<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, 2000
                                                --------------
                                       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 8, 2000, 9,703,190 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 BALANCE SHEET
                              (Unaudited)
                         (Dollars in thousands)


<TABLE>
<CAPTION>
                                                                        Mar. 31,        June 30,
                                                                         2000             1999
                                                                       --------         --------
<S>                                                                    <C>              <C>
ASSETS
Cash and cash equivalents                                              $  1,720         $  2,622
Restricted cash                                                             650              908
Accounts receivable, less allowance for  uncollectible accounts
  of $79 at Mar. 31, 2000 and $407 at June 30, 1999                       5,106            2,021
Inventories, net                                                            109              210
Capitalized software, net                                                   709              185
Other current assets                                                      1,169              482
                                                                       --------         --------
  Total current assets                                                    9,463            6,428

Property and equipment at cost, less accumulated
  depreciation of $1,021 at Mar. 31, 2000 and
  $922 at June 30, 1999                                                   1,120            1,154
Non-compete agreements, net                                                 350              560
Other assets                                                                155              135
                                                                       --------         --------
        Total assets                                                   $ 11,088         $  8,277

LIABILITIES AND SHAREHOLDERS' DEFICIT
Line of credit and note payable                                           1,837            2,054
Accounts payable                                                          1,388            2,766
Deferred revenue                                                          3,020            2,047
Accrued expenses and other liabilities                                    1,616            3,210
                                                                       --------         --------
  Total current liabilities                                               7,861           10,077
Note Payable                                                                650               --
Convertible debenture, net                                                3,758              885
                                                                       --------         --------
 Total liabilities                                                       12,269           10,962
                                                                       --------         --------

Shareholders' deficit
Common stock par value $0.01 authorized 50,000,000 shares
   issued and outstanding 9,602,644 at Mar. 31, 2000
   and 9,064,756 at June 30, 1999                                            96               91
Additional paid-in capital                                               75,482           73,677
Accumulated deficits                                                    (76,849)         (76,475)
Accumulated other comprehensive income                                       90               22
                                                                       --------         --------
  Total shareholders' deficit                                            (1,181)          (2,685)
                                                                       --------         --------
        Total liabilities and shareholders' deficit                    $ 11,088         $  8,277
                                                                       ========         ========

</TABLE>


      See accompanying notes to condensed consolidated financial statements






                                       2
<PAGE>   3


                           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,
                                                              2000               1999               2000              1999
                                                          ------------       ------------       ------------       ------------
<S>                                                       <C>                <C>                <C>                <C>
Revenues:
Products                                                  $      4,577       $      3,174       $     11,340       $      8,627
Services                                                           688                696              2,627              1,927
                                                          ------------       ------------       ------------       ------------
  Total revenues                                                 5,265              3,870             13,967             10,554

Cost of revenues:
Products                                                         1,305                808              2,692              2,860
Services                                                           474                413              1,421              1,164
                                                          ------------       ------------       ------------       ------------
  Total cost of revenues                                         1,779              1,221              4,113              4,024

                                                          ------------       ------------       ------------       ------------
Gross profit                                                     3,486              2,649              9,854              6,530
                                                          ------------       ------------       ------------       ------------

Operating expenses:
Research and development                                           568                857              2,120              2,603
Selling, general and administrative                              2,216              3,244              7,114             10,941
                                                          ------------       ------------       ------------       ------------
  Total operating expenses                                       2,784              4,101              9,234             13,544

                                                          ------------       ------------       ------------       ------------
Operating income (loss)                                            702             (1,452)               620             (7,014)
                                                          ------------       ------------       ------------       ------------

Other income (expense)
Interest expense, net                                             (317)                16               (979)               (60)
Gain on sale of assets                                              --                 --                 --              1,820
Other income (expense)                                            (115)                 4                (16)                78
                                                          ------------       ------------       ------------       ------------
  Total other income (expense)                                    (432)                20               (995)             1,838

Net income (loss)                                         $        270       $     (1,432)      $       (375)      $     (5,176)
                                                          ============       ============       ============       ============

Basic earnings (loss) per common share                    $       0.03       $      (0.16)      $      (0.04)      $      (0.58)
                                                          ============       ============       ============       ============

Weighted average number of common shares outstanding         9,346,682          8,992,493          9,193,995          8,950,036
                                                          ============       ============       ============       ============

Diluted earnings (loss) per common share                  $       0.01       $      (0.16)      $      (0.04)      $      (0.58)
                                                          ============       ============       ============       ============

Diluted common shares outstanding                           19,192,665          8,992,493          9,193,995          8,950,036
                                                          ============       ============       ============       ============

</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
                                                             ----------------------
                                                             Mar. 31,       Mar. 31,
                                                               2000           1999
                                                             --------        -------
<S>                                                          <C>             <C>
Cash flows from operating activities
Net loss                                                     $  (375)        $(5,175)
Adjustment to reconcile net loss to net cash
  used by operating activities:
Depreciation                                                     321             597
Amortization                                                     355             341
Interest on retirement of convertible debt                       240
Interest on new convertible debt                                 523
Compensation and benefits                                         --             158
Provision for uncollectible accounts receivable                 (328)            290
Provision for inventory reserve                                   --              29
Gain on sale of business assets                                   --          (1,820)

Changes in assets and liabilities
Accounts receivable                                           (2,757)            434
Other current assets                                            (687)            541
Inventories                                                      101            (255)
Accounts payable                                              (1,377)            370
Accrued expenses and other liabilities                        (1,314)            196
Deferred revenue                                                 974            (990)
Other, net                                                        49            (391)
                                                             -------         -------
  Net cash used by operating activities                       (4,275)         (5,675)
                                                             -------         -------

Cash flows provided by (used in) investing activities
Capitalized software costs                                      (665)           (140)
Additions/deletions to Property & Equipment                     (287)           (160)
Proceeds from sale of Arca Systems                                --           3,261
                                                             -------         -------
  Net cash provided (used) by investing activities              (952)          2,961
                                                             -------         -------

Cash flows provided by (used in) financing activities
Proceeds from sale of business assets                             --           1,820
Change in restricted cash                                        258            (258)
Issuance of new convertible debt                               4,313           1,125
Retirement of existing convertible debt                       (1,125)             --
Notes Payable                                                    (36)             --
Revolving line of credit                                         188            (687)
Proceeds from stock options excercised                           594
Proceeds from sale of common stock                               133              19
                                                             -------         -------
  Net cash provided from financing activities                  4,325           2,019
                                                             -------         -------

Net decrease in cash                                            (902)           (695)
Cash and cash equivalents at beginning of period               2,622           1,773

                                                             -------         -------
Cash and cash equivalents at end of period                   $ 1,720         $ 1,078
                                                             =======         =======

Supplemental disclosure of cash flow information
Cash paid for interest                                           482               0
                                                             =======         =======
Cash paid for income taxes                                        --              --
                                                             =======         =======

Non-cash financing activities
Beneficial conversion feature on new convertible debt            856              --
                                                             =======         =======


</TABLE>




   See accompanying notes to condensed consolidated financial statements







                                       4
<PAGE>   5

CYBERGUARD CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(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, 1999. 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, 2000 presented are
not necessarily indicative of the results of operations that may be expected for
the year ending June 30, 2000.

Basic earnings (loss) per share is calculated by dividing net income (loss) by
the weighted average number of common shares outstanding during the year.
Diluted per share data includes the dilutive effects of options, warrants and
convertible securities. The following reconciles the basic and diluted earnings
per share calculation for the quarter ended March 31, 2000.

<TABLE>
<CAPTION>

   Dollars in Thousands,
    Except Per Share
         Amounts                               Q300 Net Income      Weighted Average Shares     Per Share Amount
  ----------------------                       ---------------      ------------------------    ----------------
<S>                                                 <C>                   <C>                          <C>
Net earnings per share - basic                      $ 270                 9,346,682                    $ .03

Effect of Dilutive Shares:
  Stock options outstanding                                               2,112,481
  Convertible debt                                                        4,485,076
  Warrants outstanding                                                    3,248,426

Net earnings per share - diluted                    $ 270                19,192,665                    $ .01
</TABLE>

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 have been 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,





                                       5
<PAGE>   6
CYBERGUARD CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)


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, regulation, inventory obsolescence, the ultimate outcome of certain
litigation matters, and cash balances in excess of federally insured limits.


2. LITIGATION

In August 1998, the Company and certain former officers and directors were named
as defendants in 25 shareholder lawsuits filed in the United States District
Court for the Southern District of Florida. All of the lawsuits purport to be
brought on behalf of a class of all persons who purchased or otherwise acquired
the Company's common stock during various periods from October 7, 1997, through
August 24, 1998. The lawsuits allege, among other things, that as a result of
accounting issues relating to the Company's revenue recognition practices,
defendants knowingly or recklessly caused the Company to publish false and
misleading financial statements which caused the Company's common stock prices
to rise artificially. One lawsuit also alleges violations of common law. The
plaintiffs are seeking an unspecified amount of damages, interest, costs and
attorney fees. These cases have been transferred and consolidated into a single
case for purposes of all pre-trial matters and trial (the "Shareholder
Litigation"). An amended consolidated complaint was filed on August 23, 1999,
after the filing of the Company's restated financial results. On October 30,
1999, the Company filed a Motion to Dismiss Plaintiffs' 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 lawsuits, and the carrier has sent the Company a reservation of
rights letter. The Company intends to vigorously defend these actions, 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 lawsuits or paying a judgment. However, the Company is unable
to predict the ultimate outcome of the litigation. There can be no assurance
that the Company will be successful in defending the lawsuits or if
unsuccessful, insurance will be available to pay all or any portion of the
expense of the lawsuits. If the Company is unsuccessful in defending the
lawsuits and the insurance coverage is unavailable or insufficient, the
resolution of the lawsuits could have a material adverse 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.

On September 16, 1999, the Company filed a lawsuit against KPMG Peat Marwick LLP
("KPMG") and August A. Smith, the KPMG engagement partner, Case No.
99-21700CA05, in the Circuit Court of the 11th Judicial Circuit in and for
Miami-Dade County. The Company alleged KPMG failed to properly audit the
Company's financial statements and provided inaccurate advice on accounting
matters for fiscal years 1997 and 1998 and on accounting treatment of certain
matters at the end of fiscal year 1996. The complaint alleges professional
malpractice, breach of fiduciary duty, breach of contract and trade libel and
seeks damages in excess of $10 million. In March 2000, the venue was transferred
to the Circuit Court of the 17th Judicial Circuit in and for Broward County,
Case No. 00-004102-CACE-14.

In August 1998, the Securities and Exchange Commission (the "SEC") began an
informal investigation into certain accounting and financial reporting practices
of the Company and its officers, directors and employees. In September 1999, the
Company was notified that the SEC had begun a formal investigation







                                       6
<PAGE>   7

CYBERGUARD CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)


into certain accounting and financial reporting practices of the Company and its
officers, directors and employees.

The Company is unable to predict the ultimate outcome of the litigation and
investigation described above in this Part I, Item 2. 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.


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.

3. RELATED PARTY TRANSACTIONS

On August 26, 1999, certain directors, officers and employees invested in the
Company's convertible debenture offering, 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. The terms of the debt
agreement permit the conversion of the debt to common stock at a discount to
market. This discount is considered a beneficial conversion feature and, at the
date of issuance of the debt, is being recognized as interest expense over the
shortest possible conversion period. The convertible debt is subordinated to the
Company's senior debt.

On August 26, 1999, David R. Proctor, Chairman and Chief Executive Officer
signed a promissory note in the amount of $100,000 to facilitate his
participation in the convertible debt offering. The interest rate on the note is
11.5% per annum. The promissory note was being repaid biweekly in lieu of
salary, including any bonus payments. The note was paid in full on March 3,
2000.

4. SUBSEQUENT EVENTS

On September 29, 1999, the Company entered into a settlement agreement with
Digital Signature Trust Company ("DST") in connection with the lawsuits filed
after the sale of the Company's TradeWave division to DST. See Form 10-Q filed
on February 14, 2000. In April 2000, the Company filed a Motion to Enforce the
Settlement Agreement against DST. DST also filed a Motion to Enforce the
Settlement Agreement against the Company.

On April 14, 2000, the Court denied in part, and granted in part, KPMG's Motion
to Dismiss the Company's complaint for failure to state a cause of action, with
a leave to amend. The Company filed an amended complaint on May 1, 2000.






                                       7
<PAGE>   8
CYBERGUARD CORPORATION
MARCH 31, 2000
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)

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, KnightSTARO, proprietary and third-party technology (such as Virtual
Private Network, authentication, virus scanning, encryption, advanced reporting,
high availability and centralized management), and training, consulting, support
maintenance, and installation services.

RESULTS OF OPERATIONS

THE QUARTER ENDED MARCH 31, 2000 COMPARED TO THE QUARTER ENDED MARCH 31, 1999

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. Net revenues increased $1.395 million for the quarter ended
March 31, 2000; when compared to the quarter ended March 31, 1999. The $5.265
million of revenue was comprised of $4.577 million from the sales of network
security products and $688,000 from the sales of training, consulting, support
maintenance, and installation services. The $1.403 million increase in network
security product revenue as compared to last year was offset somewhat by a
$8,000 decrease in service revenue as compared to last year. The increase in
product revenue is directly attributed to the successful launch of the Company's
premium appliance firewall KnightSTAR.

GROSS PROFIT

Gross Profit as a percentage of revenues decreased slightly to 66% for the
quarter ended March 31, 2000 when compared to 68% for the quarter ended March
31, 1999. The decrease is attributable to the shift in product sales from
software only sales to KnightSTAR sales.

OPERATING EXPENSES, OTHER INCOME AND EXPENSE AND NET LOSS

Operating Expenses decreased $1.317 million for the quarter ended March 31, 2000
to $2.784 million. This is due to decreased compensation and related employee
costs, reduced professional accounting and legal fees, and better cost controls
over outside consulting and other third party contracts.

Total Other Income and Expense increased $452,000 for the quarter ended March
31, 2000 to ($432,000) million. This is the related to an increase in interest
expense associated with the issuance of the new convertible debt.

Net Income for the quarter ended March 31, 2000 was $270,000 compared to a net
loss of $1.432 million for the quarter ended March 31, 1999. The Company did not
provide for income taxes due to the significant net operating loss carryforwards
available.





                                       8
<PAGE>   9
CYBERGUARD CORPORATION
MARCH 31, 2000
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)



THE NINE-MONTH PERIOD ENDED MARCH 31, 2000 COMPARED TO THE NINE-MONTH PERIOD
ENDED MARCH 31, 1999

NET REVENUES

Revenues increased by approximately $3.413 million to $13.967 million for the
nine-month period ended March 31, 2000; when compared to $10.554 million for the
nine-month period ended March 31, 1999. Product revenue increased 31%, or $2.713
million, and service revenue increased 36%, or $700,000, over the same period
last year. The increase in both product and service revenue is directly
attributed to the return of consumer confidence in the Company's management,
products, and future.

GROSS PROFIT

Gross Profit as a percentage of revenues increased to 71% for the nine-month
period ended March 31, 2000 as compared to 62% for the nine-month period ended
March 31, 1999. The increase is attributable to the increased level of revenues
relative to the fixed personnel cost component of cost of revenues and to the
absence of any former TradeWave Division operations.

OPERATING EXPENSES, OTHER INCOME AND EXPENSE AND NET LOSS

Operating Expenses decreased $4.310 million for the nine-month period ended
March 31, 2000 to $9.234 million. The $3.827 million decrease in selling,
general and administrative expenses was the result of significant staffing
reductions and an overall reduction in discretionary spending.

Total Other Income and Expense for the nine-month period ended March 31, 2000
were ($995,000) when compared to $1.838 million for the nine-month period ended
March 31, 1999. The current year expense primarily related to interest expense
associated with the issuance of the new convertible debt, while the prior year's
income related to a non-recurring, one-time gain of $1.8 million realized from
the sale of business assets.

Net Loss for the nine-month period ended March 31, 2000 was $375,000 million
compared to $5.176 million for the nine-month period ended March 31, 1999. The
Company did not provide for income taxes due to the significant net operating
loss carryforwards available.


LIQUIDITY AND CAPITAL RESOURCES

During the quarter ended March 31, 2000, the Company achieved net income for the
first time in its history and grew EBITDA (Earnings Before Interest, Taxes,
Depreciation and Amortization) to $846,000. However, the Company previously
experienced losses since its inception as a network security company. The
Company's historical uses of cash have been to fund the net losses from
operations, the research and development of its products, and the capital
expenditures for property, equipment and software. For the quarter ended March
31, 2000, the Company recorded net income of approximately $270,000 on revenues
of approximately $5.265 million. For the quarter ended March 31, 1999, the
Company incurred a net loss of approximately $1.432 million on revenues of
approximately $3.870 million. For the nine-month period ended March 31, 2000,
the Company incurred a net loss of approximately $375,000 on revenues of
approximately $13.967 million. For the nine-month period ended March 31, 1999,
the Company incurred a net loss of approximately $5.176 million on revenues of
$10.554 million.

At March 31, 2000, the Company had cash and cash equivalents on hand of $1.720
million representing a decrease of $902,000 from $2.622 million as of June 30,
1999. Accounts payable and accrued liabilities decreased by $2.972 million,
accounts receivable (net) increased $3.085 million, property and equipment
decreased $34,000, and inventory levels decreased by $101,000 compared to June
30, 1999. On April 4, 2000, the Company made its final payment of $137,500, per
its $650,000 Settlement Agreement with





                                       9
<PAGE>   10

CYBERGUARD CORPORATION
MARCH 31, 2000
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)


Information Resource Engineering, Inc. (IRE), effectively releasing the Company
from any further obligation to IRE.

The Company's principal sources of liquidity at March 31, 2000, consisted of
cash, accounts receivable, a revolving line of credit with Coast Business
Credit, and vendor trade credit. The revolving line of credit with Coast
Business Credit is based on available eligible account receivables and
inventory. The line of credit increased $188,000, to $2.242 million from $2.054
million compared to June 30, 1999.

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 which the Company obtained a total amount of
$4,313,484 (the "Fernwood Financing"). In the Fernwood Financing, Fernwood
provided $3,699,484 and certain 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 terms of the debt agreement permit the conversion
of the debt to common stock at a discount to market. This discount is considered
a beneficial conversion feature. The beneficial conversion feature at the date
of issuance of the debt of $1,069,621 is being recognized as interest expense
over the thirty-four month conversion period. 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. 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.

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 that uses the local currency to
denominate its transactions. Therefore, the Company is subject to certain risks
associated with fluctuating foreign currencies. The resulting changes in the
financial statements do not indicate any underlying changes in the financial
position of the international subsidiary, but merely reflect 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. There was no significant change for the
quarter ended March 31, 2000. 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.

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.

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





                                       10
<PAGE>   11

CYBERGUARD CORPORATION
MARCH 31, 2000
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)


has an opportunity to execute on its business plans and achieve long term
profitability. 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 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 significant annual
operating losses and the financing of these losses through the sale of assets






                                       11
<PAGE>   12

CYBERGUARD CORPORATION
MARCH 31, 2000
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)


and newly issued Company securities; risks related to the early stage of the
Company's existence and its products' development; the Company's history of
losses; 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;
risks relating to the year 2000 problem; 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 recent 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 certain former officers and directors relating to the
restatement of financial results for the fiscal periods noted above and the SEC
investigation regarding these matters; the de-listing of the Company from the
NASDAQ National Market; and the Company's past delinquency in filing reports
that were required to be filed under the Securities Exchange Act of 1934 (which,
among other things, restricts the Company from being able to use Form S-3, a
simplified method of registering securities for sale with the Securities and
Exchange Commission). The Company continues to be current in its filings with
the SEC. In addition, the forward-looking statements herein involve assumptions,
risks and uncertainties, including, but not limited to economic, competitive,
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 at sufficient
volume and prices to become profitable on a consistent basis. 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. The Company believes that its ability to generate adequate cash flow
from operations will 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.






                                       12
<PAGE>   13
CYBERGUARD CORPORATION
MARCH 31, 2000
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)


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 policies 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. Each
of these lawsuits was filed in the United States District Court for the Southern
District of Florida. These actions seek damages purportedly on behalf of all
persons who purchased or otherwise acquired the Company's common stock during
various periods from October 7, 1997 through August 24, 1998. The complaints
allege, 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 actions
allege violations of Section 10(b) of the Securities Exchange Act of 1934 (the
"Exchange Act") and SEC Rule 10b-5 promulgated thereunder and Section 20(a) of
the Exchange Act. One action also alleges violations of common law. Pursuant to
an order issued by the Court, these actions have been consolidated into one
action, styled STEPHEN CHENEY, ET AL. V. CYBERGUARD CORPORATION, ROBERT L.
CARBERRY AND WILLIAM D. MURRAY, Case No. 98-6879-CIV-Gold, in the United States
District Court, Southern District of Florida. An amended consolidated complaint
was filed on August 23, 1999, after the filing of the Company's restated
financial results. On October 30, 1999, the Company filed a Motion to Dismiss
Plaintiffs' Amended Class Action Complaint.

On September 16, 1999, the Company filed a lawsuit against KPMG Peat Marwick LLP
("KPMG") and August A. Smith, the KPMG engagement partner, Case No.
99-21700CA05, in the Circuit Court of the 11th Judicial Circuit in and for
Miami-Dade County. The Company alleged KPMG failed to properly audit the
Company's financial statements and provided inaccurate advice on accounting
matters for fiscal years 1997 and 1998 and on accounting treatment of certain
matters at the end of fiscal year 1996. The complaint alleges professional
malpractice, breach of fiduciary duty, breach of contract and trade libel and
seeks damages in excess of $10 million. In March 2000, the venue was transferred
to the Circuit Court of the 17th Judicial Circuit in and for Broward County,
Case No. 00-004102-CACE-14.

In August 1998, the Securities and Exchange Commission (the "SEC") began an
informal investigation into certain accounting and financial reporting practices
of the Company and its officers, directors and employees. In September 1999, the
Company was notified that the SEC had begun a formal investigation into certain
accounting and financial reporting practices of the Company and its officers,
directors and employees.

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





                                       13
<PAGE>   14
CYBERGUARD CORPORATION
MARCH 31, 2000
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

     Exhibit No.     Exhibit Description
     -----------     -------------------

     27.1    --      Financial Data Schedule


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

(b) Reports filed on Form 8-K during the quarter ended March 31, 2000: On
    February 2, 2000 - Other Events






                                       14
<PAGE>   15
                                   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 11, 2000                                 CYBERGUARD CORPORATION



                                       By: /s/ David R. Proctor
                                           ------------------------------------
                                           Chairman and Chief Executive Officer




                                       By: /s/ Terrence A. Zielinski
                                           ------------------------------------
                                           Vice President of Finance and Chief
                                           Financial Officer (Principal
                                           Financial and Accounting Officer)








                                       15