**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-QSB**

 

**QUARTERLYREPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For The Quarterly Period Ended September 30,2003**

 

**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 asspecified in its charter)

 

 

| **NEVADA**                                                                          |   | **33-0879853**         |
|-------------------------------------------------------------------------------------|--------|------------------------|
| (State or  other jurisdiction of incorporation or organization)                     |   | (IRS  Employer ID No.) |
|                                                                                |   |                   |
| **2075 Corte 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 reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe past 12 months (or for such shorter period that the registrant was requiredto file such reports), and (2) has been subject to such filing requirements forthe past 90 days.

Yes  ý    No  o

 

The number of shares outstanding of the registrant’s common stock as ofNovember 12, 2003 was 19,772,006.

 

 

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| **PART I - FINANCIAL INFORMATION** |                                                                                                                               |
|------------------------------------|------------------------------------------------------------------------------------------------------------------------------------|
|                               |                                                                                                                               |
|                               | ITEM 1. CONDENSED FINANCIAL STATEMENTS                                                                                             |   |
|                               |                                                                                                                               |   |
|                               | Condensed Balance Sheets    As of September 30, 2003 (unaudited) and June 30, 2003                   |   |
|                               |                                                                                                                               |   |
|                               | Condensed Statements of Operations for the    three months ended September 30, 2003 and 2002 (unaudited)  |   |
|                               |                                                                                                                               |   |
|                               | Condensed  Statements of Cash Flows for the    three months ended September 30, 2003 and 2002 (unaudited) |   |
|                               |                                                                                                                               |   |
|                               | Notes to  Condensed Financial Statements as of September 30, 2003 (unaudited)                                                 |   |
|                               |                                                                                                                               |   |
|                               | ITEM 2.  MANAGEMENT’S  DISCUSSION AND ANALYSIS 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**                     |                                                                                                                               |

 

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**COM-GUARD.COM,INC.CONDENSED BALANCE SHEETS**

 
|                                                                                                                                  |   | **9/30/03**     |       | **6/30/03** |       |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------|------------|-------------|------------|
|                                                                                                                                  |   | **(unaudited)** |       |        | ** ** |
| **ASSETS**                                                                                                                            |   |            |       |        |       |
|                                                                                                                                  |   |            |       |        |       |
| **CURRENT ASSETS**                                                                                                                    |   |            |       |        |       |
| Cash and cash equivalents                                                                                                             |   | $               | 3,715      |        | $          | 141,504 |   |
| Accounts receivable                                                                                                                   |   | 125             |       | 2,125       |       |
| Inventories                                                                                                                           |   | 240,795         |       | 240,795     |       |
| Related party receivables                                                                                                             |   | 15,819          |       | 15,319      |       |
|                                                                                                                                  |   |            |       |        |       |
| **TOTAL ASSETS**                                                                                                                      |   | $               | 260,454    |        | $          | 399,743 |   |
|                                                                                                                                  |   |            |       |        |       |
| **LIABILITIES AND STOCKHOLDERS’ DEFICIENCY**                                                                                     |   |            | ** ** |        | ** ** |
|                                                                                                                                  |   |            |       |        |       |
| **CURRENT LIABILITIES**                                                                                                               |   |            |       |        |       |
| Line of credit — bank                                                                                                            |   | $               | 24,978     |        | $          | 21,443 |   |
| Accounts payable                                                                                                                      |   | 228,101         |       | 177,673     |       |
| Accrued payroll  liabilities                                                                                                          |   | 305,002         |       | 182,980     |       |
| Accrued interest                                                                                                                      |   | 6,685           |       | 5,907       |       |
| Accrued consulting fees                                                                                                               |   | 715,989         |       | 681,489     |       |
| Notes payable —  stockholders                                                                                                    |   | 25,000          |       | 15,000      |       |
| Total Current Liabilities                                                                                                             |   | 1,305,755       |       | 1,084,492   |       |
|                                                                                                                                  |   |            |       |        |       |
| **LONG-TERM LIABILITIES**                                                                                                             |   |            |       |        |       |
| Notes payable —  stockholders                                                                                                    |   | 27,150          |       | 27,150      |       |
|                                                                                                                                  |   |            |       |        |       |
| **TOTAL LIABILITIES**                                                                                                                 |   | 1,332,905       |       | 1,111,642   |       |
|                                                                                                                                  |   |            |       |        |       |
| **COMMITMENTS AND CONTINGENCIES**                                                                                                     |   |            |       |        |       |
|                                                                                                                                  |   |            |       |        |       |
| **STOCKHOLDERS’ DEFICIENCY**                                                                                                     |   |            |       |        |       |
| Common stock, $.001 par value, 100,000,000 shares  authorized, 18,090,006 and 17,890,006 shares issued and outstanding,  respectively |   | 18,090          |       | 17,890      |       |
| Additional paid-in-capital                                                                                                            |   | 6,656,731       |       | 6,620,976   |       |
| Accumulated deficit                                                                                                                   |   | (7,747,272      | )          | (7,349,326  | )          |
| Total Stockholders’ Deficiency                                                                                                   |   | (1,072,451      | )          | (710,460    | )          |
|                                                                                                                                  |   |            |       |        |       |
| **TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY**                                                                               |   | $               | 260,454    |        | $          | 399,743 |   |

 

See accompanyingnotes to condensed financial statements.

 

2

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**COM-GUARD.COM, INC.CONDENSED STATEMENTS OF OPERATIONS**

(unaudited)

 
|                                                                                     |   | **Three  months ended  September 30,** |     |
|------------------------------------------------------------------------------------------|--------|---------------------------------------------|----------|
|                                                                                     |   | **2003**                                    |     | **2002** | ** ** |
|                                                                                     |   |                                        |     |   |   |
| **SALES – NET**                                                                     |   | $                                           | 3,038    |   | $ | 377 |   |
|                                                                                     |   |                                        |     |   |   |
| **PROVISION TO WRITE-DOWN INVENTORY**                                                    |   | —                                      |     | 75,000 |   |
|                                                                                     |   |                                        |     |   |   |
| **GROSS LOSS**                                                                           |   | 3,038                                       |     | (74,623 | ) |
|                                                                                     |   |                                        |     |   |   |
| **OPERATING EXPENSES**                                                                   |   |                                        |     |   |   |
| Consulting fees –  related party                                                    |   | 74,500                                      |     | 83,736 |   |
| Payroll and related cost                                                                 |   | 205,803                                     |     | 46,706 |   |
| Other general and administrative                                                         |   | 101,077                                     |     | 92,553 |   |
| Research and development                                                                 |   | 2,522                                       |     | 18,495 |   |
| Sales and marketing                                                                      |   | 16,039                                      |     | — |   |
| TOTAL OPERATING EXPENSES                                                                 |   | 399,941                                     |     | 241,490 |   |
|                                                                                     |   |                                        |     |   |   |
| **LOSS FROM OPERATIONS**                                                                 |   | (396,903                                    | )        | (316,113 | ) |
|                                                                                     |   |                                        |     |   |   |
| **OTHER INCOME (EXPENSE)**                                                               |   |                                        |     |   |   |
| Interest expense                                                                         |   | (1,185                                      | )        | (1,516 | ) |
| Interest income                                                                          |   | 142                                         |     | 1,486 |   |
| TOTAL OTHER INCOME  (EXPENSE)                                                            |   | (1,043                                      | )        | (30 | ) |
|                                                                                     |   |                                        |     |   |   |
| Loss before provision for income taxes                                                   |   | (397,946                                    | )        | (316,143 | ) |
| Provision for income taxes                                                               |   | —                                      |     | — |   |
|                                                                                     |   |                                        |     |   |   |
| **NET LOSS**                                                                             |   | $                                           | (397,946 | ) | $ | (316,143 | ) |
|                                                                                     |   |                                        |     |   |   |
| Net loss per share — basic and diluted                                              |   | $                                           | (0.02    | ) | $ | (0.03 | ) |
|                                                                                     |   |                                        |     |   |   |
| Weighted average number of shares outstanding  during the period —basic and diluted |   | 18,029,791                                  |     | 10,360,183 |   |

 

See accompanyingnotes to condensed financial statements.

 

3

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**COM-GUARD.COM,INC.CONDENSED STATEMENTS OF CASH FLOWS**

(unaudited)

 
|                                                                         |   | **Three months ended  September 30,** |     |
|------------------------------------------------------------------------------|--------|--------------------------------------------|----------|
|                                                                         |   | **2003**                                   |     | **2002** | ** ** |
| **CASH FLOWS FROM OPERATING ACTIVITIES:**                                    |   |                                       |     |   |   |
| Net loss                                                                     |   | $                                          | (397,946 | ) | $ | (316,143 | ) |
| Adjustments to reconcile net loss to net cash used  in operating activities: |   |                                       |     |   |   |
| Provision for inventory write-down                                           |   | —                                     |     | 75,000 |   |
| Stock issued for services                                                    |   | 40,000                                     |     | — |   |
| Changes in operating assets and liabilities:                                 |   |                                       |     |   |   |
| Accounts receivable                                                          |   | 2,000                                      |     | (1,290 | ) |
| Related party receivables                                                    |   | (500                                       | )        | — |   |
| Accounts payable and accrued payroll liabilities                             |   | 170,622                                    |     | (33,899 | ) |
| Accrued consulting fees                                                      |   | 34,500                                     |     | (1,442,900 | ) |
| Net Cash Used In Operating Activities                                        |   | (151,324                                   | )        | (1,719,232 | ) |
|                                                                         |   |                                       |     |   |   |
| **CASH FLOWS FROM INVESTING ACTIVITIES:**                                    |   |                                       |     |   |   |
| Net Cash Used In Investing Activities                                        |   | —                                     |     | — |   |
|                                                                         |   |                                       |     |   |   |
| **CASH FLOWS FROM FINANCING ACTIVITIES:**                                    |   |                                       |     |   |   |
| Proceeds from common stock to be issued                                      |   | —                                     |     | 2,679,258 |   |
| Repayments on notes payable — stockholders                              |   | —                                     |     | (104,000 | ) |
| Proceeds from notes payable - stockholders                                   |   | 10,000                                     |     | — |   |
| Net proceeds from line of credit — bank                                 |   | 3,535                                      |     | — |   |
| Net  Cash Provided By Financing Activities                                   |   | 13,535                                     |     | 2,575,258 |   |
|                                                                         |   |                                       |     |   |   |
| NET (DECREASE) INCREASE IN CASH AND CASH  EQUIVALENTS                        |   | (137,789                                   | )        | 856,026 |   |
|                                                                         |   |                                       |     |   |   |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                             |   | 141,504                                    |     | 82,281 |   |
|                                                                         |   |                                       |     |   |   |
| **CASH AND CASH EQUIVALENTS AT END OF PERIOD**                               |   | $                                          | 3,715    |   | $ | 938,307 |   |
|                                                                         |   |                                       |     |   |   |
| **SUPPLEMENTAL DISCLOSURE OF CASH  FLOW INFORMATION:**                       |   |                                       |     |   |   |
|                                                                         |   |                                       |     |   |   |
| Interest paid                                                                |   | $                                          | —   |   | $ | — |   |
| Taxes paid                                                                   |   | $                                          | —   |   | $ | — |   |

 

See accompanying notes to condensed financialstatements.

 

4

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

**NOTES****TO CONDENSEDFINANCIAL STATEMENTS**

**AS OF SEPTEMBER 30, 2003**

(unaudited)

 

**NOTE 1.  BASIS OF PRESENTATION**

** **

The accompanying unaudited condensed financial statements ofCom-Guard.com, Inc. (the “Company”) have been prepared pursuant to the rules ofthe Securities and Exchange Commission (the “SEC”) for quarterly reports onForm 10-QSB and do not include all of the information and note disclosures requiredby generally accepted accounting principles. These condensed financialstatements and notes herein are unaudited, but in the opinion of management,include all the adjustments (consisting only of normal recurring adjustments)necessary for a fair presentation of the Company’s financial position, resultsof operations, and cash flows for the periods presented. These financialstatements should be read in conjunction with the Company’s audited financialstatements and notes thereto included in the Company’s Form 10-KSB for the yearended June 30, 2003 as filed with the SEC on October 8, 2003. Interimoperating results are not necessarily indicative of operating results for anyfuture interim period or for 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 changed its name toCOM-GUARD.COM, INC. The Company sells products that afford security protectionto computer hardware and software in microcomputers.

 

**Stock Options**

 

On August 15, 2003, the Company’s Boardof Directors approved stock options to Officers, Directors and Employees of theCompany.  Officers were granted optionsto purchase an aggregate of up to 1,224,000 shares of common stock of the Company.  408,000 shares are vested and the balancevest equally monthly over the next twenty-four months.  Directors were granted options to purchasean aggregate of up to 2,160,000 shares of common stock of the Company.  720,000 shares are vested and the balancevest equally monthly over the next twenty-four months.  Employees were granted options to purchasean aggregate of up to 642,000 shares of common stock of the Company.  234,000 shares are vested and the balancevest equally monthly over the next twenty-four months.  The exercise price of these stock options is$0.20, which was approximate to their fair market value at the date ofgrant.  The term of all options is tenyears.  The vesting schedule andthe period required for full exercisability of the stock options is at thediscretion of the Board of Directors.

 

The Company applies Accounting Principles Board (“APB”) Opinion 25,Accounting for stock issued to Employees and related interpretations inaccounting for options granted to employees, officers and directors.  Under APB Opinion 25, if the exercise priceof the Company’s stock options equal or exceeds the market price of theunderlying stock on the date of grant, no compensation cost is recognized.  For the options granted in August 2003,the exercise price of each option approximated the market price of theCompany’s stock on the date of grant and options expire in ten years.

 

SFAS No. 123, Accounting for Stock-Based Compensation, as amended bySFAS No. 148, Accounting for Stock-Based Compensation – Transition andDisclosure, requires the Company to provide pro forma information regarding netincome and earnings per share for each period presented as if compensation costfor the Company’s stock options has determined in accordance with the fair marketvalue based method prescribed in SFAS No. 123. The Company estimates the fair value of each stock option at the grantdate by using the Black-Scholes option pricing model with the followingweighted average assumptions used for the grants in August 2003; nodividend yield for all years; expected volatility of 183%; risk-free interestrate of 3%, and an expected life of 10 years.

 

Under the accounting provisions of SFAS No. 123, as amended by SFAS No.148, the Company’s net loss and net loss per common share would have been asfollows:

 

5

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|                                               |   |        |   | **For the  three months ended  Ended September 30, 2003** |     |
|----------------------------------------------------|--------|-------------|--------|----------------------------------------------------------------|----------|
|                                               |   |        |   |                                                           |     |
| Net loss                                           |   | As reported |   | $                                                              | (397,946 | ) |
|                                               |   | Pro forma   |   | $                                                              | (676,878 | ) |
| Net loss per common share – basic and diluted |   | As reported |   | $                                                              | (.02     | ) |
|                                               |   | Pro forma   |   | $                                                              | (.04     | ) |

 

A summary of the status of the Company’s option plans as ofSeptember 30, 2003 and the changes during the period ending on that dateis presented below:

 
| **September 30, 2003**                                                  |   | **Shares** |   | **Weighted  Average  Exercise Price** |   |
|------------------------------------------------------------------------------|--------|------------|--------|---------------------------------------|--------|
| Outstanding at inception                                                     |   | —     |   | —                                |   |
| Granted                                                                      |   | 4,026,000  |   | $                                     | .20    |   |
| Forfeited                                                                    |   | —     |   | —                                |   |
| Outstanding at September 30, 2003                                       |   | 4,026,000  |   | $                                     | .20    |   |
|                                                                         |   |       |   |                                  |   |
| Options exercisable at September 30,  2003                              |   | 1,473,000  |   | $                                     | .20    |   |
|                                                                         |   |       |   |                                  |   |
| Weighted average fair value of options  granted to employees during the year |   | $          | .19    |                                  |   |   |
|                                                                              |        |            |        |                                       |        |  |  |

 

The following table summarizes information about the stock optionsoutstanding at September 30, 2003:

 
|               |   | **Options  outstanding**                             |      |                                               |       | **Options  exercisable**              |   |
|--------------------|--------|------------------------------------------------------|-----------|----------------------------------------------------|------------|---------------------------------------|--------|
| **Exercise price** |   | **Number  outstanding at  September 30,  2003** |      | **Weighted  average  remaining  contractual life** |       | **Weighted  average  exercise price** |   | **Number  exercisable at  September 30,  2003** |   | **Weighted  average  exercise price** |   |
|               |   |                                                 |      |                                               |       |                                  |   |   |   |   |   |
| $                  | .20    |                                                 | 4,026,000 |                                               | 9.92 years |                                  | $      | .20 |   | 1,473,000 |   | $ | .20 |   |
|                    |        |                                                      |           |                                                    |            |                                       |        |  |  |  |  |  |  |  |

 

**Use ofEstimates**

 

Inpreparing financial statements in conformity with accounting principlesgenerally accepted in the United States of America, management is required tomake estimates and assumptions that affect the reported amounts of assets andliabilities and the disclosure of contingent assets and liabilities at the dateof the financial statements and revenues and expenses during the reportedperiod.  Actual results could differfrom those estimates.

 

6

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**Loss PerShare**

 

Basicand diluted net loss per common share for the three months endedSeptember 30, 2003 and 2002 is computed based upon the weighted averagecommon shares outstanding as defined by SFAS No. 128, “Earnings Per Share”.  Common stock equivalents have not beenincluded in the computation of diluted loss per share since the effect would beanti-dilutive.

 

**NOTE 2:****                                               ****LINE OF CREDIT - BANK**

 

AtSeptember 30, 2003, the Company had a line of credit from a bank forshort-term borrowings in the amount of $25,000, which bears interest atfloating rates.  This line is unsecuredand has an outstanding balance of $24,978. Total interest expense associated with the line of credit amountedto  $778 for the three months endedSeptember 30, 2003.

 

**NOTE 3:****                                               ****RELATED PARTY TRANSACTIONS**

 

Related Party Receivable

 

Fromtime to time, the Company advances monies to officers and directors for travel,personal expenditures, and other matters. These advances are non-interest bearing and have no specified terms ofrepayment.

 

Legal Counsel

 

TheCompany’s legal counsel is a stockholder of the Company.  For the three months endedSeptember 30, 2003 and 2002, services rendered amounted to $17,913 and$8,558 respectively, and are included in other general and administrative expenses.

 

Consulting Services

 

Duringthe three months ended September 30, 2003 and 2002, the Company incurredconsulting fees for various corporate and administrative services performed byofficers, directors, and stockholders.

 

**NOTE 4****   ****:****                                           ****NOTES PAYABLE - STOCKHOLDERS**

 

Notespayable from stockholders, as of September 30, 2003 and June 30,2003, consisted of the following:

 
|                                                                                                      |   | **September 30,  2003** |   | **June 30,  2003** |   |
|-----------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|-------------------------|--------|
| $13,566 convertible note  payable, 7.5% interest rate, principal and interest due November 30,  2004 |   | $                            | 13,566 |                    | $      | 13,566 |   |
| $13,584 convertible note payable, 7.5%  interest rate, principal and interest due November 30, 2004       |   | 13,584                       |   | 13,584                  |   |
| $48,000 convertible note payable, 7.0%  interest rate, principal and interest due May 19, 2004            |   | 15,000                       |   | 15,000                  |   |
| $10,000 convertible note payable, 7.5% interest  rate, principal and interest due March 31, 2004     |   | 10,000                       |   | —                  |   |
|                                                                                                      |   | 52,150                       |   | 42,150                  |   |
| Current portion                                                                                           |   | 25,000                       |   | 15,000                  |   |
|                                                                                                      |   |                         |   |                    |   |
| Long –term portion                                                                                   |   | $                            | 27,150 |                    | $      | 27,150 |   |

 

7

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Theholders of the above convertible notes above have the option to convert at anytime only the entire amount of the unpaid principal and interest of the noteinto the shares of the Company’s common stock at a conversion price of $0.20 to$0.35 per share.

 

**NOTE 5:****                                                GOINGCONCERN**

 

Theaccompanying financial statements have been prepared assuming that the Companywill continue as a going concern, which contemplates the realization of assetsand the settlement of liabilities and commitments in the normal course ofbusiness.   During the three monthsended September 30, 2003, the Company incurred a net loss of $397,946 andnegative cash flows from operating activities of $151,324, has a stockholders’deficiency of $1,072,451, an accumulated deficit of $7,747,272 and a workingcapital deficiency of $1,045,301 at September 30, 2003.  These conditions raise substantial doubtabout the Company’s ability to continue as a going concern.

 

In view of these matters, realization of a major portion of the assetsin the accompanying balance sheet is dependent upon continued operations of theCompany, which in turn is dependent upon the Company’s ability to meet itsworking capital requirements, and the success of its future operations.  Management’s current plans are: (1) tofurther commercialize its own products,(2) to market new products, includingproducts from other manufacturers, and  (3) to continue to operateand improve e-commerce sites to sell its products.  Management believes that the action presently being taken torevise the Company’s operating and financial requirements provide theopportunity for the Company to continue as a going concern.

 

**NOTE6:****                                                STOCKHOLDERSDEFICIENCY**

 

Duringthe three months ended September 30, 2003, the Company settled $40,000 ofconsulting expenses with two stockholders by issuing 200,000 shares of commonstock at $.20 per share.  The number ofshares issued are based on the fair market value of the services provided.

 

**NOTE 7:****                                               ****SUBSEQUENT EVENTS**

 

DuringOctober and November 2003 the Company settled accrued consulting inthe amount of $296,000 by issuing 1,482,000 shares of common stock.

 

**ITEM 2.****                 MANAGEMENT’SDISCUSSION AND ANALYSIS OR PLANS OF OPERATION.**

 

The following discussion and analysis should be read in conjunction withthe condensed financial statements and notes thereto appearing elsewhere inthis Quarterly Report on Form 10-QSB. The discussion of the Company’s businesscontained in this Quarterly Report on Form 10-QSB may contain certainprojections, estimates and other forward-looking statements that involve anumber of risks and uncertainties, including those discussed below at “Risksand Uncertainties.” While this outlook represents management’s current judgmenton the future direction of the business, such risks and uncertainties couldcause actual results to differ materially from any future performance suggestedbelow. The Company undertakes no obligation to release publicly the results ofany revisions to these forward-looking statements to reflect events or circumstancesarising after the date hereof.

 

**OVERVIEW**

 

The Company has limited operating history and is no longer in thedevelopment stage. It’s principal business is the exploitation of nicheproducts for the microcomputer industry that provide enhanced system securityfor both individual users and network administrators. The Company’s initialproduct, Com-Guard, includes unique software and hardware that enables users toprotect and limit access to data; and to provide a security system against

 

8

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tampering and unauthorized use of computers.

 

The Com-Guard system monitors a computer or network and detects,through proprietary software and hardware, unauthorized attempts to use, tamperwith, or remove data or equipment. The system is designed to generate an alarm,which can be sent to any receiving device, including pagers, telephones, andother computers.

 

The market for Com-Guard consists of individual users and industry. Thepopularity of the Internet has created a need for both data security and accesslimitations. Limiting access to sensitive and/or confidential files has grownto be a need for all users of microcomputers.

 

Home automation, including systems to provide “internal” security tocertain areas of a home or office, represents an additional market forCom-Guard. The system, installed in a PC, has the ability to function as aninternal home security system, controlling a series of sensors to protectagainst theft and intrusion.

 

The Company has commenced the initial marketing of its products.However, quarter-to-quarter financial comparisons may be of limited usefulnessnow and for the next several quarters as CGC continues to market its products.

 

The Company has recently entered into its first international licenseagreement. The Licensee will pay a small license fee so that the end user mayuse the Com-GuardTM software product up to nine (9) months. After the ninemonths period, the user can buy the product for the suggested retail price. CGCwill then be paid a percentage of the retail sales generated.

 

We have started efforts to market and sell our products through ourwebsite: www.com-guard.com and a number of other commercial websites. Inaddition, we are working on other avenues of distribution and sales for ourproducts. Funds recently raised through a Private Placement offering have beenutilized for product development, marketing and general working capital. Wecurrently anticipate that we have sufficient cash flow for approximately thenext three months. We will need to improve its working capital position. Wewill need to increase revenue or raise additional funds to fully develop ourbusiness. There can be no assurance, however, that we will be able to completeany additional debt or equity financing on favorable terms or at all, or thatany such financings, if completed, will be adequate to meet our capitalrequirements. Any additional equity or convertible debt financings could resultin substantial dilution to our stockholders. If adequate funds are notavailable, we will be required to delay, reduce or eliminate some or all of ourplanned activities. Our inability to fund our capital requirements would have amaterial adverse effect on the Company. We currently have adequate cash resources to continue throughDecember 31, 2003.

 

Also See “Risks and Uncertainties” included in this discussion.

 

**RESULTS OF OPERATIONS**

 

**Net Revenues**

 

Revenues were $3,038 and $377 for the three-month period endedSeptember 30, 2003 and 2002, respectively.  The increase in sales was primarily related to increase inrevenue from web site Internet sales.

 

**Consulting fees.**

 

For the three months ended September 30, 2003 and 2002, consultingfees were $74,500 and $83,736.  Thisdecrease was due to the Company utilizing less consulting services, mainlyengineering, during the current quarter.

 

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**Payroll and relatedcosts.**

 

Payroll for the Company commenced on September 1, 2002.  Payroll and related costs for the threemonths ended September 30, 2003 and 2002 were $205,803 compared to  $46,706 for the previous year.

 

**Other general and administrative expenses.**

 

Other general and administrative expenses for the three months endedSeptember 30, 2003 were $101,077. Other general and administrativeexpenses for the three months ended September 30, 2002 were $92,553 anincrease of $8,524.  Overall expensesfor general corporate functions remained essentially the same as the prioryear.

 

**Research and development expenses.**

 

For the three months ended September 30, 2003, research anddevelopment expenses were $2,522. For the three months ended September 30,2002, research and development expenses were $18,495 a decrease of$15,973.  Overall costs during thequarter decreased due to the Company completing certain of its products duringthe quarter.

 

**Sales and marketing**

 

Sales and marketing for the three months ended September 30, 2003and 2002 were $16,039 and $0.  Theincrease in sales and marketing was due to increased efforts by the Company tomarket its products during the quarter.

 

**Liquidity and capitalresources.**

 

  We have financed our operations primarily through cashgenerated from the sale of its stock and loans to us. We are no longerclassified as a development stage company and have commenced the sales andmarketing of our products.

 

During the three months ended September 30, 2003, the Company incurred a net loss of $397,946and negative cash flows from operating activities of $151,324, has astockholders’ deficiency of $1,072,451, an accumulated deficit of $7,747,272and a working capital deficiency of $1,045,301.

 

During the year ended June 30, 2000, the Company acquired certainhardware ISA circuit boards from a current shareholder for approximately$638,000. This shareholder currently owns 600,000 shares of our stock. Thisinventory has since been written down to $60,000 based on its current value.During the year ended June 30, 2001, the Company acquired a new series ofPCI circuit boards from another shareholder for $600,000. As of March 31,2003, this inventory has been reduced to $165,000. This shareholder currentlyowns 857,142 shares of our common stock. CGC is the sole licensee outside ofKorea for these circuit board products. We are not aware that either Guardtecor Software Technologies have ever sold these same products to any other thirdparty. CGC has the license rights to manufacture (outsource) these productsfrom other outside vendors. We will, based on sales and demand, determinewhether to outsource manufacturing to another vendor or reorder from Guardtec.During the previous two years we have been developing, refining and testing oursoftware for these products. We have recently completed a new version of itsour software for these products and are pursuing sales opportunities.

 

In addition to the software developed for the hardware circuit boards,we also have software applications that can be sold as separate products. Sincehardware related products have a higher cost to manufacture than stand-alonesoftware products, we are currently placing a strong emphasis on our standardsoftware products to generate revenue. We are developing strategies in certainkey target areas to market our hardware/software products.

 

Our auditors have expressed their uncertainty as to our ability tocontinue as a going concern. They cite the minimal

 

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capital resources available to meet existing and anticipatedobligations.  Management’s current plansare: (1) to further commercialize its own products, (2) to market new products,including products from other manufacturers, and  (3) to continue to operate and improve e-commerce sites to sellits products.  To successfully executeits current plans, the Company will need to improve its working capitalposition.  The Company plans to overcomethe circumstances that impact our ability to remain a going concern through acombination of achieving profitability, raising additional debt and equityfinancing, and renegotiating existing obligations.

 

There can be no assurance, however, that we will be able to completeany additional debt or equity financing on favorable terms or at all, or thatany such financings, if completed, will be adequate to meet our capitalrequirements. Any additional equity or convertible debt financings could resultin substantial dilution to our stockholders. If adequate funds are notavailable, we will be required to delay, reduce or eliminate some or all of ourplanned activities. Our inability to fund our capital requirements would have amaterial adverse effect on the Company. We currently have adequate cash resources to continue throughDecember 31, 2003.

 

# **CRITICALACCOUNTING POLICIES**

# ** **

The Companybelieves the following are its most critical accounting policies in that theyare the most important to the portrayal of the Company’s financial conditionand results and requires management’s most difficult, subjective or complexjudgments.

 

**InventoryValuation**

 

The Company regularly monitors and assesses our risk of not incurringany material sales of its inventory in the future.  This evaluation is based upon the Company’s sales force effortsand information the Company receives from potential customers.  Based upon the results of the analysis, theCompany records a valuation reserve for this risk.  This analysis requires the Company to make significant estimates,and changes in facts and circumstances could result in material changes in thevaluation reserve.

 

**RevenueRecognition**

 

TheCompany accounts for the licensing of software in accordance with AmericanInstitute of Certified Public Accountants (AICPA) Statement of Position (SOP97-2, Software Revenue Recognition). The Company recognizes revenue when (i) persuasive evidence of anarrangement exists; (ii) delivery has occurred or services have been rendered;(iii) the sales price is fixed or determinable; and (iv) collectibility isreasonably assured.  Post customersupport (PCS), if applicable, is recognized on delivery of applicablesoftware.  The Company accrues allestimated costs of providing the PCS services, including upgrades/enhancements.

 

Atthe time of the transaction, the Company assesses whether the fee is fixed anddeterminable based on the payment terms associated with the transaction andwhether collectibility is reasonably assured. If a significant portion of a fee is due after our normal paymentterms, the Company accounts for the fee as not being fixed anddeterminable.  In these cases, theCompany recognizes revenue as the fees become due.  Where the Company provides or delivers a product or service at aspecific point in time and there are no remaining obligations, the Companyrecognizes revenue upon the delivery of the product or completion of theservice.

 

**RISKS AND UNCERTAINTIES**

 

**Our business is capital intensive and willrequire additional financing which will result in dilution to existing shareholderswhich would in turn reduce the share price of earlier issued shares**

 

Our operations are capital intensive and growth will consume asubstantial portion of available working capital. We may require additionalcapital in order to fund are operations. We do not have any commitments foradditional financing and there can be no assurance that such additionalfunding, if required, will be available, or if available,

 

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will be available upon favorable terms. With respect to our ability toobtain financing on favorable terms, we do not have significant assets to serveas loan collateral. Still further, we presently do not have a sufficient cashflow to qualify for reasonable debt financing. Insufficient funds may preventus from implementing our business strategy. In the event we raise additionalfunds through the issuance of equity securities, dilution to the then existingstockholders will result and future investors may be granted rights superior tothose of existing stockholders. Accordingly, such dilution would reduce theshare price of the earlier issued shares.

 

**Lack of operations, positive cash flow andprofitability may continue which will affect our ability to remain in business**

 

As of March 31, 2003, planned principal operations commenced. Assuch we have a limited history of operations, the generation of positive cashflow or profits in the industries in which we participate. If we do notgenerate positive cash flow and hence become profitable, we may not be able toremain in business.

 

**Uncertainty of commercial success may affectour ability to remain in business**

 

With respect to our revenue and profitability prospects, we may not beable to achieve commercial success with our Com-Guard product. Furthermore, thecomputer industry is characterized by rapid change and growth. Accordingly, wemay not be able to keep up with the pace of technological change or fund itsgrowth. If we fail to achieve commercial success, we will continue to suffernet losses and we will have to go out of business.

 

**Competition may have an adverse effect on ourbusiness**

 

We are subject to competition from other companies that may try toemulate or compete with similar products or services. These competitors havebeen in the business longer than us and may have large executive and operatingstaffs. Our prospects may be adversely affected by competition from thesecompanies. The introduction of similar or superior products by current orfuture competitors could have a material adverse effect on our business andfinancial condition.

 

**Dependence on management will affect ourprofitability**

 

Future success depends on the continued services of Dr. Edward W.Savarese, Chief Executive Officer and Joe Sigismonti, President and Chief OperatingOfficer. While we intend to enter into customary employment agreements witheach of them, the loss of any of their services would be detrimental and couldhave a material adverse effect on the business, financial condition and resultsof operations. Future success is also dependent on our ability to identify,hire, train and retain other qualified managerial and other employees.Competition for these individuals is intense and increasing. We may not be ableto attract, assimilate, or retain qualified technical and managerial personneland our failure to do so could have a material adverse effect on the business,financial condition and results of operations.

 

**Dependence on proprietary technology andrisks of third party infringement claims could adversely affect our businessand results of operations**

 

Although we have received patent protection, our measures to protectour current proprietary rights may be inadequate to prevent misappropriation ofsuch rights or that our competitors will not independently develop or patenttechnologies that are substantially equivalent to or superior to ourtechnologies. Additionally, although we believe that our products andtechnologies do not infringe upon the proprietary rights of any third parties,that third parties may assert infringement claims against products andtechnologies that we license, or has the rights to use, from third parties. Anysuch claims, if proved, could materially and adversely affect our business andresults of operations. In addition, though any such claims may ultimately proveto be without merit, the necessary management attention to, and legal costsassociated with litigation or other resolution of such claims could materiallyand adversely affect our business and results of operations.

 

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**The results of research and developmentefforts are uncertain and we may not be able to compete effectively in themarketplace**

 

We will need to make significant research and development expendituresto remain competitive. While we perform extensive usability and beta testing ofnew products, the products we are currently developing or may develop in thefuture may not be technologically successful. If they are not technologicallysuccessful, the resulting products may not achieve market acceptance and theseproducts may not compete effectively with products of competitors currently inthe market or introduced in the future. If we are unsuccessful in themarketplace, it may affect our ability to remain in business.

 

**Reliance on third party technologies mayresult in a decreasing demand for our products and our ability to remain inbusiness affect the value of your investment**

 

Our software products are designed to run on multiple operating systemsand integrate with security products from other vendors. Businesses in thecorporate market may not adopt such technologies as anticipated or will in thefuture migrate to other computing technologies that we do not support.Moreover, if our products and technology are not compatible with newdevelopments from these companies, as to which there can be no assurances, thebusiness, results of operations and financial condition could be materially andadversely affected. If we are unable to successfully and timely developproducts that operate under existing or new operating systems, or if pending oractual releases of the new operating systems delay the purchase of products,future net revenues and operating results could be materially adverselyaffected. Additionally, as hardware vendors incorporate additional server-based network management and security tools into network operating systems, thedemand may decrease for some products, including those currently underdevelopment. In the event such demand decreases, we will continue to suffer netlosses and we will have to go out of business.

 

**Our auditors have expressed doubts about ourability to continue as a going concern which may result in the loss of yourentire investment**

 

In preparing our audited financial statements, our auditors haveexpressed doubts about our ability to continue as a going concern. If wediscontinue operations, you will lose your entire investment.

 

**Risks Relating to Our Common Stock**

 

**Because our common stock has recently beenlisted on the NASD OTC Bulletin Board there can be no assurance that a regulartrading market for our common stock will ever be developed and as such theinvestors must be able to bear the financial risk of losing their entireinvestment**

 

Our common stock was listed on December 24, 2002 on the NASD OTCBulletin Board under the trading symbol “CGUD.” There has been only limitedtrading activity in our securities at this time and a regular trading marketfor our common stock may never be developed. We do not know if a market for ourcommon stock will be established or that, if established, a market will besustained. Therefore, investors should realize that they may be unable to sellour common stock if they purchase it. Accordingly, investors must be able tobear the financial risk of losing their entire investment in our common stock.

 

**Potential volatility of stock price willaffect the value of our common stock**

 

There can be no assurance that an active public trading market can beestablished or sustained. Furthermore, if a regular trading market for thecommon stock is established, the shares could be subject to significantfluctuations in response to operating results and other factors, many of whichare not within our control. Accordingly, you may not be able to obtain a satisfactoryprice for your shares if you need to sell some or all of your shares at a timewhen the shares may be depressed.

 

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**Dividends**

 

Wehave never paid a cash dividend on our common stock. We are not obligated topay a dividend on our common stock and do not anticipate payment of anydividends for the foreseeable future. We anticipate retaining our earnings tofinance our operations, growth, and expansion.

 

**ITEM3.  CONTROLS ANDPROCEDURES**

 

Evaluation of disclosure controls and procedures.  Edward W. Savarese, our Chief ExecutiveOfficer and Gerry B. Berg, our Chief Financial Officer, have preformed anevaluation of the Company’s disclosure and procedures, as that term is definedin Rule 13a-14 © of the Securities Exchange Art of 1934, as amended (the“Exchange Act”), as of the end of the period covered by this report and eachhas concluded that such disclosure controls and procedures are effective toensure that information required to be disclosed in our periodic reports filedunder the Exchange Act is recorded, processed, summarized and reported, withinthe time period specified by the Securities and Exchange Commission’s rules andregulations.

 

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****- OTHERINFORMATION**

 

**ITEM1.  LEGAL PROCEEDINGS**

 

None.

 

**ITEM2.  CHANGES IN SECURITIESAND USE OF PROCEEDS**

 

None

 

**ITEM3.  DEFAULTS UPONSENIOR SECURITIES**

 

None

 

**ITEM4.  SUBMISSION OF MATTERSTO A VOTE OF SECURITY HOLDERS**

 

None.

 

**ITEM5.  OTHER INFORMATION**

 

None.

 

**ITEM6.  EXHIBITS ANDREPORTS ON FORM 8-K**

 

(a)  Exhibits:

 

None

 

(b)  Reports on Form 8-K:

 

None.

 

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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: November 17,  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)* |   |

 

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