2 PART I -- FINANCIAL INFORMATION Item 1. Financial Statements Page ---- Balance Sheet, September 30, 2007(unaudited) 3 Statements of Operations for the three months and nine months ended September 30, 2007 and 2006 (unaudited) 4-5 Statements of Cash Flows for the nine months ended September 30, 2007 and 2006 (unaudited) 6-7 Notes to financial statements 8-9 Item 2. Management's Discussion and Analysis or Plan of Operation 10-11 Item 3. Controls and Procedures 11 PART II - OTHER INFORMATION Item 1. Legal Proceedings 12 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 12 Item 3. Default Upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits 12 Signatures 13 3 PROGUARD ACQUISITION CORP. BALANCE SHEET SEPTEMBER 30, 2007 (UNAUDITED) ASSETS Current assets: Cash $ 248,452 Due from affiliates 120,174 ---------- Total Current Assets $ 368,626 ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,225 ---------- Total Current Liabilities 2,225 ---------- Stockholders' equity: Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued or outstanding - Common stock, $0.001 par value, 50,000,000 shares authorized, 3,000,000 shares issued and outstanding 3,000 Additional Paid in capital 701,647 Accumulated deficit (338,246) ---------- 366,401 ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 368,626 ========== See accompanying notes to the unaudited financial statements 4 PROGUARD ACQUISITION CORP. STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2007 and 2006 (UNAUDITED) 2007 2006 ---------- ---------- Interest Income $ 8,122 $ 2,825 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (136,076) (46,228) -------- -------- LOSS FROM CONTINUING OPERATIONS (127,954) (43,403) DISCONTINUED OPERATIONS: Income from discontinued operations - 6,646 --------- ---------- (LOSS) BEFORE BENEFIT FOR INCOME TAXES (127,954) (36,757) BENEFIT FOR INCOME TAXES - 8,413 --------- ---------- NET (LOSS) $(127,954) $ (28,344) ========= ========== Basic and diluted (loss) per common share $ (0.04) $ (0.01) ========= ========== Weighted average number of common shares and common equivalent shares Basic 2,947,762 2,729,041 ========= ========= Diluted 2,947,762 2,729,041 ========= ========= See accompanying notes to the unaudited financial statements. 5 PROGUARD ACQUISITION CORP. STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 and 2006 (UNAUDITED) 2007 2006 ---------- ---------- Interest Income $ 15,764 $ 6,291 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (186,103) (126,481) -------- -------- LOSS FROM CONTINUING OPERATIONS (170,339) (120,190) DISCONTINUED OPERATIONS: Income from discontinued operations - 82,319 --------- ---------- (LOSS) BEFORE BENEFIT FOR INCOME TAXES (170,339) (37,871) BENEFIT FOR INCOME TAXES - 13,342 --------- ---------- NET (LOSS) $(170,339) $ (24,529) ========= ========== Basic and diluted (loss) per common share $ (0.06) $ (0.01) ========= ========== Weighted average number of common shares and common equivalent shares Basic 2,836,479 2,628,232 ========= ========= Diluted 2,836,479 2,628,232 ========= ========= See accompanying notes to the unaudited financial statements. 6 PROGUARD ACQUISITION CORP. STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 and 2006 (UNAUDITED) 2007 2006* ---------- ---------- Cash flows from operating activities: Net (loss) from continuing operations $(170,339) $(106,848) -------- -------- Adjustments to reconcile net income(loss) to net cash provided by (used in) Operating activities: Stock based compensation 60,074 - Increase(decrease) in accounts payable and accrued expenses (26) - (Increase) due from shareholders - (17,500) Income from discontinued operations - 82,319 Changes in discontinued assets and liabilities from operations: (Increase) in assets of discontinued operations - (216,114) Increase(decrease) in liabilities of discontinued operations - 61,713 (Increase) in deferred tax asset - (13,342) -------- -------- Total adjustments to net (loss) 60,048 (102,924) -------- -------- Net cash (used in) operating activities (110,291) (209,772) -------- -------- Cash flows from investing activities - - -------- -------- Net cash (used in) investing activities - - -------- -------- Cash flows from financing activities: Proceeds from exercise of warrants 19,513 105,000 Advances to affiliates (120,174) - Proceeds from sale of common stock 5,462 361,989 -------- -------- Net cash provided by (used in) financing activities (95,199) 466,989 -------- -------- Net increase (decrease) in cash and cash equivalents (205,490) 257,217 Cash and cash equivalents, beginning of year 453,942 61,841 -------- -------- Cash and cash equivalents, end of period $248,452 $319,058 ======== ======== 7 Supplemental cash flow information: Cash paid for interest $ - $ 9,262 ========== ========== Cash paid for income taxes $ - $ - ========== ========== *reclassified for comparative purposes See accompanying notes to the unaudited financial statements. 8 PROGUARD ACQUISITION CORP. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2007 (UNAUDITED) NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The accompanying financial statements for the interim periods are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the periods presented. These financial statements should be read in conjunction with the December 31, 2006 financial statements and notes thereto contained in the Report on Form 10-KSB as filed with the Securities and Exchange Commission. The results of operations for the three months and nine months ended September 30, 2007 are not necessarily indicative of the results for the full fiscal year ending December 31, 2007. Certain prior period amounts have been reclassified to conform with current period presentation. Such reclassifications had no effect on reported net loss. NOTE 2. RELATED PARTY TRANSACTIONS During the nine months ended September 30, 2007 and 2006, the Company paid affiliated entities $77,750 and $41,525, respectively, for rent, office expenses and consulting fees. During the three months ended September 30, 2007 and 2006, the Company paid affiliated entities $50,000 and $17,000, respectively for rent, office expenses, and consulting fees. During the nine months ended September 30, 2007, the Company advanced $120,174, including interest, to related parties. The notes are payable on demand and bear interest at 8% per annum. NOTE 3. STOCKHOLDERS' EQUITY (a) On March 9, 2006, the Company successfully completed its public offering. In conjunction therewith, the Company issued 360,400 units which consisted of one common share and one warrant exercisable at $1.75 per common share. (b) During the quarter ended March 31, 2007, 11,150 warrants were exercised at a price of $1.75 per warrant and converted into 11,150 shares of common stock for a total price of $19,513. 9 (c) On July 23, 2007, the Company sold 218,450 shares of restricted common stock at $.025 per share for a total price of $5,461 from previously authorized and unissued shares. Total shares outstanding subsequent to this transaction is 3,000,000 shares. (d) Stock Based Compensation Expenses 2007: In conjunction with the stock purchases during the three months ended September 30, 2007, pursuant to accounting rules and principles applicable to stock sales in related party transactions, the Company recorded a $60,074 non-cash increase in its "additional paid in capital" account and recorded non- cash transaction expense for the same amount. The accounting rules require that in related party transactions, a non-cash expense be recorded for the difference between "fair value" (as defined in the rules) and the selling price. Further, the transaction with the related party cannot be considered to represent "fair value" and cannot be viewed as an "arms-length transaction" for purposes of the application of the rule and for the related computation. NOTE 4. OTHER EVENTS On October 2, 2006, Proguard Acquisition entered into a Common Stock Purchase and Sale Agreement with Corrections Systems International, Inc., a privately held Florida corporation in which CSII agreed to purchase and Proguard Acquisition agreed to sell all of the issued and outstanding common stock of its wholly-owned subsidiary, Proguard Protection Services, Inc. The purchase and sale transaction was completed on October 4, 2006 with the sale, transfer and conveyance of all of the issued and outstanding Proguard Protection capital stock to CSII in exchange for cash in the amount of $250,000. With completion of the purchase and sale transaction, Proguard Acquisition terminated its material operations in exchange for the cash purchase price. CSII, in this disposition of assets transaction, is related to Proguard Acquisition in that Proguard Acquisition's President and Director, Mr. Frank Bauer, is also a Vice President and Director of the Purchaser, CSII. In addition, Mr. Norman Becker is the president of CSII, a member of CSII's board of directors and is also a vice president and director of Proguard Acquisition. Neither Mr. Becker nor Mr. Bauer received any direct or indirect remuneration or compensation in the disposition of its wholly-owned subsidiary, Proguard Protection, through purchase and sale of all of its capital stock to CSII. In addition to the cross-relationship of the officers and directors, Messrs. Becker and Bauer, to Proguard Acquisition and CSII in this transaction, CSII has been a long-term loan creditor of Proguard Protection, holding, prior to the purchase and sale transaction, an interest-only loan obligation of Proguard Protection in the unpaid principal amount of $100,000. At completion of the subsidiary purchase and sale transaction, the loan obligation of Proguard Protection to CSII was current. Following closing of the transaction on October 4, 2006, Proguard Protection's loan obligation to CSII was repaid. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. Liquidity and Capital Resources ------------------------------- As at September 30, 2007, we had cash and cash equivalents of $248,452. During the nine months ended September 30, 2007, net cash used in operating activities of $110,291 was lower by $99,481 or 47.42% as compared to the nine months ended September 30, 2006. The reduction in cash used by operating activities during 2007 resulted primarily from a loss from operations. During the nine months ended September 30, 2007 and 2006, Proguard did not pursue any investing activities. During the nine months ended September 30, 2007, net cash used in financing activities of $95,199 was higher by $562,188 or 120.39% as compared to the net cash provided by financing activities of $466,989 for the nine months ended September 30, 2006. Our internal and external sources of liquidity have included interest on investments, exercise of warrants and sale of common stock. We are currently not aware of any trends that are reasonably likely to have a material impact on our liquidity. Our current cash balance is estimated to be sufficient to fund our current operations over the next six to nine months and will not be sufficient to fund our long term needs. The basis that our cash balance is expected to be sufficient to fund our current operations over the next six to nine months is based on our current net cash usage rate (cash used offset by cash received) which we estimate to be $7,000 to $10,000 per month. Financing Activities. --------------------- For the nine months ended September 30, 2007, Proguard Acquisition received $24,975 from the proceeds from sales of our common stock and the exercise of warrants as compared to $466,989 for the nine months ended September 30, 2006. In addition, the Company and made advances to affiliates of $120,174 including interest. As a result, Proguard Acquisition had net cash used by financing activities of $(95,199) for the nine months ended September 30, 2007. Investing Activities. --------------------- For the nine months ended September 30, 2007 and 2006, Proguard Acquisition did not pursue any investing activities. 11 Critical Accounting Policies. ----------------------------- Proguard Acquisition has adopted various accounting policies, which govern the application of accounting principles generally accepted in the United States of America in the preparation of Proguard Acquisition's financial statements. The significant accounting policies of Proguard Acquisition are described in the notes to the unaudited consolidated financial statements included in this report and in the notes to the audited consolidated financial statements included in Proguard Acquisition's 2006 Annual Report. Certain accounting policies involve significant estimates and assumptions by management, which have a material impact on the carrying value of certain assets and liabilities; management considers such accounting policies to be critical accounting policies. The estimates and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ from these judgments and estimates, which could have a material impact on the carrying value of assets and liabilities and the results of operations of Proguard Acquisition. Results of Operations. ---------------------- The three and nine months ended September 30, 2007 compared to three and nine months ended September 30, 2006. ---------------------------------------------------------------------- For the three months ended September 30, 2007, Proguard Acquisition had interest income of $8,122 and selling, general and administrative expenses of $136,076 resulting in a loss from continuing operations of $(127,954). Comparatively, for the three months ended September 30, 2006, Proguard Acquisition had interest income of $2,825 and selling, general and administrative expenses of $46,228 resulting in a loss for continuing operations of $(43,403). Additionally, Proguard Acquisition had income from discontinued operations of $6,646 for the three months ended September 30, 2006 and net loss of $(28,344). For the nine months ended September 30, 2007, Proguard Acquisition had interest income of $15,764 and selling, general and administrative expenses of $186,103 resulting in a loss of continuing operations of $(170,339). Included in the general and administrative expenses is $60.074 of expenses related to a non-cash related party stock purchase. Comparatively, for the nine months ended September 30, 2006, Proguard Acquisition had interest income of $6,291 and selling, general and administrative expenses of $126,481 resulting in a loss for continuing operations of $(120,190). Additionally, Proguard Acquisition had income from discontinued operations of $82,319 for the nine months ended September 30, 2006 and net loss of ($24,529). 12 Item 3. Controls and Procedures During the nine months ended September 30, 2007, there were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(e)under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting . Evaluation of Disclosure Controls and Procedures Frank Bauer, the Chief Executive Officer and Norman Becker, the Chief Financial Officer of the Corporation have made an evaluation of the disclosure controls and procedures relating to the report on Form 10QSB for the nine months ended September 30, 2007 as filed with the Securities and Exchange Commission and have concluded such controls and procedures to be effective as of September 30, 2007 to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms and to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. 13 PART II - OTHER INFORMATION Item 1. Legal Proceedings. Not Applicable. Item 2. Changes in Securities and Use of Proceeds. Not Applicable Item 3. Defaults Upon Senior Securities. Not Applicable. Item 4. Submission of Matters to a Vote of Security Holders. Not Applicable. Item 5. Other Information. Not Applicable. Item 6. Exhibits 31. Certifications Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended 32. Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 14 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. Dated: November 12, 2007 Proguard Acquisition Corp. By /s/ Frank Bauer ------------------------ Frank Bauer President and Director </TEXT> </DOCUMENT>