Both Chairman and CEO Robert Carberry and Chief Financial Officer Bill Murray have been suspended pending a review of the company's books. A special committee of the board of directors, led by Shelton James, will assume executive control of the company.
The company also reported that its auditor, KPMG Peat Marwick LLP, resigned at the close of business on Friday. CyberGuard is considering legal action against KPMG, company officials said.
CyberGuard was one of the first companies to develop firewall software, designed to prevent intruders from breaking into data networks. But the company "never really seemed to leverage that," said Forrester Research analyst Ted Julian. "I'm certainly surprised at the details and so forth, but the company has clearly been struggling in a market that's under quite a bit of pressure for consolidation," he said.
In a statement issued Monday, the company said that results could be off by as much as $2.5m (£1.52m). CyberGuard had reported revenues of $5.2 (£3.17m) for the quarter ended March 31, and a loss of $1.7(£1.03m).
The first and second quarter results for fiscal 1998 may need to be restated as well, CyberGuard said. In the statement, CyberGuard said it was reviewing its revenue recognition policies. The changes could affect fourth quarter revenues as well, the company said.
The company also said that it was seeking outside sources of capital for operations, needed because of slow payments from customers and the revenue issues.
Morning trading on CyberGuard was halted on the news. The company closed at $6 3/16 up15/16 on Friday. When the stock re-opened, it was down 4 and 1/16, or more than 65 percent.