<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, 2001

                                 ---------------

                                       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
of 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 April 30, 2001, 18,056,506 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 share and per share data)

<TABLE>
<CAPTION>

                                                                            THREE MONTHS ENDED              NINE MONTHS ENDED
                                                                          ---------------------------   ---------------------------
                                                                            MAR. 31,        MAR. 31,       MAR. 31,        MAR. 31,
                                                                              2001           2000           2001           2000
                                                                          ------------   ------------   ------------   ------------
<S>                                                                       <C>            <C>            <C>            <C>
Revenues:
Products                                                                  $      6,072   $      4,577   $     13,951   $     11,340
Services                                                                         1,563            688          4,080          2,627
                                                                          ------------   ------------   ------------   ------------
  Total revenues                                                                 7,635          5,265         18,031         13,967

Cost of revenues:
Products                                                                         1,696          1,305          3,576          2,692
Services                                                                           606            474          1,796          1,421
                                                                          ------------   ------------   ------------   ------------
  Total cost of revenues                                                         2,302          1,779          5,372          4,113
                                                                          ------------   ------------   ------------   ------------
Gross profit                                                                     5,333          3,486         12,659          9,854
                                                                          ------------   ------------   ------------   ------------
Operating expenses:
Research and development                                                         1,682            568          4,109          2,120
Selling, general and administrative                                              4,199          2,216         10,958          7,114
                                                                          ------------   ------------   ------------   ------------
  Total operating expenses                                                       5,881          2,784         15,067          9,234
                                                                          ------------   ------------   ------------   ------------
Operating income (loss)                                                           (548)           702         (2,408)           620
                                                                          ------------   ------------   ------------   ------------
Other income (expense)
Interest expense, net                                                             (310)          (317)          (749)          (979)
Gain (loss) on sale of assets                                                       (1)             0             12              0
Other expense                                                                      (29)          (115)           (88)           (16)
                                                                          ------------   ------------   ------------   ------------
  Total other expense                                                             (340)          (432)          (825)          (995)

Income (loss) before cumulative effect of change in accounting principle  $       (888)  $        270   $     (3,233)  $       (375)
                                                                          ------------   ------------   ------------   ------------
Cumulative effect of change in accounting principle                                  0              0           (129)             0

Net Income (Loss)                                                         $       (888)  $        270   $     (3,362)  $       (375)
                                                                          ============   ============   ============   ============
Basic earnings (loss) per common share:

Before cumulative effect of change in accounting principle                $      (0.06)  $       0.03   $      (0.28)  $      (0.04)
Cummulative effect of change in accounting principle                      $         --   $         --   $      (0.01)  $         --
                                                                          ------------   ------------   ------------   ------------
Basic earnings (loss) per common share                                    $      (0.06)  $       0.03   $      (0.29)  $      (0.04)
                                                                          ============   ============   ============   ============
Weighted average number of common shares outstanding                        14,890,742      9,346,682     11,524,805      9,193,995
                                                                          ============   ============   ============   ============
Diluted earnings (loss) per common share:

Before cumulative effect of change in accounting principle                $      (0.06)  $       0.01   $      (0.28)  $      (0.04)
Cummulative effect of change in accounting principle                      $         --   $         --   $      (0.01)  $         --
                                                                          ------------   ------------   ------------   ------------
Diluted earnings (loss) per common share                                  $      (0.06)  $       0.01   $      (0.29)  $      (0.04)
                                                                          ============   ============   ============   ============
Weighted average number of diluted common shares outstanding                14,890,742     19,192,665     11,524,805      9,193,995
                                                                          ============   ============   ============   ============
</TABLE>

      See accompanying notes to condensed consolidated financial statements




                                       2
<PAGE>   3
                         CYBERGUARD CORPORATION
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                              (Unaudited)
                         (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                                    Mar. 31,        June 30,
                                                                                      2001            2000
                                                                                    --------         --------
<S>                                                                                 <C>              <C>
ASSETS
Cash and cash equivalents                                                           $  4,321         $  2,497
Restricted cash                                                                          762              800
Accounts receivable, less allowance for uncollectible accounts
  of $144 at Mar. 31, 2001 and $52 at June 30, 2000                                    5,172            3,614
Inventories, net                                                                         494              159
Other current assets                                                                   1,540            1,255
                                                                                    --------         --------
  Total current assets                                                                12,289            8,325

Property and equipment at cost, less accumulated
  depreciation of $1,639 at Mar. 31, 2001 and
  $1,181 at June 30, 2000                                                              1,257            1,086
Capitalized software, net                                                                944            1,142
Non-compete agreements, net                                                              100              280
Other assets                                                                             110              163
                                                                                    --------         --------
        Total assets                                                                $ 14,700         $ 10,996
                                                                                    ========         ========

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Line of credit and note payable                                                          526            1,575
Accounts payable                                                                       1,296            1,424
Deferred revenue                                                                       2,938            2,912
Accrued expenses and other liabilities                                                 2,560            1,942
                                                                                    --------         --------
  Total current liabilities                                                            7,320            7,853

Note Payable                                                                             650              650
Convertible debenture, net                                                               242            4,445
                                                                                    --------         --------
 Total liabilities                                                                     8,212           12,948
                                                                                    --------         --------

Shareholders' equity (deficit)
Common stock par value $0.01 authorized 50,000,000 shares
   issued and outstanding 17,953,228 at Mar. 31, 2001
   and 9,799,321 at June 30, 2000                                                        180               98
Additional paid-in capital                                                            86,919           75,290
Accumulated deficit                                                                  (80,813)         (77,451)
Accumulated other comprehensive income                                                   202              111
                                                                                    --------         --------
  Total shareholders' equity (deficit)                                                 6,488           (1,952)
                                                                                    --------         --------

        Total liabilities and shareholders' equity (deficit)                        $ 14,700         $ 10,996
                                                                                    ========         ========

</TABLE>

      See accompanying notes to condensed consolidated financial statements



                                       3
<PAGE>   4
                             CYBERGUARD CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
                                  (Unaudited)
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                  Nine Months Ended
                                                                               -----------------------
                                                                               Mar. 31,        Mar. 31,
                                                                                2001            2000
                                                                               -------         -------
<S>                                                                            <C>             <C>
Cash flows from operating activities
Net loss                                                                       $(3,362)        $  (375)
Adjustments to reconcile net loss to net cash
  used by operating activities:
Depreciation                                                                       569             321
Amortization                                                                     1,073             355
Interest on retirement of convertible debt                                          --             240
Interest on new convertible debt                                                    --             523
Provision for uncollectible accounts receivable                                     92            (328)
Provision for inventory reserve                                                     (4)             --
Compensation expense related to modification to stock options                      168              --
Beneficial conversion feature on Aug 1999 and Dec 2000 convertible debt            162              --

Changes in assets and liabilities
Accounts receivable                                                             (1,650)         (2,757)
Other current assets                                                              (284)           (687)
Inventories                                                                       (331)            101
Accounts payable                                                                  (128)         (1,377)
Accrued expenses and other liabilities                                             619          (1,314)
Deferred revenue                                                                    26             974
Other, net                                                                         302              49
                                                                               -------         -------
  Net cash used in operating activities                                         (2,748)         (4,275)
                                                                               -------         -------

Cash flows used in investing activities
Capitalized software costs                                                        (360)           (665)
Additions/deletions to Property & Equipment                                       (740)           (287)
                                                                               -------         -------
  Net cash used in investing activities                                         (1,100)           (952)
                                                                               -------         -------

Cash flows provided by financing activities
Change in restricted cash                                                           38             258
Issuance of new convertible debt                                                 1,000           4,313
Retirement of existing convertible debt                                             --          (1,125)
Proceeds from exercise of stock purchase warrants                                4,804              --
Notes Payable                                                                       11             (36)
Net borrowings (repayment) under revolving line of credit                       (1,062)            188
Proceeds from stock options exercised                                              185             594
Proceeds from sale of securities                                                   500              --
Proceeds from sale of common stock                                                 196             133
                                                                               -------         -------
  Net cash provided by financing activities                                      5,672           4,325
                                                                               -------         -------

Net increase (decrease) in cash                                                  1,824            (902)
Cash and cash equivalents at beginning of period                                 2,497           2,622
                                                                               -------         -------
Cash and cash equivalents at end of period                                     $ 4,321         $ 1,720
                                                                               =======         =======

Supplemental disclosure of cash flow information
Cash paid for interest                                                             848             482
                                                                               =======         =======
Cash paid for income taxes                                                          --              --
                                                                               =======         =======

</TABLE>

Supplemental disclosure of non-cash information

Modification to stock options - on November 27, 2000, the Compensation Committee
of the Board of Directors of the Company resolved thet the February 4, 2001
expiration date of each of the options to purchase shares of the Company's
common stock granted on February 4, 1996 would be extended by three years. All
129,100 shares granted on February 4, 1996 will now expire in their entirety on
February 4, 2004. This modification required the Company to record compensation
expense during the second quarter of approximately $68,000. In January 2001, the
Compensation Committee of the Board of Directors of the Company resolved to
extend the exercise period for options granted on September 8, 1998 to the
retiring CFO, Terrence Zeilinski. The modification required the Company to
record compensation expense during the third quarter of approximately $73,000.
During the third quarter, the Company issued options to certain employees below
the then current market price. This required the Company to record compensation
expense during the third quarter of approximately $27,000.

Beneficial conversion feature on Aug 1999 and Dec 2000 convertible debt - at the
November 2000 meeting, The Emerging Issues Task Foreb (EITF) reached a consensus
opinion on Issue 00-27 regarding the "Application of EITF Issue 98-5,
"Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios," to Certain Convertible Instruments". The
consensus opinion required the Company to use an effective conversion price to
determine a convertible instrument's beneficial conversion feature. The change
is effective retroactively to transactions for which a commitment date occurs
prior to November 16, 2000. As a result, the Company recognized $129,000 as a
cumulative effect of a change in accounting principle associated with the
convertible debt issued in August 1999. The change is effective prospectively to
transactions for which a commitment date occurs after November 16, 2000. As a
result, the Company recognized $33,000 in interest expense associated with the
convertible debt issued in December 2000.


      See accompanying notes to condensed consolidated financial statements




                                       4
<PAGE>   5

CYBERGUARD CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(UNAUDITED)


1. BASIS OF PRESENTATION

     The Company has prepared the consolidated financial statements included
herein, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission with respect to Form 10-Q. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures made are adequate so as to make the information contained
not misleading. These interim financial statements and the notes should be read
in conjunction with the financial statements and the notes included in the
Company's 10-K for the year ended June 30, 2000. In the Company's opinion, all
adjustments (consisting only of normal recurring adjustments) necessary for fair
presentation of the information shown have been included. Generally accepted
accounting standards also requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses,
and disclose contingent assets and liabilities at the date of the financial
statements. Significant estimates include those made for software development
costs, reserve for inventories, the allowance for uncollectible accounts, and
contingencies. Actual results could differ from those estimates.

     The results of operations for the nine months ended March 31, 2001
presented are not necessarily indicative of the results of operations that may
be expected for the year ending June 30, 2001.

     Basic earnings (loss) per share is calculated by dividing net earnings
(loss) by the weighted average number of common shares outstanding during the
year. Diluted per share data includes the dilutive effect of options, warrants
and convertible securities. Since the effects of the outstanding options,
warrants and convertible securities are anti-dilutive, they are not included in
the calculation of diluted loss per share.

     The Company's operating results and financial condition may be impacted by
a number of factors including, but not limited to the following, any of which
could cause actual results to vary materially from current and historical
results or the Company's anticipated future results. A portion of the Company's
revenue is derived from its international operations and sources. As a result,
the Company's operations and financial results could be affected by
international factors such as changes in foreign currency exchange rates or weak
economic conditions in the international markets in which the Company
distributes its products. The network security industry is highly competitive
and competition is expected to intensify. There are numerous companies competing
in segments of the market in which the Company does business. Competitors
include organizations significantly larger and with more development, marketing
and financial resources than the Company. In addition, the Company is subject to
risks and uncertainties which include, but are not limited to, the timely
development of and acceptance of new products, impact of competitive products,
competition for and retention of key management and technology employees,
regulation, inventory obsolescence, the ultimate outcome of certain litigation
matters, and cash balances in excess of federally insured limits.

2.   CHANGE IN ACCOUNTING PRINCIPLE

     At the November 2000 meeting, The Emerging Issues Task Force (EITF) reached
a consensus opinion on Issue 00-27 regarding the "Application of EITF Issue
98-5, "Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios," to Certain Convertible Instruments".
The consensus opinion required the Company to use an effective conversion price
to determine a convertible instrument's beneficial conversion feature. The
change is effective retroactively to transactions for which a commitment date



                                       5
<PAGE>   6

CYBERGUARD CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(UNAUDITED)


occurs prior to November 16, 2000. As a result, in December 2000, the Company
recognized $129,000 as a cumulative effect of a change in accounting principle
associated with the convertible debt issued in August 1999. During December
2000, the Company also recognized $33,000 in interest expense associated with
the convertible debt issued in December 2000.

3. LITIGATION

     On August 24, 1998, the Company announced, among other things, that due to
a review of its revenue recognition practices relating to distributors and
resellers, it would restate prior financial results. After the August 24, 1998
announcement, twenty-five purported class action lawsuits were filed by alleged
shareholders against the Company and certain former officers and directors.
Pursuant to an order issued by the Court, these actions have been consolidated
into one action, styled STEPHEN CHENEY, ET AL. V. CYBERGUARD CORPORATION, ET
AL., Case No. 98-6879-CIV-Gold, in the United States District Court, Southern
District of Florida. On August 23, 1999, the plaintiffs filed a Consolidated and
Amended Class Action Complaint. This action seeks damages purportedly on behalf
of all persons who purchased or otherwise acquired the Company's common stock
during various periods from November 7, 1996 through August 24, 1998. The
complaint alleges, among other things, that as a result of accounting
irregularities relating to the Company's revenue recognition policies, the
Company's previously issued financial statements were materially false and
misleading and that the defendants knowingly or recklessly published these
financial statements which caused the Company's common stock prices to rise
artificially. The action alleges violations of Section 10(b) of the Securities
Exchange Act of 1934 ("Exchange Act") and SEC Rule 10b-5 promulgated thereunder
and Section 20(a) of the Exchange Act. Subsequently, the defendants, including
the Company, filed their respective motions to dismiss the Consolidated and
Amended Class Action Complaint. On July 31, 2000, the Court issued a ruling
denying the Company's and Robert L. Carberry's (the Company's CEO from June 1996
through August 1998) motions to dismiss. The court granted the motions to
dismiss with prejudice for defendants William D. Murray (the Company's CFO from
November 1997 through August 1998), Patrick O. Wheeler (the Company's CFO from
April 1996 through October 1997), C. Shelton James (the Company's former Audit
Committee Chairman), and KPMG Peat Marwick LLP ("KPMG"). On August 14, 2000, the
plaintiffs filed a motion for reconsideration of that order. The Company filed
an answer to the plaintiffs' Consolidated and Amended Class Action Complaint on
August 24, 2000. On March 20, 2001, the Court ruled on the plaintiffs' motion
for reconsideration that the previously dismissed defendants William D. Murray,
Patrick O. Wheeler and C. Shelton James should not have been dismissed from the
action and shall be defendants in this action under the control person liability
claims under Section 20(a) of the Exchange Act, and that the plaintiffs may
amend the Consolidated and Amended Class Action Complaint to bring claims
against C. Shelton James under Section 10(b) of the Exchange Act and Rule 10b-5
promulgated thereunder. On April 5, 2001, the plaintiffs filed their Second
Consolidated and Amended Class Action Complaint to include amended claims
against C. Shelton James. On May 10, 2001, the Company filed an Answer to the
Second Consolidated and Amended Class Action Complaint.

     The Company's obligation to indemnify its officers and directors under the
aforementioned lawsuit is insured to the extent of the limits of the applicable
insurance policies. The Company has notified its insurance carrier of the
existence of the lawsuit, and the carrier has sent the Company a reservation of
rights letter. The Company intends to vigorously defend this action, and
believes that in the event that it is unsuccessful, insurance coverage will be
available to defray a portion, or substantially all, of the expense of defending
and settling the lawsuit or paying a judgment. However, the Company is unable to
predict the ultimate outcome of the litigation. There can be no assurance that


                                       6
<PAGE>   7
\CYBERGUARD CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(UNAUDITED)


the Company will be successful in defending the lawsuit or if unsuccessful,
insurance will be available to pay all or any portion of the expense of the
lawsuit. If the Company is unsuccessful in defending the lawsuit and the
insurance coverage is unavailable or insufficient, the resolution of the lawsuit
could have an effect on the Company's consolidated financial position, results
of operations, and cash flows. The Company's consolidated financial statements
do not include any adjustments related to these matters.

     In August 1998, the Securities and Exchange Commission ("SEC") commenced an
informal inquiry into certain accounting and financial reporting practices of
the Company and its officers, directors and employees. On March 25, 1999, the
SEC issued a formal order of investigation (which the Company learned of on
September 27, 1999) into certain accounting and financial reporting practices of
the Company and its officers, directors and employees. The SEC's investigation
is ongoing.

     On September 16, 1999, the Company filed a lawsuit against KPMG and August
A. Smith, the KPMG engagement partner. The lawsuit is pending in the Circuit
Court of the 17th Judicial Circuit in and for Broward County, Case No.
00-004102-CACE-14. On May 1, 2000, the Company filed the First Amended
Complaint, alleging that KPMG failed to properly audit the Company's financial
statements and provided inaccurate advice on accounting matters for fiscal years
1996, 1997 and 1998. The action alleges professional malpractice, breach of
fiduciary duty, breach of contract and breach of implied duty of good faith, and
seeks damages in excess of $10 million. KPMG and Mr. Smith filed motions to
dismiss, which were denied. In August 2000, KPMG and Mr. Smith filed their
answers and KPMG filed counterclaims against the Company, alleging the Company's
breach of contract, negligent misrepresentation and abuse of process, and
seeking an unspecified amount of damages consisting of unpaid service fees and
legal fees and costs. The Company filed an answer to KPMG's counterclaims and
moved to dismiss KPMG's abuse of process counterclaim. On April 9, 2001, the
Court dismissed the abuse of process counterclaim with prejudice.

     The Company is involved from time to time in other litigation on various
matters relating to the conduct of its business. The Company believes that these
other litigation matters, single or collective, will not have a material adverse
effect on its consolidated financial position, results of operations or cash
flows.

4. CONVERTIBLE DEBT

     On December 29, 2000, the Company completed an additional $1 million
financing transaction with Fernwood Partners II LLC, which was constructed as an
add-on to the earlier Fernwood Financing (see Part 1, Item 2 of this 10-Q,
Management's Discussion). The additional note is convertible into the Company's
common stock at $1.51 per share and carries a warrant to purchase an additional
333,877 shares of the Company's common stock at $2.51 per share. The additional
convertible note bears interest at 11.5% per annum with no principal payments
due until June 30, 2002. The Fernwood Financing is subordinated to senior debt
and is collateralized by the assets of the Company.

     On January 24, 2001, in connection with the Fernwood Financing,
approximately $5.7 million of convertible debt and the interest accrued on that
debt was converted into approximately 4.6 million shares of common stock at
prices between $1.00 and $1.51 per share. In connection with the Fernwood
Financing, approximately $252,000 in convertible debt and interest accrued on
that debt is still outstanding. As a result of the conversion, approximately
$255,000 of costs associated with the beneficial conversion feature related to
the debt was written off.

     During January 2001, in connection with the Fernwood Financing, warrants
for the purchase of approximately 2.4 million shares of the Company's common


                                       7
<PAGE>   8
CYBERGUARD CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(UNAUDITED)


stock were exercised at $2.00 per share for a total of approximately $4.8
million in cash. In connection with the Fernwood Financing, approximately 1.9
million warrants are still outstanding.

     During January 2001, newly appointed CEO Scott J. Hammack invested $500,000
to purchase at the market value, 142,857 shares of common stock at $1.75 share,
and 62,500 shares of common stock at $4.00 per share. In conjunction with the
purchase of the 142,857 shares of common stock, Mr. Hammack was granted an equal
number of warrants to purchase the Company's common stock at $1.75 per share.
The warrants are exercisable any time before December 25, 2005.

5. MODIFICATION OF STOCK OPTIONS AND STOCK OPTION PLAN

     In January 2001, the Board of Directors resolved that upon Mr. Terrence
Zielinski's (the Company's former Chief Financial Officer ("CFO")) retirement
date, full vesting of all options held by Mr. Zielinski to purchase the
Company's common stock ("Options"), with the Options remaining exercisable
through June 30, 2003, or the Options' expiration, whichever came first. As a
result, the Company recorded approximately $73,000 in compensation expense.

     During the third quarter, the Company issued under market priced options to
various employees. As a result, the Company recorded approximately $27,000 in
compensation expense.

     On March 9, 2001, the Company filed a Registration Statement on Form S-8
with the Securities and Exchange Commission to register 2 million additional
shares of the Company's common stock for issuance pursuant to the exercise of
options to be granted under the Company's Amended and Restated Employee Stock
Option Plan.

6. RELATED PARTY TRANSACTIONS

     On August 26, 1999, certain directors, officers and employees participated
in the Fernwood Financing, contributing a total of $614,000. The interest rate
on the convertible debt is 11.5% per annum. The debt can be converted into
approximately 614,000 shares of common stock at a conversion price equal to
$1.00 per share. In addition, the Company issued approximately 614,000 warrants
to purchase the Company's common stock at $2.00 per share. The warrants are
exercisable any time before August 2004.

     On January 24, 2001, certain directors and officers elected to convert
approximately $428,000 of convertible debt and interest on that debt into
approximately 428,000 shares of common stock at $1.00 per share. Certain
directors also elected to exercise warrants for the purchase of approximately
110,000 shares of the Company's common stock for approximately $220,000 in cash
(see Note 4).

7. SUBSEQUENT EVENTS

     On April 4, 2001, the Company filed a Registration Statement on Form S-8
with the Securities and Exchange Commission to register 250,000 additional
shares of the Company's common stock for issuance under the Company's Retirement
Savings Plan, as amended (amending and restating in its entirety the Harris
Computer Systems Corporation Employee Savings Plan).


                                       8
<PAGE>   9

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

     The Company provides a full suite of products and services for the network
security industry. The products offered by the Company include the CyberGuard(R)
Firewall, proprietary and third party technology (such as Virtual Private
Network, authentication, virus scanning, encryption, advanced reporting, high
availability and centralized management), and consulting, support, and
installation services.

RESULTS OF OPERATIONS

THE QUARTER ENDED MARCH 31, 2001 COMPARED TO THE QUARTER ENDED MARCH 31, 2000

NET REVENUES

     Net revenues consist primarily of network security products and services
including third party security products and service and support related to
security products. For the quarter ended March 31, 2001, net revenues were
$7,635 compared to $5,265 for the quarter ended March 31, 2000. The increase was
comprised of an increase of $1,495 in network security product revenues and an
increase of $875 in service revenues. The increase in network security product
revenues was primarily the result of continued acceptance of the Company's
family of appliance products in Europe, Asia and the US. The increase in service
revenue corresponds to the growth in the Company's customer base. Network
security products accounted for 80% of revenues during the quarter ended March
31, 2001 as compared to 87% of revenues during the quarter ended March 31, 2000.
Support services for network security products accounted for 20% of revenues
during the quarter ended March 31, 2001 as compared to 13% of revenues during
the quarter ended March 31, 2000.

GROSS PROFIT

         Gross Profit as a percentage of revenues increased to 70% from 66% for
the quarter ended March 31, 2001 as compared to the quarter ended March 31,
2000. The increase reflects better pricing on hardware components of the
appliance products, and reduced cost of service associated with maintenance
revenue generated during the quarter.

OPERATING EXPENSES, OTHER INCOME AND EXPENSE AND NET LOSS

         Overall, operating expenses increased $3,097 for the quarter ended
March 31, 2001 to $5,881 million when compared to March 31, 2000. The majority
of the increase relates to one-time charges of $788 associated with management
restructuring, warrant conversion and marketing costs related to the
cancellation of a product branding campaign, $1,114 to the investment in
research and development for product and feature improvement and $584 to the
expansion of the sales efforts.

     Total Other Income and Expense decreased $92 for the quarter ended March
31, 2001 to $340. This relates to a reduction in foreign currency transaction
expense for the Company's foreign subsidiary.

     Net loss for the quarter ended March 31, 2001 was $888 compared to $270 in
income for the quarter ended March 31, 2000. The Company did not provide for
income taxes due to the significant net operating loss carryforwards available.


                                       9
<PAGE>   10

THE NINE-MONTH PERIOD ENDED MARCH 31, 2001 COMPARED TO THE NINE-MONTH PERIOD
ENDED MARCH 31, 2000.

NET REVENUES

     For the nine-month period ended March 31, 2001, net revenues were $18,031
when compared to $13,967 for the nine-month period ended March 31, 2000. The
change was comprised of an increase of $2,611 in network security product
revenue and an increase of $1,453 in service revenue. The increase in both
product and service revenue is directly attributed to the continued market
acceptance of the Company's appliance family of products and the Company's
growing customer base. Network security products accounted for 77% of revenues
during the nine-month period ended March 31, 2001 as compared to 81% of revenues
during the nine-month period ended March 31, 2000. Support services for network
security products accounted for 23% of revenues during the nine-month period
ended March 31, 2001 as compared to 19% of revenues during the nine-month period
ended March 31, 2000.

GROSS PROFIT

     Gross Profit as a percentage of revenues decreased to 70% from 71% for the
nine-month period ended March 31, 2001 when compared to the nine-month period
ended March 31, 2000. This is attributable to the continued shift in sales
toward the Company's appliance family of products.

OPERATING EXPENSES, OTHER INCOME AND EXPENSE AND NET LOSS

     Overall, operating expenses increased $5,833 for the nine-month period
ended March 31, 2001 to $15,067. The increase is primarily the result of costs
incurred in the third quarter ended March 31, 2001, which represents $3,097 of
the change or 53%. The majority of the increase relates to one-time charges of
$788 associated with management restructuring, warrant conversion and marketing
costs related to the cancellation of a product branding campaign, $1,989 to the
investment in research and development for product and feature improvement and
$2,144 to the expansion of the sales efforts.

     Total Other Income and Expense decreased by $170 for the nine-month period
ended March 31, 2001. This was primarily due to a decrease in interest expense
of $209 associated with the Fernwood Financing.

     Cumulative effect of a change in accounting principle was $129 for the
nine-month period ended March 31, 2001. The Emerging Issues Task Force (EITF)
reached a consensus opinion regarding the "Application of EITF Issue 98-5,
"Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios," to Certain Convertible Instruments". The
consensus opinion required the Company to use an effective conversion price to
determine a convertible instrument's beneficial conversion feature, which
resulted in the recognition of additional expense associated with the
convertible debt issued in August 1999. The expense is reported as a cumulative
effect on prior periods of a change in accounting principle.

     Net loss for the nine-month period ended March 31, 2001 was $3,362 million
compared to $375 for the nine-month period ended March 31, 2000.


                                       10
<PAGE>   11

LIQUIDITY AND CAPITAL RESOURCES

     The Company has experienced losses since its inception as a network
security company. The Company's historical uses of cash have been to fund net
losses from operations, establish inventory stocking levels, and fund capital
expenditures for property, equipment and software. For the quarter ended March
31, 2001, the Company incurred a net loss of approximately $888 on revenues of
approximately $7,635. For the quarter ended March 31, 2000, the Company had
income of approximately $270 on revenues of approximately $5,265.

     In August 1998, the Company and certain former officers and directors were
named in twenty-five shareholder lawsuits. The plaintiffs sued for unspecified
compensatory damages, legal fees, and litigation costs. The Company is unable to
predict the ultimate outcome or potential financial impact of this litigation.

     The consolidated financial statements do not include any adjustments
relating to the realization of assets and the recognition and satisfaction of
liabilities that might be necessary as a result of the matters described in this
Item 2 or Part II, Item 1 of this report.

     At March 31, 2001, the Company had cash and cash equivalents on hand of
$4,321 representing an increase of $1,824 from $2.497 million as of June 30,
2000. Accounts payable and accrued liabilities increased by $490, accounts
receivable increased by $1,558, property and equipment increased $171, and
inventory levels increased by $335 compared to June 30, 2000.

     The Company's principal sources of liquidity at March 31, 2001, consisted
of cash, accounts receivable, a revolving line of credit with a financial
institution and vendor trade credit. The revolving line of credit is based on
available eligible account receivables and inventory. The amount outstanding
decreased $1,062 from $1,316 at June 30, 2000 to $254 at March 31, 2001. The
line availability at March 31, 2001 was $1,840.

     On August 26, 1999, the Company entered into a financing transaction with
Fernwood Partners II, LLC ("Fernwood") and certain officers, directors and
employees of the Company. Through this transaction the Company obtained a total
amount of $4,313,484 (the "Fernwood Financing"). Fernwood provided $3,699,484
and certain other directors, executive officers and employees of the Company
provided $614,000. All of the financing consisted of promissory notes
convertible into the Company's Common Stock at $1.00 per share and warrants to
purchase an equivalent number of shares of the Company's Common Stock at $2.00
per share. The Fernwood Financing bears interest at a rate of 11.5% per annum
and is secured by a lien on all of the Company's assets. Interest is payable
quarterly. Part of the proceeds from this financing was used to repay a
$1,125,000 loan and accrued interest to Fernwood Partners, LLC, a limited
liability company that provided financing to the Company in December 1998.

     On December 29, 2000, the Company completed an additional $1 million
financing transaction with Fernwood, which was constructed as an add-on to the
earlier Fernwood Financing. The additional note is convertible into the
Company's common stock at $1.51 per share and carries a warrant to purchase an
additional 333,877 shares of the Company's common stock at $2.51 per share. The
additional convertible note bears interest at 11.5% per annum with no principal
payments due until June 30, 2002. The Fernwood Financing is subordinated to
senior debt and is collateralized by the assets of the Company.



                                       11
<PAGE>   12

     On January 24, 2001, in connection with the Fernwood Financing,
approximately $5.7 million of convertible debt and the interest accrued on that
debt was converted into approximately 4.6 million shares of common stock at a
price between $1.00 and $1.51 per share. In connection with the Fernwood
Financing, approximately $252,000 in convertible debt and interest accrued on
that debt is still outstanding.

     During January 2001, in connection with the Fernwood Financing, warrants
for the purchase of approximately 2.4 million shares of the Company's common
stock were exercised at $2.00 for a total of approximately $4.8 million in cash.
In connection with the Fernwood Financing, approximately 1.9 million warrants
are still outstanding.

     The Company uses the U.S. Dollar as its reporting currency for financial
statement purposes. The Company conducts business in numerous countries around
the world through its international subsidiary in the United Kingdom (UK
subsidiary). The UK subsidiary uses the local currency to denominate its
transactions. Therefore, the Company is subject to certain risks associated with
fluctuating foreign currencies. The effect of currency fluctuation to the
financial statements does not indicate any underlying changes in the financial
position of the international subsidiary, but merely reflects the adjustment in
the carrying value of the net assets of this subsidiary at the current U.S.
dollar exchange rate.

     Due to the long-term nature of the Company's investment in this subsidiary,
the translation adjustments resulting from these exchange rate fluctuations are
excluded from the results of operations and recorded in a separate component of
consolidated stockholders' equity. The Company monitors its currency exposure
but does not hedge its translation exposure due to the high economic costs of
such a program and the long-term nature of its investment in its European
subsidiary.

     Based upon information currently available to the Company, including the
Company's current level of sales, its margins on sales, its expected levels of
expense, opportunities for selling additional network security products and the
availability of additional equity and debt financing, the Company believes that
it has an opportunity to execute on its business plans and achieve profitability
in the long term. There can be no assurance, however, that the Company will be
able to execute on its business plans, or that it will not be required to obtain
additional financing or capital infusions. There can be no assurance that the
Company will be able to secure additional financing or that such additional
financing will be on terms and conditions acceptable to the Company. Any
additional financing may involve dilution of the interests of the Company's then
existing shareholders. The future liquidity of the Company will be affected by
numerous factors, including sales volumes, gross margins, the levels of selling,
general and administrative expenses, levels of required capital expenditures and
access to external sources of financing. Other recent and possible future events
that could also materially impact the Company's ability to successfully execute
on its business plans are described in Information Relating to Forward Looking
Statements of this Report on Form 10-Q.

RISK RELATED TO YEAR 2000 PROBLEM

     The Year 2000 problem stems from the use of a two-digit date to represent
the year (e.g., 85 = 1985) in computer software and firmware. It was thought
that many currently installed computer systems were not capable of
distinguishing dates beginning with the year 2000 from dates prior to the year
2000. Computer systems or applications used by many companies in a wide variety
of industries could experience operating difficulties unless the systems or
applications were modified to adequately process information related to the date
change. A degree of uncertainty still exists in the software and other



                                       12
<PAGE>   13

industries concerning the scope and magnitude of problems associated with the
century change. Many industry experts believe that the extent of Year 2000
issues may not be realized until after March 31, 2001.

     While the Company believes its Year 2000 risk management initiative's scope
covered both the Company's information technology (IT) systems and non-IT
systems and addressed all areas of the Year 2000 issues as defined by the
Information Technology Association of America (ITAA), and to date there have
been no Year 2000 issues detected, there can be no assurance that the Company
has identified and remedied all Year 2000 problems, and that such problems will
not have a material adverse affect on the Company's business.

INFORMATION RELATING TO FORWARD LOOKING STATEMENTS

     Statements regarding future products, future prospects, future
profitability, 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 all other statements contained in this Report on Form
10-Q that are not purely historical 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.
Accordingly, there can be no assurance that the forward-looking statements will
occur, or that results will not vary significantly from those described 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; the Company's history of annual net
operating losses and the financing of these losses through the sale of assets
and newly issued Company securities; 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. In addition, certain events that have occurred
also are factors that might cause future actual events to differ from those
predicted or assumed, including: the impact of the restatement of financial
results for the Company's fiscal year ended June 30, 1997 and quarters ended
September 30, 1997, December 31, 1997 and March 31, 1998; the completion of the
numerous organizational changes and the assembly of a new management team for
CyberGuard; the outcome of a purported class action lawsuit against the Company
and former CEO, Mr. Robert L. Carberry, relating to the restatement of financial
results for the fiscal periods noted above and an SEC investigation regarding
these matters; and the de-listing of the Company from the NASDAQ National
Market. In addition, the forward-looking statements herein involve assumptions,
risks and uncertainties, including, but not limited to economic, competitive,



                                       13
<PAGE>   14

operational, management, governmental, regulatory, litigation and technological
factors affecting the Company's operations, liquidity, capital resources,
markets, strategies, products, prices and other factors discussed elsewhere
herein and in the other documents filed by the Company with the Securities and
Exchange Commission. Many of the foregoing factors are beyond the Company's
control.

     The Company's future success is based largely on its ability to develop and
sell increasingly technologically advanced network security solutions in
sufficient volume and at sufficient prices to become profitable on a consistent
basis. In addition, the network security market is characterized by extremely
rapid technological change, requiring rapid product development. The velocity of
technological change has accelerated and the Company believes that it is
important to its future that it keeps pace with these changes. The Company
believes that competition will continue to intensify in the rapidly evolving
markets in which the Company is involved, and that the continued development of
technologically advanced products will be necessary to keep its products
current. In addition, the competition for and retention of key management and
technology employees is a critical challenge. The Company believes that its
ability to generate adequate cash flow from operations will also be critical to
its future.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES CONCERNING MARKET RISK

     We have limited exposure to financial market risks, including changes in
interest rates. The fair value of our investment portfolio or related income
would not be significantly impacted by a 100 basis point increase or decrease in
interest rates due mainly to the short-term nature of the major portion of our
investment portfolio. A fluctuation in interest rates would not significantly
affect interest expense on debt obligations since a significant portion of the
debt obligation is at a fixed rate of interest.

PART II: OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     On August 24, 1998, the Company announced, among other things, that due to
a review of its revenue recognition practices relating to distributors and
resellers, it would restate prior financial results. After the August 24, 1998
announcement, twenty-five purported class action lawsuits were filed by alleged
shareholders against the Company and certain former officers and directors.
Pursuant to an order issued by the Court, these actions have been consolidated
into one action, styled STEPHEN CHENEY, ET AL. V. CYBERGUARD CORPORATION, ET
AL., Case No. 98-6879-CIV-Gold, in the United States District Court, Southern
District of Florida. On August 23, 1999, the plaintiffs filed a Consolidated and
Amended Class Action Complaint. This action seeks damages purportedly on behalf
of all persons who purchased or otherwise acquired the Company's common stock
during various periods from November 7, 1996 through August 24, 1998. The
complaint alleges, among other things, that as a result of accounting
irregularities relating to the Company's revenue recognition policies, the
Company's previously issued financial statements were materially false and
misleading and that the defendants knowingly or recklessly published these
financial statements which caused the Company's common stock prices to rise
artificially. The action alleges violations of Section 10(b) of the Securities
Exchange Act of 1934 ("Exchange Act") and SEC Rule 10b-5 promulgated thereunder
and Section 20(a) of the Exchange Act. Subsequently, the defendants, including
the Company, filed their respective motions to dismiss the Consolidated and
Amended Class Action Complaint. On July 31, 2000, the Court issued a ruling
denying the Company's and Robert L. Carberry's (the Company's CEO from June 1996
through August 1998) motions to dismiss. The court granted the motions to
dismiss with prejudice for defendants William D. Murray (the Company's CFO from
November 1997 through August 1998), Patrick O. Wheeler (the Company's CFO from
April 1996 through October 1997), C. Shelton James (the Company's former Audit


                                       14
<PAGE>   15


Committee Chairman), and KPMG Peat Marwick LLP ("KPMG"). On August 14, 2000, the
plaintiffs filed a motion for reconsideration of that order. The Company filed
an answer to the plaintiffs' Consolidated and Amended Class Action Complaint on
August 24, 2000. On March 20, 2001, the Court ruled on the plaintiffs' motion
for reconsideration that the previously dismissed defendants William D. Murray,
Patrick O. Wheeler and C. Shelton James should not have been dismissed from the
action and shall be defendants in this action under the control person liability
claims under Section 20(a) of the Exchange Act, and that the plaintiffs may
amend the Consolidated and Amended Class Action Complaint to bring claims
against C. Shelton James under Section 10(b) of the Exchange Act and Rule 10b-5
promulgated thereunder. On April 5, 2001, the plaintiffs filed their Second
Consolidated and Amended Class Action Complaint to include amended claims
against C. Shelton James. On May 10, 2001, the Company filed an Answer to the
Second Consolidated and Amended Class Action Complaint.

     In August 1998, the Securities and Exchange Commission ("SEC")
commenced an informal inquiry into certain accounting and financial reporting
practices of the Company and its officers, directors and employees. On March 25,
1999, the SEC issued a formal order of investigation (which the Company learned
of on September 27, 1999) into certain accounting and financial reporting
practices of the Company and its officers, directors and employees. The SEC's
investigation is ongoing.

     On September 16, 1999, the Company filed a lawsuit against KPMG and August
A. Smith, the KPMG engagement partner. The lawsuit is pending in the Circuit
Court of the 17th Judicial Circuit in and for Broward County, Case No.
00-004102-CACE-14. On May 1, 2000, the Company filed the First Amended
Complaint, alleging that KPMG failed to properly audit the Company's financial
statements and provided inaccurate advice on accounting matters for fiscal years
1996, 1997 and 1998. The action alleges professional malpractice, breach of
fiduciary duty, breach of contract and breach of implied duty of good faith, and
seeks damages in excess of $10 million. KPMG and Mr. Smith filed motions to
dismiss, which were denied. In August 2000, KPMG and Mr. Smith filed their
answers and KPMG filed counterclaims against the Company, alleging the Company's
breach of contract, negligent misrepresentation and abuse of process, and
seeking an unspecified amount of damages consisting of unpaid service fees and
legal fees and costs. The Company filed an answer to KPMG's counterclaims and
moved to dismiss KPMG's abuse of process counterclaim. On April 9, 2001, the
Court dismissed the abuse of process counterclaim with prejudice.

     The Company is unable to predict the ultimate outcome of the litigation and
investigation described above in this Part II, Item 1. The resolution of such
matters could have a material adverse affect on the Company's results of
operations and financial position. The Company's financial statements do not
include any adjustments related to these matters.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

None

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.  OTHER INFORMATION

None


                                       15
<PAGE>   16

ITEM 5.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits:

EXHIBIT NO.   EXHIBIT DESCRIPTION
-----------   -------------------

10.1           Employment Agreement dated February 13, 2001 between the Company
               and Michael Matte.

10.2           Agreement dated February 28, 2001 between the Company and
               Terrence A. Zielinski.

10.3           Agreement dated April 14, 2001 between the Company and David R.
               Proctor.

10.4           Consulting Agreement dated March 1, 2001 between the Company and
               David R. Proctor.

10.5           Amended and Restated Employee Stock Option Plan dated September
               4, 1998, as amended through March 2, 2001(1)

10.6           Retirement Savings Plan dated July 1, 1996, as amended (2)

(b)  Reports filed on Form 8-K during the fiscal quarter ended March 31, 2001.
     The Company filed two reports on Form 8-K, dated January 29, 2001 and
     February 15, 2001.

-----------

(1)      Incorporated herein by reference to the Company's Registration
         Statement on Form S-8 (Commission File Number 333-56768, filed on March
         9, 2001).

(2)      Incorporated herein by reference to the Company's Registration
         Statement on Form S-8 (Commission File Number 333-58262, filed on April
         4, 2001).


                                       16

<PAGE>   17

                                   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 14, 2001           CYBERGUARD CORPORATION



                             By:     /s/ SCOTT HAMMACK
                                 ----------------------------------------------
                                 Chief Executive Officer

                             By:     /s/ MICHAEL D. MATTE
                                 ----------------------------------------------
                                 Chief Financial Officer
                                 (Principal Financial and Accounting Officer)




                                       17