** **

** **

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

**FORM 10-QSB**

**QUARTERLYREPORT UNDER SECTION 13 OR 15(d)**

**OF THE SECURITIES EXCHANGE ACT OF 1934**

**For TheQuarterly Period Ended December 31, 2002**

**or**

**TRANSITIONREPORT UNDER SECTION 13 OR 15(d)**

**OF THE SECURITIES EXCHANGE ACT OF 1934**

**Commission file No. 0-29501**

 

 

 

 

**Com-Guard.com, Inc.**

(Exact name of registrant as specified in its charter)

 

| **NEVADA**                                                       |   | **33-0879853**        |
|------------------------------------------------------------------|--------|-----------------------|
| (State or other jurisdiction of   incorporation or organization) |   | (IRS Employer ID No.) |

 

**2075Corte del Nogal, Suite R**

**Carlsbad,California 92009**

(Address of principal executive offices)

Registrant’s Telephone Number, Including Area Code:  **(760)431-2206**

 

Check whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the past 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

Yes   ý  No    o

 

The number ofshares outstanding of the registrant’s common stock as of February 12, 2003 was17,890,006.

 

 

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| **PART I - FINANCIAL INFORMATION** |
|------------------------------------|
|                               | ITEM 1. | CONDENSED FINANCIAL  STATEMENTS |   |
|                               |   |   |   |
|                               | Condensed  Balance Sheets    As of December 31, 2002 (unaudited) and June 30, 2002 (audited) |   |
|                               |   |   |
|                               | Condensed  Statements of Operations   Three-months ended December 31, 2002 and 2001 (unaudited) |   |
|                               |   |   |
|                               | Condensed Statements of  Operations   Six-months ended December 31, 2002 and 2001 (unaudited) and the period   from inception through December 31, 2002 |   |
|                               |   |   |
|                               | Condensed  Statements of Cash Flows    Six-months ended December 31, 2002 and 2001 (unaudited) and the period   from inception through December 31, 2002 |   |
|                               |   |   |
|                               | Notes to  Condensed Financial Statements |   |
|                               |   |   |
|                               |   |   |
|                               | ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION OR PLAN OF OPERATION |   |
|                               |   |   |   |
|                               | ITEM 3.  | CONTROLS AND  PROCEDURES |   |
|                               |   |   |   |
| **PART II - OTHER INFORMATION**    |
|                               | ITEM 1.  | LEGAL PROCEEDINGS |   |
|                               | ITEM  2.  | CHANGES  IN SECURITIES AND USE OF PROCEEDS |   |
|                               | ITEM 3.  | DEFAULTS UPON  SENIOR SECURITIES |   |
|                               | ITEM  4.  | SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS |   |
|                               | ITEM 5.  | OTHER INFORMATION |   |
|                               | ITEM 6.  | EXHIBITS AND  REPORTS ON FORM 8-K |   |
|                               |   |   |   |
|                               |   |   |   |
| **SIGNATURES**                     |

# ** **

# ** **

----

 

# **COM-GUARD.COM, INC.**

(A Development StageEntity)

**CONDENSEDBALANCE SHEETS**

** **
| **ASSETS**                                                                                                                                                                         |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                               |   | **12/31/02** |   | **6/30/02** |   |
|                                                                                                                                                                               |   | *(Unaudited)* |   | *(Audited)* |   |
| Current assets                                                                                                                                                                     |   |   |   |   |   |
| Cash and cash  equivalents                                                                                                                                                         |   | $ | 727,024 |   | $ | 82,281 |   |
| Inventories, net                                                                                                                                                                   |   | 225,000 |   | 300,000 |   |
| Related party  receivables                                                                                                                                                         |   | 13,229 |   | 8,528 |   |
| Other                                                                                                                                                                              |   | 4,392 |   | — |   |
| Total current  assets                                                                                                                                                              |   | 969,645 |   | 390,809 |   |
|                                                                                                                                                                               |   |   |   |   |   |
| Property and  equipment, net                                                                                                                                                       |   | 5,957 |   | 11,786 |   |
|                                                                                                                                                                               |   |   |   |   |   |
| Other Assets                                                                                                                                                                       |   |   |   |   |   |
| Intangible asset                                                                                                                                                                   |   | — |   | 5,000 |   |
|                                                                                                                                                                               |   |   |   |   |   |
| Total assets                                                                                                                                                                       |   | $ | 975,602 |   | $ | 407,595 |   |
|                                                                                                                                                                               |   |   |   |   |   |
| **LIABILITIES  AND STOCKHOLDERS’ DEFICIENCY**                                                                                                                                 |
|                                                                                                                                                                               |   |   |   |   |   |
| Current  liabilities                                                                                                                                                               |   |   |   |   |   |
| Loan payable —  bank                                                                                                                                                          |   | $ | 20,996 |   | $ | 22,036 |   |
| Accounts payable  and accrued expenses                                                                                                                                             |   | 108,956 |   | 856,551 |   |
| Accrued  consulting                                                                                                                                                                |   | 822,450 |   | 2,155,850 |   |
| Notes payable                                                                                                                                                                      |   | 12,500 |   | 127,500 |   |
| Notes payable —  stockholders                                                                                                                                                 |   | 60,500 |   | 180,967 |   |
| Total current  liabilities                                                                                                                                                         |   | 1,025,402 |   | 3,342,904 |   |
|                                                                                                                                                                               |   |   |   |   |   |
| Long term  liabilities                                                                                                                                                             |   |   |   |   |   |
| Notes payable                                                                                                                                                                      |   | — |   | 92,443 |   |
| Total long term  liabilities                                                                                                                                                       |   | — |   | 92,443 |   |
| Total  Liabilities                                                                                                                                                                 |   | 1,025,402 |   | 3,435,347 |   |
| Commitments and  Contingencies                                                                                                                                                     |   |   |   |   |   |
| Stockholders’  deficiency                                                                                                                                                     |   |   |   |   |   |
| Common stock,  $0.001 par value, 100,000,000 shares authorized; 14,947,003 and 10,322,000  shares issued and outstanding at December 31, 2002 and June 30,2002,  respectively |   | 14,947 |   | 10,322 |   |
| Common stock to  be issued, $.001 per value, 1,911,000 and 35,000 shares at December 31, 2002  and June 30, 2002, respectively                                                |   | 1,911 |   | 35 |   |
| Additional  paid-in capital                                                                                                                                                        |   | 6,140,258 |   | 2,350,443 |   |
| Accumulated  deficit during development                                                                                                                                            |   | (6,206,916 | ) | (5,388,552 | ) |
| Total  stockholders’ deficiency                                                                                                                                               |   | (49,800 | ) | (3,027,752 | ) |
| Total  liabilities and stockholders’ deficiency                                                                                                                               |   | $ | 975,602 |   | $ | 407,595 |   |

 

*See accompanying notes tocondensed financial statements.*

 

 

2

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# **COM-GUARD.COM, INC.**

(ADevelopment Stage Entity)

#### **CONDENSED STATEMENTS OF OPERATIONS**

*(unaudited)*

*** ***
|                                               |   | **Three-Months  Ended   December 31,** |     |
|----------------------------------------------------|--------|----------------------------------------|----------|
|                                               |   | **2002**                               |     | **2001** |   |
| Revenues                                           |   | $                                      | 444      |   | $ | — |   |
|                                               |   |                                   |     |   |   |
| Costs and expenses                                 |   |                                   |     |   |   |
| Research and development                           |   | 43,970                                 |     | 33,950 |   |
| Sales and marketing                                |   | 35,397                                 |     | — |   |
| Provision to write down inventory                  |   | —                                 |     | 154,771 |   |
| Consulting fees                                    |   | 58,447                                 |     | 214,390 |   |
| Salaries                                           |   | 181,815                                |     | — |   |
| General and administrative                         |   | 173,811                                |     | 75,720 |   |
| Total operating expenses                           |   | 493,440                                |     | 478,831 |   |
|                                               |   |                                   |     |   |   |
| Loss from operations                               |   | (492,996                               | )        | (478,831 | ) |
|                                               |   |                                   |     |   |   |
| Interest, net                                      |   | (667                                   | )        | (1,192 | ) |
|                                               |   |                                   |     |   |   |
| Provision for income taxes                         |   | —                                 |     | — |   |
|                                               |   |                                   |     |   |   |
| Net loss                                           |   | $                                      | (493,663 | ) | $ | (480,023 | ) |
|                                               |   |                                   |     |   |   |
| Net loss per share available to commonStockholders |   |                                   |     |   |   |
| Basic and Diluted                                  |   | $                                      | (.04     | ) | $ | (0.05 | ) |
|                                               |   |                                   |     |   |   |
| Weighted average common shares                     |   | 13,243,233                             |     | 10,322,000 |   |

 

*See accompanying notes to condensedfinancial statements.*

 

 

3

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# **COM-GUARD.COM, INC.**

(ADevelopment Stage Entity)

#### **CONDENSED STATEMENTS OFOPERATIONS**

*(unaudited)*

*** ***
|                                               |   | **Six Months  Ended   December 31,** |         | **For the Period****From Inception   Through   December 31,** |         |
|----------------------------------------------------|--------|--------------------------------------|--------------|---------------------------------------------------------------|--------------|
|                                               |   | **2002**                             |         | **2001**                                                      |         | **2002** |   |
|                                               |   |                                 | *** *** |                                                          | *** *** |   | *** *** |
| Revenues                                           |   | $                                    | 821          |                                                          | $            | 9,712 |   | $ | 10,849 |   |
|                                               |   |                                 |         |                                                          |         |   |   |
| Costs and expenses                                 |   |                                 |         |                                                          |         |   |   |
| Research and development                           |   | 53,018                               |         | 74,536                                                        |         | 915,346 |   |
| Sales and marketing                                |   | 42,415                               |         | —                                                        |         | 42,415 |   |
| Provision to write down inventory                  |   | 75,000                               |         | 309,542                                                       |         | 1,013,169 |   |
| Consulting fees                                    |   | 142,183                              |         | 420,817                                                       |         | 2,538,278 |   |
| Salaries                                           |   | 228,521                              |         | —                                                        |         | 228,521 |   |
| General and administrative                         |   | 277,351                              |         | 177,072                                                       |         | 1,437,373 |   |
| Total                                              |   | 818,488                              |         | 981,967                                                       |         | 6,175,102 |   |
|                                               |   |                                 |         |                                                          |         |   |   |
| Loss from operations                               |   | $                                    | (817,667     | )                                                             | $            | (972,255 | ) | $ | (6,164,253 | ) |
|                                               |   |                                 |         |                                                          |         |   |   |
| Interest, Net                                      |   | (697                                 | )            | (1,192                                                        | )            | (41,063 | ) |
|                                               |   |                                 |         |                                                          |         |   |   |
| Provision for income taxes                         |   | —                               |         | —                                                        |         | (1,600 | ) |
|                                               |   |                                 |         |                                                          |         |   |   |
| Net loss                                           |   | $                                    | (818,364     | )                                                             | $            | (973,447 | ) | (6,206,916 | ) |
|                                               |   |                                 |         |                                                          |         |   |   |
| Net loss per share available to commonStockholders |   |                                 |         |                                                          |         |   |   |
| Basic and Diluted                                  |   | $                                    | (.07         | )                                                             | $            | (0.09 | ) | $ | (.64 | ) |
|                                               |   |                                 |         |                                                          |         |   |   |
| Weighted average common shares                     |   | 11,784,430                           |         | 10,322,000                                                    |         | 9,707,683 |   |

 

*See accompanying notes to condensedfinancial statements.*

# ** **

 

4

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# **COM-GUARD.COM,INC.**

(ADevelopment Stage Entity)

**CONDENSED STATEMENTS OF CASH FLOWS**

*(unaudited)*

 

 
|                                                                       |   | **Six months  endedDecember 31,** |     | **From Inception  Through  December 31,** |   |
|----------------------------------------------------------------------------|--------|-----------------------------------|----------|-------------------------------------------|--------|
|                                                                       |   | **2002**                          |     | **2001**                                  |   | **2002** |   |
| Cash flows from operating activities                                       |   |                              |     |                                      |   |   |   |
| Net loss                                                                   |   | $                                 | (818,364 | )                                         | $      | (973,447 | ) | $ | (6,206,016 | ) |
|                                                                       |   |                              |     |                                      |   |   |   |
| Adjustments to reconcile net loss to net cashused in operating  activities |   |                              |     |                                      |   |   |   |
| Depreciation and amortization                                              |   | 5,829                             |     | 43,498                                    |   | 40,788 |   |
| Provision to write down inventory                                          |   | 75,000                            |     | 309,542                                   |   | 1,013,169 |   |
| Impairment of intangible asset                                             |   | —                            |     | —                                    |   | 150,000 |   |
| Impairment of deferred offering costs                                      |   | 5,000                             |     | —                                    |   | — |   |
| Stock issued for services                                                  |   | —                            |     | —                                    |   | 236,300 |   |
| Stock issued for research and development                                  |   | —                            |     | —                                    |   | 360,000 |   |
| Services provided as contributed capital                                   |   | —                            |     | —                                    |   | 60,000 |   |
| Beneficial conversion feature on note                                      |   | —                            |     | —                                    |   | 17,500 |   |
| Changes in operating assets and liabilities                                |   | —                            |     | —                                    |   | — |   |
| (Increase) Decrease in:                                                    |   |                              |     |                                      |   |   |   |
| Related party receivables and other current assets                         |   | (9,093                            | )        | —                                    |   | (17,621 | ) |
| Inventories                                                                |   | —                            |     | —                                    |   | (1,238,169 | ) |
| Increase (Decrease) in:                                                    |   |                              |     |                                      |   |   |   |
| Accrued interest                                                           |   | —                            |     | —                                    |   | 7,690 |   |
| Other                                                                      |   | —                            |     | (708                                      | )      | — |   |
| Accounts payable and accrued expenses                                      |   | 7,111                             |     | 490,419                                   |   | 866,670 |   |
| Accrued consulting                                                         |   | 66,600                            |     | —                                    |   | 2,222,450 |   |
|                                                                       |   |                              |     |                                      |   |   |   |
| Net cash used in operating activities                                      |   | (667,746                          | )        | (130,696                                  | )      | (2,487,968 | ) |
|                                                                       |   |                              |     |                                      |   |   |   |
| Cash flows from investing activities                                       |   |                              |     |                                      |   |   |   |
| Capital expenditures                                                       |   | (171                              | )        | (1,023                                    | )      | (46,912 | ) |
| Net cash flows used in investing activities                                |   | (171                              | )        | (1,023                                    | )      | (46,912 | ) |
|                                                                       |   |                              |     |                                      |   |   |   |
| Cash flows from financing activities                                       |   |                              |     |                                      |   |   |   |
| Payments on loan payable — bank                                       |   | (1,040                            | )        | —                                    |   | 20,996 |   |
| Repayment of notes payable                                                 |   | (37,000                           | )        | (872                                      | )      | (37,000 | ) |
| Payments on of notes payable                                               |   | —                            |     | 131,730                                   |   | 515,487 |   |
| Proceeds from issuance of stock                                            |   | 1,317,700                         |     | —                                    |   | 2,637,700 |   |
| Proceeds from notes payable — shareholders                            |   | 33,000                            |     | —                                    |   | 33,000 |   |
| Proceeds from stock to be issued                                           |   | 7,000                             |     | —                                    |   | 8,876 |   |
| Stockholder loans and advances                                             |   | —                            |     | —                                    |   | 84,725 |   |
| Net cash provided by financing activities                                  |   | 1,312,660                         |     | 130,858                                   |   | 5,744,524 |   |
| Net increase (decrease) in cash and cash equivalents                       |   | 644,743                           |     | (861                                      | )      | 727,042 |   |
| Cash and cash equivalents, beginning of period                             |   | 82,281                            |     | 1,990                                     |   | — |   |
| Cash and cash equivalents, end of period                                   |   | $                                 | 727,024  |                                      | $      | 1,129 |   | $ | 727,042 |   |
|                                                                       |   |                              |     |                                      |   |   |   |   |   |   |
| Supplemental disclosure of cash flow information                           |   |                              |     |                                      |   |   |   |   |   |   |
| Interest paid                                                              |   |                              | —   |                                      |   | — |   |   | — |   |
| Taxes paid                                                                 |   |                              | —   |                                      |   | — |   |   | — |   |

 

Supplemental disclosure of non-cash investing andfinancing activities:

During the six months ended December 31, 2002 theCompany settled $725,000 of accounts payable and accrued expenses by issuing1,036,000 shares of common stock @ $.70 per share.

During the six months ended December 31, 2002 theCompany was forgiven $1,400,000 of accrued consulting expenses.

During the six months ended December 31, 2002  the Company settled $100,000 of notespayable by issuing 335,000 shares of common stock at approximately $.30 ashare.

During the six months ended December 31, 2002$15,000 of notes payable was reclassified as notes payable — stockholder.

During the six months ended December 31, 2002 theCompany settled $223,910 of notes payable — stockholders and $29,700 of accruedinterest by issuing 350,000 shares of common stock at approximately $.70 pershare.

 

 

*See accompanying notes to condensedfinancial statements.*

 

 

5

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# **COM-GUARD.COM,INC.**

(ADevelopment Stage Entity)

**NOTESTO CONDENSED FINANCIAL STATEMENTS**

**DECEMBER31, 2002**

(unaudited)

 

**NOTE 1.  BASIS OF PRESENTATION**

The accompanying unaudited condensed financialstatements of Com-Guard.com, Inc. (the “Company”) (a development stage entity)have been prepared pursuant to the rules of the Securities and ExchangeCommission (the “SEC”) for quarterly reports on Form 10-QSB and do not includeall of the information and note disclosures required by generally acceptedaccounting principles. These condensed financial statements and notes hereinare unaudited, but in the opinion of management, include all the adjustments(consisting only of normal recurring adjustments) necessary for a fairpresentation of the Company’s financial position, results of operations, andcash flows for the periods presented. These financial statements should be readin conjunction with the Company’s audited financial statements and notesthereto included in the Company’s Form 10-KSB for the year ended June 30, 2002as filed with the SEC on September 27, 2002. Interim operating results are notnecessarily indicative of operating results for any future interim period orfor the full year.

 

The Company was formed and incorporated in the state of Nevada onOctober 7, 1998 as e-WORLD SECURITY, INC. On April 16, 1999 the Company changedits name to COM-GUARD.COM, INC. Planned principal operations of the Companyhave not yet commenced; activities to date have been limited to forming theCompany, assembling a management and consultant team, identifying markets,developing products, and obtaining initial capitalization. The Company intendsto sell products that afford security protection to computer hardware andsoftware in microcomputers.

 

Recent Accounting Pronouncements

 

In August 2001, the Financial Accounting Standards Board issued its Statementof Financial Accounting Standards No. 144 (SFAS No. 144), “Accounting for theImpairment of Long-Lived Assets.”  SFASNo. 144 supersedes SFAS No. 121, “Accounting for the Impairment of Long-LivedAssets and for Long-Lived Assets to be Disposal of a Segment of a Business, andExtraordinary, Unusual and Infrequently Occurring Events andTransactions.”  SFAS No. 144 retainsmany of the provisions of SFAS 121, but addresses certain implementation issuesassociated with that Statement.  Thisstatement is effective for financial statements issued for fiscal yearsbeginning after December 15, 2001.

 

In April 2002, the FASB issued SFAS No. 145, Rescission of SFAS No.4,44, and 64, Amendments of SFAS No. 13, and Technical Corrections.  SFAS No. 145 rescinds the provisions of SFASNo. 4 that requires companies to classify certain gains and loses from debtextinguishments as extraordinary items, eliminates the provisions of SFAS No.44 regarding transition to the Motor Carrier Act of 1980 and amends the provisionsof SFAS No. 13 to require that certain lease modifications be treated as salesleaseback transactions.  The provisionsof SFAS No. 145 related to classification of debt extinguishments are effectivefor fiscal years beginning after May 15, 2002. Earlier application is encouraged.

 

In July 2002, the FASB issued SFAS No. 146, “Accounting forRestructuring Costs.”  SFAS No. 146applies to costs associated with an exit activity (including restructuring) orwith a disposal of long-lived assets. Those activities can include eliminating or reducing product lines,terminating employees and contracts and relocating plant facilities orpersonnel.  Under SFAS No. 146, theCompany will record a liability for a cost associated with an exit or disposalactivity when that liability is incurred and can be measured at fairvalue.  SFAS No. 146 will require theCompany to disclose information about its exit and disposal activities, therelated costs, and changes in those costs in the notes to the interim andannual financial statements that include the period in which and exit activityis initiated and in any subsequent period until the activity is completed.  SFAS No. 145 is effective prospectively forexit or disposal activities initiated after December 31, 2002, with earlieradoption encouraged.  Under SFAS No.146, a company cannot restate its previously issued financial statements andthe new statement grandfathers the accounting for liabilities that a companyhad previously recorded under Emerging Issues Task Force Issue 94-3.

 

 

6

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In December 2002, the FASB issued SFAS No. 148, “Accounting forStock-Based Compensation-Transition and disclosure-and amendment of SFAS No.123”.   SFAS No.148 amends SFAS No. 123,Accounting for Stack Based Compensation” and provides alternative methods foraccounting for a change by registrants to the fair value method of accountingfor stock-based compensation. Additionally, SFAS No. 148 amends the disclosure requirements of SFASNo. 123 to require disclosure in the significant accounting policy footnote ofboth annual and interim financial statements of the method of accounting forstock-based compensation and the related pro-forma disclosures when theintrinsic value method continues to be used. The statement is effective for fiscal years beginning after December 15,2002, and disclosures are effective for the first fiscal quarter beginningafter December 15, 2002.

 

The Company does not believe that adoption of theses pronouncementswill not have a material effect on the Company’s financial position or resultof operations.

 

**NOTE 2:INVENTORIES, NET**

 

Inventories consist of work in process stated at the lower of cost(first-in, first-out) or market.  During the six-months ended December 31, 2002, the company determinedthat the fair market value of the inventory was less than the carrying amountand recorded a $75,000 valuation reserve based on management’s plannedmarketing and distribution strategies and the expected pricing of the relatedproducts.

 

The valuation reserve requires the Company tomake significant estimates and changes in facts and circumstances could resultin material changes in the valuation reserve.

 

 

**NOTE 3:  NOTES PAYABLE**

 

As of December 31, 2002and June 30, 2002, notes payable consisted of the following:

 
|                                         |   | **December  31** |   | **June 30** |   |
|----------------------------------------------|--------|------------------|--------|-------------|--------|
|                                         |   |             |   |        |   |
| Loan payable —  bank                    |   | $                | 20,996 |        | $      | 22,036 |   |
|                                         |   |             |   |        |   |
| Notes payable                                |   | 12,500           |   | 127,500     |   |
|                                         |   |             |   |        |   |
| Notes payable —  stockholders           |   | 60,500           |   | 180,967     |   |
|                                         |   |             |   |        |   |
| Long term notes  payable — stockholders |   | —           |   | 92,443      |   |
|                                         |   |             |   |        |   |
| Total                                        |   | $                | 93,996 |        | $      | 422,946 |   |

 

 

LOAN PAYABLE - BANK

 

The loan payable — bank represents a $20,996 cash advance taken by theCompany from its bank credit card as of December 31, 2002.  The loan bears interest at 11.75% perannum.  Accrued interest at December 31,2002 on this loan has been recorded in accrued expenses.

 

 

7

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NOTES PAYABLE

 

During March and April of 2002, the Company received $27,500 evidencedby two notes payable at an interest rate of 7.5% and all principal and interestis due one year from the date of the notes. As of December 31, 2002, $12,500 remained due.  During the six months ended December 31, 2002, the remaining$15,000 was reclassified to Notes Payable-Stockholders.  Accrued interest at December 31, 2002 onthese loans has been recorded in accrued expenses.

 

On June 21, 2002, the Company received $100,000 evidenced by athree-month convertible note due September 21, 2002 and bearing interest at 10%per annum.  The note is convertible intothe Company’s common stock at a conversion price of $.29787 per share.  The Company has expensed as financing costsany excess of the fair market value of the common stock at the note issuancedate over the conversion price which amounted to $17,500.  This note and related interest was paidduring the three month period ended September 30, 2002.

 

NOTES PAYABLE - STOCKHOLDERS

 

During 2002, the Company received $273,410 from three stockholders inthe form of six notes payable with varying due dates and interest rates rangingfrom 7.0% to 10.0%.  Two of the threestockholders are related parties to the majority stockholder.  As of December 31, 2002, $60,500 remaineddue while $245,016 including notes and accrued interest was converted intocommon stock at $.70 during the quarter. Accrued interest on the remaining balance of $60,500 at December 31,2002 has been recorded in accrued expenses.

 

**NOTE4:  PRIVATE PLACEMENT**

During the periodended September 30, 2002, the Company commenced a private placement shareoffering wherein it offered to accredited investors units for a minimum amountof 3,000,000 shares and 1,500,000 warrants and a maximum amount of 6,000,000shares of common stock and 3,000,000 warrants. Each unit consists of 300,000 shares of common stock at $.35 and 150,000five-year warrants convertible at $.70, although the Company may accept, attheir discretion, subscriptions for lesser amounts.  As of December 31, 2002, the Company sold 4,650,003 shares (of which1,911,000 shares are included in common stock to be issued) and 2,325,000warrants for net proceeds of $1,317,700 which included $1,911 for stock not yetissued as of December 31, 2002.  As ofDecember 31, 2002 no warrants have been exercised.  The fair market value of the warrants, aggregating $721,809 wasestimated on the grant date using the Black-Scholes option pricing model asrequired by SFAS No. 123 with the following weighted average assumptions:  expected dividend yield 0%, volatility 355%,risk-free interest rate 3.75%, expected option life 5 years.  The Company will issue 500,000 shares ofcommon stock, valued at $175,000, in payment of offering costs incurred.  The value assigned to this stock was basedon the private placement offering of $.35 per share.  The value of the common stock has been charged to equity asdirect costs to the offering.

**NOTE 5:GOING CONCERN**

 

As reflected in the accompanying condensed financial statements, theCompany has a working capital deficiency of $55,757, a stockholders’ deficiencyof  $49,800, and continuing losses sinceinception of $6,206,916. The ability of the Company to continue as a goingconcern is dependent on the Company’s ability to raise additional capital and implementits business plan. The financial statements do not include any adjustments thatmight be necessary if the Company is unable to continue as a going concern.

 

 

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**ITEM 2****.****                ****MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

The following discussion and analysis should be readin conjunction with the consolidated financial statements and notes theretoappearing elsewhere in this Quarterly Report on Form 10-QSB. The discussion ofthe Company’s business contained in this Quarterly Report on Form 10-QSB maycontain certain projections, estimates and other forward-looking statementsthat involve a number of risks and uncertainties, including those discussedbelow at “Risks and Uncertainties.” While this outlook represents management’scurrent judgment on the future direction of the business, such risks anduncertainties could cause actual results to differ materially from any futureperformance suggested below. The Company undertakes no obligation to releasepublicly the results of any revisions to these forward-looking statements toreflect events or circumstances arising after the date hereof.

 

**OVERVIEW**

 

The Company was incorporatedas e-World Security, Inc. in the State of Nevada on October 7, 1998. TheCompany’s name was changed to Com-Guard.com, Inc. and filed on April 16, 1999.

The Company has limitedoperating history and is in the development stage. Its principal business isthe exploitation of niche products for the microcomputer industry that provideenhanced system security for both individual users and network administrators.The Company’s initial product, Com-GuardTM, includes unique software andhardware that will enable users to protect and limit access to data; and toprovide a security system against tampering and unauthorized use of computers.

The Com-GuardTM systemmonitors a computer or network and detects, through proprietary software andhardware, unauthorized attempts to use, tamper with, or remove data orequipment. The system is designed to generate an alarm, which can be sent toany receiving device, including pagers, telephones, and other computers.

The market forCom-GuardTM consists of individual users and industry. The popularity of theinternet has created a need for both data security and access limitations.Limiting access to sensitive and/or confidential files has grown to be a needfor all users of microcomputers.

Home automation,including systems to provide “internal” security to certain areas of a home oroffice, represents an additional market for Com-GuardTM. The system, installedin a PC, has the ability to function as an internal home security system,controlling a series of sensors to protect against theft and intrusion, andchild safety.

The Company’sbusiness continues to be in the development phase. Accordingly,quarter-to-quarter financial comparisons may be of limited usefulness now andfor the next several quarters as the Company prepares to launch and market itsfirst products.

The Company’scurrent strategy is to develop, commercialize and distribute its products. Tosuccessfully execute its strategy, the Company will need to improve its workingcapital position. The Company needs to raise additional funds to fully developits business. There can be no assurance, however, that the Company will be ableto complete any additional debt or equity financing on favorable terms or atall, or that any such financings, if completed, will be adequate to meet theCompany’s capital requirements. Any additional equity or convertible debtfinancings could result in substantial dilution to the Company’s stockholders.If adequate funds are not available, the Company will be required to delay,reduce or eliminate some or all of its planned activities. The Company’sinability to fund its capital requirements would have a material adverse effecton the Company. Also See “Risks and Uncertainties” included in this discussion.

 

 

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**RESULTS OF OPERATIONS**

 

**NET REVENUES**

Revenues were $444 and $0 for the three-month period ended December 31,2002 and 2001, respectively. Revenues were $9,712 and $821 for the six-monthperiod ended December 31, 2002 and 2001, respectively.

**RESEARCH AND DEVELOPMENT EXPENSES**

For the three-month period ended December 31, 2002 and 2001, researchand development expenses were $43,970 and $33,950, respectively. For the six-month period ended December31, 2002 and 2001, research and development expenses were $53,018 and $74,536,respectively. These expenses were due to expenditures to develop the Company’score technology.

**SALES AND MARKETING**

Sales andmarketing for the three-month period ended December 21, 2002 and 2001 were$35,397 and $-0- and for the six-month period ended December 21, 2002 and 2001were $42,415 and $-0-, respectively.

**PROVISIONTO WRITE DOWN INVENTORIES**

 

During thesix-months ended December 31, 2002, the Company wrote-down inventories based onmanagement’s planned marketing and distribution strategies and the expectedpricing of the related products.

###### *** ***

**CONSULTINGFEES**

 

Consulting feesfor the three-month period ended December 31, 2002 and 2001 were $58,447 and$214,390, respectively, a decrease of $155,943.  Consulting fees for the six-month period ended December 21, 2002and 2001 were $142,183 and $420,817, respectively, a decrease of $278,634.  This decrease was due to commencing salariesfor key employees during the fiscal year.

**SALARIES**

 

Salaries for thethree-month period ended December 31, 2002 and 2001 were $181,815 and $0,respectively.  Salaries for thesix-month period ended December 31, 2002 and 2001 were 228,521 and $0,respectively.  The increase was due tothe Company commencing salary for key personnel during the quarters.

**GENERAL AND ADMINISTRATIVE EXPENSES**

General and administrative expenses were$173,811 and $75,720 for the three-month period ended December 31, 2002 and2001, respectively, an increase of $98,091 or 129%. For the six-month periodended December 31, 2002, general and administrative expenses were $277,351compared to $177,072 for the six months ended December 31, 2001, an increase of  $100,279 or 57%.   The increase was due to several factors related tobuilding the business.  Morespecifically, general and administrative expenses included related costs forgeneral corporate functions, including, facilities, legal, advertising,marketing related expenses, and other fees.

 

 

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**LIQUIDITY ANDCAPITAL RESOURCES**

The Company is in the development stage and has financedits operations primarily through cash generated from the sale of its stock andloans to the Company.

As of December 31,2002, the Company had a working capital deficiency of $55,757 as compared to aworking capital deficiency of $2,952,095 at June 30, 2002.  The $2,896,338 increase in working capitalis due primarily a private placement offering (See Note 4) and the reduction ofdebt.

The Company’s auditors have expressed theiruncertainty as to the Company’s ability to continue as a going concern. Theycite the minimal capital resources available to meet existing and anticipatedobligations. In order to address this uncertainty, the Company has taken stepsto raise additional funds to finance its operations.

 

**CRITICALACCOUNTING POLICIES**

 

The Company believes the following is its most critical accounting policy in that itis the most important to the portrayal of the Company’s financial condition andresults and requires management’s most difficult, subjective or complexjudgments.

 

InventoryValuation

 

The Company regularly monitors and assesses its risk of not incurring any sales of itsinventory in the future.  Thisevaluation is based upon the Company’s sales force efforts and information theCompany receives from potential customers. Based upon the results of the analysis, the Company records a valuationreserve for this risk.  This analysisrequires the Company to make significant estimates, and changes in facts andcircumstances could result in material changes in the valuation reserve.

 

 

**RISKS ANDUNCERTAINTIES**

 

**Lack of Operations and Profitability.**

The Company is inthe development-stage and commenced pre-operating activities approximately oneyear ago. It has no history of operations or profits in the industries in whichit participates.

 

**Uncertainty of Commercial Success.**

Although theCompany is optimistic about its revenue and profitability prospects, there canbe no assurance of commercial success of its Com-Guard product. Furthermore,the computer industry is characterized by rapid change and growth. There can beno assurance that the Company will be able to keep up with the pace oftechnological change or fund its growth.

 

**Competition.**

The Company issubject to competition from other companies that may try to emulate or competewith similar products or services. These competitors have been in the businesslonger than the Company and may have large executive and operating staffs.There can be no assurance that the Company’s prospects will not be adverselyaffected by competition from these companies.

 

**Need for Additional Financing.**

The Company willrequire additional financing in order to establish profitable, ongoingoperations; there is no assurance that such financing will be available or, ifavailable, that it can be obtained on terms favorable to the Company.

 

**Dependence on Management.**

The Company islargely dependent upon the efforts and abilities of Dr. Edward W. Savarese andthere can be no assurance that the Company can be successful in operating theCompany should the services of Dr. Savarese be unavailable. Dr. Savarese hashad extensive experience in marketing, sales and financing.  He has managed for Hewlett-Packard and hasextensive contacts in the computer industry.

 

 

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**Dividends.**

The Company hasnever paid a cash dividend on its common stock. The Company is not obligated topay a dividend on its common stock and does not anticipate payment of anydividends for the foreseeable future. The Company anticipates retaining itsearnings to finance its operations, growth, and expansion.

 

**Common Stock**

 

The Company’s common stock was listedon December 24, 2002 on the NASD OTC Bulletin Board under the trading symbol“CGUD”.  There has been only limitedtrading activity in our securities at this time and there can be no assurancethat a regular trading market for our common stock will ever be developed.  We do not know if a market for our commonstock will ever be developed.  We do notknow if a market for our common stock will be established or that, ifestablished, a market will be sustained. Therefore, investors should realize that they may be unable to sell ourcommon stock if they purchase it. Accordingly, investors must be able to bear the financial risk of losingtheir entire investment in our common stock.

 

**Dependence on Proprietary Technology;Risks of Third Party Infringement Claims.**

Although theCompany has received patent protection, there can be no assurance that theCompany’s measures to protect its current proprietary rights will be adequateto prevent misappropriation of such rights or that the Company’s competitorswill not independently develop or patent technologies that are substantiallyequivalent to or superior to the Company’s technologies. Additionally, althoughthe Company believes that its products and technologies do not infringe uponthe proprietary rights of any third parties, there can be no assurance thatthird parties will not assert infringement claims against products andtechnologies that the Company licenses, or has the rights to use, from thirdparties. Any such claims, if proved, could materially and adversely affect theCompany’s business and results of operations. In addition, though any suchclaims may ultimately prove to be without merit, the necessary managementattention to, and legal costs associated with litigation or other resolution ofsuch claims could materially and adversely affect the Company’s business andresults of operations.

 

**ITEM 3.  CONTROLS AND PROCEDURES**

Evaluation of disclosure controls andprocedures.  Edward W. Savarese, ourChief Executive Officer and Gerry B. Berg, our Chief Financial Officer, havepreformed an evaluation of the Company’s disclosure and procedures, as thatterm is defined in Rule 13a-14 © of the Securities Exchange Art of 1934, asamended (the “Exchange Act”), within 90 days of the date of this report andeach has concluded that such disclosure controls and procedures are effectiveto ensure that information required to be disclosed in our periodic reportsfiled under the Exchange Act is recorded, processed, summarized and reported,within the time period specified by the Securities and Exchange Commission’srules and regulations.

Changes in internal controls.  No significant changes in the Company’sinternal controls or in other factors that could significantly affect thesecontrols were made as a result of the evaluation.

 

**PART II - OTHER INFORMATION**

 

**ITEM 1.  LEGAL PROCEEDINGS**

None.

 

**ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS**

None

 

**ITEM 3.  DEFAULTS UPON SENIOR SECURITIES**

None

 

 

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**ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS**

None.

**ITEM 5.  OTHER INFORMATION**

None.

 

**ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K**

(a)  Exhibits:

None

 

(b) Reports on Form 8-K:

None.

 

 

 

 

**CERTIFICATION OF CHIEF EXECUTIVEOFFICERAND CHIEF FIANCIAL OFFICERPURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

 

        Pursuantto Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersignedcertifies that this periodic report fully complies with the requirements ofsection 13(a) or 15(d) of the Securities Exchange Act of 1934 andthat information contained in this periodic report fairly presents, in allmaterial respects, the financial condition and results of operations ofCom-Guard.com, Inc. 

 
|   | COM-GUARD.com, INC. |
|--------|---------------------|
|   |                |
|   |                |   |
|   | By:                 | /s/  EDWARD W. SAVARESE  |
|   |                | Edward W. Savarese *Chief Executive Officer* |
|   |                |   |
|   | By:                 | /s/  GERRY B. BERG  |
|   |                | Gerry B. Berg *Chief Financial Officer   (Principal Financial and Accounting Officer)* |

 

 

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**SIGNATURES**

        Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

Dated:February 18, 2003

 

COM-GUARD.com,INC. 

 
|      |                                                                                   |
|-----------|----------------------------------------------------------------------------------------|
| By:       | /s/  EDWARD W. SAVARESE                                                 |
|      | Edward W. Savarese *Chief Executive Officer*                                           |
|      |                                                                                   |
|  By: | /s/  GERRY B. BERG                                                      |
|      | Gerry B. Berg *Chief Financial Officer   (Principal Financial and Accounting Officer)* |

 

 

 

 

**Certification**

I, EdwardSavarese, certify that:

1.

I have reviewed this quarterly report on Form 10-QSB ofCom-Guard.com, Inc.;

2.

Based on my knowledge, this quarterly report does not contain anyuntrue statement of a material fact or omit to state a material fact necessaryto make the statements made, in light of the circumstances under which suchstatements were made, not misleading with respect to the period covered by thisquarterly report;

3.

Based on my knowledge, the financial statements, and other financialinformation included in this quarterly report, fairly present in all materialrespects the financial condition, results of operations and cash flows of theregistrant as of, and for, the periods presented in this quarterly report;

4.

The registrant’s other certifying officers and I areresponsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrantand have: 

 

a.

designed such disclosure controls and procedures to ensure thatmaterial information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularlyduring the period in which this quarterly report is being prepared;

 

 

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b.

evaluated the effectiveness of the registrant’s disclosure controls andprocedures as of a date within 90 days prior to the filing date of thisquarterly report (the “Evaluation Date”); and

c.

presented in this quarterly report our conclusionsabout the effectiveness of the disclosure controls and procedures based on ourevaluation as of the Evaluation Date;

 

5.

The registrant’s other certifying officers and I havedisclosed, based on our most recent evaluation, to the registrant’s auditorsand the audit committee of registrant’s board of directors (or personsperforming the equivalent function):

 

a.

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

b.

any fraud, whether or not material, that involvesmanagement or other employees who have a significant role in the registrant’sinternal controls; and

 

6.

The registrant’s other certifying officers and I haveindicated in this quarterly report whether or not there were significantchanges in internal controls or in other factors that could significantlyaffect internal controls subsequent to the date of our most recent evaluation,including any corrective actions with regard to significant deficiencies andmaterial weaknesses.

 

Date:    February18, 2003 

 
|   | By:    | /s/  EDWARD  W. SAVARESE           |
|--------|--------|----------------------------------------------|
|   |   | Edward W. Savarese   Chief Executive Officer |

 

 

 

** **

**Certification**

I, GerryBerg, certify that:

1.

I have reviewed this quarterly report on Form 10-QSB ofCom-Guard.com, Inc.;

2.

Based on my knowledge, this quarterly report does not contain anyuntrue statement of a material fact or omit to state a material fact necessaryto make the statements made, in light of the circumstances under which suchstatements were made, not misleading with respect to the period covered by thisquarterly report;

3.

Based on my knowledge, the financial statements, and other financialinformation included in this quarterly report, fairly present in all materialrespects the financial condition, results of operations and cash flows of theregistrant as of, and for, the periods presented in this quarterly report;

 

 

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4.

The registrant’s other certifying officers and I areresponsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant andhave: 

 

a.

designed such disclosure controls and procedures to ensure thatmaterial information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularlyduring the period in which this quarterly report is being prepared;

b.

evaluated the effectiveness of the registrant’s disclosure controls andprocedures as of a date within 90 days prior to the filing date of thisquarterly report (the “Evaluation Date”); and

c.

presented in this quarterly report our conclusionsabout the effectiveness of the disclosure controls and procedures based on ourevaluation as of the Evaluation Date;

 

5.

The registrant’s other certifying officers and I havedisclosed, based on our most recent evaluation, to the registrant’s auditorsand the audit committee of registrant’s board of directors (or personsperforming the equivalent function): 

 

a.

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

b.

any fraud, whether or not material, that involvesmanagement or other employees who have a significant role in the registrant’sinternal controls; and

 

6.

The registrant’s other certifying officers and I haveindicated in this quarterly report whether or not there were significantchanges in internal controls or in other factors that could significantlyaffect internal controls subsequent to the date of our most recent evaluation,including any corrective actions with regard to significant deficiencies andmaterial weaknesses.

 

Date:    February18, 2003 

 
|   | By:    | /s/  GERRY B.  BERG           |
|--------|--------|-----------------------------------------|
|   |   | Gerry B. Berg   Chief Financial Officer |

 

 

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