<PAGE>   1

                        SECURITIES AND EXCHANGE COMMISSION
                              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 DECEMBER 31, 1997


                                       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                          (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 February 6, 1998, 8,391,862 shares of the Registrant's $0.01 par
value Common Stock were outstanding.


<PAGE>   2



                          PART I FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS


                             CYBERGUARD CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>

                                                    THREE MONTHS ENDED          SIX MONTHS ENDED
                                                   DEC. 31      DEC. 31       DEC. 31      DEC. 31
                                                     1997         1996          1997         1996
                                                  ----------   ----------    ----------    ----------
<S>                                               <C>          <C>           <C>           <C>       
Revenues:
  Products                                        $    4,531   $    2,835    $    9,207    $    5,711
  Services                                               323          212           710           403
                                                  ----------   ----------    ----------    ----------
     Total sales                                       4,854        3,047         9,917         6,114


Cost of revenues:
  Products                                             1,616        1,408         3,162         3,197
  Services                                               212          100           462           185
                                                  ----------   ----------    ----------    ----------
     Total cost of sales                               1,828        1,508         3,624         3,382

Gross profit                                           3,026        1,539         6,293         2,732

Operating expenses:
  Research and development                             1,582        1,011         3,162         2,067
  Selling, general and administrative                  4,235        2,552         8,076         4,896
                                                  ----------   ----------    ----------    ----------
    Total operating expenses                           5,817        3,563        11,238         6,963
                                                  ----------   ----------    ----------    ----------

Operating loss                                        (2,791)      (2,024)       (4,945)       (4,231)

Other income (expense)
  Interest income, net                                   112          198           236           363
  Gain (Loss) on sale of equity securities               182          997           522        (5,214)
  Other income (expense)                                (107)          12          (119)            3
                                                  ----------   ----------    ----------    ----------
    Total other income (expense)                         187        1,207           639        (4,848)
                                                  ----------   ----------    ----------    ----------

Net Loss                                          $   (2,604)  $     (817)   $   (4,306)   $   (9,079)
                                                  ==========   ==========    ==========    ==========

Basic loss per common share                           ($0.32)      ($0.12)       ($0.54)       ($1.30)
                                                  ==========   ==========    ==========    ==========

Weighted average number of common
  shares outstanding                               8,111,851    7,086,692     7,899,557     6,972,919
                                                  ==========   ==========    ==========    ==========
</TABLE>


      See accompanying notes to condensed consolidated financial statements




                                       2
<PAGE>   3
                             CYBERGUARD CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                  (UNAUDITED)




(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                    DEC. 31,       JUNE 30,
                         ASSETS                                       1997            1997
                                                                  ------------   ------------
<S>                             <C>                               <C>            <C>       
Cash and cash equivalents (Note 7)                                $    4,942     $    2,975
Securities available for sale                                             --          1,268
Accounts and notes receivable, less allowance for
  uncollectible accounts of $733 at December 31, 1997
  and $547 at June 30, 1997                                            6,232          6,642
Inventories (Note 3)                                                   1,424          1,588
Prepaid expenses                                                         834            520
                                                                  ----------     ----------
    Total current assets                                              13,432         12,993

Property and equipment at cost, less accumulated (Note 4)
    depreciation of $1,821 at December 31, 1997 and
    $1,582 at June 30, 1997                                            1,821          1,706

Non-Compete Agreement                                                    980          1,120
Other assets                                                             160            155
                                                                  ----------     ----------

Total assets                                                      $   16,393     $   15,974
                                                                  ==========     ==========

         LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts payable                                                  $    1,568     $    1,144
Short term revolving loan payable (Note 7)                               157             --
Deferred revenue                                                         889          1,277
Accrued expenses                                                       2,260          3,636
                                                                  ----------     ----------

    Total current liabilities                                          4,874          6,057
                                                                  ----------     ----------

Notes payable long term (Note 7)                                         650             --
                                                                  ----------     ----------
    Total liabilities                                                  5,524          6,057

Shareholders' equity:
    Common stock par value $0.01 authorized 20,000,000 shares
      issued and outstanding 8,229,722 at December 31, 1997
      and 7,452,314 at June 30, 1997                                      82             74
    Additional paid-in capital                                        64,988         59,507
    Accumulated deficit                                              (54,006)       (49,700)
    Unrealized gain on securities available for sale                      --            173
    Cumulative foreign currency translation adjustment (Note 6)         (195)          (137)
                                                                  ----------     ----------
    Total shareholders' equity                                        10,869          9,917
                                                                  ----------     ----------

Total liabilities and shareholders' equity                        $   16,393     $   15,974
                                                                  ==========     ==========
</TABLE>


     See accompanying notes to condensed consolidated financial statements



                                       3
<PAGE>   4

                             CYBERGUARD CORPORATION
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
                                  (UNAUDITED)




(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                            SIX MONTHS ENDED
                                                          DEC 31,          DEC 31,
                                                           1997             1996
                                                        ------------    ------------
<S>                                                      <C>             <C>        
Cash flows from operating activites
     Net loss                                            $    (4,306)    $   (9,079)
     Adjustment to reconcile net loss to net cash
       provided from (used in) operating activities:
     Depreciation                                                412            217
     Amortization                                                140            140
     (Gain) Loss on sale of Concurrent Computer stock           (522)         5,219
     Reserve for uncollectible accounts receivable               461             --
     Changes in assets and liabilities
        Receivables                                              199            303
        Prepaid Expenses                                        (314)           (56)
        Inventories                                              164           (900)
        Trade payables                                           424            860
        Other expenses and accruals                           (1,626)        (1,973)
        Deferred revenue                                        (388)         1,000
        Other                                                     61            (80)
                                                         -----------     ----------
Net cash used in operating activities                         (5,295)        (4,349)
                                                         -----------     ----------

Cash flows from investing activities
     Additions to property and equipment, net                   (315)          (567)
     Software development costs & other assets                    --             (9)
                                                         -----------     ----------
Net cash used in investing activities                           (315)          (576)
                                                         -----------     ----------

Cash flows from financing activities
     Proceeds from sale of Concurrent Computer Stock           1,416          9,893
     Proceeds from sale of common stock                        5,354          1,460
     Proceeds from note payable                                  650             --
     Payoff of short-term loan                                    --         (3,200)
     Proceeds from short term note payable                       157             --
                                                         -----------     ----------
Net cash provided from financing activities                    7,577          8,153

Net increase in cash                                           1,967          3,228
Cash and cash equivalents at beginning of period               2,975          3,617
                                                         -----------     ----------

Cash and cash equivalents at end of period               $     4,942     $    6,845
                                                         ===========     ==========
</TABLE>


     See accompanying notes to condensed consolidated financial statements


                                       4

<PAGE>   5

                             CYBERGUARD CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997
                                   (UNAUDITED)

1.   BASIS OF PRESENTATION

     The accompanying unaudited consolidated financial statements have been
     prepared in accordance with the instructions to Form 10-Q and, therefore,
     do not include all information and footnotes necessary for a fair
     presentation of financial position, results of operations, and cash flows
     in conformity with generally accepted accounting principles. The
     information furnished, in the opinion of management, reflects all
     adjustments, which consist of normal recurring adjustments, necessary to
     present fairly the results of operations of the Company for the three- and
     six-month periods ended December 31, 1997 and December 31, 1996 and the
     financial position of the Company as of December 31, 1997 and June 30,
     1997.

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

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

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

2.   BASIC EARNINGS PER SHARE

     Basic net loss per share for the periods presented have been computed using
     the weighted average number of common shares outstanding. The common
     equivalent shares (stock options) outstanding during the period have been
     excluded due to their anti-diluting effect.

3.   INVENTORIES

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

4.   LONG LIVED ASSETS

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

                                       5
<PAGE>   6

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997
(CONTINUED)

5.   REVENUE RECOGNITION

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

6.   FOREIGN CURRENCY TRANSLATION

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

7.   REVOLVING CREDIT AGREEMENT

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

8.   SUBSEQUENT EVENTS

     On January 30, 1998, the Company sold 146,496 shares of Common Stock in
     exchange for net proceeds of $588,180 under the private placement equity
     agreement with Capital Ventures, Inc.





                                       6
<PAGE>   7




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


RESULTS OF OPERATIONS

THE QUARTER ENDED DECEMBER 31, 1997 COMPARED TO THE QUARTER ENDED DECEMBER 31,
1996

NET REVENUES

Net revenues consist primarily of network security product sales--including
third party security products--and service and support related to security
products. For the quarter ended December 31, 1997, net sales increased by
approximately $1.8 million compared to the quarter ended December 31, 1996. The
$1.8 million increase represents an increase of $1.7 million in product revenues
and $0.1 million in service revenues over the 1996 quarter. The $1.7 million (or
59.6%) increase in network security product revenues is the result of increased
shipments of the Company's CyberGuard firewall systems. Specifically, the
Company shipped 252 CyberGuard Firewall systems during the quarter ended
December 31, 1997, compared to 119 for the quarter ended December 31, 1996.

For the quarter ended December 31, 1997, international sales of the Company's
network security products increased to $2.1 million from $1.9 million for the
quarter ended December 31, 1996. The increase in revenue from international
sales of network security products is the result of increased market penetration
in Europe due, the Company believes, to the formal award of the ITSEC E3
certification standard given to the CyberGuard Firewall. International sales
represented 42.6% and 61.8% of total security product sales for the periods
ending December 31, 1997 and 1996 respectively.

Domestic sales for the Company's network security products increased by $1.6
million to $2.8 million in the quarter ended December 31, 1997 compared to the
quarter ended December 31, 1996. The increase in domestic sales is due to
increased orders for the Company's products resulting, the Company believes,
from increased customer awareness and acceptance of firewall products generally,
and from positive reviews from leading-industry publications of the Company's
Release 3 firewall products.

During the quarter ended December 31, 1997, revenues from the various firewall
products and TradeVPI products increased from $2.8 million to $4.5 million,
representing an increase of 60% over sales in the same quarter of the previous
year. Support services related to firewall products and TradeWave certificate
authority services increased from $0.2 million for the three months ended
December 31, 1996 to $0.3 million for the three months ended December 31, 1997.
This increase is due to the greater number of installed firewall units and to
the greater need for customer training that results from increased sales.

Support services for network security products as a percentage of overall
revenue remained relatively constant in the quarter ended December 31, 1997
compared to the same quarter in the previous year, accounting for 6.7% of sales
during the 1997 quarter, compared to 6.9% for the 1996 quarter.

GROSS PROFIT

Gross Profit as a percent of sales increased to 62.3% from 50.5% for the quarter
ended December 31, 1997 compared to the corresponding period in the previous
year. The increase is a result of increased "software-only" sales, which
accounted for 53% of sales during the quarter ended December 31, 1997. During
the same quarter of the previous year, there were no "software-only" sales;
instead sales during the quarter ended December 31, 1996 consisted exclusively
of a hardware and software combination, which has lower gross margins than those
associated with selling exclusively software. In addition, the Company
experienced cost reductions associated with the shipping of the Intel-based
platform as compared to the 



                                       7
<PAGE>   8

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


proprietary Nighthawk platform associated with the Company's combined
hardware/software product. The gross profit margin over the past four quarters
has experienced increases quarter to quarter. Since the introduction of the
Company's software-only product, the Company's sales in Asia have been almost
exclusively "software-only". During the quarter ended December 31, 1997, the
Company's sales in Asia decreased as a result of general economic conditions in
that area of the world. As a result, the software-only products, which have
higher gross margins, decreased as a percentage of the Company's product sales
overall. Although gross margins have generally increased since the introduction
of the software-only product, should Asian sales remain flat or begin to fall,
the growth in gross margins can be expected to slow.

OPERATING EXPENSES AND NET LOSS

Overall, the Company's operating expenses increased by $2.2 million to $5.8
million for the quarter ended December 31, 1997. This increase is due to an
increase of $0.6 million in research and development expenditures compared to
the same quarter of the prior year and an increase of $1.6 million in selling,
general and administrative expenses.

The increased expenditures in research and development are associated primarily
with the Release 4 version of the Company's CyberGuard Firewall "software-only"
product, development of the Windows NT-based Firewall product, and TradeWave VPI
suite of products. Increased selling, general, and administrative expenses
relate to increased product and services sales and the associated additional
expenditures in hiring of new sales personnel, increasing marketing efforts, and
increasing administrative functions to support the larger organization. Overall,
the selling, general, and administrative expenses increased as a percent of
revenues from 83.8% for the quarter ended December 31, 1996 to 87.2% for the
quarter ended December 31, 1997. In mid-December, the Company's management
implemented cost reduction measures in connection with the ongoing integration
of TradeWave Corporation's operations into the Company's. The Company has also
implemented measures designed to reduce research and development expenses
related to the completion of the Company's Windows NT-based products.

The net loss for the quarter ended December 31, 1997 was $2.6 million, compared
to $0.8 million for the quarter ended December 31, 1996. This increase in net
loss is principally attributable to increased operating expenses (described
above) and to the gain realized on the sale of securities (which consist of
common stock of Concurrent Computer Corporation received by the Company as
consideration for the June 1996 sale to Concurrent of the Company's real-time
computer division) of $0.2 million, as compared to a gain of $1.0 million for
the quarter ended December 31, 1996.

THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1997 COMPARED TO THE SIX-MONTH PERIOD
ENDED DECEMBER 31, 1996

NET REVENUES

For the six-month period ended December 31, 1997, net revenues increased by
approximately $3.8 million to $9.7 million when compared to the six-month period
ended December 31, 1996. The $3.8 million increase represents an increase of
$3.5 million in revenues from the sale of network security products and $0.3
million in service-related revenues. The $3.5 million (or 61.4%) increase in
network security product revenues is the result of increased shipments of the
Company's CyberGuard firewall product. Specifically, the Company shipped 516
CyberGuard systems during the six-month period ended December 31, 1997, compared
to 285 for the six-month period ended December 31, 1996.



                                       8
<PAGE>   9
CYBERGUARD CORPORATION
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS (CONTINUED)


For the six-month period ended December 31, 1997, international sales of the
Company's network security products increased to $4.1 million compared to $3.5
million for the six month period ended December 31, 1996. The increase in
international sales represents a 30.3% increase in sales in Europe over the
corresponding period in the prior year. The increase in international sales is
due, the Company believes, to the formal award of the ITSEC E3 certification
standard given to the CyberGuard Firewall. International sales represent 41.5%
and 57.6% of total security product sales for the six-month periods ending
December 31, 1997 and 1996 respectively.

Domestic product sales for network security products increased by $3.2 million
to $5.8 million in the six-month period ended December 31, 1997 over the same
period in the prior year. Domestic sales represent 58.5% of product revenues as
compared to 42.4% for the six month period ended December 31, 1996. This change
is due to increased orders for the Company's products due, the Company believes,
to increased customer awareness and acceptance of firewall products generally,
from positive reviews from industry publications of the Company's Release 3
firewall products and from increased market penetration by the Company's network
of resellers.

Revenues from support services related to firewall products and TradeWave
certificate authority increased from $0.4 million for the six months ended
December 31, 1996 to $0.7 million for the six months ended December 31, 1997.
This increase in service-related revenues is due to the greater number of
installed units and to the increased need for customer training that results
from increased sales. Support services for network security products accounted
for 7.2% of sales during the quarter ended December 31, 1997 as compared to 6.6%
for the quarter ended December 31, 1996.

GROSS PROFIT

The Company's gross profit as a percent of sales increased to 63.5% from 44.7%
for the six months ended December 31, 1997 compared to the corresponding period
in the previous year. The increase is a result of increased "software-only"
sales; for six months ended December 31, 1997, "software-only" sales accounted
for 61% of the revenues. During the six month ended December 31, 1996, there
were no "software-only" sales; instead sales during the quarter ended December
31, 1996 consisted exclusively of a hardware and software combination product
that has lower gross margins than the Company's software-only products. In
addition, the Company experienced cost reductions with the shipping of the Intel
based product as compared to products sold during the previous year that
combined the Company's firewall software with the Company's proprietary
Nighthawk platform.

OPERATING EXPENSES AND NET LOSS

The Company's overall operating expenses increased by $4.3 million for the
six-month period ended December 31, 1997 to $11.2 million. This is due to an
increase of $1.1 million for research and development expenditures compared to
the same period in the prior year and an increase of $3.2 million in selling,
general and administrative expenses over those in the same period of the prior
year.

The increased expenditures in research and development are primarily associated
with the Release 4 version of the CyberGuard Firewall software product,
development of the Windows NT-based firewall product, and the TradeWave VPI
suite of products. Increased selling, general and administrative expenses relate
to increased sales and the associated additional expenditures of hiring of new
sales personnel, increasing marketing efforts, and increasing administrative
functions to support the larger organization. In mid-


                                       9
<PAGE>   10
CYBERGUARD CORPORATION
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS (CONTINUED)


December, the Company's management implemented cost reduction measures related
primarily to the ongoing integration of TradeWave Corporation's operations into
the Company's own operations. The Company also implemented measures designed to
reduce research and development expense related to the completion of the Windows
NT-based products. Overall, selling, general, and administrative expenses
increased as a percent of revenues from 80.1% for the six-month period ended
December 31, 1996 to 81.4% for the six-month period ended December 31, 1997.

The net loss for the six-month period ended December 31, 1997 was $4.3 million
compared to $9.1 million for the six-month period ended December 31, 1996. This
decrease in net loss is principally attributable to two factors (1) to the gain
realized on the sale of securities (which are comprised of common stock of
Concurrent Computer Corporation received by the Company as consideration for the
June 1996 sale to Concurrent of the Company's real-time computer division) of
$0.5 million, as compared to a loss of $5.2 million for the six months ended
December 31, 1996; and (2) offset in part by increased operating loss (described
above).

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1997, the Company had cash and cash equivalents on hand of $4.9
million, representing an increase of $1.9 million over the $3.0 million on hand
as of June 30, 1997. The Company's accounts receivable decreased by $0.2 million
as a result of the Company's collection efforts and decreased quarter-to-quarter
sales. Inventory levels decreased marginally by $0.2 million during the quarter
ended December 31, 1997 as compared to the inventory levels at June 30, 1997.
Property and equipment additions in the six months ended December 31, 1997
amounted to $0.3 million. These additions consisted of office equipment,
furniture, development computers, and demonstration equipment.

Since the sale of the Company's real-time computer division in June 1996, the
Company has experienced a loss from operations. To the extent that the Company
has required cash in addition to that generated from sales, such requirements
have been funded from the sale of Concurrent common stock received in connection
with the sale of the Company's real-time computer division, as well as sale of
the Company's own common stock pursuant to a private placement arrangement
arranged in May 1997 (the "Private Placement Arrangement"). The Private
Placement Arrangement permits the Company, under certain conditions, to sell up
to $7.5 million worth of its common stock to an investor at a discount from the
market price. As of February 6, 1998, the Company has sold in the aggregate
806,482 shares of its common stock under the Arrangement and had received
proceeds of $5,737,236. The Arrangement permits Cyberguard to make calls for
proceeds only within certain volume limitations, subject to certain trends in
the price of Cyberguard common stock, and only upon the passage of specified
time limits between calls for proceeds. The purchaser under the Private
Placement Arrangement has indicated its willingness to waive these restrictions
and to allow the Company to sell the purchaser the amount under the Agreement
without requiring these restrictions be met.

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

                                       10
<PAGE>   11

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


expected to be replaced by the Company's property and equipment (up to a maximum
of 50% of such property and equipment's appraised value). The revolving credit
facility is secured by all of the tangible assets of the Company and by the
Company's intellectual property.

The Company's principal sources of liquidity at December 31, 1997 consisted of
cash, the Private Placement Arrangement for the sale of common stock, the Coast
Credit Facility, and vendor trade credit.

The Company believes that its current liquidity and capital resources are
sufficient to fund the Company's current business plan for the next twelve
months.

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

                            PART II OTHER INFORMATION

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

As previously reported in notes to the Company's financial statements and
management's discussion and analysis of financial condition and results of
operations in the Company's Form 10K for the fiscal year ended June 30, 1997 and
Form 10Q for the quarter ended September 30, 1997, up through November 12, 1997,
the Company sold an aggregate of 464,524 shares of its common stock under its
"Private Placement Arrangement" for an aggregate net proceeds of $3,917,057.

On November 14, 1997, the Company sold 195,462 shares of its common stock under
the Private Placement Arrangement in exchange for net proceeds of $1,231,998.
Additionally, on January 30, 1998, the Company sold 146,496 shares of common
stock in exchange for net proceeds of $588,180. The purchaser under the Private
Placement Arrangement was Capital Ventures, Inc., a corporation organized under
the laws of the Cayman Islands (the "Investor"). The sale of common stock was
undertaken without



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<PAGE>   12

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

registration under the Securities Act of 1933 as amended (the "Act") pursuant to
an exemption from registration contained in Section 4(2) of the Act. The resale
of the common stock by the Investor has been registered on a registration
statement (No. 333-28693) filed under the Act.



PART II. OTHER INFORMATION

ITEM 6.    EXHIBITS AND REPORTS OF FORM 8-K

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

     (a)  Exhibits:

          10.1 Loan and Security Agreement dated December 29, 1997 with Coast
               Business Credit.

          10.2 Amendment to the loan and Security Agreement dated December 29,
               1997 with Coast Business Credit.

          27   Financial Data Schedule

     (b) On November 20, 1997, the Company filed a Current Report on Form 8-K
and reported on Item 5 thereof the change in the date of its annual meeting of
shareholders, the employment of Tommy D. Steele as a director of the Company and
as President and Chief Operating Officer and the appointment of William D.
Murray as the Company's Chief Financial Officer.






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<PAGE>   13



                                   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: February 13, 1998                CYBERGUARD CORPORATION



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


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




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