete or unmarketable.  Additionally, if a
specific  product or  technology  other than Cylink's is adopted as the standard
for implementing network security in any segment of the network security market,
sales of Cylink's  existing and planned  products in that market  segment may be
adversely impacted,  which could have a material adverse effect on its business,
financial condition and results of operations.

         The National  Institute of Standards and Technology has announced a new
Advanced Encryption Standard, or AES, which Cylink expects to integrate into its
products.  Cylink's  ability to timely  implement  the AES into its products may
materially  affect  its  development  costs and  ability  to timely  market  its
solutions.

                                       19
<PAGE>

If Cylink's research and development activities are unsuccessful, it will not be
able to market new products and services.

         The markets for Cylink's products are characterized by rapidly changing
technologies,  extensive research and new product introductions. Cylink believes
that its future success will depend in part upon Cylink's ability to continue to
enhance  its  existing  products  and to  develop,  manufacture  and  market new
products.  As a  result,  Cylink  expects  to  continue  to  make a  significant
investment in engineering,  research and development.  However,  there can be no
assurances that such  investments  will lead to the development of new or viable
products or enhancements to Cylink's existing products. In addition,  Cylink may
not be able to develop and  introduce new products or  enhancements  in a timely
manner that satisfies its customer  needs,  achieves broad market  acceptance or
addresses  technological  changes  in its  target  markets.  If Cylink  fails to
develop new products and enhancements or to introduce them successfully and in a
timely manner,  its  competitive  position,  financial  condition and results of
operations will be adversely affected.

Cylink faces risks associated with its international operations.

         Cylink plans to continue to maintain its foreign sales channels,  which
require significant management attention and financial resources.  International
sales are subject to a number of risks, including:

         o        unexpected changes in regulatory requirements;

         o        export control laws, tariffs and other trade barriers;

         o        political and economic instability in foreign markets;

         o        difficulties  in the staffing,  management and  integration of
                  foreign operations;

         o        longer  payment  cycles and greater  difficulty  in collecting
                  accounts receivable;

         o        currency fluctuations; and

         o        potentially adverse tax consequences.


         Because most of Cylink's foreign sales are denominated in U.S. dollars,
its  products  become  less  price  competitive  in  countries  in  which  local
currencies  decline in value relative to the U.S. dollar.  The  uncertainties of
monetary exchange values have caused,  and may in the future cause, some foreign
customers to delay new orders or delay payment for existing  orders in the short
term, although the long-term impact of such devaluation, cannot be predicted.

         Cylink's  ability  to compete  successfully  in  foreign  countries  is
dependent in part on its ability to obtain and retain  reliable and  experienced
in-country  distributors  and other  strategic  partners.  Cylink  does not have
long-term contracts with most of its value added resellers and distributors and,
therefore,  has no assurance of a continuing relationship with such reseller and
distributors within a given market.

         Due  to  U.S.   government   regulations   restricting  the  export  of
cryptographic devices and software, including Cylink's network security products
to non-civilian  agencies of foreign governments,  Cylink often is disadvantaged
in competing for  international  sales  against  companies  located  outside the
United  States  which are not  subject  to such  restrictions.  Furthermore,  in
certain foreign countries, Cylink's distributors are required to secure licenses
or formal permission before  encryption  products can be imported.  Although the
U.S.  Department of Commerce  continues to relax certain  export control laws as
they  apply  to sales  of  Cylink's  products  to its  international  commercial
customers,  Cylink  still  faces  export  controls  on sales of its  products to
certain  foreign  governments  and on transfers of its technology to its foreign
partners.  To date,  Cylink  has been able to secure  the  necessary  export and
import licenses to compete  effectively in the  international  market.  However,
there can be no assurances that Cylink will be able to secure such licenses in a
timely manner in the future, or at all.

Cylink  faces  risks  from its  dependence  on third  party  subcontractors  and
suppliers.

         Cylink's  ability  to  deliver  its  products  in a  timely  manner  is
dependent upon the  availability  of quality  components and subsystems  used in
these  products.  Cylink  depends in part upon  subcontractors  to  manufacture,
assemble and deliver certain components and subsystems used in its products in a
timely and satisfactory manner. Cylink obtains certain components and subsystems
from a  single,  or a limited  number  of,  suppliers.  A  significant

                                       20
<PAGE>

delay in obtaining a supply of components  selected by Cylink's design engineers
or an interruption  in the delivery of such items could have a material  adverse
effect on Cylink's financial condition and results of operations.

         On February  14,  2002,  Cylink  notified  its OEM supplier of its ISDN
encryption  products,  Biodata  Information  Technology  AG  ("Biodata")  of its
decision to terminate  Cylink's  development and supply  agreement with Biodata,
following  Biodata's  declaration  of  insolvency.  Due to  Biodata's  financial
failure,  as well as the financial  failure of Cylink's previous supplier of its
ISDN  encryption  products,  Dica,  in the first  nine  months  of 2001,  Cylink
discontinued  all further  sales and support for this product  line.  Cylink has
disclaimed  all  liability  for  Biodata's  and Dica's  failures in terms of its
supply  contract  with  Cylink's  principal  customer  for its  ISDN  encryption
products; however, there can be no assurance that Biodata's and Dica's financial
failures, and Cylink's subsequent discontinuance of this ISDN product line, will
not give rise to claims for breach of warranty and support by Cylink's  customer
and end users of this product line. If these customers  should bring such claims
against  Cylink,  and if Cylink  were  found to be liable  for these  customers'
damages,  Cylink's  operations  and financial  condition  may be materially  and
adversely effected

Cylink  common stock could be delisted  from The Nasdaq Small Cap Market,  which
could adversely affect Cylink and its shareholders.

         On June 27, 2002, Cylink received a notice from the staff of The Nasdaq
National  Market that its common  stock had failed to  maintain  the minimum bid
price of $1.00 over the prior 30 trading days as required for continued  listing
on The Nasdaq  National  Market.  The notice  stated that, if during the 90 days
following the date of the notice, the bid price of Cylink common stock failed to
close at or above  $1.00  for at least 10  consecutive  trading  days,  then the
Cylink common stock could be delisted.

         On September 24, 2002,  Cylink  submitted its  application to Nasdaq to
move trading of its common stock from The Nasdaq  National  Market to The Nasdaq
Small Cap  Market.  Cylink's  application  was  accepted  and on October 9, 2002
Cylink  common  stock  began  trading on The Nasdaq  Small Cap Market  under the
symbol  "CYLK".  Under the listing rules of The Nasdaq Small Cap Market,  Cylink
received an extension of an  additional 90 days to comply with the $1.00 minimum
bid requirement until December 24, 2002.  However,  should Cylink's common stock
continue to close below $1.00,  Cylink  common stock could be delisted  from The
Nasdaq Small Capital  Market.  If Cylink's common stock were to be delisted from
The Nasdaq Small Cap Market,  Cylink could apply for listing on the OTC Bulletin
Board or another quotation system or exchange for which it could qualify. Cylink
cannot guarantee,  however, that it could apply for listing on another quotation
system or exchange if it is delisted from The Nasdaq Small Cap Market or that if
it does apply for listing that it will be eligible initially for such listing or
that if it does become  listed,  that it will be able to  maintain  eligibility.
Also,  listing on another quotation system or exchange may negatively affect the
price of  Cylink's  common  stock  because  stocks  trading on  over-the-counter
markets are typically less liquid and trade with larger  variations  between bid
and ask prices.  In addition,  the  delisting of Cylink's  common stock from the
Nasdaq Small Cap Market would adversely  affect or limit or restrict its ability
to raise funds through stock issuances.

         If the market price for Cylink's  common stock  remains below $1.00 per
share, its common stock will be deemed to be penny stock and be subject to rules
that impose  additional  sales  practices on  broker-dealers  who sell  Cylink's
securities.  For  example,   broker-dealers  must  make  a  special  suitability
determination  for  the  purchaser  of a  penny  stock  and  have  received  the
purchaser's  written  consent  to the  transaction  prior to the sale.  Also,  a
disclosure schedule must be prepared prior to any transaction  involving a penny
stock and  disclosure is required  about sales  commissions  payable to both the
broker-dealer and the registered  representative  and current quotations for the
securities.  Monthly  statements are also required to be sent disclosing  recent
price information for the penny stock held in the account and information on the
limited market in penny stock.  Because of these  additional  obligations,  some
brokers  may  be  unwilling  to  effect   transactions  in  penny  stocks.  Such
circumstances  could have an adverse effect on the liquidity of Cylink's  common
stock.

Terrorist  attacks may  negatively  impact all  aspects of Cylink's  operations,
revenues, costs and stock price.

         Recent terrorist attacks in the United States, as well as future events
occurring in response or connection to such attacks,  including future terrorist
attacks  against  United  States  targets,  rumors  or  threats  of war,  actual
conflicts  involving  the  United  States  or its  allies or  military  or trade
disruptions impacting Cylink's domestic or foreign suppliers of merchandise, may
negatively  impact  Cylink's  operations  by  causing  delays  or  losses in the
delivery of goods and supplies to Cylink and decreased  sales of the products it
carries.  More generally,  any of these events may

                                       21
<PAGE>

continue to negatively affect the general economy and Cylink's customers' demand
for capital equipment,  thereby negatively impacting Cylink's operating results,
revenues and costs.

Recent  accounting  pronouncements  may impact Cylink's  financial  position and
results of operations.

         Cylink has adopted recent changes in financial accounting standards. In
June 2001, the FASB issued SFAS 142, "Goodwill and Other Intangible Assets". The
valuation of Cylink's  goodwill and intangible  assets under SFAS 142 depends on
certain  factors outside of its control,  including its stock price,  and Cylink
has written down all of the $6.2 million net carrying value of its investment in
goodwill as of September 29, 2002. In June, July and August, 2001, the FASB also
issued  SFAS 141  "Business  Combinations",  SFAS  143,  "Accounting  for  Asset
Retirement  Obligations",  and SFAS  144,"Impairment  or Disposal of  Long-Lived
Assets",  respectively,  which are  effective for fiscal years  beginning  after
December 15,  2001.  The  adoption of these  statements  did not have a material
effect on Cylink's financial condition or results of operations. There can be no
assurances,  however,  that the  issuance by FASB of  additional  statements  of
financial  accounting  standards would not materially  adversely affect Cylink's
business, financial condition, and results of operations if such are required to
be adopted by us in the future.

         In  June  2002,  the  FASB  issued  SFAS  146,  "Accounting  for  Costs
Associated with Exit or Disposal  Activities,"  which  addresses  accounting for
restructuring  and  similar  costs.  SFAS  146  supersedes  previous  accounting
guidance,  principally  Emerging  Issues Task Force Issue No. 94-3.  Cylink will
adopt  the  provisions  of SFAS 146 for the  restructuring  activities,  if any,
initiated  after  December 31, 2002.  SFAS 146 requires  that the  liability for
costs  associated  with an exit or  disposal  activity  be  recognized  when the
liability  is  incurred.  Under  Issue 94-3,  a  liability  for an exit cost was
recognized  at the date of Cylink's  commitment  to an exit plan.  SFAS 146 also
established that the liability should initially be measured and recorded at fair
value. Accordingly,  SFAS 146 may affect the timing of recognizing Cylink future
restructuring  costs as well as the amounts  ultimately  recognized by Cylink in
this regard.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

         As of September  29, 2002,  Cylink held a total of $8.2 million of cash
and cash equivalents.  These securities  consist primarily of money market funds
and high-grade,  short-term corporate  obligations.  Certain of these securities
are subject to interest  rate risk and will decline in value if market  interest
rates  increase.  If market  interest  rates were to  increase  immediately  and
uniformly by 10% from levels as of September 29, 2002, the decline in fair value
of the portfolio would not be material.

         Cylink  transacts  substantially  all of its revenues and costs in U.S.
dollars  and its  results of  operations  would not be  materially  affected  by
fluctuations in foreign  exchange rates.  Accordingly,  to date,  Cylink has not
used material amounts of derivative financial  instruments.  As of September 29,
2002,  Cylink had no fixed rate obligations  except for an equipment loan with a
balance of approximately $35,000. As such, the fair value of Cylink's fixed rate
obligations is not subject to a material adverse impact from changes in interest
rates.

Item 4. Controls and Procedures.

         Within 90 days prior to the filing of this Quarterly  Report,  Cylink's
President and Chief  Executive  Officer  along with  Cylink's Vice  President of
Finance and Chief Financial Officer evaluated Cylink's  disclosure  controls and
procedures.  Based upon this evaluation,  Cylink's President and Chief Executive
Officer  along with  Cylink's  Vice  President  of Finance  and Chief  Financial
Officer concluded that Cylink's disclosure controls and procedures are effective
in ensuring that material  information  related to Cylink that is required to be
disclosed in its periodic filings with the Securities and Exchange Commission is
included  in the  reports  that it files  with  the  Commission.  There  were no
significant  changes in Cylink's  internal  controls or, to the knowledge of the
management  of Cylink,  in other factors that could  significantly  affect these
controls  subsequent to the evaluation  date,  including any corrective  actions
with regard to significant deficiencies and material weaknesses.

                                       22
<PAGE>

PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings

Securities Class Action.

         In 1998,  Cylink  filed  amended  Forms  10-Q for the  first  and third
quarters of 1998 and an amended Form 10-K for the 1997 fiscal  year,  reflecting
restated  financial  results for those  quarters,  and for the fourth quarter of
1997.  Between November 6, 1998 and December 14, 1998,  several securities class
action  complaints  were filed  against  Cylink and  certain of its  current and
former directors and officers in federal courts in California.  These complaints
alleged,   among  other  things,   that  Cylink's  previously  issued  financial
statements were materially  false and misleading and that the defendants knew or
should have known that these financial  statements  caused Cylink's common stock
price to rise artificially.  The actions variously alleged violations of Section
10(b) of the Securities  Exchange Act of 1934 (the "Exchange  Act"), as amended,
and SEC Rule 10b-5 promulgated thereunder, and Section 20 of the Exchange Act.

         The securities class action lawsuits were ordered  consolidated  into a
single  action  pending in the United  States  District  Court for the  Northern
District  of  California,  captioned  In Re Cylink  Securities  Litigation,  No.
C98-4292 (VRW).

         On  October  16,  2002,  Cylink  entered  into an  agreement  with  all
plaintiffs in the  securities  class action  lawsuit to settle all claims in the
class action for $6.2 million.  The settlement amount will be paid entirely from
insurance  proceeds  under  insurance  policies held by Cylink.  The  settlement
agreement  is subject to approval by the United  States  District  Court for the
Northern  District of California.  Cylink expects that the settlement  agreement
will be approved in March 2003.  The  Stipulation  and  Agreement of  Settlement
effecting the above is attached as an exhibit to this  Quarterly  Report on Form
10-Q for the period ended September 29, 2002.

         Other Litigation

         In addition,  in the normal  course of business,  Cylink,  from time to
time,  receives  inquiries  or  other  communication  with  regard  to  possible
infringement of third party intellectual  property rights by Cylink's patents or
the features or content of certain of its products.  Cylink  believes that it is
unlikely  that the outcome of any of these  infringement  inquiries  will have a
material  adverse  effect on its  financial  position or results of  operations,
however if  litigation  results  from any of these  inquires  and the outcome is
unfavorable to Cylink,  it could have a material adverse effect on Cylink's cash
flows, results of operations and financial condition.

         There  has been  substantial  litigation  regarding  patent  and  other
intellectual  property  rights in the  software  and  network  security  related
industries  in which  Cylink  operates.  Further  commercialization  of Cylink's
products could provoke claims of infringement from third parties. In the future,
litigation may be necessary to enforce  Cylink's  patents,  to protect its trade
secrets  or  know-how  or  to  defend  against   claimed   infringement  of  the
intellectual  property  rights of others and to determine the scope and validity
of the proprietary rights of others.  Any litigation  regarding the intellectual
property  rights  of  Cylink or others  could  result  in  substantial  cost and
diversion of Cylink's management's efforts from the operation of its businesses,
which by itself could have a material adverse effect on its financial  condition
and operating results.  Further, adverse determinations in such litigation could
result in loss of Cylink's  proprietary  rights,  subject  Cylink to significant
liabilities to third parties,  require it to seek licenses from third parties or
prevent Cylink from  manufacturing  or selling its products,  any of which could
have a material adverse effect on its business,  financial  condition or results
of operations.

Item 2. Changes in Securities and Use of Proceeds

         Not applicable

Item 3. Defaults upon Senior Securities

         Not applicable

                                       23
<PAGE>

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

         None

Item 5. Other Information.

         On October  9, 2002,  Cylink  Corporation  moved  trading of its common
stock from The Nasdaq  National  Market to The Nasdaq  Small Cap Market.  Cylink
continues to be traded under the symbol "CYLK".

         On  October  16,  2002,  Cylink  entered  into an  agreement  with  all
plaintiffs to settle several  securities class action complaints that were filed
against  Cylink and certain of its current and former  directors and officers in
federal  courts in California  for $6.2  million.  The  securities  class action
lawsuits were ordered  consolidated  into a single action  pending in the United
States District Court for the Northern  District of California,  captioned In Re
Cylink Securities Litigation,  No. C98-4292 (VRW). The settlement amount will be
paid entirely from insurance  proceeds under insurance  policies held by Cylink.
The  settlement  agreement is subject to approval by the United States  District
Court  for  the  Northern  District  of  California.  Cylink  expects  that  the
settlement  agreement  will be approved in March 2003.  For more  information on
this lawsuit,  see Part II, Item 1. "Legal  Proceedings."  The  Stipulation  and
Agreement of Settlement  filed on November 5, 2002 in the  referenced  action is
attached  as an  exhibit  to this  Quarterly  Report on Form 10-Q for the period
ended September 29, 2002.

         On October  30,  2002,  Cylink  announced  that it had  entered  into a
definitive agreement to be acquired by SafeNet, Inc., a publicly traded Delaware
corporation.  SafeNet  trades on The  Nasdaq  National  market  under the symbol
"SFNT".  Cylink will be  acquired  by SafeNet  through a merger of Cylink with a
wholly-owned  subsidiary of SafeNet.  If the merger is consummated each share of
Cylink common stock outstanding as of the date of the closing of the merger will
be converted  into the right to receive 0.05 of a share of SafeNet  common stock
on a fixed exchange ratio basis. The transaction will be accounted for using the
purchase method of accounting, whereby Cylink's net assets and operating results
will be included in the  consolidated  financial  statements of SafeNet from the
date of the  closing of the  merger,  and is  intended  to qualify as a tax-free
reorganization under applicable U.S. tax laws and regulations. As of October 30,
2002 this represented an issuance by SafeNet of  approximately  1.839 million of
its shares, or approximately 16% of the outstanding stock of SafeNet. The merger
agreement  has been  approved  by the  Boards of  Directors  of both  Cylink and
SafeNet and the merger is expected  to  formally  close in the first  quarter of
2003;  however,  there can be no assurances that the merger will be completed in
that quarter,  or at all. If the merger is consummated,  Cylink will continue to
operate as a wholly-owned  subsidiary of SafeNet. The consummation of the merger
is subject to the satisfaction of customary  closing  conditions,  including the
declaration by the Securities and Exchange  Commission of the  effectiveness  of
the registration  statement to be filed by SafeNet in connection with the merger
and the  approval  of both  Cylink's  and  SafeNet's  shareholders.  The  merger
agreement  is attached as an exhibit to this  Quarterly  Report on Form 10-Q for
the period ended September 29, 2002. You are urged to read the merger  agreement
in  its  entirety  for  a  complete   description  of  the  merger  and  related
transactions.

         Directors,  executive  officers  and certain  affiliates  of Cylink and
Cylink's  Directors  have  executed a voting  agreement  agreeing to approve the
merger and the merger  agreement and an  irrevocable  proxy in favor of SafeNet,
Inc.  in  connection  with such voting  agreement.  These  Directors,  executive
officers and affiliates  hold  approximately  23% of all  outstanding  shares of
Cylink common stock. A form of the voting agreement is attached as an exhibit to
this Quarterly  Report on Form 10-Q for the period ended September 29, 2002. You
are  urged  to  read  the  voting  agreement  in  its  entirety  for a  complete
description of such agreement and the proxy.

         Also on October  30,  2002  Cylink  entered  into a lease  modification
agreement with its landlord for its Santa Clara  headquarters and  manufacturing
facility to terminate its lease obligations on approximately  46,724 square feet
effective  November 1, 2002, and another  49,104 square feet effective  March 1,
2003 in exchange for the payment of $3.2  million,  $1.0 million to come from an
existing  security  deposit  held by the  landlord,  and a warrant  to  purchase
500,000  shares of Cylink  common  stock at a price of  $0.3838  per share  (the
average closing price of Cylink's common stock for the 15 business days prior to
the effective date of the lease modification agreement). Cylink will continue to
lease  approximately  46,724 square feet as its headquarters  and  manufacturing
facility from the existing landlord at the previous rates set forth in its lease
agreement.  The Second  Amendment  to Lease and Partial  Termination  Agreement,
Assignment of Sublease;  Consent of Landlord and Warrant effecting the above are
attached as exhibits to this Quarterly  Report on Form 10-Q for the period ended
September 29, 2002.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits:

                  2.1      Agreement  and Plan of  Reorganization  By and  Among
                           SafeNet,  Inc., Sapphire Acquisition Corp. and Cylink
                           Corporation dated as of October 30, 2002.

                  4.1      Form of Voting Agreement, executed in connection with
                           the Agreement and Plan of Reorganization By and Among
                           SafeNet,   Inc.,  Sapphire   Acquisition  Corp.,  and
                           Cylink.

                  10.1     Stipulation  and  Agreement  of  Settlement  filed on
                           November 5, 2002, in the United States District Court
                           for the Northern District of California, No. C98-4292
                           (VRW)

                                       24
<PAGE>

                  10.2     Second  Amendment  to Lease and  Partial  Termination
                           Agreement  between  Orchard  Jay  Investors,  LLC and
                           Cylink Corporation dated as of October 30, 2002.

                  10.3     Assignment to Sublease;  Consent of Landlord  between
                           Orchard  Jay  Investors,  LLC and Cylink  Corporation
                           dated as of October 30, 2002.

                  10.4     Warrant   to   Purchase   Common   Stock  of   Cylink
                           Corporation  between  Orchard Jay Investors,  LLC and
                           Cylink Corporation dated as of October 30, 2002.

                  99.1     Certification  of William P.  Crowell,  President and
                           Chief Executive  Officer of Cylink  Corporation dated
                           November 14, 2002 in accordance with 18 U.S.C.  1350,
                           as   adopted   pursuant   to   Section   906  of  the
                           Sarbanes-Oxley Act of 2002

                  99.2     Certification  of R. Christopher  Chillingworth  Vice
                           President of Finance and Chief  Financial  Officer of
                           Cylink   Corporation   dated  November  14,  2002  in
                           accordance with 18 U.S.C.  1350, as adopted  pursuant
                           to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K:

         On September 30, 2002 Cylink filed a report on Form 8-K announcing that
         Cylink had submitted its application to Nasdaq on September 24, 2002 to
         move the trading of its common stock from The Nasdaq National Market to
         The Nasdaq Small Cap Market.

         On October 9, 2002 Cylink  filed a report on Form 8-K  announcing  that
         Cylink  had moved the  trading  of its  common  stock  from The  Nasdaq
         National Market to The Nasdaq Small Cap Market.

                                       25
<PAGE>

                                   SIGNATURES

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


Date: November 13, 2002                        CYLINK CORPORATION

                                           By: /s/ R. Christopher Chillingworth
                                               --------------------------------
                                               R. Christopher Chillingworth
                                               Vice President of Finance
                                               and Chief Financial Officer
                                               (Duly Authorized Officer and
                                               Principal Financial Officer)

                                       26
<PAGE>

                                  CERTIFICATION

            Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

         I, William P. Crowell,  President and Chief Executive Officer of Cylink
Corporation certify that:

         1.       I have reviewed this  quarterly  report on Form 10-Q of Cylink
                  Corporation;

         2.       Based on my knowledge,  this quarterly report does not contain
                  any untrue  statement  of a  material  fact or omit to state a
                  material fact necessary to make the statements  made, in light
                  of the  circumstances  under which such  statements were made,
                  not  misleading  with  respect to the  period  covered by this
                  quarterly report;

         3.       Based on my  knowledge,  the financial  statements,  and other
                  financial  information  included  in  this  quarterly  report,
                  fairly   present  in  all  material   respects  the  financial
                  condition,  results  of  operations  and  cash  flows  of  the
                  registrant  as of,  and for,  the  periods  presented  in this
                  quarterly report;

         4.       The  registrant's   other   certifying   officers  and  I  are
                  responsible  for  establishing   and  maintaining   disclosure
                  controls  and  procedures  (as defined in  Exchange  Act Rules
                  13a-14 and 15d-14) for the registrant and we have:

                  a) designed such disclosure  controls and procedures to ensure
                  that  material   information   relating  to  the   registrant,
                  including its consolidated  subsidiaries,  is made known to us
                  by others  within  those  entities,  particularly  during  the
                  period in which this quarterly report is being prepared;

                  b) evaluated the effectiveness of the registrant's  disclosure
                  controls and  procedures  as of a date within 90 days prior to
                  the filing  date of this  quarterly  report  (the  "Evaluation
                  Date"); and

                  c) presented in this quarterly  report our  conclusions  about
                  the  effectiveness  of the disclosure  controls and procedures
                  based on our evaluation as of the Evaluation Date;

         5.       The  registrant's   other  certifying   officers  and  I  have
                  disclosed,  based  on  our  most  recent  evaluation,  to  the
                  registrant's  auditors and the audit committee of registrant's
                  board of  directors  (or  persons  performing  the  equivalent
                  function):

                  a) all significant  deficiencies in the design or operation of
                  internal   controls   which   could   adversely   affect   the
                  registrant's ability to record, process,  summarize and report
                  financial  data  and  have  identified  for  the  registrant's
                  auditors any material weaknesses in internal controls; and

                  b)  any  fraud,   whether  or  not  material,   that  involves
                  management or other  employees who have a significant  role in
                  the registrant's internal controls; and

         6.       The  registrant's   other  certifying   officers  and  I  have
                  indicated in this  quarterly  report whether or not there were
                  significant  changes in internal  controls or in other factors
                  that could  significantly  affect internal controls subsequent
                  to the  date of our  most  recent  evaluation,  including  any
                  corrective actions with regard to significant deficiencies and
                  material weaknesses.


         Date: November 13, 2002                     By: /s/ William P. Crowell
                                                         ----------------------
                                                         Chief Executive Officer
                                                         Cylink Corporation

                                       27
<PAGE>

                                  CERTIFICATION

            Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

         I, R.  Christopher  Chillingworth,  Vice President of Finance and Chief
Financial Officer of Cylink Corporation certify that:

         1.       I have reviewed this  quarterly  report on Form 10-Q of Cylink
                  Corporation;

         2.       Based on my knowledge,  this quarterly report does not contain
                  any untrue  statement  of a  material  fact or omit to state a
                  material fact necessary to make the statements  made, in light
                  of the  circumstances  under which such  statements were made,
                  not  misleading  with  respect to the  period  covered by this
                  quarterly report;

         3.       Based on my  knowledge,  the financial  statements,  and other
                  financial  information  included  in  this  quarterly  report,
                  fairly   present  in  all  material   respects  the  financial
                  condition,  results  of  operations  and  cash  flows  of  the
                  registrant  as of,  and for,  the  periods  presented  in this
                  quarterly report;

         4.       The  registrant's   other   certifying   officers  and  I  are
                  responsible  for  establishing   and  maintaining   disclosure
                  controls  and  procedures  (as defined in  Exchange  Act Rules
                  13a-14 and 15d-14) for the registrant and we have:

                  a) designed such disclosure  controls and procedures to ensure
                  that  material   information   relating  to  the   registrant,
                  including its consolidated  subsidiaries,  is made known to us
                  by others  within  those  entities,  particularly  during  the
                  period in which this quarterly report is being prepared;

                  b) evaluated the effectiveness of the registrant's  disclosure
                  controls and  procedures  as of a date within 90 days prior to
                  the filing  date of this  quarterly  report  (the  "Evaluation
                  Date"); and

                  c) presented in this quarterly  report our  conclusions  about
                  the  effectiveness  of the disclosure  controls and procedures
                  based on our evaluation as of the Evaluation Date;

         5.       The  registrant's   other  certifying   officers  and  I  have
                  disclosed,  based  on  our  most  recent  evaluation,  to  the
                  registrant's  auditors and the audit committee of registrant's
                  board of  directors  (or  persons  performing  the  equivalent
                  function):

                  a) all significant  deficiencies in the design or operation of
                  internal   controls   which   could   adversely   affect   the
                  registrant's ability to record, process,  summarize and report
                  financial  data  and  have  identified  for  the  registrant's
                  auditors any material weaknesses in internal controls; and

                  b)  any  fraud,   whether  or  not  material,   that  involves
                  management or other  employees who have a significant  role in
                  the registrant's internal controls; and

         6.       The  registrant's   other  certifying   officers  and  I  have
                  indicated in this  quarterly  report whether or not there were
                  significant  changes in internal  controls or in other factors
                  that could  significantly  affect internal controls subsequent
                  to the  date of our  most  recent  evaluation,  including  any
                  corrective actions with regard to significant deficiencies and
                  material weaknesses.


         Date: November 13, 2002         By: /s/ R. Christopher Chillingworth
                                             --------------------------------
                                             Chief Financial Officer
                                             Cylink Corporation

                                       28
<PAGE>

                                  EXHIBIT INDEX

                  2.1      Agreement  and Plan of  Reorganization  By and  Among
                           SafeNet,  Inc., Sapphire Acquisition Corp. and Cylink
                           Corporation dated as of October 30, 2002.

                  4.1      Form of Voting Agreement, executed in connection with
                           the Agreement and Plan of Reorganization By and Among
                           SafeNet,   Inc.,  Sapphire   Acquisition  Corp.,  and
                           Cylink.

                  10.1     Stipulation  and  Agreement  of  Settlement  filed on
                           November 5, 2002, in the United States District Court
                           for the Northern District of California, No. C98-4292
                           (VRW)

                  10.2     Second  Amendment  to Lease and  Partial  Termination
                           Agreement  between  Orchard  Jay  Investors,  LLC and
                           Cylink Corporation dated as of October 30, 2002.

                  10.3     Assignment to Sublease;  Consent of Landlord  between
                           Orchard  Jay  Investors,  LLC and Cylink  Corporation
                           dated as of October 30, 2002.

                  10.4     Warrant   to   Purchase   Common   Stock  of   Cylink
                           Corporation  between  Orchard Jay Investors,  LLC and
                           Cylink Corporation dated as of October 30, 2002.

                  99.1     Certification  of William P.  Crowell,  President and
                           Chief Executive  Officer of Cylink  Corporation dated
                           November 13, 2002 in accordance with 18 U.S.C.  1350,
                           as   adopted   pursuant   to   Section   906  of  the
                           Sarbanes-Oxley Act of 2002

                  99.2     Certification  of R. Christopher  Chillingworth  Vice
                           President of Finance and Chief  Financial  Officer of
                           Cylink   Corporation   dated  November  13,  2002  in
                           accordance with 18 U.S.C.  1350, as adopted  pursuant
                           to Section 906 of the Sarbanes-Oxley Act of 2002

                                       29