**SECURITIES
AND EXCHANGE COMMISSION**
 WASHINGTON,
D.C. 20549
  **FORM
10-QSB**
  **QUARTERLY
REPORT UNDER SECTION 13 OR 15(d)**
 **OF
THE SECURITIES EXCHANGE ACT OF 1934**
  **For
The Quarterly Period Ended December 31, 2004**
  or
  **TRANSITION
REPORT 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.)
 
 **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 be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
  Yes X  No
__
 
 The
number of shares outstanding of the registrant's common stock as of February 11,
2005 was 43,159,901.
   
 **PART
I - CONSOLIDATED FINANCIAL INFORMATION**
  ITEM
      1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Condensed
Consolidated Balance Sheets as of December 31, 2004 (unaudited) and June
30,
2004                                                      2
 
 Condensed
Consolidated Statements of Operations for the three months ended December 31,
2004 and 2003
(unaudited)                                   3
 
 Condensed
Consolidated Statements of Operations for the six months ended December 31, 2004
and 2003
(unaudited)                                          4
 
 Condensed
Consolidated Statements of Cash Flows for the six months ended December 31, 2004
and 2003
(unaudited)                       5
 
 Notes to
Condensed Consolidated Financial Statements as of December 31, 2004
(unaudited)                                                         6
 
 
 ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLANS OF OPERATION 9
 
 ITEM 3.
CONTROLS AND PROCEDURES 12
 
  **PART
II - OTHER INFORMATION**
  ITEM 1.
LEGAL PROCEEDINGS  14
  ITEM 2.
CHANGES IN SECURITIES AND USE OF PROCEEDS  14
  ITEM 3.
DEFAULTS UPON SENIOR SECURITIES  14
  ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS  14
  ITEM 5.
OTHER INFORMATION  14
  ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K  14
  **SIGNATURES**   15
 
   **COM-GUARD.COM,
INC. AND SUBSIDIARY**
 **CONDENSED
CONSOLIDATED BALANCE SHEET** **S**
 December
      31,2004
    
    
    June
      30,
      2004ASSETS
    
    
    (unaudited
    )Current
      assetsCash
      and cash equivalents
    
    $
    131,000
    
    $
    394,000Accounts
      receivable
    
    
    806,000
    
    
    -Inventories
    
    
    7,000
    
    
    488,000Prepaid
      expenses and other current assets
    
    
    47,000
    
    
    -Total
      current assets
    
    $
    991,000
    
    $
    882,000LIABILITIES
      AND STOCKHOLDERS’ (DEFICIENCY) EQUITYCurrent
      liabilitiesAccounts
      payable
    
    $
    363,000
    
    $
    163,000Accrued
      expenses
    
    
    772,000
    
    
    590,000Line
      of credit — bank
    
    
    25,000
    
    
    25,000Convertible
      notes payable to a related party, net of unamortized discount of$0
      and$10,000,
      respectivelyas
      of June 30, 2004
    
    
    -
    
    
    10,000Loan
      payable - officer
    
    
    3,000
    
    
    3,000Total
      current liabilities
    
    
    1,163,000
    
    
    791,000Commitments
      and contingenciesStockholders’
      (deficiency) equityCommon
      stock, $.001 par value, 100,000,000 shares authorized, 42,109,901 and
      39,721,342 shares issued and outstanding, respectively
    
    
    42,000
    
    
    40,000Common
      stock to be issued, 400,000 and 293,559 shares,
    respectively
    
    
    -
    
    
    -Additional
      paid-in-capital
    
    
    9,692,000
    
    
    9,413,000Deferred
      consulting expense
    
    
    (200,000
    )
    
    -Accumulated
      deficit
    
    
    (9,706,000
    )
    
    (9,362,000
    )Total
      stockholders’ (deficiency) equity
    
    
    (172,000
    )
    
    91,000Total
      liabilities and stockholders’ (deficiency) equity
    
    $
    991,000
    
    $
    882,000
 
 See
accompanying notes to condensed consolidated financial statements. **COM-GUARD.COM,
INC. AND SUBSIDIARY**
  
   **CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS**
 **For
the Three Months Ended December 31, 2004 and 2003**
 (unaudited)
 
 2004
    
    
    2003Net
      sales
    
    $
    2,356,000
    
    $
    6,000Cost
      of goods sold
    
    
    2,251,000
    
    
    2,000Gross
      profit
    
    
    105,000
    
    
    4,000Selling,
      general and administrative expenses
    
    
    313,000
    
    
    334,000Loss
      from operations
    
    
    (208,000
    )
    
    (330,000
    )Other
      income (expense)Interest
      expense
    
    
    (3,000
    )
    
    (2,000
    )Gain
      on conversion of debt
    
    
    12,000
    
    
    -Total
      other income (expense)
    
    
    9,000
    
    
    (2,000
    )Loss
      before provision for income taxes
    
    
    (199,000
    )
    
    (332,000
    )Less:
      provision for income taxes
    
    
    -
    
    
    -Net
      loss
    
    $
    (199,000
    )
    $
    (332,000
    )Net
      loss per share - basic and diluted
    
    $
    -
    
    $
    (0.02
    )Weighted
      average number of shares outstanding - basic and diluted
    
    
    40,981,640
    
    
    19,383,898
 
 
 
 
 
 
 
 
 
 
 
 
 See
accompanying notes to condensed consolidated financial
statements.
  
  
 **COM-GUARD.COM,
INC. AND SUBSIDIARY**
 **CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS**
 **For
the Six Months Ended December 31, 2004 and 2003**
 (unaudited)
 
 2004
    
    
    2003Net
      sales
    
    $
    4,058,000
    
    $
    9,000Cost
      of goods sold
    
    
    3,830,000
    
    
    2,000Gross
      profit
    
    
    228,000
    
    
    7,000Selling,
      general and administrative expenses
    
    
    573,000
    
    
    734,000Loss
      from operations
    
    
    (345,000
    )
    
    (727,000
    )Other
      income (expense)Interest
      expense
    
    
    (11,000
    )
    
    (3,000
    )Gain
      on conversion of debt
    
    
    12,000
    
    
    -Total
      other income (expense)
    
    
    1,000
    
    
    (3,000
    )Loss
      before provision for income taxes
    
    
    (344,000
    )
    
    (730,000
    )Less:
      provision for income taxes
    
    
    -
    
    
    -Net
      loss
    
    $
    (344,000
    )
    $
    (730,000
    )Net
      loss per share - basic and diluted
    
    $
    (0.01
    )
    $
    (0.04
    )Weighted
      average number of shares outstanding - basic and diluted
    
    
    40,749,311
    
    
    18,710,179
 
 
 
 
 
 
 
 
 
 
 
 
 See
accompanying notes to condensed consolidated financial
statements.
  
  **COM-GUARD.COM,
INC. AND SUBSIDIARY**
 **CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS**
 (unaudited)
 For
      the Six months ended December 31,2004
    
    
    2003Cash
      Flows From Operating Activities:Net
      loss
    
    $
    (344,000
    )
    $
    (730,000
    )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Stock
      and options issued for services
    
    
    68,000
    
    
    74,000Amortization
      of discount on convertible notes payable
    
    
    10,000
    
    
    2,000Gain
      on conversion ofaccounts
      payabledebt
    
    
    (12,000
    )
    
    -Changes
      in operating assets and liabilities:Accounts
      receivable
    
    
    (806,000
    )
    
    2,000Inventories
    
    
    481,000
    
    
    -Prepaid
      expenses and other current assets
    
    
    (47,000
    )
    
    -Accounts
      payable and accrued expenses
    
    
    406,000
    
    
    409,000Net
      cash used in operating activities
    
    
    (244,000
    )
    
    (243,000
    )Cash
      Flows From Financing Activities:Proceeds
      from the sale of warrants
    
    
    1,000
    
    
    -Proceeds
      from convertible notes payable
    
    
    -
    
    
    110,000Repayment
      of convertible notes payable
    
    
    (20,000
    )
    
    -Proceeds
      from the sale of common stock
    
    
    -
    
    
    217,000Net
      proceeds (repayments) from bank line of credit
    
    
    -
    
    
    4,000Net
      cash (used in) provided by financing activities
    
    
    (19,000
    )
    
    331,000Net
      (decrease) increase in cash and cash equivalents
    
    
    (263,000
    )
    
    88,000Cash
      and cash equivalents at beginning of period
    
    
    394,000
    
    
    141,000Cash
      and cash equivalents at end of period
    
    $
    131,000
    
    $
    229,000Supplemental
      disclosure of cash flow information:Interest
      paid
    
    $
    -
    
    $
    -Taxes
      paid
    
    $
    -
    
    $
    -Supplemental
      disclosure of non-cash investing and financing activities:Common
      stock issued for accounts payable and accrued expenses
    
    $
    12,000
    
    $
    326,000Common
      stock issued for deferred consulting services, of which $62,000 has been
      amortized
    
    $
    141,000
    
    $
    -Options
      issued for deferred consulting services, of which $6,000 has been
      amortized
    
    $
    127,000
    
    $
    -
 
  See
accompanying notes to condensed consolidated financial statements.
 
   
   **COM-GUARD.COM,
INC. AND SUBSIDIARY**
 **NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
OF DECEMBER 31, 2004**
 (unaudited)
 
  **NOTE
1 - THE COMPANY AND BASIS OF PRESENTATION**
   The
accompanying interim condensed consolidated financial statements of
Com-Guard.com, Inc. and subsidiary (collectively, the "Company" or “Com-Guard”)
have been prepared pursuant to the rules of the Securities and Exchange
Commission (the "SEC") for quarterly reports on Form 10-QSB and do not include
all of the information and note disclosures required by generally accepted
accounting principles. These condensed consolidated financial statements 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, results of operations,
and cash flows for the periods presented. These condensed consolidated financial
statements should be read in conjunction with the Company's audited financial
statements and notes thereto included in the Company’s Form 10-KSB for the year
ended June 30, 2004 as filed with the SEC on October 13, 2004. Interim operating
results are not necessarily indicative of operating results for any future
interim period or for the full year.
   Com-Guard
was incorporated in the state of Nevada on October 7, 1998 as E-WORLD SECURITY,
INC and on April 16, 1999, the Company changed its name to COM-GUARD.COM, INC.
The Company’s planned principal operations commenced during the year ended June
30, 2003. The Company sells products that afford security protection to computer
hardware and software in microcomputers. The Company’s initial product,
Com-GuardTM, includes unique software and hardware that enables users to protect
and limit access to data and to provide a security system against tampering and
unauthorized use of computers. At the end of the fiscal year ended June 30,
2004, the Company formed its PC Products subsidiary which started formal
operating activities during the first quarter of fiscal year 2005. In addition
to generating potential sales of computers and accessories, which may include
Com-GuardTM security products, this subsidiary will be used to generate end-user
awareness of the Company’s security products.
   The
accompanying condensed consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. During the six
months ended December 31, 2004, the Company suffered a net loss of $344,000 and had
negative cash flows from operating activities of $244,000. As of December 31,
2004, the Company had an accumulated deficit of $9,706,000. The Company has
sustained its operations primarily through equity and debt financing. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern.
   In view
of these matters, realization of a major portion of the assets in the
accompanying consolidated  balance
sheet is dependent upon continued operations of the Company, which in turn is
dependent upon the Company's ability to meet its working capital requirements,
and the success of its future operations. Management’s current plans are: (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
its e-commerce sites to sell its products. Management believes that the actions
presently being taken to revise the Company's operating and financial
requirements may provide the opportunity for the Company to continue as a going
concern.
   **NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
   ***(A)
Principles of Consolidation***
   The
accompanying condensed consolidated financial statements include the accounts of
Com-Guard.com, Inc. and its wholly owned subsidiary, PC Products, Inc. All
significant intercompany accounts and transactions have been eliminated.
   ***(B)
Use of Estimates***
   In
preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and revenues and expenses during the reported
period. Actual results could differ from those estimates.
   ***(C)
Reclassifications***
   Certain
amounts from prior periods have been reclassified to conform to the current
period’s presentation.
   ***(D)
Stock Options and Warrants***
   In
accordance with Statement of Financial Accounting Standards ("SFAS") No. 123,
" *Accounting
for Stock-Based Compensation* ," the
Company has elected to account for Stock Options issued to employees under
Accounting Principles Board Opinion No. 25 ("APB Opinion No. 25") and related
interpretations. The Company accounts for stock options issued to non-employees
under the fair value method of SFAS No. 123. Under APB Opinion No. 25, if the
exercise price of the Company’s stock options equal or exceeds the market price
of the underlying stock on the date of grant, no compensation cost is
recognized.
   SFAS No.
123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148,
Accounting for Stock-Based Compensation - Transition and Disclosure, requires
the Company to provide pro forma information regarding net income and earnings
per share for each period presented as if compensation cost for the Company’s
stock options was determined in accordance with the fair market value based
method prescribed in SFAS No. 123.  The Company estimates the fair value of
each stock option at the grant date by using the Black-Scholes option pricing
model. The estimated fair value of each stock option granted in fiscal 2004
using the Black-Scholes option pricing model was based on the following weighted
average assumptions: no dividend yield; expected volatility of 183%; risk-free
interest rate of 3%, and an expected life of 6 years. The Company granted no
additional options or warrants to employees during the six months ended December
31, 2004.
   Under the
accounting provisions of SFAS No. 123, as amended by SFAS No. 148, the Company’s
pro forma net loss and net loss per common share reflects the expense related to
options issued to employees which is recognized over the vesting period. For the
six months ended December 31, 2004 and 2003, the pro forma net loss and net loss
per common share would have been as follows:
  Net
      loss:
    
    2004
    
    2003As
      reported
    $
    (344,000)
    $
    (730,000)Pro
      forma
    $
    (446,000)
    $
    (1,068,000)Net
      loss per common share - basic and fully diluted:As
      reported
    $
    (0.01)
    $
    (0.04)Pro
      forma
    $
    (0.01)
    $
    (0.06)
  ***(E)
Loss Per Share***
   Basic and
diluted net loss per share for all periods presented is computed based upon the
weighted average number of common shares outstanding as defined by SFAS No. 128,
"Earnings Per Share". Common stock equivalents, have not been included in the
computation of diluted loss per share since the effect would be anti-dilutive
for all periods presented.
   ***(F)
Concentration of Credit Risk Arising from Cash Deposits in Excess of Insured
Limits***
   The
Company maintains the majority of its cash balances in a financial institution
located in Carlsbad, California. The balance in this institution is insured by
the Federal Deposit Insurance Corporation up to $100,000. At December 31, 2004,
the Company's uninsured cash total was $31,000.
   ***(G)
Fair Value of Financial Instruments***
   SFAS No.
107, “Disclosures about Fair Value of Financial Instruments”, requires
disclosures of information about the fair value of certain financial instruments
for which it is practicable to estimate that value. For purposes of this
disclosure, the fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced sale or liquidation.
  The carrying
amounts of the Company’s financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses, line of
credit and notes payable, approximate fair value due to the relatively short
period to maturity for these instruments.
   ***(H)*** ***Rounding***
   All
amounts have been rounded to the nearest $1,000 except for share
amounts.
  ***(I*** ***)
Recent Accounting Pronouncements***
  In
December 2004, the FASB issued SFAS No. 123 (R), “Share-Based Payment”. SFAS No.
123 (R) revises SFAS No. 123, “Accounting for Stock-Based Compensation” and
supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”. SFAS
No. 123 (R) focuses primarily on the accounting for transactions in which an
entity obtains employee services in share-based payment transactions. SFAS No.
123 (R) requires companies to recognize in the statement of operations the cost
of employee services received in exchange for awards of equity instruments based
on the grant-date fair value of those awards (with limited exceptions). SFAS No.
123 (R) is effective as of the first interim or annual reporting period that
begins after June 15, 2005 for non-small business issuers and after December 15,
2005 for small business issuers. Accordingly, the Company will adopt SFAS No.
123 (R) in its quarter ending March 31, 2006. The Company is currently
evaluating the provisions of SFAS No. 123 (R) and has not yet determined the
impact, if any, that SFAS No. 123 (R) will have on its financial statement
presentation or disclosures.
   **NOTE
3 - LINE OF CREDIT - BANK**
   At
December 31, 2004, the Company had a line of credit from a bank for short-term
borrowing in the amount of $25,000, which bears interest at floating rates. This
line is unsecured. Total interest expense associated with the line of credit
amounted to $1,000 and $1,000 for the six months ended December 31, 2004 and
2003, respectively.
   **NOTE
4 - RELATED PARTY TRANSACTIONS**
   ***Convertible
Notes Payable - Related Party***
   During
fiscal years 2003 and 2004, the Company issued convertible notes to certain
individuals, at par, maturing at various dates throughout 2004, for an original
principal amount of $214,000. The notes bore interest at 7.0% and 7.5%, and were
convertible, at the option of the holder, into shares of the Company's common
stock at prices from $0.15 to $0.35 per share. During fiscal 2004, the holders
of the convertible notes converted outstanding debt and accrued interest of
approximately $124,000 into 1,234,642 shares of the Company's common stock of
which 293,559 shares were to be issued as of June 30, 2004.
   In August
and November 2004, the Company repaid the final $20,000 of the convertible notes
payable to a stockholder.
   In
conjunction with the sale of convertible notes payable during fiscal 2004, the
Company issued warrants to purchase an aggregate of 666,667 shares of the
Company’s common stock at a price of $0.15 per share. The warrants were valued
using the Black-Scholes pricing model and the aggregate fair value of $99,000
(limited to the face value of the notes) was recorded as discounts on notes
payable and is
being was amortized as additional interest expense over the life of the notes. During the
three and six month periods ended December 31, 2004, aggregate interest expense
associated with the amortization of the discount of notes payable was $3,000 and
$10,000, respectively. As of December 31, 2004 there is no remaining unamortized
discount on notes payable.
   In August
and November 2004, the Company repaid the final $20,000 of the convertible notes
payable to a stockholder.
  
 **NOTE
5 - STOCKHOLDERS’ EQUITY**
   During
the six months ended December 31, 2004, the Company issued 2,095,000 shares of
common stock at prices ranging from $0.05 and $0.10 per share for consulting
services totaling $134,000 and had agreed to issue an additional 150,000 shares
at $0.05 per share totaling $7,500. The number of shares issued was based on the
fair market value of the services provided
.. Of this, 1,650,000 shares were issued, 150,000 shares were to be issued, in
December 2004 as compensation for consulting services  to be
provided during succeeding twelve months  with an
aggregate value of $141,000 . As of
December 31, 2004, the unamortized balance, presented as deferred consulting
expense in the condensed consolidated balance sheets, was $79,000.
  During
the three months ended December 31, 2004, the Company granted options to acquire
an aggregate of 3,400,000 shares of the Company’s common stock at $0.05 per
share, the fair value of the common stock at the date of grant, to certain
consultants as compensation for consulting services to be provided during
succeeding twelve months. These options were valued at $ 127 ,000
using the Black-Scholes pricing model. As of December 31, 2004, the unamortized
balance, presented as deferred consulting expense in the condensed consolidated
balance sheets, was $121,000.
  In
December 2004, the Company agreed to convert $24,000 of accounts payable into
250,000 shares of its common stock to be
issued having a
value of $12,000 resulting in a gain of $12,000, representing the difference in
the aggregate conversion price and the market value of the shares on the
conversion date.
   In July
2004, the Company issued 293,559 shares of its common stock which represented
the common stock to be issued as of June 30, 2004 as part of the June 2004
conversion of convertible notes payable and accrued interest (see Note 4 above).
   
  **NOTE
6 -  SUBSEQUENT EVENTS**
 
 Subsequent
to December 31, 2004, the Company issued 850,000 shares of its common stock to a
consultant for the exercise of an option of $.05 per share, for which the
Company received $10,000 in cash and the balance was a reduction in accrued
consulting fees of  $32,500 owed to the consultant. In addition, the
Company issued an additional 200,000 shares of its common stock for the exercise
of an option with a fair market value of $0.05 per share to a consultant for
services.
 
  On
January 21, 2005, the Company’s Board of Directors approved the following stock
options at $.05 per share to Officers, Directors and Employees of the Company.
Officers were granted options to purchase an aggregate of up to 1,250,000 shares
of common stock of the Company. Directors were granted options to purchase an
aggregate of up to 1,800,000 shares of common stock of the Company. Employees
were granted options to purchase an aggregate of up to 400,000 shares of common
stock of the Company.
   
   **ITEM
      2.**
    **MANAGEMENT'S
      DISCUSSION AND ANALYSIS OR PLANS OF OPERATION.**
   The
following discussion and analysis should be read in conjunction with the
condensed consolidated financial statements and notes thereto appearing
elsewhere in this Quarterly Report on Form 10-QSB. The discussion of the
Company’s business contained in this Quarterly Report on Form 10-QSB may contain
certain projections, estimates and other forward-looking statements that involve
a number of risks and uncertainties, including those discussed below at "Risks
and Uncertainties." While this outlook represents management’s current judgment
on the future direction of the business, such risks and uncertainties could
cause actual results to differ materially from any future performance suggested
below. The Company undertakes no obligation to release publicly the results of
any revisions to these forward-looking statements to reflect events or
circumstances arising after the date hereof.
   **OVERVIEW**
   The
Company has limited operating history and is no longer in the development stage.
Its’ principal business is the exploitation of niche products for the
microcomputer industry that provide enhanced system security for both individual
users and network administrators. The Company's initial product, Com-GuardTM,
includes unique software and hardware that enables users to protect and limit
access to data and to provide a security system against tampering and
unauthorized use of computers.
   The
Com-GuardTM system monitors a computer or network and detects, through
proprietary software and hardware, unauthorized attempts to use, tamper with, or
remove data or equipment. The system is designed to generate an alarm, which can
be sent to any receiving device, including pagers, telephones, and other
computers.
   The
market for Com-GuardTM consists of individual users and industry. The popularity
of the Internet has created a need for both data security and access
limitations. Limiting access to sensitive and/or confidential files has grown to
be a need for all users of microcomputers.
   Home
automation, including systems to provide "internal" security to certain areas of
a home or office, represents an additional market for Com-GuardTM. The system,
installed in a PC, has the ability to function as an internal home security
system, controlling a series of sensors to protect against theft and intrusion.
   The
Company has commenced the initial marketing of its products. However,
period-to-period financial comparisons may be of limited usefulness now and for
the near future as the Company continues to market its products.
   We have
started efforts to market and sell our products through our website:
www.com-guard.com and a number of other commercial websites. In addition, we are
working on other avenues of distribution and sales for our products. At the end
of fiscal 2004, we formed our PC Products subsidiary that started formal
operating activities during the first quarter of fiscal year 2005. In addition
to generating potential sales of computers and accessories, which may include
the Company’s security products, this subsidiary will be used to generate
end-user awareness of our security products. As more fully described below, our
PC Products subsidiary accounted for a preponderance of our sales and gross
profit during the quarter ended December 31, 2004. We anticipate that this trend
will continue for at least the next several quarters.
   Funds
raised through a Private Placement offering have been utilized for marketing and
general working capital. We currently anticipate that we have sufficient cash
flow for approximately the next twelve months. We will need to improve our
working capital position. We will need to increase revenue or raise additional
funds to fully develop our business. There can be no assurance, however, that we
will be able to complete any additional debt or equity financing on favorable
terms or at all, or that any such financings, if completed, will be adequate to
meet our capital requirements. Any additional equity or convertible debt
financings could result in substantial dilution to our stockholders. If adequate
funds are not available, we will be required to delay, reduce or eliminate some
or all of our planned activities. Our inability to fund our capital requirements
would have a material adverse effect on the Company.
   Also See
“Risks and Uncertainties” included in this discussion.
   **Results
of Operations**
   **Three
Months Ended December 31, 2004**
   **Sales**
   Sales for
the three months ended December 31, 2004 were $2,356,000 compared to $6,000 for
the three months ended December 31, 2003, an increase of $2,350,000. Sales
during the three-month period ended December 31, 2003 were entirely due to
Internet sales of our downloadable security products. During the three months
ended December 31, 2004, such sales amounted to approximately $1,000. The
remaining sales, during the quarter ended December 31, 2004, were derived from
sales of $2,355,000 of sales of other manufacturers hardware and software
products though the Company’s PC Products subsidiary.
   **Cost
of Goods Sold**
   Cost of
goods sold for the three months ended December 31, 2004 was $2,251,000 and for
the three months ended December 31, 2003, such costs were $2,000. The increase
is attributed to the cost of goods sold of $2,251,000 of cost of goods sold for
other manufacturers hardware and software products though the Company’s PC
Products subsidiary.
   **Selling,
general and administrative**
   For three
months ended December 31, 2004, selling, general and administrative were
$313,000 compared to $334,000 for the three months ended December 31, 2003, a
decrease of $21,000. This decrease was due to reductions in wages attributed to
headcount reductions during the periods, and reductions in consulting expenses,
legal expenses, and marketing expenses due to limited working capital during the
period which were partially offset by increases in insurance and audit fees
during the periods.
   **Six
Months Ended December 31, 2004**
   **Sales**
   Sales for
the six months ended December 31, 2004 were $4,058,000 compared to $9,000 for
the six months ended December 31, 2003, an increase of $4,049,000. Sales during
the six-month period ended December 31, 2003 were entirely due to Internet sales
of our downloadable security products. During the six months ended December 31,
2004, such sales only amounted to approximately $2,000. The remaining sales,
during the six months ended December 31, 2004, were derived from sales of
$30,000 of Com Guard’s hardware products, and $4,026,000 of sales of other
manufacturers hardware and software products through the Company’s PC Products
subsidiary.
   **Cost
of Goods Sold**
   Cost of
goods sold for the six months ended December 31, 2004 was $3,830,000 compared to
$2,000 for the three months ended September 30, 2003, an increase of $3,828,000.
The increase is attributed to the cost of goods sold for the Com Guard’s
hardware products of $11,000, and $3,819,000 of cost of goods sold for other
manufacturers hardware and software products though the Company’s PC Products
subsidiary.
   **Selling,
general and administrative**
   For six
months ended December 31, 2004, selling, general and administrative were
$574,000 compared to $734,000 for the six months ended December 31, 2003, a
decrease of $160,000. This decrease was due to reductions in wages attributed to
headcount reductions during the periods, and reductions in consulting expenses,
legal expenses, and marketing expenses due to limited working capital during the
period which were partially offset by increases in insurance and audit fees
during the periods.
   **Liquidity
and Capital Resources**
   We have
financed our operations primarily through cash generated from the sale of our
stock and loans to us. We are no longer classified as a development stage
company and have commenced the sales and marketing of our products.
   During
the six months ended December 31, 2004, the Company incurred a net loss of
$344,000 and had negative cash flows from operating activities of
$244,000.
   Our
security products contain software developed for the hardware circuit boards and
we also have software applications that can be sold as separate products. Since
hardware related products (1) have a higher cost to manufacture than stand-alone
software products, and (2) recent trends showing that end-users are less likely
to purchase and install hardware-based products, we are currently placing a
strong emphasis on our standard software products to generate revenue. We are
developing strategies in certain key target areas to market our
hardware/software products.
   For
the year ended June 30, 2004, our auditors expressed their uncertainty as to our
ability to continue as a going concern. They cite the cash flow deficiency from
operations and the minimal capital resources available to meet existing and
anticipated obligations. Management’s current plans are: (1) to further
commercialize its own products; (2) to market new products, including products
from other manufacturers; (3) to continue to operate and improve e-commerce
sites to sell its products; and (4) to continue to generate profitable sales and
end-user awareness of our security products through our PC Products subsidiary.
To successfully execute its current plans, the Company will need to improve its
working capital position. The Company plans to overcome the circumstances that
impact our ability to remain a going concern through a combination of achieving
profitability, raising additional debt and equity financing, and renegotiating
existing obligations.
   There can
be no assurance, however, that we will be able to complete any additional debt
or equity financing on favorable terms or at all, or that any such financings,
if completed, will be adequate to meet our capital requirements. Any additional
equity or convertible debt financings could result in substantial dilution to
our stockholders. If adequate funds are not available, we will be required to
delay, reduce or eliminate some or all of our planned activities. Our inability
to fund our capital requirements would have a material adverse effect on the
Company.
  In
December 2004, the FASB issued SFAS No. 123 (R), “Share-Based Payment”. SFAS No.
123 (R) revises SFAS No. 123, “Accounting for Stock-Based Compensation” and
supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”. SFAS
No. 123 (R) focuses primarily on the accounting for transactions in which an
entity obtains employee services in share-based payment transactions. SFAS No.
123 (R) requires companies to recognize in the statement of operations the cost
of employee services received in exchange for awards of equity instruments based
on the grant-date fair value of those awards (with limited exceptions). SFAS No.
123 (R) is effective as of the first interim or annual reporting period that
begins after June 15, 2005 for non-small business issuers and after December 15,
2005 for small business issuers. Accordingly, the Company will adopt SFAS No.
123 (R) in its quarter ending March 31, 2006. The Company is currently
evaluating the provisions of SFAS No. 123 (R) and has not yet determined the
impact, if any, that SFAS No. 123 (R) will have on its financial statement
presentation or disclosures.
   
   **CRITICAL
ACCOUNTING POLICIES**
   The
Company believes the following are its most critical accounting policies in that
they are the most important to the portrayal of the Company’s financial
condition and results and requires management’s most difficult, subjective or
complex judgments.
   ***Inventory
Valuation***
   The
Company regularly monitors and assesses its risk of not incurring any material
sales of its inventory in the future. This evaluation is based upon the
Company’s sales force efforts and information the Company receives from
potential customers. Based upon the results of the analysis, the Company records
a writedown for this risk. This analysis requires the Company to make
significant estimates, and changes in facts and circumstances could result in
material changes in the inventory valuation.
   ***Revenue
Recognition***
   The
Company accounts for the licensing of software in accordance with American
Institute of Certified Public Accountants (AICPA) Statement of Position (SOP
97-2, *Software
Revenue Recognition* ). The
Company recognizes revenue when (i) persuasive evidence of an arrangement
exists; (ii) delivery has occurred or services have been rendered; (iii) the
sales price is fixed or determinable; and (iv) collectibility is reasonably
assured. Post customer support (PCS), if applicable, is recognized on delivery
of applicable software. The Company accrues all estimated costs of providing the
PCS services, including upgrades/enhancements.
   At the
time of the transaction, the Company assesses whether the fee is fixed and
determinable based on the payment terms associated with the transaction and
whether collectibility is reasonably assured. If a significant portion of a fee
is due after our normal payment terms, the Company accounts for the fee as not
being fixed and determinable. In these cases, the Company recognizes revenue as
the fees become due. Where the Company provides or delivers a product or service
at a specific point in time and there are no remaining obligations, the Company
recognizes revenue upon the delivery of the product or completion of the
service.
   **RISKS
AND UNCERTAINTIES**
   **Risks
Relating to Com-Guard.Com, Inc.**
   **Our
business is capital intensive and will require additional financing which will
result in dilution to existing shareholders which would in turn reduce the share
price of earlier issued shares.** Our
operations are capital intensive and growth will consume a substantial portion
of available working capital. We may require additional capital in order to fund
our operations. We do not have any commitments for additional financing and
there can be no assurance that such additional funding, if required, will be
available, or if available, will be available upon favorable terms. With respect
to our ability to obtain financing on favorable terms, we do not have
significant assets to serve as loan collateral. Still further, we presently do
not have a sufficient cash flow to qualify for reasonable debt financing.
Insufficient funds may prevent us from implementing our business strategy. In
the event we raise additional funds through the issuance of equity securities,
dilution to the then existing stockholders will result and future investors may
be granted rights superior to those of existing stockholders. Accordingly, such
dilution would reduce the share price of the earlier issued shares.
   **Lack
of operations, positive cash flow and profitability may continue which will
affect our ability to remain in business.** As of
March 31, 2003, planned principal operations have commenced. As such we
have a limited history of operations, the generation of positive cash flow or
profits in the industries in which we participate. If we do not generate
positive cash flow and hence become profitable, we may not be able to remain in
business.
   **Uncertainty
of commercial success may affect our ability to remain in business.** With
respect to our revenue and profitability prospects, we may not be able to (1)
achieve commercial success with our Com-Guard product; or (2) continue
profitable sales through our PC Products Subsidiary. Furthermore, the computer
industry is characterized by rapid change and growth. Accordingly, we may not be
able to keep up with the pace of technological change or fund its growth. If we
fail to achieve commercial success, we will continue to suffer net losses and we
will have to go out of business.
   **Competition
may have an adverse effect on our business.** We are
subject to competition from other companies that may try to emulate or compete
with similar products or services. These competitors have been in the business
longer than us and may have large executive and operating staffs. Our prospects
may be adversely affected by competition from these companies. The introduction
of similar or superior products by current or future competitors could have a
material adverse effect on our business and financial condition.
   **Dependence
on management will affect our profitability.** Future
success depends on the continued services of Dr. Edward W. Savarese, Chief
Executive Officer and Joe Sigismonti, President and Chief Operating Officer. The
loss of any of their services would be detrimental and could have a material
adverse effect on the business, financial condition and results of 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 able to attract,
assimilate, or retain qualified technical and managerial personnel and our
failure to do so could have a material adverse effect on the business, financial
condition and results of operations.
   **Dependence
on proprietary technology and risks of third party infringement claims could
adversely affect our business and results of operations.** Although
we have received patent protection, that our measures to protect our current
proprietary rights may be inadequate to prevent misappropriation of such rights
or that our competitors will not independently develop or patent technologies
that are substantially equivalent to or superior to our technologies.
Additionally, although we believe that our products and technologies do not
infringe upon the proprietary rights of any third parties, that third parties
may assert infringement claims against products and technologies that we
license, or has the rights to use, from third parties. Any such claims, if
proved, could materially and adversely affect our business and results of
operations. In addition, though any such claims may ultimately prove to be
without merit, the necessary management attention to, and legal costs associated
with litigation or other resolution of such claims could materially and
adversely affect our business and results of operations.
   **The
results of research and development efforts are uncertain and we may not be able
to compete effectively in the marketplace.** We will
need to make additional research and development expenditures to remain
competitive. While we perform usability and beta testing of new products, the
products we are currently developing or may develop in the future may not be
technologically successful. If they are not technologically successful, the
resulting products may not achieve market acceptance and these products may not
compete effectively with products of competitors currently in the market or
introduced in the future. If we are unsuccessful in the marketplace, it may
affect our ability to remain in business.
   **Reliance
on third party technologies may result in a decreasing demand for our products
and our ability to remain in business affect the value of your investment.** Our
software products are designed to run on multiple operating systems and
integrate with security products from other vendors. Businesses in the corporate
market may not adopt such technologies as anticipated or will not in the future
migrate to other computing technologies that we do not support. Moreover, if our
products and technology are not compatible with new developments from these
companies, as to which there can be no assurances, the business, results of
operations and financial condition could be materially and adversely affected.
If we are unable to successfully and timely develop products that operate under
existing or new operating systems, or if pending or actual releases of the new
operating systems delay the purchase of products, future net revenues and
operating results could be materially adversely affected. Additionally, as
hardware vendors incorporate additional server- based network management and
security tools into network operating systems, the demand may decrease for some
products, including those currently under development. In the event such demand
decreases, we will continue to suffer net losses and we will have to go out of
business.
   **Our
auditors have expressed doubts about our ability to continue as a going concern
which may result in the loss of your entire investment.** In
preparing our audited financial statements, our auditors have expressed doubts
about our ability to continue as a going concern. If we discontinue operations,
you will lose your entire investment.
   **Risks
Relating to Our Common Stock**
   **Due
to the fact that our common stock has recently been listed on the NASD OTC
Bulletin Board, there can be no assurance that a regular trading market for our
common stock will ever be developed. As such, the investors must be able to bear
the financial risk of losing their entire investment.** Our
common stock was listed on December 24, 2002 on the NASD OTC Bulletin Board
under the trading symbol "CGUD." There has been only limited trading activity in
our securities at this time. We do not know if a market for our common stock
will be established or that, if established, a market will be sustained.
Therefore, investors should realize that they may be unable to sell our common
stock if they purchase it. Accordingly, investors must be able to bear the
financial risk of losing their entire investment in our common stock.
   **Since
a significant portion of our common stock is being registered and may be
available for resale, a significant overhang on the market could depress the
market price of our stock which will reduce the value of your investment.** Following
the effective date of the July 14, 2004 registration statement, a maximum of
33,116,331 shares of our common stock will be eligible for resale to the public.
This amount of common stock represents a significant overhang on any market that
may develop for our common stock. If a substantial number of shares in this
overhang were sold in a short period of time, any market for our common stock
could be dramatically depressed which will result in a reduction of the value of
your investment.
   **Lack
of dividends may affect the value of your investment when compared to comparable
stock which does pay a dividend.** We have
never paid a cash dividend on our common stock. We are not obligated to pay a
dividend on our common stock and do not anticipate payment of any dividends for
the foreseeable future. We anticipate retaining our earnings to finance our
operations, growth, and expansion. The value of your stock may be reduced in
that prospective buyers may prefer a stock which does pay a dividend.
   **Potential
volatility of stock price will affect the value of our common stock.** There can
be no assurance that an active public trading market can be established or
sustained. Furthermore, if a regular trading market for the common stock is
established, the shares could be subject to significant fluctuations in response
to operating results and other factors, many of which are not within our
control. Accordingly, you may not be able to obtain a satisfactory price for
your shares if you need to sell some or all of your shares at a time when the
shares may be depressed.
   **Dividends**
   The
Company has never paid any cash dividends on its capital stock. The Company
currently anticipates that it will retain all available earnings for use in the
operation and expansion of its business, and does not anticipate paying any cash
dividends in the foreseeable future.
   **ITEM
3. CONTROLS AND PROCEDURES**
   Evaluation
of disclosure controls and procedures . Edward
W. Savarese, our Chief Executive Officer and acting Chief Financial Officer, has
preformed an evaluation of the Company’s disclosure and procedures, as that term
is defined in Rule 13a-14(c) of the Securities Exchange Art of 1934, as amended
(the “Exchange Act”), as of the end of the period covered by this report and
each has concluded that such disclosure controls and procedures are effective to
ensure that information required to be disclosed in our periodic reports filed
under the Exchange Act is recorded, processed, summarized and reported, within
the time period specified by the Securities and Exchange Commission’s rules and
regulations.
   Changes
in internal controls . No
significant changes in the Company’s internal controls or in other factors that
could significantly affect these controls 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**
   In July
2004, a total of 595,000 shares of common stock were issued in consideration of
various consulting services provided to Com Guard with an aggregate value of
$59,000.
   In
December 2004, the Company issued 1,500,000 shares of common stock at $0.05 per
share for consulting services totaling $75,000.
   **ITEM
3. DEFAULTS UPON SENIOR SECURITIES**
   None
   **ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
   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 EXECUTIVE OFFICER**
  **AND
CHIEF FINANCIAL OFFICER**
 **PURSUANT
TO**
 **18
U.S.C. SECTION 1350,**
 **AS
ADOPTED PURSUANT TO**
 **SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002**
  Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned
certifies that this periodic report fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that
information contained in this periodic report fairly presents, in all material
respects, the financial condition and results of operations of
Com-Guard.com, Inc.
  COM-GUARD.com,
      INC.By:
    /s/  EDWARD
      W. SAVARESE
      [Missing Graphic Reference]
      Edward
      W. Savarese
      *Chief
      Executive Officer and*
      *Acting
      Chief Financial Officer*
  
   **SIGNATURES**
   Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
   Dated:
February 11, 2005
   COM-GUARD.com,
INC.
  By:
    /s/  EDWARD
      W. SAVARESE
      [Missing Graphic Reference]
      Edward
      W. Savarese
      *Chief
      Executive Officer and Acting Chief Financial Officer*
   
  **CERTIFICATIONS**
 
  I, Edward
W. Savarese, certify that:
   1.  I have
reviewed this Form 10-QSB of Com-Guard.com, Inc.
   2.  Based on
my knowledge, the Amendment does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report.
   3.  Based on
my knowledge, the financial statements, and the financial information included
in this Amendment, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report.
   4.  The
registrant’s other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
   (a)  Designed
such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervisions, to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this Amendment is being prepared;
   (b)  Designed
such internal controls over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statement for external purposed in accordance with
generally accepted accounting principles;
   (c)  Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
   d)  Disclosed
in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s fourth fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
   5.  The
registrant’s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of registrant’s board of directors
(or persons performing the equivalent functions):
   a)  All
significant deficiencies and material weaknesses in the design or operation of
internal controls over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and
report financial information and have identified for the registrant’s auditors
any material weaknesses in internal controls; and
   b)  Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant’s internal control over financial
reporting.
  
 DATED:
      February 11, 2005/s/
      Edward W. SavareseEDWARD
      W. SAVARESE*Chief
      Executive Officer and*
      *Acting
      Chief Financial Officer*