<PAGE>   1
                        SECURITIES AND EXCHANGECOMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

(Mark One)

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934


                  For the quarterly period ended      MARCH 31, 1998
                                                --------------------------------
                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934


           For the transition period from ____________ to ____________


                         Commission file number 0-24544


                             CYBERGUARD CORPORATION
--------------------------------------------------------------------------------
             (Exact name of Registrant as Specified in Its Charter)


           FLORIDA                                          65-0510339
--------------------------------------------------------------------------------
(State or Other Jurisdiction of                         (I.R.S. Employer 
Incorporation or Organization)                         Identification No.)



2000 WEST COMMERCIAL BLVD., SUITE 200, FORT LAUDERDALE, FLORIDA       33309
--------------------------------------------------------------------------------
(Address of Principle Executive Offices)                            (Zip Code)


Registrant's Telephone Number, Including Area Code        954-958-3900
                                                  ------------------------------

--------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

     Indicate by check x whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports),

Yes   X        No
   ------        ------

and (2) has been subject to such filing requirements for the past 90 days.

Yes   X        No
   ------        ------

          As of May 7, 1998, 8,775,228 shares of the Registrant's $0.01 par
value Common Stock were outstanding.


<PAGE>   2

                          PART I FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS

                             CYBERGUARD CORPORATION
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)
(Dollars in thousands except per share data)

<TABLE>
<CAPTION>

                                                                Three Months Ended                    Nine Months Ended       
                                                          -----------------------------       ----------------------------- 
                                                            March 31,         March 31,         March 31,         March 31,
                                                              1998              1997              1998              1997
                                                          -----------       -----------       -----------       ----------- 
<S>                                                       <C>               <C>               <C>               <C>        
Revenue:
        Products                                          $     4,333       $     3,874       $    13,540       $     9,585
        Services                                                  819               231             1,529               634
                                                          -----------       -----------       -----------       ----------- 
                Total revenue                                   5,152             4,105            15,069            10,219

Cost of revenues:
        Products                                                1,457             1,727             4,619             4,924
        Services                                                  321               143               784               328
                                                          -----------       -----------       -----------       ----------- 
                Total cost of revenue                           1,778             1,870             5,403             5,252

Gross profit                                                    3,374             2,235             9,666             4,967

Operating expenses:
        Research and development                                1,059             1,028             4,221             3,095
        Selling, general and administrative                     3,988             2,847            12,064             7,743
                                                          -----------       -----------       -----------       ----------- 
                Total operating expenses                        5,047             3,875            16,285            10,838
                                                          -----------       -----------       -----------       ----------- 

Operating loss                                                 (1,673)           (1,640)           (6,619)           (5,871)

Other income (expense)
        Interest income,net                                        45               187               281               550
        Gain(loss) on sale of equity securities                    (1)              800               521            (4,414)
        Other expense                                             (15)             (239)             (134)             (236)
                                                          -----------       -----------       -----------       ----------- 
                Total other income (expense)                       29               748               668            (4,100)
                                                          -----------       -----------       -----------       ----------- 
Net loss                                                  $    (1,644)      $      (892)      $    (5,951)      $    (9,971)
                                                          ===========       ===========       ===========       ===========

Basic loss per common share                               $     (0.19)      $     (0.12)      $     (0.75)      $     (1.40)
                                                          ===========       ===========       ===========       ===========
Weighted average number of common
         shares outstanding                                 8,504,575         7,375,293         7,925,961         7,105,576
                                                          ===========       ===========       ===========       =========== 


</TABLE>

      See accompanying notes to condensed consolidated financial statements



                                       2
<PAGE>   3

                             CYBERGUARD CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                  (Unaudited)


(Dollars in thousands except per share data)

<TABLE>
<CAPTION>
                                                                            March 31,       June 30,      
                                                                              1998            1997    
                                                                            --------       --------
                                     ASSETS
<S>                                                                         <C>            <C>     
Cash and cash equivalents(Note 7)                                           $  4,361       $  2,975
Securities available for sale                                                     --          1,268
Accounts and notes receivable, less allowance for
        uncollectible accounts of $606 at March 31, 1998
        and $547 at June 30, 1997                                              7,362          6,642
Inventories(Note 3)                                                            1,302          1,588
Prepaid expenses                                                                 927            520
                                                                            --------       --------
        Total current assets                                                  13,952         12,993

Property and equipment at cost, less accumulated
        depreciation of $1,980 at March 31, 1998 and
        $1,582 at June 30, 1997 (Note 4)                                       1,792          1,706

Non-Compete Agreement                                                            910          1,120
Other assets                                                                     121            155
                                                                            --------       --------
Total assets                                                                $ 16,775       $ 15,974
                                                                            ========       ========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts payable                                                            $    525       $  1,144
Short term revolving loan payable (Note 7)                                        72             -- 
Deferred revenue                                                                 938          1,277
Accrued expenses                                                               2,765          3,636
                                                                            --------       --------
        Total current liabilities                                              4,300          6,057

Notes payble-long term (Note 7)                                                  650             -- 
                                                                            --------       --------
        Total liabilities                                                      4,950          6,057

Shareholders' equity:
        Common stock par value $0.01 authorized 20,000,000 shares
           issued and outstanding 8,754,802 at March 31, 1998
           and 7,452,314 at June 30, 1997                                         87             74
        Additional paid-in capital                                            67,532         59,507
        Accumulated deficit                                                  (55,651)       (49,700)
        Unrealized gain on securities available for sale                          --            173
        Cumulative foreign currency translation adjustment                      (143)          (137)
                                                                            --------       --------
        Total shareholders' equity                                            11,825          9,917
                                                                            --------       --------
Total liabilities and shareholders' equity                                  $ 16,775       $ 15,974
                                                                            --------       --------


</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>   4

                             CYBERGUARD CORPORATION
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
                                  (Unaudited)

(Dollars in thousands)

<TABLE>
<CAPTION>
                                                                      Nine Months Ended
                                                                  March 31,       March 31,
                                                                    1998            1997
                                                                  --------       --------
<S>                                                               <C>            <C>      
Cash flows from operating activities
        Net loss                                                  $ (5,951)      $ (9,971)
        Adjustment to reconcile net loss to net cash
                used in operating activities:
        Depreciation                                                   619            289
        Amortization                                                   210            210
        (Gain)loss on sale of Concurrent Computer stock               (522)         3,772
        Reserve for uncollectible accounts receivable                  461             --
        Changes in assets and liabilities
                Receivables                                         (1,181)        (1,188)
                Prepaid expenses                                      (373)          (112)
                Inventories                                            286         (1,310)
                Trade payables                                        (619)         1,473
                Other expenses and accruals                           (806)        (1,649)
                Deferred revenue                                      (339)           860
                Other                                                  148            681
                                                                  --------       --------
Net cash used in operating activities                               (8,067)        (6,945)
                                                                  --------       --------

Cash flows from investing activities
        Net, additions to property and equipment                      (519)          (707)
        Software development costs & other assets                       --           (200)
                                                                  --------      --------
Net cash used in investing activities                                 (519)          (907)
                                                                  --------       --------
Cash flows from financing activities
        Proceeds from sale of Concurrent Computer Stock              1,417         12,363
        Proceeds from sale of common stock                           7,898          1,506
        Proceeds from note payable                                     650             --
        Payoff of short-term loan                                       --         (3,200)
        Proceeds from short term note                                    7             --
                                                                  --------       --------
Net cash provided from financing activities                          9,972         10,669

Net increase in cash                                                 1,386          2,817

Cash and cash equivalents at beginning of period                     2,975          3,617
                                                                  --------       --------
Cash and cash equivalents at end of period                        $  4,361       $  6,434
                                                                  --------       --------


</TABLE>

          See accompanying notes to consolidated financial statements.

                                        4


<PAGE>   5


                             CYBERGUARD CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1998
                                   (Unaudited)

1.   BASIS OF PRESENTATION

     The accompanying unaudited consolidated financial statements have been
     prepared in accordance with the instructions to Form 10-Q and, therefore,
     do not include all information and footnotes necessary for a fair
     presentation of financial position, results of operations, and cash flows
     in conformity with generally accepted accounting principles. The
     information furnished, in the opinion of management, reflects all
     adjustments, which consist of normal recurring adjustments, necessary to
     present fairly the results of operations of the Company for the three- and
     nine-month periods ended March 31, 1998 and March 31, 1997 and the
     financial position of the Company as of March 31, 1998 and June 30, 1997.

     While the Company believes that the disclosures presented are adequate to
     make the information not misleading, it is suggested that these
     consolidated financial statements be read in conjunction with the audited
     consolidated financial statements and the notes included in the Company's
     Form 10-K for the fiscal year ended June 30, 1997, as filed with the
     Securities and Exchange Commission.

     In October 1997, the Accounting Standards Executive Committee of the
     American Institute of Certified Public Accountants issued Statement of
     Position 97-2 " Software Revenue Recognition" ("SOP 97-2"). This statement
     provides guidance on applying generally accepted accounting principles in
     recognizing revenues on software transactions. SOP 97-2 supercedes
     Statement of Position 91-1 "Software Revenue Recognition". SOP 97-2 is
     effective for transactions entered into in fiscal years beginning after
     December 15, 1997. Earlier application is encouraged as of the beginning of
     the fiscal year or interim period for which financial statements or
     information have not been issued. Retroactive application of the provisions
     of this statement is prohibited. The Company believes that the adoption of
     this statement will not have a material impact on its revenue recognition.

     The results of operations of interim periods are not necessarily indicative
     of results which may be expected for any other interim period or for the
     year as a whole.

2.   BASIC EARNINGS PER SHARE

     Basic net loss per share for the periods presented have been computed using
     the weighted average number of common shares outstanding. The number of
     shares outstanding does not include stock options (common equivalents) in
     calculating the Basic earnings per share. Common stock equivalents are
     excluded due to their anti-dilutive effect.

3.   INVENTORIES

     Inventories are valued at the lower of cost or market, with cost being
     determined by using the first-in, first-out ("FIFO") method. All
     inventories consist of finished goods.

4.   LONG LIVED ASSETS

     Property and equipment are carried on the basis of cost. Depreciation is
     computed by the straight-line method using the estimated useful lives of
     the assets.


                                       5
<PAGE>   6

                             CYBERGUARD CORPORATION
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                 MARCH 31, 1998
                                   (Unaudited)

5.   REVENUE RECOGNITION

     Revenue is recognized from sales when a product is delivered, from rentals
     as they accrue, and from services and maintenance when performed. Unearned
     income on service contracts is amortized by the straight-line method over
     the term of the contracts. Revenue from long-term software contracts is
     accounted for by the percentage of completion method whereby income is
     recognized based on the estimated stage of completion of individual
     contracts using costs incurred as a percentage of total estimated costs at
     completion. Losses on long-term contracts are recognized in the period in
     which such losses are determined.

6.   FOREIGN CURRENCY TRANSLATION

     The assets and liabilities of the foreign subsidiary are translated using
     the local currency as the functional currency.

7.   REVOLVING CREDIT AGREEMENT

     In December 1997, the Company entered into a $3,350,000 asset-based
     revolving line of credit and a $650,000 Term Note Agreement with Coast
     Business Credit. Interest is charged at the prime rate plus 2.0% (10.5% at
     March 31, 1998). The credit facility is collateralized by all of the
     tangible assets and intellectual property of the Company. Availability
     under the revolving credit facility is limited to 80% of eligible accounts
     receivable and 30% of qualified inventory up to a maximum availability of
     $300,000 on eligible inventory. The term note is for a period of three
     years and payable in thirty-nine monthly installments. The term note is
     secured by $650,000 cash compensating balance account equal to the amount
     of the term loan, which collateral is expected to be replaced by the
     Company's property and equipment (up to a maximum of 50% of such property
     and equipment's appraised liquidated value). The restriction of cash
     compensating balances may be revised upon appraisal of the tangible assets
     that are directly collateralizing the term note.








                                       6

<PAGE>   7



CYBERGUARD CORPORATION
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS



RESULTS OF OPERATIONS

THE QUARTER ENDED MARCH 31, 1998 COMPARED TO THE QUARTER ENDED MARCH 31, 1997

NET REVENUE

Net revenue (refers to gross product sales less any returns and allowances)
consist primarily of network security product sales--including third party
security products--and services, which include consulting, installation, and
maintenance support contracts related to security products. For the quarter
ended March 31, 1998, net revenue increased by approximately $1.05 million (or
25.6%) compared to the quarter ended March 31, 1997

During the quarter ended March 31, 1998, revenue from the various firewall
products and TradeVPI products increased from $3.8 million to $4.3 million,
representing an increase of 13% over sales in the same quarter of the previous
year. The increase is the result of a greater number of shipments of the
Company's firewall product; specifically, the Company shipped 355 CyberGuard
Firewall systems during the quarter ended March 31, 1998 compared to 171 for the
quarter ended March 31, 1997.

Support services related to firewall products and TradeWave certificate
authority services increased from $0.2 million for the three months ended March
31, 1997 to $0.8 million for the three months ended March 31, 1998 or a 255%
increase. Subsequently, as the installed base increases, the Company's support
revenue will increase.

For the quarter ended March 31, 1998, international sales of the Company's
network security products decreased slightly to $2.5 million from $2.6 million
for the quarter ended March 31, 1997. The nominal decline in revenue from
international sales of network security products is the result of economic
pressures placed on the Asian market. International sales represented 47.9% and
64.3% of total security product revenue- for the periods ending March 31, 1998
and 1997 respectively.

Domestic revenues for the Company increased by $1.2 million to $2.7 million for
the quarter ended March 31, 1998 compared to the quarter ended March 31, 1997.
The increase in domestic revenues is due in part to the release of the NT
firewall; the addition of the Tradewave VPI product suite; increased service
revenue from consulting and installation; and increased maintenance support
contracts for the larger installed base. The sales of the Company's direct sales
force increased 50%, the sales through the distribution channel increased by
130%, and service revenue increased by 255%.

GROSS PROFIT

Gross Profit as a percent of sales increased to 65.5% from 54.4% for the quarter
ended March 31, 1998 compared to the corresponding period in the previous year.
The result of increased "software- only" sales, accounted for approximately 72%
of sales during the quarter ended March 31, 1998 as compared to the same quarter
of the previous year, there were approximately 47% "software-only" sales. In
addition, the Company experienced cost reductions associated with the shipping
of the Intel-based platform as compared to the proprietary Nighthawk platform
associated with the Company's combined hardware/software product. Since the
introduction of the Company's "software-only " product, the Company's sales in
Asia which represent 48% of the Company's revenue, have been almost exclusively
"software-only. This result has had a significant effect on the Company's gross
profit margin. In addition, the North American commercial market share has been
increasing with the intensive program on the way to develop new 



                                       7
<PAGE>   8


CYBERGUARD CORPORATION
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS
(Continued)



channels. The sales to these markets have approximately doubled. This "software
only sale", too, has greatly attributed to the increase in the overall gross
profit margin.

OPERATING EXPENSES AND NET LOSS

Overall, the Company's operating expenses increased by $1.2 million to $5.0
million for the quarter ended March 31, 1998. The results are attributed to the
increased number of seminars and trade shows, media advertising, and sales
personnel in the field to support the company's growth strategy. In addition,
there were marginal increases in general and administrative expenses to support
the larger organization including the hiring of a Chief Operating Officer and
needed support staff. 

Increased selling, marketing, and administrative expenses relate to product and
services revenue and the associated additional expenditures in hiring of new
sales personnel, marketing efforts, and administrative functions to support the
larger organization. Overall, the selling, general, and administrative expenses
increased as a percent of revenues from 69% for the quarter ended March 31, 1997
to 77% for the quarter ended March 31, 1998. In mid-December 1997, the Company's
management implemented planned cost reduction measures in connection with the
ongoing integration of TradeWave Corporation's operations and the NT development
project. The combined effect of these reductions were realization of $0.7
million in savings from the previous quarter.

The operating loss for the quarter ended March 31, 1998 was $1.7 million
compared to $1.6 million for the quarter ended March 31, 1997. The net loss for
the quarter ended March 31, 1998 was $1.6 million, compared to $ 0.9 million for
the quarter ended March 31, 1997. This increase in net loss is principally
attributable to the gain of $0.8 million realized on the sale of securities for
the quarter ended March 31, 1997 (which consist of common stock of Concurrent
Computer Corporation received by the Company as part of the sale of the Real
time computing division).

THE NINE-MONTH PERIOD ENDED MARCH 31, 1998 COMPARED TO THE NINE-MONTH PERIOD
ENDED MARCH 31, 1997

NET REVENUE

For the nine-month period ended March 31, 1998, net revenue (refers to gross
product sales less any returns and allowances) increased by approximately $4.9
million to $15.1 million when compared to the nine-month period ended March 31,
1997. The $4.9 million increase is represented by $4.0 million in revenue from
the sale of network security products and $0.9 million in service-related
revenues. The $4.0 million (or 41%) increase in network security product
revenues is the result of increased shipments of the Company's CyberGuard
firewall and Trade VPI products. Specifically, the Company shipped 861
CyberGuard systems during the nine-month period ended March 31, 1998 compared to
391 for the nine-month period ended March 31, 1997 an increase of 120%. Revenue
from support services, related to firewall products and TradeWave certificate
authority, increased from $0.6 million for the nine months ended March 31, 1997
to $1.2 million for the nine months ended March 31, 1998. This increase is due
to the greater number of installed units, the installed base of customers with
Tradewave's OASIS project and increased consulting and customer training.
Support services for network security products accounted for 10% of revenues
during the quarter ended March 31, 1998 as compared to 6% for the quarter ended
March 31, 1997.

For the nine-month period ended March 31, 1998, international sales of the
Company's network security products increased to $6.6 million compared to $6.2
million for the nine month period ended March 31, 



                                       8
<PAGE>   9

CYBERGUARD CORPORATION
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS
(Continued)



1997. The increase in international sales of 14% is due entirely to increased
shipments in Europe over the corresponding period in the prior year. With the
introduction of the NT firewall and the acceptance of the Intel based UnixWare
firewall, the Company believes, the European market will continue to show
positive results. International sales represent 44% and 60% of total security
product sales for the nine-month periods ending March 31, 1998 and 1997
respectively.

Domestic product revenues increased by $4.4 million to $8.5 million in the
nine-month period ended March 31, 1998 over the same period in the prior year.
Domestic revenues represent 56% of revenues as compared to 40% for the
nine-month period ended March 31, 1997. This result of increased orders for the
Company's products, the Company believes, is due to increased customer awareness
and acceptance of firewall products (generally from positive reviews from
industry publications of the Company's Release 4 and NT firewall products and
the TradeWave VPI products) and from increased market penetration by the
Company's network of resellers.

GROSS PROFIT

The Company's gross profit as a percent of sales increased to 64.1% from 48.6%
for the nine months ended March 31, 1998 compared to the corresponding period in
the previous year. The result of increased "software-only" sales; for nine
months ended March 31, 1998, accounted for 62% of the revenues compared to 30%
for the nine months ended March 31, 1997. As the Company moves to a
"software-only" product line with limited number of combined hardware and
software sales, and to more network security service offerings, the gross profit
margins realized are expected to show increases. In addition, the Company
experienced cost reductions with the shipping of the Intel based product as
compared to products sold during the previous year that combined the Company's
firewall software with the Company's proprietary Nighthawk platform.

OPERATING EXPENSES AND NET LOSS

The Company's overall operating expenses increased by $5.4 million for the
nine-month period ended March 31, 1998 to $16.3 million. This is due to an
increase of $1.1 million for research and development expenditures compared to
the same period in the prior year and an increase of $4.3 million in selling,
general and administrative expenses over those in the same period of the prior
year.

The increased research and development expenditures are primarily associated
with the Release 4 version of the CyberGuard Firewall software product,
development of the Windows NT-based firewall product, and the TradeWave VPI
suite of products. Increased selling, general, and administrative expenses
relate to increased sales and the associated additional expenditures of hiring
of new sales personnel, increasing marketing efforts, and increasing
administrative functions to support the larger organization. In mid-December
1997, the Company's management implemented cost reduction measures related
primarily to the ongoing integration of TradeWave Corporation's operations into
the Company's own operations. The Company also implemented measures designed to
reduce research and development expense related to the completion of the Windows
NT-based products. Overall, selling, general, and administrative expenses
increased as a percent of revenues from 76% for the nine-month period ended
March 31, 1997 to 80% for the nine-month period ended March 31, 1998.

The net loss for the nine-month period ended March 31, 1998 was $6.0 million
compared to $10.0 million for the nine-month period ended March 31, 1997. This
decrease in net loss is principally attributable to (1) to the gain realized on
the sale of securities (which are comprised of common stock of Concurrent





                                       9
<PAGE>   10

CYBERGUARD CORPORATION
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS
(Continued)


Computer Corporation received by the Company as consideration for the June 1996
sale to Concurrent of the Company's real-time computer division) of $0.5
million, as compared to a loss of $4.4 million for the nine months ended March
31, 1997; and, (2) offset in part by increased operating loss (described above).

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 1998, the Company had cash and cash equivalents on hand of $4.4
million, representing an increase of $1.4 million over the $3.0 million on hand
as of June 30, 1997. The Company's accounts receivable increased by $1.2 million
as a result of the Company's increased quarter to quarter sales. In addition,
the receivable at quarter end did experience some additional aging due to the
pressure on the Asian economy. Subsequent to March 31, 1998, the Company did
receive a significant paydown on the Asian receivables. Inventory levels
decreased marginally by $0.3 million during the quarter ended March 31, 1998 as
compared to June 30, 1997. Property and equipment additions in the nine months
ended March 31, 1998 amounted to $0.5 million. These additions consisted of
office equipment, furniture, development computers, and demonstration equipment.

Since the sale of the Company's real-time computer division in June 1996, the
Company has experienced a loss from operations. To the extent that the Company
has required cash in addition to that generated from sales, such requirements
have been funded from the sale of Concurrent common stock received in connection
with the sale of the Company's real-time computer division, as well as sale of
the Company's own common stock pursuant to a private placement arrangement
arranged in May 1997 (the "Private Placement Arrangement"). The Private
Placement Arrangement permitted the Company, under certain conditions, to sell
up to $7.5 million worth of its common stock to an investor at a discount from
the market price. As of March 31, 1998, the Company has sold in the aggregate
1,143,117 shares of its common stock under the Arrangement and had received
proceeds of $7.5 million.

In December 1997, the Company entered into a Loan and Security Agreement (the
"Coast Credit Facility") with Coast Business Credit, a division of Southern
Pacific Bank consisting of a $3,350,000 asset-based revolving line of credit and
a three-year $650,000 term note. Interest on the Coast Credit Facility is at
prime rate plus 2.0% (10.5% at March 31, 1998). Availability under revolving
credit portion of the Coast Credit Facility is limited to 80% of the Company's
eligible accounts receivable and 30% of its qualified inventory (up to a maximum
availability of $300,000 on eligible inventory). The term note portion of the
Coast Credit Facility is payable in thirty-nine monthly installments. The term
note is secured by a $650,000 cash compensating balance account equal to the
amount of the term loan, which collateral is expected to be replaced by the
Company's property and equipment (up to a maximum of 50% of such property and
equipment's appraised value). The revolving credit facility is secured by all of
the tangible assets of the Company and by the Company's intellectual property.

The Company's principal sources of liquidity at March 31, 1998 consisted of
cash, the Coast Credit Facility, and vendor trade credit.

In October 1997, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 97-2 "
Software Revenue Recognition" ("SOP 97-2"). This statement provides guidance on
applying generally accepted accounting principles in recognizing revenues on
software transactions. SOP 97-2 supercedes Statement of Position 91-1 "Software
Revenue Recognition". SOP 97-2 is effective for transactions entered into in
fiscal years beginning after December 15, 1997. Earlier application is
encouraged as of the beginning of the fiscal year or interim period for which
financial statements or information have not been issued. Retroactive
application of the provisions 




                                       10
<PAGE>   11
CYBERGUARD CORPORATION
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS
(Continued)




of this statement is prohibited. The Company believes that the adoption of this
statement will not have a material impact on its revenue recognition.

Statements regarding future products, future prospects, business plans and
strategies, future revenues and revenue sources, future liquidity and capital
resources, computer network security market directions, future acceptance of the
Company's products, possible growth in markets, as well as other statements
contained in this Report on Form 10-K that address activities, events or
developments that the Company expects, believes or anticipates will or may occur
in the future, and similar statements are forward looking statements. These
statements are based upon assumptions and analyses made by the Company in light
of current conditions, future developments and other factors the Company
believes are appropriate in the circumstances, or information obtained from
third parties and are subject to a number of assumptions, risks and
uncertainties. Readers are cautioned that forward looking statements are not
guarantees of future performance and that the actual results might differ
materially from those suggested or projected in the forward looking statements.
Some of the factors that might cause future actual events to differ from those
predicted or assumed include future advances in technologies and computer
security; risks related to the early stage of the Company's existence and its
products' development; the Company's ability to execute on its business plans;
the Company's dependence on outside parties such as its key customers and
alliance partners; competition from major computer hardware, software, and
networking companies; risk and expense of Government regulation and effects on
changes in regulation; the limited experience of the Company in marketing its
products; uncertainties associated with product performance liability; risks
associated with growth and expansion; risks associated with obtaining patent and
intellectual property right protection; uncertainties in availability of
expansion capital in the future and other risks associated with capital markets.


                            PART II OTHER INFORMATION


Item 2(c).  Changes in Securities and Use of Proceeds

As previously reported in notes to the Company's financial statements and
management's discussion and analysis of financial condition and results of
operations in the Company's Form 10K for the fiscal year ended June 30, 1997 and
Form 10Q for the quarter ended December 31, 1997, up through February 6, 1998,
the Company sold an aggregate of 806,482 shares of its common stock under its
"Private Placement Arrangement" for an aggregate net proceeds of $5,737,236 .

On February 17, 1998, the Company sold 336,635 shares of its common stock under
the Private Placement Arrangement in exchange for net proceeds of $ 1,762,764.
The purchaser under the Private Placement Arrangement was Capital Ventures,
Inc.; a corporation organized under the laws of the Cayman Islands (the
"Investor"). The sale of common stock was undertaken without registration under
the Securities Act of 1933 as amended (the "Act") pursuant to an exemption from
registration contained in Section 4(2) of the Act. The resale of the common
stock by the Investor has been registered on a registration statement (No.
333-28693) filed under the Act.




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PART II. OTHER INFORMATION

ITEM 6.    EXHIBITS AND REPORTS OF FORM 8-K

     The following exhibits are filed as part of this Quarterly Report on Form
10-Q:

          (a)     Exhibits:
          27      Financial Data Schedule


                                   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.

Date May 13, 1998    



                     CYBERGUARD CORPORATION

                     

                     By: /s/ ROBERT L. CARBERRY
                         -----------------------------------------------------
                         ROBERT L. CARBERRY
                         Chairman and Chief Executive Officer



                     By: /s/ WILLIAM D. MURRAY
                         -----------------------------------------------------
                         WILLIAM D. MURRAY
                         Vice President of Finance and Chief Financial Officer
                         (Principal Financial and Accounting Officer)






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