<PAGE>
                      SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549
                           ----------------------
                                   FORM 10-Q
                           ---------------------- 

  XX  Quarterly report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934, for the quarterly period ended March 31, 1997, 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 1-10139
                         ------------------------------ 
                                NETEGRITY, INC.
            (Exact name of registrant as specified in its charter)

DELAWARE                                       04-2911320
(State or other jurisdiction of                (I.R.S. Employer
incorporation or organization)                 Identification No.)

245 Winter Street                              02154
Waltham, MA                                    (Zip Code)
(Address of principal executive offices)

                               (617)890-1700
                      (Registrant's Telephone Number)

        Securities registered pursuant to Section 12(g) of the Act: NONE
                        ----------------------------
 
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 other 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  XX     Yes          No
                                         -------      -------
 
As of April 9, 1997 there were 9,264,446 shares of Common Stock outstanding.



<PAGE>
                                   FORM 10-Q
 
                                QUARTERLY REPORT
 
                                   ----------
<TABLE>
<CAPTION>
                                TABLE OF CONTENTS
<S>                                                            <C>
 
Facing Sheet..................................................   1
 
Table of Contents.............................................   2
 
PART I. FINANCIAL INFORMATION
 
  Item 1. Consolidated Financial Statements
    Consolidated Balance Sheets...............................   3
    Consolidated Statements of Operations.....................   5
    Consolidated Statements of Cash Flows.....................   6
    Notes to Consolidated Financial Statements................   8
 
  Item 2. Management's Discussion and Analysis of Financial
    Condition and Results of Operations.......................  10
 
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....................  13
 
SIGNATURES....................................................  14
 
Exhibit 11--Computation of earnings per share.................  15
</TABLE>
 
                                       2
<PAGE>
                         PART I.--FINANCIAL INFORMATION
 
                                NETEGRITY, INC.
                          CONSOLIDATED BALANCE SHEETS
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                              MARCH 31,
                                                 1997                      DECEMBER 31,
                                              (UNAUDITED)                      1996
                                            -------------                  ------------
<S>                                          <C>                           <C>
 
CURRENT ASSETS:
 
  Cash and cash equivalents..................  $5,876,911                 $   6,791,057
  Escrow receivable..........................  600,000                          600,000
  Accounts receivable-trade, net of
    allowance for doubtful accounts
    of $74,797 and $67,797 at March 31,
    1997 and December 31, 1996, respectively.     672,857                       787,780
  Other current assets.......................     572,931                       559,230
                                            -------------                  ------------
      TOTAL CURRENT ASSETS...................   7,722,699                     8,738,067
                                            -------------                  ------------
EQUIPMENT AND LEASEHOLD
  IMPROVEMENTS, NET..........................     345,271                       287,323
 
CAPITALIZED SOFTWARE COSTS...................     158,839                            --
 
OTHER ASSETS:
  Investment in Encotone, LTD................   1,000,000                     1,000,000
  Investment in Encotone, Inc................     153,956                       210,000
  Other......................................      23,360                        23,360
                                            -------------                  ------------
      TOTAL OTHER ASSETS.....................   1,177,316                     1,233,360
                                            -------------                  ------------
TOTAL ASSETS.................................  $9,404,125                 $  10,258,750
                                            -------------                  ------------
                                            -------------                  ------------
</TABLE>
 
    The accompanying notes are an integral part of the financial statements.
 
                                       3

<PAGE>

                                NETEGRITY, INC.
                          CONSOLIDATED BALANCE SHEETS
 
                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------
<TABLE>
<CAPTION>
                                                                        MARCH 31,
                                                                          1997           DECEMBER 31,
                                                                       (UNAUDITED)           1996
                                                                  ---------------------  -------------
<S>                                                               <C>                    <C>            <C>
 
CURRENT LIABILITIES:
  Accounts payable-trade........................................  $1,833,042            $   2,099,436
  Other accrued expenses........................................   1,966,767                2,009,890
                                                                   ---------               ----------
TOTAL LIABILITIES...............................................   3,799,809                4,109,326
                                                                   ---------               ----------
COMMITMENTS AND CONTINGENCIES...................................         --                        --
 
STOCKHOLDERS' EQUITY:
  Common stock, voting, $.01 par value,
    authorized 25,000,000 shares: 9,264,446
    shares issued and 9,239,845 shares
    outstanding at March 31, 1997; 9,204,946
    shares issued and 9,179,845 shares
    outstanding at December 31, 1996............................     92,650                    92,049
  Additional paid-in capital.................................... 10,563,154                10,460,554
  Cumulative translation adjustment.............................     28,028                    28,028
  Cumulative deficit............................................ (4,795,859)               (4,147,550)
  Loan to officer...............................................   (200,000)                 (200,000)
                                                                   --------                ----------
                                                                  5,687,973                 6,233,081
  Less--Treasury Stock, at cost:
    25,101 shares...............................................    (83,657)                  (83,657)
                                                                   --------                ----------
TOTAL STOCKHOLDERS' EQUITY......................................  5,604,316                  6,149,424
                                                                   --------                ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................... $9,404,125              $  10,258,750
                                                                   --------                ----------
                                                                   --------                ----------



</TABLE>
 
    The accompanying notes are an integral part of the financial statements.
 
                                       4
<PAGE>

                                 NETEGRITY, INC.
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)
 
<TABLE>
<CAPTION>
                                                       FOR THE THREE MONTHS ENDED
                                                                MARCH 31,
 
<S>                                                    <C>                      <C>
                                                          1997                 1996
                                                        -----------      ----------
Net revenues.........................................       986,594       1,328,911
Cost of revenues.....................................       535,251         755,048
                                                        -----------      ----------
Gross profit.........................................       451,343         573,863
 
Selling, general and administrative
  expenses...........................................     1,021,522         398,786
Research and development costs.......................       101,148              --
                                                        -----------      ----------
Income (loss) from operations of continuing
  operations.........................................     (671,327)         175,077
 
Interest income......................................       79,062            6,334
 
Share of loss from investment
  in Encotone, Inc...................................      (56,044)              --
                                                        -----------      ----------
Income (loss) from continuing operations.............     (648,309)         181,411

Loss from discontinued operations....................           --         (214,453)
                                                        -----------      ----------
Net loss.............................................    $(648,309)      $  (33,042)
                                                        -----------      ----------
                                                        -----------      ----------

Earnings (loss) per share:
  Income (loss) from continuing operations...........    $   (0.07)      $     0.02
  Loss from discontinued operations..................           --            (0.02)
                                                        -----------      ----------
    Net loss.........................................    $   (0.07)      $     0.00
                                                        -----------      ----------
                                                        -----------      ----------
Weighted average shares outstanding..................    9,261,616        8,835,000
</TABLE>
 
    The accompanying notes are an integral part of the financial statements.
 
                                       5
<PAGE>

                                NETEGRITY, INC.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
 
<TABLE>
<CAPTION>
                                                          FOR THE THREE MONTHS ENDED
                                                                   MARCH 31,
<S>                                                    <C>                      <C>
                                                          1997                 1996
                                                        -----------      ----------
OPERATING ACTIVITIES
 
Net income (loss) from continuing operations......       $(648,309)        $181,411
                                                         ----------        --------
Adjustments to reconcile income (loss) to
  net cash provided by (used for)
  operating activities:
    Share of loss from investment.................          56,044              --
Depreciation and amortization.....................          16,500           4,483
Provision for doubtful accounts receivable........           7,000             500
Change in operating assets and liabilities:
  Accounts receivable.............................         107,923         (81,792)
  Other current assets............................         (13,701)        (90,646)
  Accounts payable................................        (234,628)        542,468
  Other accrued expenses..........................         (43,123)        316,420
  Accrued income taxes............................              --        (180,000)
  Intangible assets...............................              --         (42,417)
                                                        -----------      ----------
  Total adjustments...............................        (103,985)        469,016
 
  Net cash (used for) provided by
    continuing operating activities...............        (752,294)        650,427
 
  Net cash (used for) provided by
     discontinued operating activities............         (31,766)        351,557
                                                        -----------      ----------
  Net cash (used for) provided by
     operating activities.........................     $  (784,060)   $  1,001,984
                                                        -----------      ----------
                                                        -----------      ----------
</TABLE>
 
    The accompanying notes are an integral part of the financial statements.
 
                                       6
<PAGE>

                                 NETEGRITY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
 
<TABLE>
<CAPTION>
                                                          FOR THE THREE MONTHS ENDED
                                                                   MARCH 31,
<S>                                                    <C>                      <C>
                                                          1997                 1996
                                                        -----------      ----------

INVESTING ACTIVITIES:
 
Capitalized software costs............................  $  (158,839)             --
Capital expenditures for equipment and
  leasehold improvements..............................      (74,448)   $   (110,337)
                                                        -----------      ----------
    Net cash used for investing activities............     (233,287)       (110,337)
                                                        -----------      ----------
FINANCING ACTIVITIES:
 
Net proceeds from issuance of stock...................      103,201          14,336
Net payments on line of credit........................           --        (700,000)
Principal debt payments...............................           --         (22,092)
Principal payments under capital leases...............           --         (17,700)
                                                        -----------      ----------
    Net cash provided by (used for)
     financing activities.............................      103,201        (725,456)
                                                        -----------      ----------
Effect of exchange rate changes on cash...............           --         (13,807)
 
  NET (DECREASE) INCREASE IN CASH
    AND CASH EQUIVALENTS..............................    (914,146)         152,384
 
Cash and cash equivalents at beginning of period......    6,791,057       1,258,061
                                                        -----------      ----------
    CASH AND CASH EQUIVALENTS AT END OF PERIOD........   $5,876,911     $ 1,410,445
                                                        -----------      ----------
                                                        -----------      ----------
 
Supplemental Disclosures of Cash
  Flow Information:
    Interest paid....................................          --     $     44,037
                                                        -----------      ----------
                                                        -----------      ----------
 
    Income taxes paid................................  $   63,557               --
                                                        -----------      ----------
                                                        -----------      ----------
</TABLE>

    The accompanying notes are an integral part of the financial statements.
 
                                  7

<PAGE>
 
                                 NETEGRITY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
    Note 1--The unaudited financial information furnished herein reflects all
adjustments which are of a normal recurring nature, which in the opinion of
management are necessary to fairly state the Company's financial position, cash
flows and the results of its operations for the periods presented. Certain
information and footnote disclosure normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. This information should be read in conjunction with the
Company's audited financial statements for the fiscal year ended December 31,
1996, included in Form 10-K filed on March 17, 1997.
 
    Note 2--The results of operations for the three-month period ended March 31,
1997 are not necessarily indicative of the results to be expected for the entire
year ending December 31, 1997.
 
    Note 3--Minority interest represents the minority shareholders'
proportionate share of their equity of Personal Computing Tools, Inc. (PCT). At
March 31, 1997, the Company owned 94% of the capital stock of PCT.
 
    Note 4--Net income per share is based upon the weighted average number of
common shares outstanding including the dilutive effects of options and
warrants.
 
    Note 5--The Company provides for income taxes during interim reporting
periods based on reported earnings before income taxes using an estimate of the
annual effective tax rate. Deferred income taxes reflect the impact of temporary
differences between the amount of assets and liabilities recognized for tax
purposes. These deferred taxes are measured by applying currently enacted tax
laws.
 
    Note 6--Effective April 1, 1993, the Company changed its method of
accounting for incomes taxes from the deferred method to the liability method
required by FASB Statement No. 109 "Accounting for Income Taxes". The effect of
the adoption of this statement had no impact on the operating results,
components of income tax expense or financial position of the Company.
 
    The principal components of the Company's deferred tax assets as of January
1, 1997 consisted of the following (in thousands):
 
<TABLE>
<CAPTION>
<S>                                                                <C>   
 
  Deferred tax assets:
    Expenses not currently deductible....................       $     731
    Operating loss carry forwards........................           1,727
                                                                    -----
                                                                    2,458
Valuation allowance......................................          (2,458)
                                                                    -----
    Net..................................................              --
                                                                    -----
                                                                    -----
</TABLE>

    As a result of the divestiture described in Note 7, the Company estimates
the utilization of approximately $6,000,000 of its current available operating
loss carryforward.
 
                                    8

<PAGE>
 
    Note 7--As of June 28, 1996, the Company completed the divestiture of its 
catalog related business, consisting of The Programmer's SuperShop 
("TPS")catalog, the TPS web site, the corporate sales group, the German 
subsidiary ("SDC Germany") and SDC Communications. The Company completed the 
transaction for an aggregate price of $10,035,000. The aggregate price 
consisted of payment of $9,300,000 in immediately available funds and the 
deposit of $735,000 under an escrow arrangement. As of August 12, 1996, 
$135,000 of the escrow has been returned to the Company. The final purchase 
price of $10,035,000 was a negotiated settlement. Prior to the closing, the 
parties had a dispute as to how catalog revenue should be measured under the 
Agreement.
 
    The aggregate price of $10,035,000 assumes that the Company will transfer 
to the Purchaser as of the Closing date, tangible net assets of the catalog 
related business that equal $1,500,000. These net assets are currently being 
audited and the Company expects no material adjustments.
 
    The Company incurred $2,587,000 in expenses and write-offs related to the 
divestiture. These expenses were primarily comprised of write-off of 
goodwill, severance costs, professional fees and facility shut-down costs for 
its corporate offices and distribution facility. The Company reported a gain 
of $6,000,000 from the sale of the assets of its catalog related business.
 
    Note 8--Effective February 1, 1997, the company has begun to capitalize 
eligible software costs as required by FASB Statement No. 86 "Accounting for 
the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed." 
The Company capitalizes eligible software costs upon establishing product 
technological feasibility and will amortize these costs on a 
product-by-product basis, commencing upon release of the products to 
customers, on a straight-line basis over the economic life of the product. 
Costs related to research, design and development of computer software are 
charged to research and development expense as incurred.
 
                                       9
<PAGE>

                                NETEGRITY, INC.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS
 
OVERVIEW
 
    The Private Securities Litigation Reform Act of 1995 contains certain safe
harbors regarding forward-looking statements. In that context, the discussion in
this Item contains forward-looking statements which involve certain degrees of
risk and uncertainties, including statements relating to liquidity and capital
resources. Except for the historical information contained herein, the matters
discussed in this section are such forward-looking statements that involve risks
and uncertainties, including the impact of competitive pricing within the
software industry, the effect any reaction to such competitive pressures has on
current inventory valuations, the need for and effect of any business
restructuring, the presence of competitors with greater financial resources,
capacity and supply constraints or difficulties, and the Company's continuing
need for improved profitability and liquidity.
 
    The following overview reflects the recent divestiture of the Company's
catalog related business. Any comments relating to operating results or issues
are reflective of the continuing network security business. The Company's
revenues were generated by the sale of network security products, integration
and support services to companies doing business on the Internet and internal
networks. The divestiture of the Company's catalog related business is recorded
as discontinued operations in the accompanying unaudited financial statements.
 
    The Company plans to develop and introduce new products to address the
changing needs of the evolving network security market. There can be no
assurance that the Company will be able to develop new products or that such
products will achieve market acceptance, or, if market acceptance is achieved,
that the Company will be able to maintain such acceptance for a significant
period of time.
 
                                       10

<PAGE>

RESULTS OF CONTINUING OPERATIONS
 
    The following information should be read in conjunction with the
consolidated financial statements and notes thereto:
 
<TABLE>
<CAPTION>
                                                                                
FOR THE THREE MONTHS                             % to Net Revenue        % Change
ENDED MARCH 31,                                  1997         1996       97 v. 96
---------------                                  ----         ----       --------
<S>                                             <C>          <C>          <C>
Net Revenues:
  Product sales............................       100%         100%           ---
 
Gross Margins:
  Product sales............................        46%          43%             3%
 
Selling, general and administrative
  expenses.................................        104%          30%            74%
 
Research and development costs.............         10%           --            10%
 
Income (loss) from continuing operations...        (66%)        (14%)          (80%)
</TABLE>
 
    Revenues: Net revenues for the first quarter ended March 31, 1997 decreased
by $342,317, or 26%, to $986,594 from $1,328,911 for the quarter ended March 31,
1996. This decrease is due to the Company's decision to eliminate hardware sales
to its customers as well as to reduce its distribution of FireWall-1 to other
resellers in the industry. Revenues generated from these two portions of the
business were approximately 334,000 lower in the quarter ended March 31, 1997
versus March 31, 1996. These portions of the business were eliminated or reduced
because they yield low margins and do not fit with the Company's longer-term
strategic plan.
 
    Gross Profit: Total Gross Profit dollars for the first quarter ended March
31, 1997 decreased by $122,520, or 21%, to $451,343 from $573,863 for the
quarter ended March 31, 1996. This decrease can be attributed to the
corresponding decrease in Net Revenues, discussed above.
 
    Selling, General and Administrative Expenses: Selling, general and
administrative expenses for the first quarter ended March 31, 1997 increased by
$622,736 or 156%, to $1,021,522 from $398,786 for the quarter ended March 31,
1996. This increase was a result of the Company continuing the building of its
management and employee infrastructure to bring to market its proprietary
product line and address the growing network security marketplace.
 
    Research and Development Costs: Research and Development expenditures for
the first quarter ended March 31, 1997 were $259,987 as compared to $0 for the
quarter ended March 31, 1996. Beginning February 1, 1997, $158,839 of these
expenditures were capitalized as a result of the Company realizing technological
feasibility. The Company is continuing the development of new products to
address the changing needs of the evolving network security market. Research and
Development Costs are expensed as incurred, and are capitalized upon
establishing technological feasibility on a product-by-product basis.

                                       11

<PAGE>

Interest Income:  Interest income for the first quarter ended March 31, 1997 
increased $72,728 from $6,334 for the quarter ended March 31, 1996. This 
increase is mainly attributable to available cash being invested at 
prevailing rates of interest.
 
LIQUIDITY AND CAPITAL RESOURCES

(in thousands, except ratios)

<TABLE>
<CAPTION>
                                                 MARCH 31,         DECEMBER 31,
FINANCIAL CONDITION AS OF                          1997             1996
-------------------------                          ----             ----
<S>                                               <C>               <C> 
  Cash and cash equivalents..................  $   5,876        $   6,791
   Working capital...........................      3,923            4,629
   Current ratio.............................       2.03             2.13
</TABLE>
 
<TABLE>
<CAPTION>
CASH FLOW ACTIVITY SUMMARY FOR                   MARCH 31,        MARCH 31,
THE THREE MONTHS ENDED                             1997             1996
------------------------------                   ---------         -------
<S>                                              <C>               <C>
 
Net cash (used for) provided by
  continuing operating activities............     (784,060)            427
 
Net cash used for investing activities.......     (233,287)       (110,337)
 
Net cash provided by (used for)
  financing activities.......................      103,201        (725,456)
</TABLE>
 
    The Company's net cash balance decreased by $914,000 to $5,877,000 at March
31, 1997 from $6,791,000 at December 31, 1996. This decrease was primarily
attributable to increased expenditures related to building the Company's
infrastructure and the research and development costs associated with bringing
its flagship product to market.
 
    Accounts receivable-trade decreased 15% to $673,000 at March 31, 1997 from
$788,000 at December 31, 1996. This decrease resulted from the corresponding
decrease in net revenues discussed above.
 
    Working capital decreased by $706,000 to $3,923,000 at March 31, 1997 from
$4,629,000 at December 31, 1996. This decrease was primarily attributable to
increased expenditures related to building the Company's infrastructure and the
research and development costs associated with bringing its flagship product to
market.
 
    The Company anticipates that its existing cash resources and cash flow from
operations will be sufficient to fund its operations through the Company's
current fiscal year ending December 31, 1997. Additionally, the Company
currently anticipates that its available cash, expected cash flows from
operations, and its borrowing capacity will be sufficient to fund operations
through 1998.
 
                                    12

<PAGE>

                          PART II.--OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS
 
    The Company is not involved in any material legal proceedings.
 
ITEM 2. CHANGES IN SECURITIES
 
    There have been no changes in securities during the quarter ended March 31,
1997
 
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 
    Not applicable.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
    No matters were submitted to a vote of security holders, whether through the
solicitation of proxies or otherwise, during the quarter ended March 31, 1997.
 
ITEM 5. OTHER INFORMATION
 
    NOT APPLICABLE
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
 
    No reports on Form 8-K were filed during the quarter ended March 31, 1997.
 
                                      13

<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.
 
                                          NETEGRITY, INC.



Date: May 14, 1997                        BY: /S/ BARRY N. BYCOFF
                                             -----------------------------
                                             Barry N. Bycoff
                                             President and Chief Executive
                                             Officer (Principal Executive
                                             Officer)




Date: May 14, 1997                       BY: /S/ JAMES O'CONNOR, JR.
                                            ------------------------------
                                            James O'Connor, Jr.
                                            Vice President, Finance and
                                            Chief Financial Officer
                                            (Principal Financial and Chief
                                            Accounting Officer)

                                       14