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


                                    FORM 10-Q

(Mark One)

|X|  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934
     For the Quarterly Period Ended June 30, 2001

          or

|_|  Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934
     For the Transition Period From _______________ to ________________.

                         Commission file number 0-27074
                                                -------

                          SECURE COMPUTING CORPORATION
         ---------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


                      Delaware                               52-1637226
           -------------------------------               -------------------
           (State or other jurisdiction of                (I.R.S. employer
           incorporation or organization)                identification no.)


                 4810 Harwood Road,
                    San Jose, CA                                95124
           -------------------------------                    ----------
       (Address of principal executive offices)               (Zip code)

                                 (800) 379-4944
               --------------------------------------------------
               Registrant's telephone number, including area code

                                 Not Applicable
         ---------------------------------------------------------------
         (Former name, former address and former fiscal year, if changed
                               since last report)


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

         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date: Common Stock, $.01 par
value - 28,244,034 issued and outstanding as of August 3, 2001.


                                       1
<PAGE>


                          SECURE COMPUTING CORPORATION

                                      INDEX


PART I    FINANCIAL INFORMATION                                         PAGE NO.
                                                                        --------

Item 1.   Condensed Consolidated Financial Statements:

          Condensed Consolidated Balance Sheets  as of June 30, 2001
              (Unaudited) and December 31, 2000..........................      3

          Condensed Consolidated Statements of Operations (Unaudited)
              for the three and six months ended June 30, 2001 and 2000..      4

          Condensed Consolidated Statements of Cash Flows (Unaudited)
              for the six months ended June 30, 2001 and 2000............      5

          Notes to the Condensed Consolidated Financial Statements
              (Unaudited)................................................  6 - 8

Item 2.   Management's Discussion and Analysis of Financial Condition
              and Results of Operations.................................. 9 - 12

Item 3.   Quantitative and Qualitative Disclosures About Market Risk.....     12






PART II   OTHER INFORMATION

Item 1.   Legal Proceedings..............................................     13

Item 2.   Changes in Securities..........................................     13

Item 3.   Defaults upon Senior Securities................................     13

Item 4.   Submission of Matters to a Vote of Security Holders............     13

Item 5.   Other Information..............................................     13

Item 6.   Exhibits and Reports on Form 8-K...............................     14

          Signatures ....................................................     15


                                       2
<PAGE>


                          PART 1. FINANCIAL INFORMATION

                          SECURE COMPUTING CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                       (IN THOUSANDS EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                        June 30,       December 31,
                                                                          2001             2000
                                                                      ------------     ------------
                                                                      (Unaudited)
<S>                                                                   <C>              <C>
ASSETS

CURRENT ASSETS
   Cash and cash equivalents                                          $     20,874     $     12,496
   Investments                                                               1,516           13,831
   Accounts receivable, net                                                  5,793            6,762
   Inventories                                                                 785              630
   Other current assets                                                      2,063            2,143
                                                                      ------------     ------------
     Total current assets                                                   31,031           35,862

PROPERTY AND EQUIPMENT, NET                                                  6,068            5,658

OTHER ASSETS                                                                 3,620            3,451
                                                                      ------------     ------------
                                                                      $     40,719     $     44,971
                                                                      ============     ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable                                                   $      1,517     $      2,950
   Accrued payroll                                                           3,106            3,767
   Other accrued expenses                                                    1,662            1,378
   Deferred revenue                                                          7,763            6,250
                                                                      ------------     ------------
     Total current liabilities                                              14,048           14,345

STOCKHOLDERS' EQUITY
   Convertible preferred stock, par value $.01 per share:
     Authorized -2,000,000 shares; issued and outstanding shares -              --               --
     June 30, 2001 - 0 and December 31, 2000 - 7,700
   Common stock, par value $.01; 50,000,000 shares authorized;
     issued and outstanding - June 30, 2001- 28,226,637 and
     December 31, 2000 -26,675,230                                             282              267
   Additional paid-in capital                                              145,486          141,484
   Accumulated deficit                                                    (118,397)        (110,717)
    Foreign currency translation                                              (700)            (408)
                                                                      ------------     ------------
     Total stockholders' equity                                             26,671           30,626
                                                                      ------------     ------------
                                                                      $     40,719     $     44,971
                                                                      ============     ============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       3
<PAGE>


                          SECURE COMPUTING CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

               (UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                              Three Months Ended            Six Months Ended
                                                   June 30,                     June 30,
                                             2001           2000           2001           2000
                                          ----------     ----------     ----------     ----------
<S>                                       <C>            <C>            <C>            <C>
Products and services revenue             $   11,444     $    7,563     $   21,664     $   14,083
Advanced Technology contracts revenue          1,121          1,259          2,144          2,251
                                          ----------     ----------     ----------     ----------
                                              12,565          8,822         23,808         16,334

Cost of revenue                                2,116          2,683          4,704          5,527
                                          ----------     ----------     ----------     ----------
Gross profit                                  10,449          6,139         19,104         10,807

Operating expenses:
   Selling and marketing                       9,196          7,899         17,802         14,567
   Research and development                    3,603          3,035          7,273          6,342
   General and administrative                  1,052          1,139          2,133          2,342
                                          ----------     ----------     ----------     ----------
                                              13,851         12,073         27,208         23,251
                                          ----------     ----------     ----------     ----------
Operating loss                                (3,402)        (5,934)        (8,104)       (12,444)

Interest and other income                        213            189            424            216
                                          ----------     ----------     ----------     ----------
Loss before income taxes                      (3,189)        (5,745)        (7,680)       (12,228)

Income tax expense                                --             --             --             --
                                          ----------     ----------     ----------     ----------
Net loss                                  $   (3,189)    $   (5,745)    $   (7,680)    $  (12,228)
                                          ==========     ==========     ==========     ==========

Net loss per share - basic and diluted    $    (0.11)    $    (0.23)    $    (0.28)    $    (0.50)
                                          ==========     ==========     ==========     ==========

Weighted average shares outstanding           27,942         24,603         27,633         24,267
                                          ==========     ==========     ==========     ==========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       4
<PAGE>


                          SECURE COMPUTING CORPORATION
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                            (UNAUDITED, IN THOUSANDS)

<TABLE>
<CAPTION>
                                                              Six months ended June 30,
                                                                 2001           2000
                                                             --------------------------
<S>                                                          <C>            <C>
NET CASH USED IN OPERATING ACTIVITIES                        $   (5,470)    $   (4,433)

INVESTING ACTIVITIES
    Proceeds from sales of investments                           13,831          7,925
    Purchase of investments                                      (1,516)        (7,669)
    Purchase of property and equipment                           (1,693)        (2,093)
    Increase in intangibles and other assets                       (499)          (231)
                                                             ----------     ----------
      Net cash provided by (used in) investing activities        10,123         (2,068)

FINANCING ACTIVITIES
    Proceeds from issuance of Preferred Stock                       (38)        16,581
    Proceeds from issuance of Common Stock                        1,974          1,361
    Proceeds from exercise of Warrants                            2,082             --
                                                             ----------     ----------
      Net cash provided by financing activities                   4,018         17,942
                                                             ----------     ----------

EFFECT OF EXCHANGE RATE CHANGES                                    (293)           (51)
                                                             ----------     ----------

    Increase (decrease) in cash and cash equivalents              8,378         11,390
    Cash and cash equivalents beginning of period                12,496          3,678
                                                             ----------     ----------
    Cash and cash equivalents ending of period               $   20,874     $   15,068
                                                             ==========     ==========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       5
<PAGE>


                          SECURE COMPUTING CORPORATION
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                                   (UNAUDITED)

1. ORGANIZATION

         We develop and sell computer software products and services designed to
provide secure access control for all users engaging in business over public
networks, including the Internet, intranets, and extranets. Our solutions enable
our customers to control, manage, and personalize access for millions of
customers, employees, and partners connecting to their business.

2. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

         The accompanying condensed consolidated financial statements have been
prepared by us without audit and reflect all adjustments (consisting only of
normal and recurring adjustments and accruals) which are, in our opinion,
necessary to present a fair statement of the results for the interim periods
presented. The consolidated financial statements include our accounts and those
of our subsidiaries. All intercompany balances and transactions have been
eliminated in consolidation. The statements have been prepared in accordance
with the regulations of the Securities and Exchange Commission, but omit certain
information and footnote disclosures necessary to present the statements in
accordance with generally accepted accounting principles. The results of
operations for the interim periods presented are not necessarily indicative of
the results to be expected for the full fiscal year. The December 31, 2000
Condensed Balance Sheet is derived from our audited Condensed Balance Sheet as
of December 31, 2000. These condensed financial statements should be read in
conjunction with the Consolidated Financial Statements and footnotes thereto
included in our Annual 10-K Report for the year ended December 31, 2000, as
filed with the Securities and Exchange Commission.

3. SIGNIFICANT ACCOUNTING POLICIES

         Results of operations are translated using the average exchange rates
throughout the quarter. Translation gains or losses, net of applicable deferred
taxes, are accumulated as a separate component of stockholders' equity and
included in comprehensive income. During the second quarter of 2001 and 2000,
total comprehensive loss amounted to ($3,468) and ($5,762) respectively. During
the first six months of 2001 and 2000, total comprehensive loss amounted to
($7,973) and ($12,278) respectively.

4. STOCK OPTION EXPENSE

         We had an Executive Stock Option program under which options would only
vest if certain price performance targets were met. Upon meeting those targets,
compensation expense would be recorded. As of June 30, 2001, 81,000 options
remain exercisable.

5. PREFERRED STOCK FINANCING

         In June 2000, we entered into a Put and Call Agreement with Elliot
International, which provided for the sale of up to 15,250 shares of Series F 4%
Cumulative Convertible Preferred Stock (the "Series F Stock") to Elliot
International at $1,000 per share. In August 2000, Elliot International
assigned, and Elliot Associates, L.P.("Elliott Associates') assumed, 50% of
Elliot International's rights and obligations under the put and call agreement.
Later in August and December 2000, we sold to each of Elliott International and
Elliott Associates a total of 7,625 shares of the Series F Stock resulting in
gross proceeds of $15,250. All sales of securities to Elliott International and
Elliot Associates were completed pursuant to the exemption provided by
Regulation D under the Securities Act of 1933. As of June 30, 2001 all
outstanding shares of the series F stock were converted into 1,568,559 shares of
our common stock at an average price of $9.74 per share.


                                       6
<PAGE>


                          SECURE COMPUTING CORPORATION
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                                   (UNAUDITED)

6. PROFESSIONAL SERVICES

         In March 2000, we sold our Professional Services group to Guardent,
Inc. We have included the gain on this transaction, which was not material, in
other income.

7. SEGMENT INFORMATION

         We have two reportable segments consisting of Products and Services and
Advanced Technology. Our Products and Services segment sells computer software
products and services designed to provide secure access control for users
engaging in business over public networks. Our Advanced Technology Division is a
self-funded organization whose mission is to develop new technologies and
products that meet the emerging needs of the Department of Defense (DoD) and the
commercial sector. As a result, we continue to innovate, providing
state-of-the-market products for organizations of all types and sizes. Cash,
investments, deferred tax assets, general and administrative expenses, and stock
option compensation costs cannot be readily identified to the two business
segments, therefore, they are presented separately in a corporate segment.

         We evaluate segment performance based on gross profit. Resources are
allocated based on contractual requirements as the Advanced Technology segment
is reimbursed on a cost plus basis from the various agencies of the United
States government. The accounting policies of the reportable segments are the
same as those described in Note 3, "Significant Accounting Policies." Revenue is
recognized at time of shipment and/or when performance of services are complete
for the Products and Services segment. For Advanced Technology, contract revenue
is recognized on the basis of costs incurred for the government contracts
serviced by Advanced Technology and intersegment transfers are recorded at cost;
there are no intercompany profits or losses recorded on intersegment transfers.

         Our reportable segments are business units that offer distinct products
and services to very different customer groups. The reportable segments are each
managed separately because they require different managerial skill sets and are
focused toward different markets.


         Significant components of our segments are as follows:


<TABLE>
<CAPTION>
                                                PRODUCTS AND      ADVANCED
                                                  SERVICES       TECHNOLOGY
SIX MONTHS ENDED JUNE 30, 2001                     SEGMENT         SEGMENT         CORPORATE           TOTAL
--------------------------------------------    ------------     ------------     ------------     ------------
<S>                                             <C>              <C>              <C>              <C>
   Revenues from external customers ........    $     21,664     $      2,144     $         --     $     23,808
   Depreciation expense ....................           1,118               49               16            1,183
   Segment gross profit ....................          18,521              583               --           19,104
   Segment operating loss ..................          (4,831)          (1,140)          (2,133)          (8,104)
   Interest and other income ...............              --               --              424              424
   Segment assets ..........................          14,840              710           25,169           40,719
   Expenditures for long lived assets ......           2,159               19               14            2,192
                                                ------------     ------------     ------------     ------------
</TABLE>


                                       7
<PAGE>


                          SECURE COMPUTING CORPORATION
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                PRODUCTS AND      ADVANCED
                                                  SERVICES       TECHNOLOGY
SIX MONTHS ENDED JUNE 30, 2001                     SEGMENT         SEGMENT         CORPORATE           TOTAL
--------------------------------------------    ------------     ------------     ------------     ------------
<S>                                             <C>              <C>              <C>              <C>
   Revenues from external customers ........    $     14,083     $      2,251     $         --           16,334
   Depreciation expense ....................             868               41                3              912
   Segment gross profit ....................          10,019              788               --           10,807
   Segment operating loss ..................          (8,840)          (1,262)          (2,342)         (12,444)
   Interest and other income ...............              --               --              216              216
   Segment assets ..........................          12,450            1,117           22,792           36,359
   Expenditures for long lived assets ......           2,066               --               27            2,093
                                                ------------     ------------     ------------     ------------
</TABLE>


         International sales accounted for 28 percent and 21 percent of total
revenue for the six months ended June 30, 2001 and 2000 respectively. Major
foreign markets for our products include Europe and the Pacific Rim. In each
country, we have independent channel partners who are responsible for marketing,
selling and supporting our products to resellers and end-users within their
defined territories.

         The following table summarizes information about our international and
domestic sales and operations:

<TABLE>
<CAPTION>
                                                                    SIX MONTHS ENDED
                                                                        JUNE 30,
                                                                   2001           2000
                                                                ----------     ----------
<S>                                                                <C>            <C>
                     Revenues:
                        United States sales ..............      $   17,045     $   12,980
                        International sales ..............           6,763          3,354
                                                                ----------     ----------
                                                                $   23,808     $   16,334
                                                                ==========     ==========
</TABLE>


                                       8
<PAGE>



                          SECURE COMPUTING CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

         The following discussion contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including statements regarding our
expectations, beliefs, intentions or strategies regarding the future. These
statements are not guarantees of future performance and are subject to risks,
uncertainties, and other factors, some of which are beyond our control and
difficult to predict and could cause actual results to differ materially from
those expressed or forecasted in the forward-looking statements. Forward-looking
statements reflect our view only as of the date of this report. We cannot
guarantee future results, levels of activity, performance, or achievements.

         In addition, the following information should be read in conjunction
with the financial statements and notes thereto included in Item 1 of this
Quarterly Report, the risk factors detailed in our Annual Report on Form 10-K
for the year ended December 31, 2000 and our Registration Statement on Form S-3
filed with the Securities and Exchange Commission on February 1, 2001, as well
as the factors identified in Forward Looking Statements below.

RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED JUNE 30, 2001 AND 2000.

         REVENUE. Our revenue increased 42 percent to $12,565,000 for the second
quarter of 2001 up from $8,822,000 in the same period of 2000. Products and
services revenue was $11,444,000 for the quarter, an increase of 51 percent over
2000. We expect quarterly revenue from products and services to grow 45 to 50
percent year over year in each of the remaining quarters of 2001. Advanced
Technology contract revenue was $1,121,000 for the quarter, a decrease of 11
percent from 2000 as we continue our strategy of focusing only on funded
development contracts that add value to our commercial product offerings. We
expect quarterly revenue from Advanced Technology contracts for the remainder of
2001 to remain comparable to the second quarter of 2001.

         GROSS PROFIT. Gross profit as a percentage of revenue increased from 70
percent in the second quarter of 2000 to 83 percent in 2001. This improvement
was driven primarily by our success in leveraging software revenue. We expect
gross profit to stabilize at approximately 80 percent.

         SELLING AND MARKETING. Selling and marketing expense increased 16
percent to $9,196,000 in the second quarter of 2001, an increase from $7,899,000
in the same period of 2000. The increased spending levels resulted primarily
from investment in a stronger sales presence. As a percentage of revenue,
selling and marketing expense was 73 percent for the quarter compared to 90
percent in the same period of 2000. We expect selling and marketing expense
levels to increase on an actual dollar basis but continue to decline as a
percent of revenue for the remainder of 2001 as we strengthen our sales presence
while supporting new product launches.

         RESEARCH AND DEVELOPMENT. Research and development expense increased by
19 percent to $3,603,000 in the second quarter of 2001 from $3,035,000 in the
same period of 2000. The increase resulted primarily from our continued
investment in next generation product development, including our Embedded
Firewall technology. As a percentage of revenue, research and development
expense was 29 percent for the quarter compared to 34 percent in 2000. We expect
quarterly research and development expense levels for the remainder of 2001 to
remain at levels comparable to the second quarter of 2001 but to decline as a
percent of revenue.

         GENERAL AND ADMINISTRATIVE. General and administrative expense
decreased 8 percent to $1,052,000 in the second quarter of 2001, from $1,139,000
in the same period of 2000. As a percentage of revenue, general and
administrative expenses were 8 percent for the second quarter of 2001 compared
to 13 percent for the second quarter of 2000. We expect the quarterly general
and administrative expense for the remainder of 2001 to remain at levels
comparable to the second quarter of 2001 but continue to decline as a percent of
revenue.


                                       9
<PAGE>


         INTEREST AND OTHER INCOME. Net interest and other income was $213,000
in the second quarter of 2001, an increase from $189,000 in the same period of
2000. The increase reflects higher average cash and investment balances in 2001
as compared to 2000.

         INCOME TAXES. We recognized no income tax expense for either of the
periods in 2001 or 2000. We believe it is more likely than not that deferred tax
assets, which total $2,700,000 at June 30, 2001, will be realized. The
computations of our deferred tax assets and valuation allowance are based on
taxable income we expect to earn on existing government contracts, commercial
products, and projected interest income. The amount of the deferred tax assets
considered realizable could be reduced in the near term if estimates of future
taxable income are reduced.


COMPARISON OF SIX MONTHS ENDED JUNE 30, 2001 AND 2000.

         REVENUE. Our revenue increased 46 percent to $23,808,000 for the first
six months of 2001 up from $16,334,000 in the same period of 2000. Products and
services revenue was $21,664,000 for the six months, an increase of 54 percent
over the same six months of 2000. We expect quarterly revenue from products and
services to grow 45 to 50 percent year over year in each of the remaining
quarters of 2001. Advanced Technology contract revenue was $2,144,000 for the
first six months of 2001, a decrease of 5 percent from the first six months of
2000 as we continue our focus on development contracts that add value to our
products and services offerings. We expect quarterly revenue from Advanced
Technology contracts for the remainder of 2001 to remain comparable to the first
six months of 2001.

         GROSS PROFIT. Gross profit as a percentage of revenue increased from 66
percent in the first six months of 2000 to 80 percent in 2001. The increase
resulted primarily from increased software license revenues and the disposition
of our lower margin Professional Services consulting group in first quarter of
2000. We expect gross profit to stabilize at approximately 80 percent.

         SELLING AND MARKETING. Selling and marketing expense increased 22
percent to $17,802,000 in the first of six months of 2001 up from $14,567,000 in
the same period of 2000. The increased spending levels resulted primarily from
investment in a stronger sales and marketing presence. We expect selling and
marketing expense levels to increase on an actual dollar basis but continue to
decline as a percent of revenue when compared to the first six months of 2001 as
we strengthen our sales presence while supporting new product launches.

         RESEARCH AND DEVELOPMENT. Research and development expense increased 15
percent to $7,273,000 in the first six months of 2001 up from $6,342,000 in the
same period of 2000. The increased spending levels resulted primarily from our
continued investment in next generation product development. We expect quarterly
research and development expense levels for the remainder of 2001 to remain at
levels comparable to the first six months of 2001 but to decline as a percent of
revenue.

         GENERAL AND ADMINISTRATIVE. General and Administrative expense
decreased 9 percent to $2,133,000 in the first six months of 2001 down from
$2,342,000 in the same period of 2000. We expect the quarterly general and
administrative expenses for the remainder of 2001 to remain at levels comparable
to the first six months of 2001 but to decline as a percent of revenue.

         INTEREST AND OTHER INCOME. Net interest and other income was $424,000
in the first six months of 2001, an increase from $216,000 in the same period of
2000. The increase reflects higher average cash and investment balances in 2001
as compared to 2000.

         INCOME TAXES. We recognized no income tax expense in the first six
months of 2001 or 2000. We believe it is more likely than not that deferred tax
assets, which total $2,700,000 million at June 30, 2001, will be realized. The
computations of our deferred tax assets and valuation allowance are based in
part on taxable income we expect to earn on existing government contracts and
projected interest income. The amount of the deferred tax assets considered
realizable could be reduced in the near term if estimates of future taxable
income are reduced.

LIQUIDITY AND CAPITAL RESOURCES

         Our cash, cash equivalents and short term investments decreased by
$3,937,000 from December 31, 2000 to June 30, 2001. The decrease resulted
primarily from the use of cash to fund operations and purchase capital equipment
offset by $2,100,000 in proceeds from the exercise of the warrants associated
with our 1998 Series C Preferred Stock


                                       10
<PAGE>


financing. As of June 30, 2001 we had working capital of $16,983,000. We
anticipate using available cash to fund growth in operations, invest in capital
equipment, acquire businesses, and to license technology or products related to
our line of business.

         Capital additions in the first six months of 2001 were $1,693,000 and
were primarily made up of computer equipment and technology upgrades. We expect
to invest another $1,400,000 throughout the remainder of 2001 mainly for
computer equipment and technology upgrades.

         We believe that we have sufficient financial resources available to
fund our current working capital and capital expenditure requirements for at
least the next 12 months.

THE EURO CONVERSION

         We do not anticipate nor have we experienced any material problems
related to the euro conversion.

FORWARD LOOKING STATEMENTS

         Certain statements made above, which are summarized below, are
forward-looking statements that involve risks and uncertainties, and actual
results may be materially different. Factors that could cause actual results to
differ include those identified below:

*    WE EXPECT QUARTERLY REVENUE FROM PRODUCTS AND SERVICES TO GROW 45 TO 50
     PERCENT YEAR OVER YEAR IN EACH OF THE REMAINING QUARTERS OF 2001. We may be
     unable to meet this expectation for a variety of reasons, including general
     market conditions for our products and services and other general economic
     uncertainties and weaknesses in geographic regions of the world, delays or
     difficulties in the development and inability to obtain market acceptance
     of our new products, and introduction of products by competitors.

*    WE EXPECT QUARTERLY REVENUE FROM ADVANCED TECHNOLOGY CONTRACTS FOR THE
     REMAINDER OF 2001 TO REMAIN COMPARABLE TO THE SECOND QUARTER/FIRST SIX
     MONTHS OF 2001. Meeting this expectation depends upon our ability to
     maintain the current government contracts revenue, which might not occur
     for a variety of reasons, including an inability to staff engineers to our
     current contract requirements or customer delays or cancellations of
     contract awards.

*    WE EXPECT GROSS PROFIT TO STABILIZE AT APPROXIMATELY 80 PERCENT. Meeting
     this expectation depends upon our ability to achieve a higher level of
     products and services revenue. We may be unable to meet this expectation
     for a variety of reasons, including general market conditions for the
     Company's products and services and other general economic uncertainties
     and weaknesses in geographic regions of the world, delays or difficulties
     in the development and inability to obtain market acceptance of our new
     products, and introduction of products by competitors.

*    WE EXPECT SELLING AND MARKETING EXPENSE LEVELS TO INCREASE ON AN ACTUAL
     DOLLAR BASIS BUT CONTINUE TO DECLINE AS A PERCENT OF REVENUE WHEN COMPARED
     TO THE SECOND QUARTER/FIRST SIX MONTHS OF 2001 AS WE STRENGTHEN OUR SALES
     PRESENCE WHILE SUPPORTING NEW PRODUCT LAUNCHES. This expectation depends on
     us maintaining the current anticipated level of selling and marketing
     expenses, which may not occur due to unexpected increases in such costs or
     because of a need to accelerate a full scale product marketing and branding
     campaign, or decreased products and services revenue. Fluctuations in
     revenue from quarter to quarter will likely have an increasingly
     significant impact on the Company's results of operations. Additionally,
     meeting this expectation depends upon our ability to control costs and
     achieve a higher level of revenue. We may be unable to meet this
     expectation for a variety of reasons, including general market conditions
     for our products and services, development and acceptance of our new
     products, and introduction of products by competitors.

*    WE EXPECT QUARTERLY RESEARCH AND DEVELOPMENT EXPENSE LEVELS FOR THE
     REMAINDER OF 2001 TO REMAIN AT LEVELS COMPARABLE TO THE SECOND
     QUARTER/FIRST SIX MONTHS OF 2001 BUT TO DECLINE AS A PERCENT OF REVENUE.
     This expectation depends on us maintaining the current anticipated level of
     product development, which may not occur due to unexpected increases in
     such costs or because of a need to accelerate or begin new product
     development. Fluctuations in revenue from quarter to quarter will likely
     have an increasingly significant impact on our results of operations.
     Additionally, meeting this expectation depends upon our ability to control
     costs and achieve a higher level of revenue. We may be unable to meet this
     expectation for a variety of reasons, including general market

                                       11
<PAGE>


     conditions for our products and services, development and acceptance of our
     new products, and introduction of products by competitors.

*    WE EXPECT THE QUARTERLY GENERAL AND ADMINISTRATIVE EXPENSE FOR THE
     REMAINDER OF 2001 TO REMAIN AT LEVELS COMPARABLE TO THE SECOND
     QUARTER/FIRST SIX MONTHS BUT CONTINUE TO DECLINE AS A PERCENT OF REVENUE.
     This expectation depends on us maintaining the current anticipated level of
     spending which may not occur due to unexpected increases in such costs.

*    WE BELIEVE IT IS MORE LIKELY THAN NOT THAT DEFERRED TAX ASSETS, WHICH TOTAL
     $2,700,000 AT JUNE 30, 2001, WILL BE REALIZED. This expectation depends
     primarily on our estimates of future taxable income. The amount of deferred
     tax assets considered realizable could be reduced in the near term if
     estimates of future taxable income are reduced.

*    WE BELIEVE THAT WE HAVE SUFFICIENT FINANCIAL RESOURCES AVAILABLE TO FUND
     OUR CURRENT WORKING CAPITAL AND CAPITAL EXPENDITURE REQUIREMENTS FOR AT
     LEAST THE NEXT TWELVE MONTHS. Several factors may affect the availability
     of sufficient cash resources to fund our product development and marketing
     and sales plans for the next twelve months, including:

          *    our ability to generate revenue as currently expected;

          *    unexpected expenses;

          *    the need for additional funds to react to changes in the
               marketplace;

          *    unexpected increases in personnel costs;

          *    unexpected increases in selling and marketing expenses; or

          *    currently unplanned acquisitions.


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not have material exposure to quantitative and qualitative market risks
because we do not own any risk sensitive financial instruments.


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<PAGE>


                          SECURE COMPUTING CORPORATION
                                     PART II
                                OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

         On April 2, 9, 12, 14 and 20, 1999, purported class action complaints
were filed in the United States District Court for the Northern District of
California by Myron Goldstein, Herbert Silverberg, William Preiner, Charles
McInnis, and George H. Rosenquist and Melvin Freedenberg, respectively, against
Secure Computing Corporation, and its present or former officers Jeffrey Waxman,
Timothy McGurran, Patrick Regester, Gary Taggart, Howard Smith and Christine
Hughes. Each complaint alleges that defendants made false and misleading
statements about our business condition and prospects during a purported class
period of November 10, 1998 to March 31, 1999, and asserts claims for violations
of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule
10b-5. Each complaint seeks damages of an unspecified amount. By stipulated
Order dated August 19, 1999, the Court consolidated these actions, appointed
lead plaintiffs, and approved the retention of lead counsel. On January 7, 2000,
plaintiffs served a consolidated corrected compliant. On August 18, 2000,
Plaintiff's served a First Amended Complaint. Defendants' motion to dismiss that
Complaint is now pending.

         There has been no discovery to date and no trial is scheduled in any of
these actions. We believe that we have meritorious defenses to these actions and
intend to defend them vigorously. However, if we do not obtain a favorable
resolution of the claims set forth in the actions it could have a material
adverse effect on our business, results of operations and financial condition.
We are currently unable to reasonably estimate the size or impact of such
material adverse effect.


ITEM 2.     CHANGES IN SECURITIES

         In August and December 2000, we sold to each of Elliott International
and Elliott Associates 7,625 shares of Series F 4% cumulative Convertible
Preferred Stock ("the Series F Stock"). The offer and sale of these securities
were completed pursuant to the exemption provided by Regulation D under the
Securities Act of 1933.

         The Series F Stock is convertible at the election of the holder into
shares of Common Stock. As of June 30, 2001 all outstanding shares of the Series
F Preferred Stock were converted into 1,568,559 shares of our Common Stock at an
average price of $9.74.

         In June 1998, we issued to each of Marshall Capital Management, Inc.
("Marshall Capital") and CC Investments, LDC (`CC Investments') warrants to
purchase shares of our Common Stock. In June 2001, Marshall Capital and CC
Investments each exercised their entire warrant of 87,232 shares of our Common
Stock.


ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

            Not applicable

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

            None

ITEM 5.     OTHER INFORMATION

            None


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<PAGE>


ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

(a)      EXHIBITS

The following exhibits are filed as part of this Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 2001.

         10.1     Employment Agreement between Secure Computing Corporation and
                  Vincent Schiavo dated April 30, 2001.

         10.2     Employment Agreement between Secure Computing Corporation and
                  Tim Steinkopf dated March 1, 2001.

Copies of Exhibits will be furnished upon request and payment of the Company's
reasonable expenses in furnishing the Exhibits.

(b)      REPORTS ON FORM 8-K:

         A form 8-K was not filed during the quarter ended June 30, 2001.


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<PAGE>


                          SECURE COMPUTING CORPORATION

                                   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.



                                       SECURE COMPUTING CORPORATION


DATE: August 6, 2001                   By:  /s/ Timothy J. Steinkopf
                                          -------------------------------------
                                          Timothy J. Steinkopf
                                          Vice President of Operations and Chief
                                          Financial Officer
                                          (Duly authorized officer and Principal
                                          Financial Officer)


                                       15
<PAGE>


                                INDEX TO EXHIBITS


EXHIBIT                    DESCRIPTION                              PAGE
-------                    -----------                              ----

10.1     Employment Agreement between Secure Computing      FILED ELECTRONICALLY
         Corporation and Vincent Schiavo dated April 30,
         2001.


10.2     Employment Agreement between Secure Computing      FILED ELECTRONICALLY
         Corporation and Tim Steinkopf dated March 1,
         2001.


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