AMENDMENT NUMBER 3 TO REGISTRATION STATEMENT ON FORM S-1, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16,
1997.
Registration Number 333-19183
_________________________________________________________________
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
JYRA RESEARCH INC.
(NAME OF ISSUER IN ITS CHARTER)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 3679 98-0167341
- --------------- ----------- ----------------
(STATE OR PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION
INCORPORATION OR CLASSIFICATION NUMBER)
ORGANIZATION) CODE NUMBER)
</TABLE>
HAMILTON HOUSE
111 MARLOWES
HEMEL HEMPSTEAD
HERTFORDSHIRE HP1 1BB
ENGLAND
Tel: 44 1 71 371 0702
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
RODERICK ADAMS, SECRETARY
HAMILTON HOUSE
111 MARLOWES
HEMEL HEMPSTEAD
HERTFORDSHIRE HP1 1BB
ENGLAND
Tel: 44 1 71 371 0702
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
----------------
COPIES TO:
JAMES BERNS, ESQ.
BERNS & BERNS
ONE ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
TELEPHONE NO.: (212) 332-3320
FACSIMILE NO.: (212) 332-3315
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED
SALE TO PUBLIC:
As soon as practicable after this Registration Statement becomes
effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933 check the following box
[X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant
to Rule 462(c) under the Securities Act, check the following box
and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
[_]
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF AMOUNT PROPOSED PROPOSED AMOUNT
EACH CLASS OF TO BE MAXIMUM MAXIMUM OF
SECURITIES REGISTERED OFFERING AGGREGATE REGISTRATION
TO BE PRICE PRICE(1) OFFERING
REGISTERED PER FEE
SHARE(1)
-----------------------------------------------------------------
----------
<S> <C> <C> <C> <C>
Common Stock, $.001
par value......... 1,043,100 $7.12 $7,432,088 $2,562
-----------------------------------------------------------------
----------
--------------
(1) Estimated solely for the purposes of calculating the
registration fee.
</TABLE>
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON
SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT
WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION
8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
CROSS REFERENCE SHEET
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED
BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
FORM S-1 ITEM LOCATION IN PROSPECTUS
<S> <C>
1. Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus................. Front Cover Page of
Registration
Statement;
Cross-Reference
Sheet; Outside Front
Cover Page of
Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus................ Inside Front Cover
Page of Prospectus
and Outside Back
Cover Page of
Prospectus
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed
Charges............................ Prospectus
Summary; Risk Factors
4. Use of Proceeds..................... Prospectus Summary;
Use of Proceeds
5. Determination of Offering Price..... Inapplicable
6. Dilution............................ Inapplicable
7. Selling Security Holders............ Selling Security
Holders
8. Plan of Distribution................ Front Cover
Page of Prospectus;
Selling Security
Holders
9. Description of Securities to Be
Registered......................... Front Cover
Page of Prospectus;
Prospectus Summary;
Description of
Securities
10. Interests of Named Experts and
Counsel............................ Inapplicable
11. Information with Respect to the
Registrant......................... Outside Front Cover
Page of Prospectus;
Risk Factors; The
Company; Dividend
Policy;
Capitalization and
Description of
Securities;
Management's
Discussion and
Analysis of
Financial Condition
and Results of
Operations;
Business; Directors,
Officers, and Key
Personnel;
Legal Proceedings; Office
Facilities;
Remuneration;
Related Party
Transactions;
Trading Market of
Company's Shares;
Principal
Stockholders; Shares
Eligible for Future
Sale; Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities........................ Capitalization and
Description of
Securities
</TABLE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION
OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO
THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE.
THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE
BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
JYRA RESEARCH INC.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 15, 1997
PROSPECTUS
1,043,100 SHARES OF COMMON STOCK
All of the 1,043,100 shares of Common Stock ("Shares")
offered hereby are being sold by existing shareholders of Jyra
Research Inc. ("Selling Shareholders"). No proceeds will be received
by the Company.
Prior to this offering ("Offering"), there has been a limited
public market for the Common Stock of the Company on the
National Association of Securities Dealers, Inc.'s Over-the-Counter
Bulletin Board ("OTC Bulletin Board") and there can be no assurance
that any active trading market will ever develop. On July 9, 1997,
the last reported sales price on the OTC Bulletin Board for the
Company's shares was $16.75.
-----------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE IN
NATURE AND INVOLVE A HIGH DEGREE OF RISK AND
INVESTORS SHOULD NOT INVEST ANY FUNDS IN THIS
OFFERING UNLESS THEY CAN AFFORD TO LOSE THEIR
ENTIRE INVESTMENT. SEE "RISK FACTORS."
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST
RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND
THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THESE SECURITIES HAVE NOT
BEEN RECOMMENDED OR APPROVED BY ANY FEDERAL
OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THESE AUTHORITIES HAVE
NOT PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference
to, and should be read in conjunction with, the more detailed
information and financial statements (including the notes thereto)
appearing elsewhere in this Prospectus. Unless otherwise indicated,
"Company" shall include its English subsidiary, Jyra Research Ltd.
Each prospective investor is urged to read this Prospectus in its
entirety.
THE COMPANY
The principal executive offices of the Company are
located at Hamilton House, 111 Marlowes, Hemel Hempstead,
Hertfordshire HP1 1BB, England, and its telephone number is 44
171 371 0702.
The Company was incorporated on May 2, 1996 under the
laws of Delaware. The Company's plans are to design, develop,
manufacture, and market new computer network management
systems to (i) maximize network productivity, (ii) minimize network
downtime, and (iii) solve network problems caused by the constant
increase in network traffic, combined with the growing complexity of
networks. These problems result in escalating costs and major
systems failures across the corporate spectrum. Management
believes that current network management systems do not have the
capability to effectively deal with these issues. Management proposes
to develop distributed monitoring systems incorporating a proprietary
technology linking advanced protocol decodes with expert analysis
capabilities to facilitate real-time identification, diagnosis and
resolution of network problems.
2
<PAGE>
THE OFFERING
Common Stock Offered on Behalf of
Selling Shareholders.........................1,043,100 shares
Common Stock Outstanding Prior to
this Offering ...............................6,276,600 shares
Common Stock to be Outstanding
After this Offering...........................6,276,600 shares
USE OF PROCEEDS
The Shares being registered pursuant to this prospectus were
originally sold to persons residing in Europe who purchased the
Shares from the Company in October and November 1996 (the
"European Offering"). These Shares will be offered for resale by the
purchasers in the European Offering (the "Selling Shareholders").
The Company will receive no proceeds from sales by the Selling
Shareholders.
RISK FACTORS
The securities offered hereby involve a high degree of
risk, including, but not limited to, its status as a new business, its
continued dependence on securing additional financing, the fact that
it has only commenced taking orders for its products, its lack of
revenues, its dependence upon key personnel, inexperience of
management, protection of intellectual property, competition, the
fact that its proposed products are only at the conceptual stage
or software prototypes states, limited experience of management in
manufacturing, delays in development of software and related
products, competitive disadvantage of Company, changes in
technology, risk of competing technologies, risks associated with
international operations, dependence of the company upon unproven
products, limited market for Shares, potential sales of substantial
amounts of shares, significant control and influence by existing
shareholders, limitation of officers' and directors' liabilities under
Delaware law.: See "Risk Factors."
An investment in the Shares is speculative and involves a high
degree of risk. See "Risk Factors."
DESCRIPTION OF OFFERING
The Shares being registered pursuant to this prospectus were
originally sold to persons who purchased the Shares from the
Company in Europe during November 1996 (the "European
Offering"). No Shares are being sold by the Company and the
Company will receive no proceeds from the sales by the Selling
Shareholders.
3
<PAGE>
Estimated expenses incurred by the Company with respect to this
Offering are $50,000. In the United States, the Shares are being
offered directly by the Selling Shareholders. No commissions are
being paid with respect to the sale of the Shares being offered in the
United States other than normal brokerage commissions.
SELLING SECURITY HOLDERS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Name Relationship No. of No. of No. of
To Company Shares Owned Shares Offered Shares
&
% of
Company
Owned
After
Offering
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Ten Cate None 105,000 95,000 10,000
& Cie .16%
Wexford None 15,000 15,000 0
Finance
Banque None 80,500 50,000 30,500
Paribas .48%
Mees None 10,000 10,000 0
Pierson BV
Mees None 10,000 10,000 0
Pierson
(Luxembourg) SA
Pim None 5,000 5,000 0
Holdings, NV
Veer None 20,000 20,000 0
Palthe
Voute Asset
Management
Belficom None 12,425 12,425 0
4
<PAGE>
Optimix None 40,000 40,000 0
Vermogen-
sbeheer
Eeb g None 17,000 17,000 0
Vermogen-
eheer BV
Loek None 17,000 17,000 0
Van Den
Boog
PBI None 15,000 15,000 0
Securities
Plashof None 30,000 30,000 0
Beheer BV
Mees None 38,000 38,000 0
Pierson
Int'l None 442,575 317,575 125,000
Publishing 2.0%
Holding, SA
Grupo de None 23,000 8,000 15,000
Creacion .24%
Ltd.
Union None 315,000 50,000 265,000
Bancaire Privee 4.2%
Standard None 20,000 20,000 0
Bank Nomi-
nees (CI)
Limited
Securities None 10,000 100,000 10,000
Trading SA .16%
Bertrand None 5,000 5,000 0
Chatelain
5
<PAGE>
Pascal None 5,000 5,000 0
Zannetti
Clark & None 5,000 5,000 0
Cie
Yves None 10,500 6,500 4,000
Gut .06%
M.F. None 10,000 10,000 0
Van Til
Finter None 18,000 18,000 0
Bank
Brewin None 75,000 10,000 65,000
Nominees 1.0%
Limited
Bank None 404,500 72,000 332,500
von 5.3%
Ernst & Co.Ltd.
Union /fn/ 132,600 41,600 91,000
Securities 1.4%
(Int'l) Ltd.
</TABLE>
/fn/ Mr. Timothy A.B. Mills, a founder of the Company, who
owns 550,000 Shares, is a director, and owns 20%, of Union
Securities (International) Ltd.
6
<PAGE>
GENERAL
Following is a glossary of terms used in this prospectus.
GLOSSARY OF TERMS
Access Terminal A screen and keyboard solely to
access information; incapable of
independent operation.
ATM Asynchronous Transfer Mode. A
new method of allowing far greater
volumes of data to be passed through a
network.
Backbone A series of devices used to guide
Routers and direct data efficiently to its
destination by the most
appropriate path.
Bridges Devices that prevent local traffic
from being flooded to an entire
network.
Broadcast Any data or signal that is
transmitted throughout the entire
network.
Code Language in which software
programs are written.
Control Methods to inhibit the flow of data
Mechanisms communications traffic.
Dealer Feeds Electronic supply of financial
market data.
Ethernet A standard that defines the way
data is transmitted.
FDDI A standard that defines the way
data is transmitted over fiber optic
cable.
7
<PAGE>
Global Network A data communications network
that connects interconnects
international
operations worldwide.
IBM SNA A standard that defines the way in
IBM computers are connected.
Interface Adaptors that connect a device to
Modules the network.
Interop A major international trade show
attended by leading Internet and
networking technology companies.
LAN Local Area Network. This is a
network designed to interconnect personal
computers within a localized
environment by a type of
highspeed data
communications arrangement.
Management General term that refers to any
System system for
administering network devices
or traffic.
Mbps Millions of bits per second. A
measurement of the amount of
data passed. A bit is the smallest unit
of data.
Modern Generic term for new applications
Network that use the network. Current
Applications applications are video, image and
multi-media applications.
Network The infrastructure that
interconnects
computers to one another.
Novell Netware A widely used network operating
system that allows users to share
data.
8
<PAGE>
OEM Original Equipment Manufacturer.
An industry term for equipment
originally manufactured by a third
party, but branded and sold by a
separate vendor.
On-line Active live connection.
Outsourcers Companies that are responsible for
operating and maintaining
networks on behalf of clients.
Probe A device that is connected to a
network for the proper monitoring
of networks.
Protocols The sets of rules or standards that
describe the way in which traffic is
presented to devices on a network.
The most widely used of which are
IP (often called TCP/IP) and
IPX (most often used by Novell
Netware)
Protocols The ability to breakdown and
Decoder analyze the way in which traffic is
presented to a network device.
RMON A standard for describing what
should be monitored by a network
device.
RMON 2 A revision of the RMON standard.
Serial Line Probe devices that monitor the
Analyzers lines that connect serial networks
at different locations.
SNMP Simple Network Management
Protocol. A
Standard for monitoring network
hardware.
9
<PAGE>
TCP/IP A standard that describes the way
in which data traffic is transmitted
across a network.
Trunk A line that connects remote
locations over telecommunications
networks.
Token Ring A form of Local Area
Network (LAN).
Traffic The data that passes across a
network.
UNIX A standard operating system for
computers.
Usage The ability to identify the origin of
Accounting traffic and thereby charge back
network costs to the source.
WAN Wide Area Network. A network
that connects users via
telecommunications
lines.
10
<PAGE>
RISK FACTORS
The securities offered hereby are speculative in nature and
involve a high degree of risk. Accordingly, in analyzing an
investment in these securities, prospective investors should
carefully consider, along with the other matters referred to herein,
the following risk factors.
1. NEW BUSINESS; CONTINUED DEPENDENCE ON
SECURING ADDITIONAL FINANCING. The Company was
incorporated as a start-up business on May 2, 1996. Accordingly,
the Company, is subject to all of the risks attendant to new
business ventures including, without limitation, raising capital,
acquiring or developing products and/or services for sale,
securing appropriate leased space for offices, obtaining necessary
personnel, establishing and/or penetrating markets for such
products and/or services, and achieving profitable operations, of
which there can be no assurance. Investors should not purchase
any Shares unless they are prepared, and can afford, to lose their
entire investment.
As a new business having no sales or revenues,
Management anticipates that the Company may be dependent
over the foreseeable future upon securing additional financing, of
which there can be no assurance. There are numerous risks
associated with investments in start-up companies, including,
among others, those inherent in evaluating and acquiring a
business involving technologies with limited or no commercial
histories, effectively identifying and penetrating the market for the
goods and services to be offered, competing with other
companies with greater financial and other resources, securing
adequate financing, and achieving profitable operations, of which
there can be no assurance.
2. LIMITED OPERATIONS. To date, the Company
has only recently received a limited number of orders for its
products and no revenues. There can be no assurance that
the Company will ever have enough sales or receive sufficient
revenues to be profitable.
3. DEPENDENCE UPON KEY PERSONNEL. The
Company is very dependent upon the continued services of (a)
Mr. Paul Robinson, Chief Executive Officer and Chairman of the
Board of Directors of the Company, (b) Mr. Peter Lynch, a
director and Vice President - Technical, (c) Roderick Adams, a
Director and VP-Corp. Development, and (d) Robin Elsom, a
director of Jyra Research Ltd., the Company's wholly-owned
subsidiary. These are deemed to be key persons of the Company.
The Company does not have key man life insurance on the lives
of any of these persons. Even though the Company has hired
experienced sales and technical personnel, in the event that either
Mr. Robinson, Mr. Lynch, Mr. Adams or Mr. Elsom becomes
unavailable for any reason, the Company would be materially and
adversely affected.
4. INEXPERIENCE OF MANAGEMENT. Management of the
Company has had limited experience in management positions.
Although members of management have worked for many years
in various large corporations in various positions, no member of
Management has ever served in a senior managerial role.
11
<PAGE>
5. FINANCIAL CONDITION OF COMPANY; DIFFICULTY
IN FUNDING OPERATIONS. Although Management believes
it will begin receiving revenues from sales of its proposed
products during the second quarter of 1997, there can be no
assurance that the Company will be able to sell any products or
ever receive any revenues. After the completion of the
Company's European Offering, the Company had approximately
$3,500,000 in funds. Management believes that these funds
would be sufficient to fund operations through mid-1998,
assuming the Company receives no other funds from sales or
otherwise. There can be no assurance the Company would be
able to raise any additional necessary funds at that time.
6. PROTECTION OF INTELLECTUAL PROPERTY;
COMPETITION. Management of the Company believes that
there may be a significant business opportunity to sell worldwide
Jyra's line of proposed products ("Products"). The Company
intends to copyright, where appropriate, the software which
would operate its various Products. However, there can be no
assurance that the software can be copyrighted, or, even if
copyrighted, third parties will not infringe upon or design around
such copyrights to develop a competing product. Furthermore,
others may design and manufacture superior products. In the
event that a third party infringes upon any such copyrights or
makes a claim that Jyra's Products infringe upon its proprietary
rights to competing products, the Company may not have the
financial resources to enforce its rights or successfully defend
such a claim. In the event of any infringement of the Company's
rights, a claim being made against the Company by third parties,
the development of products which are designed around
copyrights held by the Company or the development of a superior
product by others, the Company's business would be adversely
affected. There has been substantial litigation regarding patent
and other intellectual property rights in the software industry. As
is typical in the software industry, the Company anticipates that it
may receive from time to time notices from third parties alleging
infringement claims. Although there are currently no pending
lawsuits against the Company regarding any possible infringement
claims, there can be no assurance infringement claims will not be
asserted in the future or that such assertions will not materially
adversely affect the Company's business, financial condition and
results of operations. If any such claims are asserted against the
Company, the Company may need to seek to obtain a license
under the third party's intellectual property rights. There can be
no assurance a license will be available on reasonable terms or at
all. Failure to obtain a necessary license on commercially
reasonable terms would materially adversely affect the Company's
business, financial condition and results of operations. The
Company could decide, in the alternative, to resort to litigation to
challenge such claims. Such litigation could be expensive and
time consuming and could materially adversely affect the
Company's business, financial condition and results of operations.
7. PROPOSED PRODUCTS ARE AT THE
CONCEPTUAL OR SOFTWARE PROTOTYPE STAGES.
At the present time, the Company has not generated any
revenues from the sale of any products, although it has begun
receiving orders for its Mid-Level Manager ("MLM"). . All
of its proposed products are at the conceptual stage or
software prototype states. Based upon preliminary
tests, Management believes it is possible to use Sun
Microsystem's Java language to distribute simple network
management functions to remote devices. However, a
significant phase remains to be completed - commercializing
the software prototype. There can be no
12 <PAGE>
assurance the Company will be able to successfully complete this
step. Moreover, for its other proposed products, the Company
must design its proposed products (including writing all required
software), arrange for prototypes of the products to be
manufactured, test the prototypes, and then make a determination
of whether the product should be marketed to its intended
audience. There can be no assurance that the Company will
successfully complete all the steps necessary to bring a product to
market.
8. MANUFACTURING OF PRODUCT. At the present
time the Company has completed a field trial (Beta test) of its
prototype for the Mid-Level Manager ("MLM") and early
prototyping of its probe. Accordingly, after the Company has
completed designing a product, it must then arrange for a
prototype or model to be manufactured. If tests of the prototypes
are successful, and Management believes that there will be a
commercial demand for its products, Management must arrange
for the products to be manufactured. The Company does not
plan on manufacturing its Products itself, but intends to have
outside manufacturers produce its Products. If and when the
probe goes into production, the Company will be relying upon
outside manufacturers, not under its control, to produce its
products, using industry standard components such as Intel
microprocessors and network adapters manufactured by Digital
Equipment. Although the Company believes that there are
manufacturers which would be available to produce its products,
delays in receiving the necessary hardware components or other
delays in manufacturing the Products could materially adversely
affect the Company. Even though Management believes its use of
standardized industry components and outside assemblers will
lessen the risks it faces in quality control, there can be no
assurance the Company will not have quality control problems.
In the United States personal computer industry, most of the
major companies receive their components from the same
sources, such as Intel, Seagate, and others. However, there are
still significant disparities in the actual, or perceived, reliability of
the various companies' computers. Furthermore, once a company
obtains a reputation for inferior quality, even if undeserved, it can
be extremely difficult to change the public's perception.
9. LIMITED EXPERIENCE OF MANAGEMENT IN
MANUFACTURING. No member of Management has extensive
experience in manufacturing products including, but not limited
to, making arrangements with manufacturers, monitoring the
manufacturing process, and ensuring a smooth, timely flow of
completed products.
10. DELAYS IN DEVELOPMENT OF SOFTWARE AND
RELATED PRODUCTS COMMON IN COMPUTER
INDUSTRY. Delays in the development of software and related
products are common in the computer industry. Any delays in
development could cause significant additional expense and result
in lost sales of the Company's products, having a materially
adverse effect on the Company. If the Company is delayed in
bringing its planned products to market, the Company could be
forced to seek additional financing in order to continue
operations. There can be no assurance the Company will be able
to raise any additional funds, or, even if funds are available, on
terms that are acceptable to the Company.
13
<PAGE>
11. COMPETITIVE DISADVANTAGE OF COMPANY. The
network system management industry is characterized by an
increasing number of participants who have introduced products
and services for network management. The Company will be
competing with products of other companies, most of which have
substantially greater financial, marketing, manufacturing and
technical expertise. Accordingly, the Company is at a competitive
disadvantage with respect to these other companies and their
products.
12. CHANGES IN TECHNOLOGY; RISK OF COMPETING
TECHNOLOGIES.
Management believes that its ability to compete will be
dependent, in large part, upon the software it intends to develop.
Management believes that the market for the probe it intends to
develop and market is established and rapidly expanding. There
can be no assurance that the market for network management
systems will continue to grow, or that if it does develop and
grow, the Company's proposed products will be successful.
Furthermore, there can be no assurance (i) the Company will be
able to successfully identify new product and service
opportunities for the Company's products, (ii) develop and bring
any such new and enhanced products and related services to
market in a timely manner, (iii) that such products, services or
technologies can be developed or will be commercially successful,
(iv) that the Company will benefit from such developments, or (v)
that the products, services or technologies developed by others
will not render the Company's planned products obsolete. The
International Standards Organization, one of three major
international bodies that sets standards for computer management
functions, has defined five functional areas for network
management applications: (1) performance management, (2) fault
management, (3) accounting, (4) configuration management, and
(5) security management. The initial range of the Company's
products are being designed to provide solutions addressing only
the first three areas. Therefore, even if the Company is successful
in designing and manufacturing its planned initial products, it is
possible that a competitor may design and market a product that
addresses these issues in a more comprehensive way than does
the Company's products, thereby having a material adverse effect
on the Company.
13. SUBSTANTIAL ADDITIONAL FUNDS MAY BE
REQUIRED; SUBSTANTIAL
SHAREHOLDER DILUTION. Although the Company believes
that Company has sufficient funds to develop and bring its
products to market, there can be no assurance the Company's
current plans and projections are correct. In the event the
Company's plans or the basis for its assumptions change or prove
to be inaccurate, or the anticipated cash flow proves insufficient
to fund the Company's operations (due to delays, unanticipated
expenses, lack of sales revenues, problems, operating difficulties,
or otherwise) the Company would be forced to seek additional
financing. There can be no assurance that additional financing
would be available on commercially acceptable terms, or at all.
14
<PAGE>
To obtain any necessary financing, the Company could sell
additional Shares or other financial instruments convertible or
exchangeable into Shares, resulting in substantial dilution to all
shareholders.
14. RISKS ASSOCIATED WITH INTERNATIONAL
OPERATIONS. The Company's operations are currently
headquartered in the United Kingdom, although it plans, initially,
to engage in marketing efforts in the United States and Europe.
There are certain risks inherent in international operations
including, but not limited to, remote management, unexpected
changes in regulatory requirements, export restrictions, export
controls relating to technology, tariffs and other trade barriers,
difficulties in staffing and managing foreign operations, longer
payment cycles, problems in collecting accounts receivable,
political instability, fluctuations in currency exchange rates,
seasonal reductions in business activity during the summer
months in Europe, and potential adverse tax consequences, which
could materially adverse affect the Company's business, operating
results, and financial condition.
15. COMPETITION. The Company anticipates that it will
experience competition from established and emerging computer,
communications, intelligent network wiring, network
management and test equipment companies and expects such
competition to increase in the future. New and competitive
entrants into the field of network fault and performance
management may come from areas as diverse as embedded
systems in network hardware from established network hardware
companies, as well as certain software referred to as "network
management" by smaller companies. The primary competitors for
the Company planned products are Network General,
Hewlett-Packard Company ("Hewlett-Packard"), and 3Com,
which are already well entrenched in the market for network
management systems. Network General, Hewlett-Packard and
3Com have greater name recognition, more extensive
engineering, manufacturing and marketing organizations and
substantially greater financial, technological and personnel
resources than those available to the Company. Other
competitors include Azure Technologies Incorporated, Frontier
Software Development, Inc., Wandel & Goltermann, Inc.,
Shomiti Systems, Inc. and embedded systems companies.
There can be no assurance that the Company's products
will ever receive commercial acceptance, or that there will ever be
any meaningful sales of its products. Furthermore, new
companies may emerge at any time with products that are
superior, or that the marketplace perceives are superior, to the
Company's products. New entrants, new technology and new
marketing techniques may cause customer confusion, thereby
lengthening the sales cycle process for the Company. Increased
competition may also lead to downward pricing pressure on the
Company's products.
The LAN and WAN industries are characterized by rapid
technological advances and can be significantly affected by
product introductions and market activities of industry
participants. In addition to its current principal competitors, the
Company expects substantial competition from established and
emerging computer, communications, intelligent network wiring,
network
15
<PAGE>
management, embedded systems and test instrument companies.
There can be no assurance that the Company will be able to
compete successfully in the future with existing or anticipated
competitors.
Competitive pressures from existing manufacturers who
offer lower prices or introduce new products may, in some
instances, result in delayed or deferred purchasing decisions by
potential customers of the Company. Purchase delays or
deferrals by potential customers of the Company's products may
require the Company to reduce its prices. These competitive
scenarios could materially adversely affect the Company's
revenues and operating margins.
16. DEPENDENCE UPON DEVELOPING NEW
PRODUCTS. The Company believes its future success will
depend, in part, on its ability to develop, introduce and sell new
products, in addition to the products the Company is
currently developing and attempting to market. The
Company is committed to continuing investments in research and
development; however, there is no assurance these efforts will
result in the development, timely release or market acceptance of
new products.
17. IMPACT OF GENERAL ECONOMIC CONDITIONS ON
OPERATIONS AND DEPENDENCE UPON OTHER
COMPANY'S PRODUCTS AND THEIR AVAILABILITY.
The Company's proposed products may be considered by certain
customers to be capital purchases. An adverse change in general
economic conditions could cause certain of the Company's
potential customers to reduce their capital spending, which may
adversely affect the Company's operating results.
For certain critical components of its products, the
Company anticipates that it will be relying on a limited number of
suppliers. In addition, it is anticipated that some of the Company's
products will be designed around specific computer platforms
which are only available from certain manufacturers. Any
significant shortage of computer platforms or other critical
components for the Company's products could lead to
cancellations or delays of purchases of the Company's products
which would materially adversely affect the Company's operating
results. If purchases of computer platforms or other components
exceed demand, the Company would incur expenses for disposing
of the excess inventory, which would also adversely affect the
Company's operating results.
16
<PAGE>
18. NEED OF COMPANY TO COMPLY WITH
ELECTRICAL, EMISSIONS, AND OTHER APPLICABLE
SAFETY REQUIREMENTS. There can be no assurance that
the Company's Products will meet all necessary electrical,
emissions or other applicable safety requirements in any of its
major potential markets or that standards imposed by federal or
local authorities will not be changed with material adverse effects
on the Company's activities. Moreover, compliance with such
laws may cause substantial delays and require capital outlays in
excess of those anticipated, thus, causing an adverse effect on the
Company.
19. DEPENDENCE UPON TECHNOLOGY FROM SUN
MICROSYSTEMS. The Company licenses Java and Solstice
technology from Sun Microsystems. The quality of those
technologies can affect the Company's ability to deliver and
market its products in many ways, including, but not limited to,
timely delivery of product to market, quality of finished goods,
and market acceptance of the Company's products.
If the Company's agreement with Sun
Microsystems is terminated, the Company would be
required to cease selling any products incorporating Java
Technology immediately, at which point the Company would
very likely have no practical alternative but to rewrite its
products based upon alternative technology. There can be no
assurance that such alternative technology would prove
equally suitable for the Company's products. It is possible
for either party to terminate the Agreement on grounds of
the other party's breach, or upon grounds stated in the
Agreement. The Company also has the contractual right, at
its option, to elect to terminate Agreement for its
convenience effective as early as the end of the second year of
the initial term. Reference is made to "License from Sun
Microsystems" at pages 23-24.
20. DEPENDENCE OF THE COMPANY UPON UNPROVEN
PRODUCTS. Management believes that the Company's financial
performance will be dependent upon its ability to market its
Products.
Because the Products are only at the conceptual
or the prototype stage, there can be no assurance that the
Company will be able to develop the Products. Furthermore,
even if the Company is able to develop a product, there can be no
assurance that the Company will be able to sell any Products.
Accordingly, there can be no assurance that any significant
demand for the Products will ever develop or that the Products
will be able to effectively compete with products produced by
others.
21. LIMITED MARKET FOR SHARES; POTENTIAL SALES
OF SUBSTANTIAL AMOUNTS OF SHARES. There are
presently 6,276,600 outstanding Shares. Prior to this offering
("Offering"), there has been a limited public market for the
Common Stock of the Company on the National Association of
Securities Dealers, Inc.'s Over-the-Counter Bulletin
17
<PAGE>
Board ("OTC Bulletin Board") and there can be no assurance that
any active trading market will ever develop. In the event that no
liquid market for the Shares develops, it will be extremely difficult
for a shareholder to dispose of the Shares. In the event a market
develops, there can be no assurance that the market will be
strong enough to absorb all of the Shares which may be offered
for sale by existing shareholders. The resales of substantial
amounts of Shares will have a depressive effect on the market.
22. SIGNIFICANT CONTROL AND INFLUENCE BY
EXISTING SHAREHOLDERS. At this time, Management and
insiders beneficially own approximately 44% of the Company's
outstanding shares. As a result, Management will be able to
control most matters requiring shareholder approval, such as the
election of directors, or a merger or consolidation of the
Company. Under certain circumstances, such control could
prevent shareholders from receiving a premium over the then
current market value for their shares.
23. LIMITATION OF OFFICERS' AND DIRECTORS'
LIABILITIES UNDER DELAWARE LAW. Pursuant to the
Company's Certificate of Incorporation, as authorized under
Delaware law, officers and directors of the Company are not
liable for monetary damages for breach of fiduciary duty, except
in connection with breach of duty or loyalty, for acts or omissions
not in good faith or which involve intentional misconduct or a
knowing violation of law, for dividend payments or stock
repurchases illegal under Delaware law, or for any transaction in
which a director has derived an improper personal benefit. In
addition, the Company's Certificate of Incorporation provides that
the Company shall indemnify its officers and directors to the
fullest extent permitted by law for expenses incurred in the
settlement of any actions against such persons in connection with
their having served as officers or directors of the Company.
24. CONSEQUENTIAL LOSS. The Company's products are
complex, distributed software systems, which under certain
conditions have the capability to damage rather than assist the
network on which it is installed. This leads to the possibility of a
loss, although the Company's software takes explicit steps to
avoid this type of fault. Although the Company's license terms
explicitly deny responsibility for losses of this type, the risk still
exists.
USE OF PROCEEDS
Because the Shares being offered hereby have already
been sold by the Company during November 1996, the Company
will not be receiving any proceeds from the sales of Shares by the
Selling Shareholders.
18
<PAGE>
DIVIDEND POLICY
The Company has never declared or paid cash or other
dividends on its Shares and it is currently the intention of the
Company not to declare or pay cash dividends on its Shares. The
payment of cash dividends in the future will depend on the
Company's earnings, financial condition, capital needs and other
factors deemed relevant by the Board, including statutory
restrictions on the availability of capital for the payment of
dividends, the rights of holders of any series of preferred stock
that may hereafter be issued and the limitations, if any, on the
payment of dividends under any then-existing credit facility or
other indebtedness. It is the current intention of the Board to
retain earnings, if any, to finance the operations and expansion of
the Company's business.
CAPITALIZATION
(at December 31, 1996)
<TABLE>
<CAPTION>
<S> <C>
Common Stock
Authorized: 20,000,000 Shares, $.001 par value
Issued and Outstanding: 6,276,600 Shares $6,277
Paid-in Capital $3,819,405
Deficit Accumulated During Development Stage ($347,692)
Foreign Currency Translation Adjustments ($31,289)
Total Stockholders Equity $3,446,701
Long-Term Obligations 0
</TABLE>
19
<PAGE>
THE COMPANY
The Company was incorporated on May 2, 1996 under
the laws of Delaware. The Company's plans are to design,
develop, manufacture, and market new computer network
management systems to (i) maximize network productivity, (ii)
minimize network downtime, and (iii) solve network problems
caused by the constant increase in network traffic, combined with
the growing complexity of networks. These problems result in
escalating costs and major systems failures across the corporate
spectrum. Management believes that current network
management systems do not have the capability to effectively deal
with these problems.
The Company is designing products consisting of portable
tools and centralized systems incorporating a proprietary
technology linking advanced protocol decodes with expert
analysis capabilities to facilitate identification, diagnosis and
resolution of network problems.
Background
Over the past ten years corporations have moved rapidly
from using mainframe computers with numerous access terminals
to individual personal computers ("PCs"), interconnected by
networks. This has resulted in the network traffic increasing to
the point where it outstrips the capacity of the existing networks.
A corporate network may connect thousands of individual
PCs together. The network, rather than a mainframe computer,
now connects all the parts of the organization together. This
resulting increase in network use can result in increased costs to a
company including (i) uncontrolled and unknown network traffic,
(ii) unnecessary telephone costs, and (iii) poor usage accounting.
Management believes there a number of problems with the
management of networks today.
One major problem with existing network management
systems is their inability to determine the reason why the link
between two PCs is busy, or which type of traffic is causing the
congestion (i.e., processing, spreadsheets, dealer feeds, games,
etc.).
Management believes that another major problem with
existing network management systems is their inability to
efficiently and cost-effectively do anything other than real-time
sampling. Real time sampling will only describe the current state
of the system, which immediately after a failure is "down".
Management believes that a real-time view is not effective for
long-term solving or diagnosis.
Management believes that existing network management
devices are expensive, while being limited to carrying out a single
function. Existing networks probe devices or network analyzers
require other devices for these products to work most effectively.
Accordingly, the cost
20
<PAGE>
of deploying these network probes and related devices can be
quite expensive.
The Company plans to design products which would
provide practical tools to address the problems of (i) uncontrolled
and unpredictable network traffic, (ii) unnecessary telephone line
charges, and (iii) poor usage accounting.
Planned Initial Products
The initial products the Company currently plans to
develop are as follows:
1. Mid-Level Manager ("MLM")
It is intended that the MLM will be an application suite
suitable for execution on Sun Solaris, IBM AIX, Windows NT
and Windows 95. Management anticipates that the initial releases
will be on Windows NT. It is intended that the Manager will
provide the interface between the raw statistics gathered at a
probe and the presentation layer software used to display this
data.
The MLM will support (i) RMON data capture interface
allowing data capture from existing RMON probes, and (ii)
SNMP data capture interface allowing data capture from existing
SNMP devices.
The MLM will be designed to allow secure network
installation of user applications. The security will prevent the
execution of unlicensed copies of Jyra Products. The MLM will
contain authentication capability internally to prevent
unauthorized access and will be designed to support external
authentication protocols such as TACACS, CHAP, and RADIUS.
2. Jyra Diagnosis Pack
It is intended that this product will provide local
diagnosis of network problems. Management plans that the probe
software will be secured so that it cannot be used in non-Jyra
systems.
3. Jyra Analysis Pack
Management anticipates that this product will provide a
global view of the performance of applications within a network,
capturing and analyzing data from more than one probe. This
product would provide the administrator of the network system
with a view of traffic across an entire network. This would allow
the administrator to gain an understanding of the flow of traffic
and to optimize the network by managing out unnecessary traffic.
21
<PAGE>
It is intended that this product would be equipped with
memory capacity sufficient to record problems as they occur and
play back the sequences of events that led up to the problem. In
addition, Management believes that this historical data allows
trend analysis and will provide a company with the ability to
charge its various operating companies according to their use of
the network.
It is anticipated that data analysis will be distributed
depending upon where the CPU, memory and network bandwidth
constraints exist within the monitoring system.
4. Jyra Probe
The Jyra Probe ("Probe") is likely to be available as
a10/100 Mbps Ethernet device. It is intended that the Probe will
support multiple packet capture contexts so that traffic streams
from different switching configurations can be separated.
5. Service Level Management ("SLM")
Management anticipates that this product will initially
focus on measuring and reporting on response time as
experienced by network users. Management anticipates that this
will be supplemented by an application oriented network cost
management system based upon transactional monitoring and
billings.
*******
It is the Company's goal that any products it may develop
will be compatible with the emerging standards being set by users
of the Internet and its equipment suppliers. Management hopes
that such an approach will help attract third parties to develop
applications supporting the Company's products.
However, there can be no assurance that the Company
will be able to develop any of the products described above, or
that, even if developed, that any of the products will be
commercially successful.
MANUFACTURING
After the Company completes designing a product, the
Company must then arrange for a prototype or model to be
manufactured. If tests of the prototype are successful, and
Management believes that there will be a commercial demand for
the product, Management must arrange for the product to be
manufactured in commercial quantities. Currently, the Company
does not plan on manufacturing any Products itself, but plans on
having outside manufacturers produce any Products.
22
<PAGE>
Management intends that the hardware element of the
Probe will be assembled using industry standard components such
as microprocessors manufactured by Intel and network adaptors
manufactured by Digital Equipment. The Probe would then
assembled by a third party assembler. Management believes the
primary advantages of using a third party to assemble the
Probeare (1) the Company would not incur the expense of
operating a manufacturing plant, and (2) the Company would
achieve lower component costs through the buying capability of
the assembler who buys standard components in large numbers.
The Company anticipates that its manufacturing
operations will not require any capital expenditures for
environmental control facilities or any special activities for
protection of the environment.
LICENSE FROM SUN MICROSYSTEMS
On June 29, 1996, the Company entered into a
Technology License and Distribution Agreement ("Agreement")
with Sun Microsystems, Inc. ("Sun"). Under the Agreement, the
Company was granted a worldwide non-exclusive license to
develop and distribute products based upon Sun's Java
technology (the "JavaTechnology"). The Agreement does not
prohibit the Company from using technology which is competitive
with Java Technology. Although Java Technology is a
yet-untested work in progress, since Management expects Java
Technology to be a suitable basis for the Company's initial
products, Management intends to develop the Company's Probe
and related products based in large part upon Java Technology.
Pursuant to the Agreement, the Company is required to
meet three principal payment obligations to Sun, consisting of: A.
upfront license fees; B. per unit royalties; and C. support and
update fees.
The Agreement is capable of ending either by expiration
or termination. The Agreement is scheduled to expire at the end
of its stated initial term of five (5) years, after which the Company
may, at its option, elect to renew the Agreement for as many as
five successive terms of one (1) year each. If the Agreement ends
by expiration of any such term, then, after expiration, the
Company may continue to sell its products incorporating Java
Technology as such technology existed at the time of expiration,
subject always to the Company's continuing obligation to pay "per
unit royalties."
Alternatively, if the Agreement ends by termination (as
distinguished from expiration), the Company would be required
to cease selling any products incorporating Java Technology
immediately, at which point the Company would very likely have
no practical alternative but to rewrite its products based upon
alternative technology. There can be no assurance that such
alternative technology would prove equally suitable for the
Company's products. It is possible for either party to terminate
the Agreement on grounds of the other party's breach, or upon
grounds stated in the Agreement. The Company also has the
contractual right, at its option, to
23
<PAGE>
elect to terminate Agreement for its convenience effective as
early as the end of the second
year of the initial term.
PROPRIETARY RIGHTS AND LICENSES
At the present time, the Company does not own any
patents relating to any of its planned Products. Management
intends to rely primarily upon copyright, trademark and trade
secret laws to establish its proprietary rights in its products.
Because the LAN and WAN industry is characterized by rapid
technological change, the Company will be relying upon its
innovative management, technical expertise, and marketing skills
to develop, enhance and market its products.
MARKET FOR COMPANY'S PROPOSED
PRODUCTS
The market for network monitoring equipment is a result
of the general globalization of business. Corporations are
increasing selling, developing and supporting products at all
times, throughout the world. This, in turn, causes the creation of
additional corporate networks.
Management believes there are millions of computers
connected to local area networks around the world. Management
also believes that the growth of these corporate networks will
continue to grow rapidly, fueled, in part, by the growth in the
Internet and the telecommunications industry. Management
believes that the market for network monitoring equipment is
growing and that the opportunity exists for new products to find
acceptance in the marketplace.
Management believes the market for networking products
is divided into five major semi-autonomous sections as described
below.
Fortune 500 Corporations
The Fortune 500 companies are major consumers of
network management technology. Networks are crucial to the
success of these companies. Although networks are important
strategic assets for these companies, they also present major risks
and constitute major expenses. Once the Company has Products
that are ready to be marketed, the Company intends to approach
directly major corporations where Management believes the
Company has a good possibility of making sales. Initially, the
Company will focus on approaching a limited number of
companies (30), to help ensure that early sales and
implementations of the Products go smoothly. Subsequently, the
Company plans to recruit up to two marketing representatives for
the United Kingdom and United States.
24
<PAGE>
Telecommunications Providers
The increase in the use of the Internet and ATM services
is requiring providers of telecommunications equipment to
develop more flexible services, many of which will be billed by
usage. Manage significant demand in the area of Internet billing.
In conjunction with the marketing activities planned for
the Fortune 500 companies described above, Management plans
to initially approach major telecommunications companies in the
United Kingdom and the United States with a view to initiating
trials of the Company's systems in the areas of networking and
Internet problem solving and network chargeback. If the trials
are successful, Management believes these companies will be in a
position to distribute the Company's products to their customers.
However, there can be no assurance that (i) any
telecommunications companies will test the Company's products,
(ii) that any trials conducted would be successful, or (iii) these
companies would distribute the Company's products to their
customers.
Because virtually all of the Fortune 500 companies are
customers of major telecommunications companies, Management
intends to focus its direct marketing activities to attempt to create
demand for the Company's Products within the Fortune 500
companies, which can then be fulfilled by the major
telecommunications companies.
Outsourcers
Outsourcers are outside organizations which a company
uses to manage certain aspects of the company's operations.
Outsourcing companies can reduce the cost of network
ownership through remote management. Outsourcers must
demonstrate that their services are effective to retain their
contracts. It is not uncommon that many of these contracts do
not become profitable until they are renewed. Outsourcers
require the networks that they manage to have a greater amount
of remote diagnosis, control and measurement equipment than
previously existed.
A key element for outsourcers is providing network
monitoring services less expensively than the company could do
so itself. Management believes that its proposed products will be
able to efficiently monitor significant events, carry out instant
diagnosis, and capture performance and billing information.
Initially, all approaches to outsource companies will be
made by Management. Once the Company obtains a reference
customer, the Company intends to recruit a third market
representative to focus on this area, along with third party
applications vendors.
Third Party Application Developers and Consultants
25
<PAGE>
Service-only companies, such as software application
developers, require technologies to which they can add value.
Management believes that the ability to add local programming
for specialist applications to its proposed products will make its
products attractive to consultants and software developers.
Management intends to control the architecture and platform
licensing, not the overall market. The Company plans to market
its open probe architecture over the Internet and publish the links
to its architecture necessary for third parties to build applications
to the Probe.
Existing Data Communications Equipment and Probe Vendors
Major equipment vendors are already utilizing distributed
approaches for controlling equipment, but, generally, own no
probe technology of their own. Management intends to attempt
to license its proposed products to both major and smaller
vendors within the network industry. Once the Company has
established sales for its products in the markets described above,
Mr. Paul Robinson, CEO of the Company, will approach existing
vendors. Management believes that the potential opportunities
are of high value but not numerous, so any marketing activities
will be carried out by Management.
UNITED STATES MARKETING OPERATIONS
The Company established a sales presence in the
United States during April 1997 and attended Interop in Las
Vegas, Nevada in May 1997. At this show the Company
publicly launched its first product, the MLM.
In addition, during May 1997, the Company opened a
sales office in San Jose, California. Initially, the Company
hired two people for its United States operations. However,
there can be no assurance that the Company will be able to
attract additional qualified salespeople or that any
salespeople hired will be successful. Moreover, there can be no
assurance that the Company's products will be well received or
that the United States activities will result in increased revenues
for the Company.
COMPETITIVE TECHNOLOGY
The Company's planned products will compete in three
sectors of the systems and network management market:
26
<PAGE>
1. Network Diagnosis and Analysis;
2. Remote Monitoring; and
3. Systems Management.
Management believes that the primary forces that control
these markets are:
(i) minimizing overall user network cost on the
theory that application of the appropriate
technology will reduce the number of people
required to manage the network; and
(ii) the desire on the part of managers to catch up
on communications technology. Management
believes that owners of networks generally feel
that they do not have
the right degree of control, compared to other
business assets such as mainframe computers.
The protocols, applications and bandwiths in use
are changing much faster than the management
technology can keep up with.
NETWORK DIAGNOSIS AND ANALYSIS
This part of the market is highly fragmented, although
products can generally be placed into three categories:
1. portable packet capture;
2. local network analysis; and
3. global network analysis.
(A) Portable Packet Capture
Devices in the class are designed to capture all traffic from
a single network segment for later analysis. The device will
attempt to decode each packet seen on the network; expert
analysis of what is actually transpiring is left to the user.
Triticom LANDecoder
Triticom is the developer is many LAN management tools
designed for network administrators and integrators. Triticom's
products include software-based network monitors, protocol
analyzers, bridges and routers, RMON and Microsoft Windows
network management software.
27
<PAGE>
The Triticom LANDecoder is a software packet capture
and protocol analyzer product which runs on almost any PC.
The device is designed as an inexpensive field service tool. The
device makes it easy to capture data as it decodes a wide variety
of network protocols.
Wandel and Goltermann
The WG DA30 is the most expensive piece of network
diagnosis equipment in common use. It is typically sold to large
corporations, product manufacturers, and network integrators.
The device supports multiple physical interfaces at
wire-speed through the use of multiple processors. For a user
with significant programming skills, it is possible to write
specialized capture and diagnosis routines in Occam, a
parallel-processing programming language designed to support
the SGS-Thomson (Immos) Transputer, which is attached to
each physical interface. Wandel and Goltermann also produces
the Domino, which is a single module packaged for use with a
laptop PC.
Hewlett-Packard
Hewlett-Packard is recognized as the market leader in
serial line analyzers. Management of the Company believes
that it has not been able to establish the same visibility in LAN
analyzers or in RMON probes. Management of the Company
believes this is due to competition from PC-based platforms for
the low-end market.
(b) Local Network Analysis
Network General
The Expert Sniffer, sold by Network General, is a
PC-based network monitor which accumulates information about
traffic flows on Ethernet, FDDI, and Token Ring segments in
almost real-time. Following data capture, a series of expert
system modules interpret the capture data traffic to make
assessments of where any problems may lie. This expert analysis
makes protocol knowledge available to less skilled field service
staff and reduces repair time in corporate environments. The
Distributed Sniffer consists of one or more probes and a
management application sells for around the same price.
(c) Global Network Analysis
ECONet
28
<PAGE>
ECONet is a PC-based application which first came to
market in early 1995, under the name CoroNet. The product
won a Best in Show award at Interop and was immediately
purchased by Compuware for $35 million. ECONet was the first
product to use packet capture and analysis techniques to attempt
to automatically build a global view of the applications in use
within a network. The product is very useful in providing
network managers application-oriented network utilization
figures. Management of the Company believes that there are no
other similar products which meets this need without significant
engineering work on the part of the end user.
Desktalk TrendSNMP+
This is a data collection and consolidation system for
long-term capture of SNMP and RMON data. The product can
be used as a base for service-level monitoring, capacity planning
and billing. The basis for monitoring is limited to the functions
provided by RMON and SNMP. It uses a standard relational
database. It has a sophisticated polling engine.
REMOTE MONITORING
Current and future remote monitoring products are based
on the RMON and RMON-2 standards. RMON defines a fixed
set of monitoring functions which can be performed by a probe
on a single network segment. RMON-2 includes packet
capture, conversation statistics and breakdown by
communications protocol.
The primary disadvantages of RMON are:
a. due to the requirement that standards agree among
competing manufacturers, the standard that is
adopted, usually substantially trails user needs;
b. the reporting and control mechanism for RMON is SNMP,
which leads to highly inefficient data transfers. The
fixed function of the RMON probes means that
sophisticated applications have to be executed at a
central management station, to which all data must be
transferred. The use of SNMP makes this impractical in
many networks;
c. problem analysis still requires expert individuals for
such analysis;
29
<PAGE>
d. as the number of devices supported by each network
segment becomes reduced, the per-user cost of RMON
increases. Few organizations feel that they can afford
a probe per segment.
Management of the Company has had direct recent
experience constructing management reporting solutions with
RMON products and recognize the following limitations:
a. limited programming capability at the probe;
b. very inefficient data transfer;
c. limited security for captured data; and
d. limited resilience in the management system as a whole.
Each probe vendor has its own unique management
technology. This allows the probe vendor to drive the
vendor-specific features of each offering, while allowing the
products to be demonstrated. These management applications
have required the probe vendors to engage in a substantial
amount of re-engineering. As a general rule, the management
applications designed by probe vendors compare unfavorably to
the products of the leading systems management vendors.
Activity in RMON probe manufacturers is currently
focused on four areas:
a. alliances with major vendors of network switching
equipment;
b. upgrading from RMON to RMON-2;
c. supporting new physical interfaces; and
d. increasing management functionality.
The leading products in this area are manufactured by
Frontier Software, ARMON, AXON and Hewlett-Packard.
Frontier Software
Frontier Software ("Frontier"), now renamed "Netscout
Inc.", has two major products: Netscout Probes and Netscout
Manager. Generally, customers buy one or more probes,
depending upon the number of network segments to be
monitored, and one copy of the Netscout Manager .
30
<PAGE>
Frontier has the most third-party relationships, and
supplies products and technology to the market leading switch
vendor, Cisco Systems. Frontier supports the widest range of
physical interfaces: 10 mbps Ethernet, Token Ring, FDDI, and
high-speed serial links. Frontier uses a ruggedized PC hardware
platform, which gives Frontier a cost advantage when developing
new probes.
SYSTEMS MANAGEMENT
Systems management products take a top-down view of
the entire information technology infrastructure within a single
corporation. They developed as an extension of the market for
network management consoles. These are large complex
applications for which development takes a long time, and
innovation is rare. Management of the Company believes that
there have been no significant technical innovations in the area
since Hewlett-Packard Openview first came to the market.
The leading corporate systems management products are:
Computer Associates Unicenter, Hewlett-Packard Openview,
IBM System View, and Tivoli.
Typical customers spend in excess of $250,000 on
systems management products, and an additional $250,000 to
make the products perform.
Timetable
Management of the Company believes that it has
adequate funds to develop and bring to market its MLM.
Currently, the Company has completed development and has
commenced marketing its initial release of its MLM. The
Company anticipates a 2nd release of its MLM will be
available during the 2nd half of 1997.
31
<PAGE>
FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
In addition to historical information, the
following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains
forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ
significantly from those anticipated in these forward-looking
statements as a result of certain factors, including those
discussed in "Risk Factors" and elsewhere in this Prospectus.
Liquidity and Capital Resources
At March 31, 1997 the Company had cash on hand of
approximately $2.8 million. The Company believes these funds
are adequate to finance operations through mid-1998, assuming
the Company receives no other funds, from either the sale of
Shares or its products.
From May 2, 1996 through December 31, 1996, the
Company's only source of revenues was $30,366 in interest it has
received from funds on deposit.
On August 14, 1996 the Company formed a
wholly-owned subsidiary in the United Kingdom, Jyra Research
Ltd., to carry out research and development duties. Currently,
the majority of the Company's activities are carried out through
Jyra Research Ltd.
The Company's monthly general and administrative
expenses are approximately $150,000 (exclusive of legal, auditing
and license payments). Management anticipates that this figure
will increase significantly in the second half of 1997 as it
launches its products and establishes a presence in the United
States. In addition, the Company will be incurring costs of
approximately $50,000 in connection with attending trade
shows, scheduled for the second half of 1997.
The Company also has financial commitments relating to
its agreement with Sun Microsystems to license Sun's Java
technology. For each of the first 5,000 products utilizing Java
Technology sold by the Company, the Company will be required
to pay Sun a royalty of $66 per unit; for each such product in
excess of the first 5,000, the Company will be required to pay Sun
a royalty of $20 per unit.
In addition, as "support and update fees," the Agreement
requires the Company to pay Sun: $50,000 per year for the period
during which the Company is paying "per unit royalties" of $66;
and $300,000 per year for the period when the Company is
paying Sun "per unit royalties" of $20.
32
<PAGE>
Results of Operations
The Company's audited financial statements for the period
from its inception, May 2, 1996, through December 31, 1996
reflect a net loss of $347,692, which relates to the expenses
incurred in developing its initial products, forming the Company,
and the raising of approximately $4 million through the sale of
6,276,600 Shares.
Three Months Ended March 31, 1997
Results of Operations
The unaudited figures should be read in conjunction
with the notes accompanying the audited year end statements
through to December 31, 1996. Because the Company was
formed in May 1996, there are no previous year's figures
available for comparison. Accordingly, the only figures that
can be used for comparison are the audited financial
statements covering the period from May 2, 1996 through
December 31, 1996 (the "Initial 8 Month Period").
For the three months ended March 31, 1997, the
Company incurred a net loss of $337,004. During this
period, the Company expended approximately $402,325 on
development and administrative expenses. The majority of
these expenses relate to the expansion of its technical
development staff and the recruitment of the initial European
sales team of three individuals. In addition, the Company
purchased computer software and hardware for use in testing
its initial products prior to release. The Company's
Management anticipates that the development and
administrative expenses could rise significantly during the
current fiscal year, as the Company expands in anticipation
of product sales.
During the three months ended March 31, 1997, the
Company did not generate any revenues from the sales of its
products. The only income received was $26,993 interest
generated by cash funds held on deposit, and $50,585 from
currency exchange differences.
During the three months ended March 31, 1997, the
Company granted stock options to acquire 7,500 Shares to
certain key individuals providing services to the Company.
33
<PAGE>
SELECTED FINANCIAL DATA
Following is selected financial data of the Company for
the period from the Company's incorporation, May 2, 1996,
through March 31, 1997.
<TABLE>
<CAPTION>
<S> <C> <C>
3 Months Ended For the Period
March 31, 1997 May 2, 1996 through
(Unaudited) Dec. 31, 1996
Current Assets $2,866,805 $3,449,489
Current Liabilities 39,657 100,994
Stockholders Equity 3,007,755 3,446,701
Revenues 0 0
Loss 337,004 347,692
Loss Per Share (0.05) (0.08)
</TABLE>
34
<PAGE> OFFICE FACILITIES
The Company's executive offices are located at
Hamilton House, 111 Marlowes, Hemel Hempstead,
Hertfordshire HP1 1BB England, consist of approximately
2,700 square feet, and is where it conducts research and
development, at an annual rental of 23,500 pounds sterling.
The lease expires in August 1999. In addition, the Company
is leasing an office in San Jose, California, on a month-to-
month basis, at a rental of $800 per month.
DIRECTORS, OFFICERS AND KEY PERSONNEL
Management
<TABLE>
<CAPTION>
<S> <C> <C>
NAME AGE POSITION
Paul Robinson 33 President, CEO, Chairman
of the Board
Peter Lynch 41 Director, VP - Technology
Roderick Adams 33 Director, VP-Corp. Development
Andy Mulholland 47 Director - Jyra Research Ltd.
Robin Elsom 37 Director - Jyra Research Ltd.
</TABLE>
Paul Robinson has served as Chairman of the Board of
Directors, President, and Chief Executive Officer of the Company
since June 3, 1996. From August 1995 to October 1, 1996, Mr.
Robinson was an Account Manager for Cisco Systems, handling
customers in the United Kingdom financial sector. From 1992 to
August 1995 Mr. Robinson was employed by Biss Ltd. as a new
business sales executive. From 1989 to 1992 Mr. Robinson was a
sales executive for Prime Computers in the United Kingdom. In
1990, Mr. Robinson was transferred to Thailand where he was
sales manager for southeast Asia. Mr. Robinson intends to spend
all of his time on the Company's affairs.
Peter Lynch has served as a director of the Company since
its inception in May 1996. Since 1990 Mr. Lynch has held
various management positions with Wang Biss Ltd. in the areas
of system engineering, product marketing, and regional
operations. Mr. Lynch intends to spend all of his time on the
Company's affairs.
35
<PAGE>
Roderick Adams has served as a director of the Company
since its inception in May 1996. Since 1991 Mr. Adams has
acted as a consultant to a number of companies seeking financing.
Mr. Adams provides services and advice on corporate matters
including fund raising, listings and quotes, investor and media
relations. Mr. Adams intends to spend all of his time on the
Company's affairs.
Mr. Andy Mulholland has served as a director of Jyra
Research Ltd., the Company's wholly-owned English subsidiary,
since January 14, 1997. Since July 1996, Mr. Mulholland has
been a divisional director of Cap Gemini UK, part of Europe's
largest computer services business. From 1989, Mr. Mulholland
was a founder and marketing director (executive) of BISS Ltd.
In 1993 he was a key figure in raising more than 5.5 million
pounds sterling for a management buy out of BISS Ltd. BISS
Ltd. was subsequently sold to Wang Laboratories, USA in 1995.
Mr. Mulholland is an experienced senior manager with strong
skills in strategic, tactical, and management aspects of
technology and services provisions.
Robin Elsom has served as a director of Jyra
Research Lt., the Company's wholly-owned English
subsidiary, since April 6, 1997. Prior to that time, Mr. Elsom
was employed by Wang Laboratories where he reported to
the President of Wang. Mr. Elsom was responsible for
developing Service Management technologies, to be utilized
by I-Net, the outsourcing division of Wang. Mr. Elsom was
part of the technology evaluation team which undertook the
$250 million acquisition of I-Net in 1996. Previously, Mr.
Elsom was a founder and, from 1991, a Technical Director of
BISS Ltd. In 1993, he was one of the directors who secured
funding for, and successfully completed a management buy-
out of, BISS Ltd.
36
<PAGE>
REMUNERATION
SUMMARY COMPENSATION TABLE *
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
- -----------------------------------------------------------------
NUMBER OF
NAME YEAR SALARY BONUS OPTIONS
AND PRINCIPAL
POSITION
<S> <C> <C> <C> <C>
Paul Robinson.............. 1996 46,500\1 0 0
Chairman, Chief Executive
Officer, President
Peter Lynch................ 1996 46,500\2 0 0
Director, VP-Technical
Roderick Adams.............. 1996 43,000\3 0 0
Director, VP-Corp.
Development
</TABLE>
* All monetary amounts in this table are in English pounds
sterling.
1/ Mr. Robinson is being compensated at an annual rate of 46,500
pounds sterling per year. Such compensation commenced on
October 1, 1996. From the Company's incorporation on May 2,
1996 through September 30, 1996, Mr. Robinson received no
compensation from the Company. For the period from October
1, 1996 through December 31, 1996, Mr. Robinson received
compensation totaling 11,625 pounds sterling.
2/ Mr. Lynch is being compensated at an annual rate of 46,500
pounds sterling per year. Mr. Lynch began receiving
compensation in July 1996. Through December 31, 1996 Mr.
Lynch received compensation totaling 23,250 pounds sterling.
3/ Mr. Adams began receiving compensation at the annual rate of
43,000 pounds sterling in July 1996. Through December 31,
1996, Mr. Adams received compensation totaling 21,500 pounds
sterling.
37
<PAGE>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST
FISCAL YEAR AND FY- END OPTIONS/SAR VALUES
At the present time, the only stock options held by any
of the Company's executive officers and directors is the
option to purchase 150,000 Shares at a price of $16.00 per
share, held by Mr. Robin Elsom, a director of the Company's
wholly-owned subsidiary, Jyra Research Ltd. At the present
time, the Company has outstanding stock options to purchase
a total of 60,000 Shares at an exercise price of $0.40 per
Share, 40,000 Shares at an exercise price of $4.00 per Share,
55,000 Shares at an exercise price of $7.00 per Share, and
7,500 Shares at an exercise price of $9.00 per Share, and
227,000 shares at an exercise price of $16.00 per Share.
STOCK OPTION PLAN
The Company has adopted the Stock Option Plan (the
"Plan") to attract and retain officers, non-employee directors,
employees, and consultants of the Company or any of its
subsidiaries or affiliates. The Plan authorizes the purchase of up
to 500,000 shares of Common Stock through the grant of stock
options and awards of restricted stock. The Company has granted
options under the Plan to purchase 389,500 Shares of the
Company's Common Stock at varying exercise prices. The Plan
will be administered by either the Board of Directors or a
committee of two or more non-employee directors
("Administrator"). In general, the Administrator will determine
which eligible officers, directors, employees and consultants of
the Company may participate in the Plan and the type, extent and
terms of the stock option grants and awards of restricted
stock.
Options granted to employees may be either incentive
stock options within the meaning of Section 422 of the Code
("ISOs") or non-ISOs. Each option has a maximum term of ten
years from the date of the grant, subject to early termination. The
exercise price of any options granted after this Offering shall be
equal to the greater of the market price per share of the Common
Stock on the date of grant or the initial public offering price. At
the discretion of the Administrator, the exercise price of the
options may be paid in cash, with shares of Common Stock
having a fair market value equal to the option exercise price, or
with other property having a fair market value equal to the
option exercise price, including other vested but unexercised
options. In the event of a change in control, as defined in the
Plan, all options will become immediately vested and exercisable
and the restrictions with regard to restricted stock will lapse,
unless provided otherwise.
RELATED PARTY TRANSACTIONS
During 1996 the Company has issued a total of 132,600
Shares to Union Securities
38
<PAGE>
(International) Ltd., as compensation for its services in assisting
the Company sell Shares in the (i) June/July 1996 offering and
(ii) the European Offering in October and November 1996. Mr.
Timothy A.B. Mills, a founder of the Company, who owns
550,000 Shares, is a director, and owns 20%, of Union Securities
(International) Ltd.
PRINCIPAL STOCKHOLDERS
The table below sets forth certain information regarding
the beneficial ownership as of the date hereof and as adjusted to
reflect the sale of Common Stock offered hereby, by (i) each
person known by the Company to own beneficially five percent or
more of the Common Stock, (ii) each of the Company's directors,
(iii) each of the Named Officers and (iv) all directors and
executive officers as a group. Except as otherwise indicated, (x)
the Company believes that each of the beneficial owners of the
Common Stock listed in the table, based on information furnished
by such owner, has sole investment and voting power with
respect to such shares, and (y) the address of the beneficial
owner is the address of the principal executive offices of the
Company. The information set forth in the table and
accompanying footnotes has been furnished by the named
beneficial owners.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
TITLE OF NAME AND ADDRESS AMOUNT AND PERCENT PERCENT
CLASS OF BENEFICIAL NATURE OF OF CLASS OF CLASS
OWNER BENEFICIAL Before After
OWNERSHIP Offering Offering
Common Timothy A.B. Mills 550,000 8.8% 8.8%
10/20 Garlick Hill Direct
London EC4V 2AL
England
Common International Publishing 442,575 7.1% 2.0%
Holding, SA * Direct
1 Place Dargent
Luxembourg
Common Bank Von Ernst & Co., 404,500 6.4% 5.3%
Ltd. Direct
40 Rue du Rhone, 1211
Geneva
Switzerland
Common Union Bancaire Privee 315,000 5.0% 4.2%
96/98 Rue du Rhone, Direct
P.O. Box 1329'CH-1211
Geneva
Switzerland
</TABLE>
* International Publishing Holding, SA ("IPH") is a Luxembourg
corporation registered and headquarterd at 1 Place Dargent,
1413 Luxembourg. Its principal business address is c/o
Mr. Joseph G.B. Platvoet, Hans Memlingdreef 20, 3920 Lommel,
Belgium. The principal business of IPH is to make, hold,
and dispose of investments. IPH has approximately 350
shareholders and is managed by a Board of Directors consisting
of three individuals: (i) Mr. Vincent Pieter Kamer ("V. Kamer");
(ii) Mr. Joseph G.B. Platvoet; and (iii) Mr. Hans M. Koppenaal.
V. Kamer is of German and Dutch nationality, is the son of Mr.
Rienk H. Kamer ("R. Kamer"), an investment advisor to IPH
(described below), and resides at Avenue Albert ler 275,
1331 Genval, Belgium. V. Kamer's principal occupation is
to serve as a division director of an European subsidiary
of a multinational pharmaceutical company that is not
associated or connected in any way with IPH or R. Kamer.
Mr. Platvoet is of Dutch nationality and resides at Hans
Memlingdreef 20, 3920 Lommel, Belgium. Mr. Platvoet is a
retired private investor.
Mr. Koppenaal is of Dutch nationality and resides at Tolhutterweg
22, 72621 KT Ruurie, The Netherlands. Mr. Koppenaal is the owner
and manager of Makotex BV, an import/export textile company,
having an address at Tolhutterweg 22, 72621 KT Ruurio,
The Netherlands, as well as Mekolux Investments B.V., a
private investment company having an address at Tolhutterweg 22,
72621 KT Ruurie, The Netherlands.
R. Kamer is an investment advisor to IPH. R. Kamer
has represented to Management of the Company that he
is neither a shareholder of the Company nor a shareholder,
director, or officer of IPH. However, by virtue of his role
as an investment advisor to IPH and the authority conferred
upon him in such capacity, R. Kamer may be deemed to be a
"beneficial owner" of the Shares of the Company owned by IPH,
within the meaning of that term as it is defined in Rule 13d-3,
promulgated under the Securities Exchange Act of 1934, as amended.
R. Kamer is a Dutch citizen and resides at Residenza 'Le Palme,
Corso Italia 28B, Campione, Italy. In addition to carrying on
business as an investment advisor, principally from premises
located at Gevers Deynootweg 93/N, 6th Floor, 2586 BK, The
Hague, The Netherlands, and Los Molineros 155, 29600, Marbella,
Spain, R. Kamer is also a financial journalist and the publisher
of an investment publication in The Netherlands known as
"Financiele Strategie". In 1983, R. Kamer was indicted on
charges, among others, of conspiracy, mail fraud and wire
fraud in connection with the sale of real property located in the
United States. A conviction based upon a plea bargain agreement
was reversed by the United States Court of Appeals for the
Ninth Circuit in a decision reported at United States v. Rienk
Kamer, 781 F.2d 1380 (9th Cir. 1986) and remanded for further
proceedings to be taken by the lower court. Since that decision,
to R. Kamer's knowledge, United States prosecutors have elected
not to proceed further with respect to the indictment. Similar
charges were brought in The Netherlands resulting in full
acquittal in 1990 of the fraud charges and the imposition of a
$600 fine for R. Kamer's vicarious liability for the actions
of an employee.
R. Kamer has disclaimed beneficial ownership of the Shares
in the Company owned by IPH.
IPH has the sole voting power with respect to the Company's Shares
owned by it. By virtue of the authority conferred R. Kamer
as investment advisor to IPH, R. Kamer shares dispositive power
with respect to the Shares of the Company owned by IPH.
For his services as investment advisor to IPH, R. Kamer receives
an annual fee based upon the net asset value of the IPH's entire
portfolio of securities.
Grupo de Creacion Ltd., a Gibraltar corporation, which owns 23,000
Shares of the Company, and which is one of the Selling
Shareholders, acts as an investment advisor to IPH through R.
Kamer as its designee. The investment of IPH in the Company
was recommeded to IPH by R. Kamer.
SECURITY OWNERSHIP OF MANAGEMENT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
TITLE OF CLASS NAME OF AMOUNT AND PERCENT PERCENT
BENEFICIAL OWNER NATURE OF OF OF
BENEFICIAL CLASS CLASS
OWNERSHIP Before After
Offering Offering
Common Paul Robinson 735,000 11.7% 11.7%
Direct
Common Peter Lynch 735,000 11.7% 11.7%
Direct
Common Roderick Adams 730,000 11.6% 11.6%
Direct
All executive officers and directors as a group
(3 persons) 2,200,000 35.1% 35.1%
</TABLE>
39
<PAGE>
TRADING MARKET OF COMPANY'S SHARES
The principal trading market for the Company's
shares in the United States is the National Association of
Securities Dealers Over the Counter Bulletin Board ("OTC
Bulletin Board"), on which the Company's shares have
traded since September 24, 1996. The price range of trading
in the Shares, on a quarterly basis, since that time, is as
follows:
<TABLE>
<CAPTION>
OTC BULLETIN
BOARD
1996 Trades Volume
Low |High
<S> <C> <C>
1st Quarter |
2nd Quarter |
3rd Quarter .90 | 1.625 182,200
4th Quarter 1.50 |12.00 4,496,500
1997 Trades Volume
Low |High
1st Quarter 7.125|24.00 2,756,300
2nd Quarter 15.875|20.75 5,026,800
3rd Quarter 16.625|18.625 416,400
(July 1-9, 1997)
</TABLE>
Note: OTC Bulletin Board Quotations - The OTC Bulletin Board
quotations represent inter-dealer prices, without mark-ups,
commissions, etc., and they may not necessarily be indicative of
actual sales prices.
The last trade of the Shares on the OTC Bulletin Board on
July 9, 1997 was $16.75.
40
<PAGE>
LEGAL PROCEEDINGS
As of July 9, 1997 there are no material legal
proceedings pending against the Company.
CAPITALIZATION AND DESCRIPTION OF
SECURITIES
The Company has one class of capital stock outstanding,
common stock having $0.001 par value ("Shares").
On July 9, 1997, there were 6,276,600 Shares
outstanding out of 20,000,000 Shares authorized .
All Shares are of the same class and have the same rights,
preferences and limitations. Holders of Shares are entitled to
receive dividends in cash, property or shares when and if
dividends are declared by the Board of Directors out of funds
legally available therefor. The By-Laws impose no limitations on
the payment of dividends. A quorum for any meeting of
shareholders is a majority of Shares then issued and outstanding
and entitled to be voted at the meeting. Holders of Shares are
entitled to one vote per Share. There is no cumulative voting
with respect to the election of directors, with the result that the
holders of more than 50% of the shares voted can elect all of the
directors then being elected. Upon any liquidation, dissolution or
winding up of the business of the Company, any assets will be
distributed to the holders of Shares after payment or provision
for payment of all debts, obligations or liabilities of the
Company. There are no preemptive rights, subscription
rights, conversion rights or redemption provisions relating to the
Shares, and none of the Shares carries any liability for further
calls.
The rights of holders of Shares may not be modified other
than by vote of two-thirds of the Shares voting on such
modification.
INDEMNIFICATION OF OFFICERS AND
DIRECTORS
As permitted by the General Corporation Law of
Delaware, as amended ("DGCL"), the Company's Certificate of
Incorporation limits the personal liability of a director or officer
to the Company for monetary damages for breach of fiduciary
duty of care as a director. Liability is not eliminated for (i) any
breach of the director's duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law,
(iii) unlawful payment of dividends or stock purchases or
redemptions pursuant to Section 174 of the DGCL, or (iv) any
transaction from which the director derived an improper personal
benefit.
41
<PAGE>
The Company has also entered into indemnification
agreements with each of its directors and executive officers. The
indemnification agreements provide that the directors and
executive officers will be indemnified to the fullest extent
permitted by applicable law against all expenses (including
attorneys' fees), judgments, fines and amounts reasonably paid or
incurred by them for settlement in any threatened, pending or
completed action, suit or proceeding, including any derivative
action, on account of their services as a director or officer of the
Company or of any subsidiary of the Company or of any other
company or enterprise in which they are serving at the request of
the Company. No indemnification will be provided under the
indemnification agreements, however, to any director or
executive officer in certain limited circumstances, including on
account of knowingly fraudulent, deliberately dishonest or willful
misconduct. To the extent the provisions of the indemnification
agreements exceed the indemnification permitted by applicable
law, such provisions may be unenforceable or may be limited to
the extent they are found by a court of competent jurisdiction to
be contrary to public policy.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and
controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
DELAWARE LAW
The Company is subject to Section 203 of the DGCL,
which prevents an "interested stockholder" (defined in Section
203, generally, as a person owning 15% or more of a
corporation's outstanding voting stock) from engaging in a
"business combination" with a publicly-held Delaware
corporation for three years following the date such person
became an interested stockholder, unless: (i) before such person
became a stockholder, the board of directors of the corporation
approved the transaction in which the interested stockholder
became an interested stockholder or approved the business
combination; (ii) upon consummation of the transaction that
resulted in the interested stockholder's becoming an interested
stockholder, the interested stockholder owns at least 85% of the
voting stock of the corporation outstanding at the time the
transaction commenced (subject to certain exceptions); or (iii)
following the transaction in which such person became an interested
stockholder, the business combination is approved by the Board
of the corporation and authorized at a meeting of stockholders
by the affirmative vote of the holders of 66% of the outstanding
voting stock of the corporation not owned by the interested
stockholder. A "business combination" includes mergers, stock
or asset sales and other transactions resulting in a financial
benefit to the interested stockholder.
42
<PAGE>
The provisions of Section 203 of the DGCL could have
the effect of delaying, deferring or preventing a change in control
of the Company.
TRANSFER AGENT
The transfer agent for the Common Stock is the Registrar
and Transfer Company, Cranford, New Jersey.
SHARES ELIGIBLE FOR FUTURE SALE
At the present time, the Company has 6,276,600 shares of
Common Stock outstanding, not including the 389,500 shares of
Common Stock issuable upon exercise of the options held by the
Company's employees, Of these outstanding shares, 5,233,500
shares may be freely traded without restriction or further
registration under the Securities Act, except that any shares that
are held by an "affiliate" of the Company (as that term is defined
in the rules and regulations under the Securities Act) may be sold
only pursuant to a registration under the Securities Act or
pursuant to an exemption from registration under the Securities
Act including the exemption provided by Rule 144 adopted under
the Securities Act.
1,043,100 shares of Common Stock were sold in Europe
in October and November 1996 pursuant to the safe harbor from
registration set forth in Regulation S, promulgated under the
Securities Act. Under Regulation S, these shares are subject to a
"restricted period," that requires that the Company take such
steps as are necessary to ensure that the shares are not resold
into the United States for at least one year from the date of sale.
1,043,100 of these shares, are being registered pursuant to this
prospectus. These Shares, if not sold pursuant to this
prospectus, will be available for resale into the United States
commencing in October 1997.
In addition, shareholders who are deemed to be
affiliates are also subject to resale limitations pursuant to Rule
144. Currently, there are 2,750,000 shares which are held by
founders of the Company which may be deemed to be "control
stock." These shares, although not subject to a one-year holding
requirement, are still subject to the other provisions of Rule 144,
so long as the shareholder is deemed to be an "affiliate" of the
Company.
In general, under Rule 144 as currently in effect, an
affiliate will be entitled to sell, within any three-month period,
that number of shares that does not exceed the then outstanding
shares of Common Stock or (ii) the average weekly trading
volume of the Stock during the four calendar weeks preceding
the date on which notice of such sale is given to the Commission
provided certain public information, manner of sale and notice
requirements are satisfied. A stockholder who is deemed to be an
affiliate of the Company, including members of the Board of
Directors and senior management of the Company, will still need
to comply with the restrictions and requirements of Rule 144,
other than the one-year holding period requirement, in order to
43
<PAGE>
sell shares of Common Stock that are not Restricted Securities,
unless such sale is registered under the Securities Act. A
stockholder (or stockholders whose shares are aggregated) who
is deemed not to have been an affiliate of the Company at any
time during the 90 days preceding a sale by such stockholder, and
who has beneficially owned Restricted Shares for at least two
years, will be entitled to sell such shares under Rule 144 without
regard to the volume limitations described above. The
Commission is currently considering a reduction in the required
holding periods under Rule 144.
No predictions can be made of the effect, if any, that
future sales of shares of the availability of shares for sale will
have on the market price prevailing from time to time.
Nevertheless, sales of substantial amounts of Shares in the public
market could adversely affect the then-prevailing market price.
In addition, any employee, officer or director of or consultant
to the Company who purchases his or her shares pursuant to a
written plan or contract may be entitled to rely on the resale
provisions of Rule 701, promulgated under the Securities Act
("Rule 701"). Rule 701 permits affiliates to sell their shares
which are subject to Rule 701 ("Rule 701 shares") under Rule
144 without complying with the holding period requirements of
Rule 144. Rule 701 further provides that non-affiliates may sell
Rule 701 shares in reliance on Rule 144 without having to
comply with the public information, volume limitation or notice
provisions of Rule 144. In both cases, a holder of Rule 701
shares is required to wait until 90 days after the date of this
Prospectus. At the present time, there are no Rule 701 shares
outstanding.
LEGAL MATTERS
The legality of the securities offered hereby will be passed
upon for the Company by Berns & Berns, New York, New York.
EXPERTS
The financial statements as of December 31, 1996, and for
the period from May 2, 1996 through December 31, 1996
included in this Prospectus have been audited by Faw, Casson &
Co., LLP, independent auditors, as stated in their reports
appearing herein and elsewhere. Such financial statements
included herein in reliance upon the reports of such firm given
upon their authority as experts in auditing and accounting.
44
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a
Registration Statement under the Securities Act with respect to
the Securities offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement and
the exhibits thereto, certain portions having been omitted from
this Prospectus in accordance with the rules and regulations of
the Commission. For further information with respect to the
Company, the securities offered by this Prospectus and such
omitted information, reference is made to the Registration
Statement, including any and all exhibits and amendments
thereto. Statements contained in this Prospectus concerning the
provisions of any documents filed as an exhibit are of necessity
brief descriptions thereof and are not necessarily complete, and in
each instance reference is made to the copy of the document filed
as an exhibit to the Registration Statement, each such statement
being qualified in its entirety by this reference.
Following the effectiveness of the Registration Statement,
the Company will be subject to the informational requirements of
the Securities Exchange Act of 1934, as amended, and in
accordance therewith will file reports, proxy statements and other
information with the Commission. Such reports, proxy
statements and other information may be inspected and copied at
the public reference facilities of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549; Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and 7 World Trade Center, New York, New York
10048. Copies of such material, including the Registration
Statement, can be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission also maintains a site
on the World Wide Web that contains reports, proxy and
information statements and other information regarding
registrants that file electronically of such site is
http://www.sec.gov.
The Company intends to furnish its stockholders with
annual reports containing audited financial statements, quarterly
reports containing unaudited financial information and such other
periodic reports as the Company may determine to be appropriate
or as may be required by law.
45
<PAGE>
FINANCIAL STATEMENTS
JYRA RESEARCH INC. AND SUBSIDIARY
(DEVELOPMENT STAGE ENTERPRISE)
London, England
**********
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTARY INFORMATION
Period May 2, 1996 Through December 31, 1996
46
<PAGE>
TABLE OF CONTENTS
******************************
PAGES
INDEPENDENT AUDITORS REPORT 1
AUDITED FINANCIAL STATEMENTS
Consolidated Balance Sheet 2
Consolidated Statement Of Operations 3
Consolidated Statement Of Stockholders Equity 4
Consolidated Statement of Cash Flows 5
Notes To Consolidated Financial Statements 6
SUPPLEMENTARY INFORMATION
Schedule 1: Condensed Financial Information - Omitted:
Test Not Met
Schedule 2: Valuation And Qualifying Accounts - Omitted:
Full Disclosure In Financial Statements And Notes
Thereto
Schedule 3: Real Estate And Accumulated Depreciation -
Omitted:
No Respective Financial Statement Caption
Schedule 4: Mortgage Loans On Real Estate - Omitted:
No Respective Financial Statement Caption
Schedule 5: Supplemental Information Concerning Property -
Casualty Insurance Operations - Omitted:
No Respective Financial Statement Caption
*****************************
47
<PAGE>
SUPPLEMENTARY INFORMATION
48
<PAGE>
INDEPENDENT AUDITORS REPORT
BOARD OF DIRECTORS
JYRA RESEARCH INC. AND SUBSIDIARY
London, England
We have audited the accompanying consolidated
balance sheet of Jyra Research Inc. and its Subsidiary as
of December 31, 1996, and the related consolidated
statements of operations, stockholders equity and cash
flows and the supplementary information as listed in the
Table of Contents for the period then ended. These
consolidated financial statements are the responsibility of
the Corporation's management. Our responsibility is to
express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the audit
to obtain reasonable assurance about whether the
financial statements are free of material
misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes
assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement
presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial
statements and supplementary information referred to
above present fairly, in all material respects, the
financial position of Jyra Research Inc. and its
Subsidiary, at December 31, 1996, and the results of
its operations and its cash flows for the period then
ended, in conformity with generally accepted
accounting principles.
Dover, Delaware
March 10, 1997
/s/ Faw Casson & Co., LLP
49
<PAGE>
JYRA RESEARCH INC. AND SUBSIDIARY
(DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
___________________________________________________________________________
A S S E T S
<TABLE>
<CAPTION>
<S> <C>
CURRENT ASSETS
Cash And Cash Equivalents $3,398,855
Prepaid Expenses 50,634
TOTAL CURRENT ASSETS 3,449,489
PROPERTY AND EQUIPMENT
Computers And Equipment 104,743
Less: Accumulated Depreciation 6,537
TOTAL PROPERTY AND EQUIPMENT 98,206
TOTAL ASSETS $3,547,695
L I A B I L I T I E S
CURRENT LIABILITIES
Accounts Payable $100,994
S T O C K H O L D E R S E Q U I T Y
COMMON STOCK
Authorized: 20,000,000 Shares, $.001 Par Value
Issued And Outstanding: 6,276,600 Shares 6,277
PAID-IN CAPITAL 3,819,405
DEFICIT ACCUMULATED DURING
THE DEVELOPMENT STAGE (347,692)
FOREIGN CURRENCY TRANSLATION
ADJUSTMENTS (31,289)
TOTAL STOCKHOLDERS EQUITY 3,446,701
TOTAL LIABILITIES AND STOCKHOLDERS
EQUITY $3,547,695
See Accompanying Notes To Consolidated Financial Statements.
1
50
</TABLE>
<PAGE>
JYRA RESEARCH INC. AND SUBSIDIARY
(DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD MAY 2, 1996 THROUGH DECEMBER 31, 1996
___________________________________________________________________________
<TABLE>
<CAPTION>
<S> <C>
REVENUE $ -
EXPENSES
Research And Development Expenses (260,367)
Administrative Expenses (194,566)
LOSS BEFORE OTHER INCOME (EXPENSE) (454,933)
OTHER INCOME (EXPENSE)
Currency Exchange Differences 83,412
Interest Income 30,366
Depreciation (6,537)
TOTAL OTHER INCOME 107,241
LOSS BEFORE INCOME TAXES (347,692)
PROVISION FOR INCOME TAXES -
NET LOSS $ (347,692)
EARNINGS PER SHARE OF COMMON STOCK
Average Shares Of Common Stock Outstanding 4,277,897
Earnings Per Average Share Of Common Stock $ (.08)
See Accompanying Notes To Consolidated Financial Statements.
</TABLE>
3
51
<PAGE>
JYRA RESEARCH INC. AND SUBSIDIARY
(DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
PERIOD MAY 2, 1996 THROUGH DECEMBER 31, 1996
____________________________________________________________________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
COMMON STOCK DEFICIT
ACCUMULATED FOREIGN
PAID-IN DURING CURRENCY
SHARES AMOUNT CAPITAL DEVELOPMENT TRANSLATION
BALANCE AT BEGINNING
OF PERIOD - $ - $ - $ - $ -
NET LOSS - - - (347,692) -
OMMON STOCK ISSUED
Public And Private
Offerings:
May, 1996 At $.001
Per Share 2,750,000 2,750 - - -
August, 1996 At $.40
Per Share 2,392,500 2,393 954,607 - -
December, 1996 At $3
Per Share 1,000,000 1,000 2,999,000 - -
Stock Issued
As Commissions:
August, 1996 At $.40
Per Share 91,000 91 36,309 - -
November, 1996 At $3
Per Share 43,100 43 129,257 - -
Issuance Expenses Of
Capital Stock - - (299,768) - -
Translation Adjustment
For The Period - - - - (31,289)
TOTAL 6,276,600 $6,277 $3,819,405 $ (347,692) $(31,289)
See Accompanying Notes To Consolidated Financial Statements.
4
53
</TABLE>
<PAGE>
JYRA RESEARCH INC. AND SUBSIDIARY
(DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD MAY 2, 1996 THROUGH DECEMBER 31, 1996
_________________________________________________________________________
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (347,692)
Adjustments To Reconcile Net Loss To Net Cash
Used For Operating Activities:
Depreciation 6,537
Decrease (Increase) In Prepaid Expenses (50,634)
Increase (Decrease) In Accounts Payable 100,994
NET CASH USED FOR OPERATING ACTIVITIES (290,795)
CASH FLOWS FROM INVESTMENT ACTIVITIES
Purchases Of Property And Equipment (104,743)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds From The Issuance Of Common Stock 3,825,682
EFFECTS OF EXCHANGE RATE CHANGES ON
CASH (31,289)
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,398,855
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD -
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $3,398,855
NONCASH TRANSACTIONS
Stock Issued For Services Performed $165,700
See Accompanying Notes To Consolidated Financial Statements.
5
54
</TABLE>
<PAGE>
JYRA RESEARCH INC. AND SUBSIDIARY
(DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
_________________________________________________________________
________
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company's Activities
The Company was incorporated in the State of Delaware May 2,
1996. The Company's plans are to develop new computer
network management systems to solve network problems caused
by the constant increase in network traffic and growing
complexity of networks. This Company is still in the
development stage.
Cash
The Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents. Substantially all cash accounts are interest bearing.
Basis Of Consolidation
The accounts of the wholly owned United Kingdom subsidiary
Jyra Research Ltd. are included in the consolidated financial
statements. All intercompany accounts and transactions have
been eliminated.
Property And Equipment
Property and equipment are stated at cost. Major expenditures
for property and those which substantially increase useful lives are
capitalized. Maintenance and repairs are expensed as incurred.
Property and equipment are depreciated using the straight-line
method based on the expected useful life.
Advertising
The Company follows the policy of charging the costs of
advertising to expense as incurred.
6
55
<PAGE>
Per Unit Royalties and Support and Update Fees
The Company follows the policy of charging the costs
of per unit royalties and support and update fees
to expense as incurred.
Use Of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Foreign Currency Translation
Through December 31, 1996, the Company had determined that
the U.S. dollar was the "functional currency" of its operations.
All foreign currency asset and liability amounts were remeasured
into U.S. dollars at end-of-period exchange rates. Foreign
currency income and expenses were remeasured at average
exchange rates in effect during the year. Unrealized currency
adjustments in the consolidated balance sheet are accumulated in
stockholders equity. Exchange gains and losses arising from
remeasurement of foreign currency-denominated monetary assets
and liabilities were included in income in the period in which they
occur.
Concentration Of Credit Risk
As of December 31, 1996, the Company had cash deposits on
hand in financial institutions which exceeded depositor's insurance
provided by the applicable guaranty agency.
Software Development Costs
In accordance with Statement of Financial Accounting Standards
No. 86, Accounting for the Costs of Computer Software to be
Sold, leased or otherwise marketed, initial costs are charged to
operations as research prior to the development of a detailed
program design or a working model. When technological
feasibility is established and before the product is released for
sale, the Company will capitalize the direct costs and allocated
overhead associated with the development of software products.
Costs incurred subsequent to the product release, and research
and development performed under contract will be charged to
operations.
Stock Option Plan
The Company is accounting for its stock option plan in
accordance with Accounting Principles Board Opinion No. 25,
"Accounting For Stock Issued To Employees" and related
interpretations. The Company, as required, has provided
56
<PAGE>
proforma disclosures of compensation expenses as determined
under the provision of Statement of Financial Accounting
Standard No. 123.
NOTE B - COMMITMENT
The Company has entered into an agreement with another
corporation pursuant to which the Company was granted a
worldwide non-exclusive license to develop and distribute
products based upon the Corporation's technology.
57
<PAGE>
JYRA RESEARCH INC. AND SUBSIDIARY
(DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996
_____________________________________________________________
_________
NOTE B - COMMITMENT - CONTINUED
Also pursuant to the agreement, the Company is required to meet
three principal payment obligations consisting of: (a) upfront
license fees; (b) per unit royalties; and (c) support and update
fees, described as follows:
As an "upfront license fee", the Company has paid $50,000
for the first package chosen by the Company. For each
additional package that may be chosen by the Company,
the Company will be required to pay an additional "upfront
license fee" of $50,000.
In addition, as "per unit royalties", for each of the first
5,000 products utilizing the Corporation's technology to be
sold by the Company, the Company will be required to pay
a royalty of $66 per unit; for each such product in excess of
the first 5,000, the Company will be required to pay a
royalty of $20 per unit.
In addition, as "support and update fees", the agreement
requires the Company to pay: (i) $50,000 per year for the
period during which the Company is paying "per unit
royalties" of $66; and (ii) $300,000 per year for the period
when the Company is paying "per unit royalties" of $20.
The agreement is capable of ending either by expiration or
termination. The agreement is scheduled to expire at the end of its
stated initial term of five (5) years, after which the Company may, at
its option, elect to renew the agreement for as many as five
successive terms of one (1) year each. If the agreement ends by
expiration of any such term, then, after expiration, the Company may
continue to sell its products incorporating the Corporation's
technology as such technology existed at the time of expiration,
subject always to the Company's continuing obligation to pay "per
unit royalties".
58
<PAGE>
NOTE C - INCOME TAXES
The Company's total deferred tax assets, deferred tax liabilities,
and deferred tax asset valuation allowances at December 31, 1996
are as follows:
U.S. Federal $ -
U.S. State -
Outside United States 124,000
Total Deferred Tax Assets 124,000
Less: Valuation Allowance (124,000)
NET DEFERRED TAX ASSET $ -
59
<PAGE>
JYRA RESEARCH INC. AND SUBSIDIARY
(DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -
CONTINUED
DECEMBER 31, 1996
_____________________________________________________________
___________
NOTE C - INCOME TAXES - CONTINUED
The deferred tax assets have been recorded based on a net
operating loss carryforward. Management has based the
valuation allowance on the risky nature of the industry.
Factors determining Jyra Research Inc.'s effective tax rate:
U.S. Federal Statutory Rate 34%
Nondeductible Costs 2%
EFFECTIVE INCOME TAX RATE 36%
Those amounts have been presented in the Company's financial
statements as follows:
Net Deferred Tax Asset $ -
For tax return purposes, the Subsidiary Company has
approximately $375,000 of net operating loss
carryforwards as of December 31, 1996, which expire
in the year 2011.
NOTE D - LEASES
The Company leases its United Kingdom facilities
from a third party. The lease is for three years at
a rental rate of $22,247 per year. The current
lease expires August, 1999. Lease expense for the
period ending December 31, 1996 is $20,141.
NOTE E - STOCK OPTION PLAN
The Company has a stock option plan for key
employees of the Company. The Plan was adopted July
20, 1996. The Plan provides for the granting of
incentive stock options as defined in Section 422 of
the Internal Revenue Code, as well as nonincentive
stock options. All options are awarded at not less
than the market price of the Company's common stock
on the date of grant. Such options expire on the
fifth anniversary of the date on which the option
was granted.
60
<PAGE>
Of the 175,000 shares granted, 105,000 are
exercisable according to the following schedule:
PERCENT
EXERCISABLE EXERCISE EVENT
50% On Or After The First
Customer shipment, or
Two Years From Grant
Date, whichever comes first
12.5% One Year From Grant Date
12.5% Two Years From Grant Date
25% Three Years From Grant Date
61
<PAGE>
JYRA RESEARCH INC. AND SUBSIDIARY
(DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996
______________________________________________________________
___________
NOTE E - STOCK OPTION PLAN - CONTINUED
Of the 175,000 shares granted, 70,000 are exercisable
according to the following schedule:
PERCENT
EXERCISABLE
EXERCISE EVENT
One Year From Grant Date 25%
Two Years From Grant Date 25%
Three Years From Grant Date 25%
Four Years From Grant Date 25%
The number of shares for which options may be granted
cannot exceed 300,000 shares of the Company's common
stock. The Plan shall terminate on the tenth
anniversary of its original effective date, July 20,
1996, after which no awards may be granted.
The plan is accounted for under Accounting Principles
Board Opinion No. 25 and related interpretations. No
compensation cost has been recognized for the plan.
Had compensation cost for the plan been determined
based upon the fair value of the options at the grant
dates consistent with the method of SFAS No. 123,
"Accounting for Stock-Based Compensation", the
Company's net earnings and net earnings per share
would have been reduced to the proforma amounts
indicated below:
1996
Net Earnings As Reported $(347,692)
Proforma $(1,112,442)
Primary Earnings Per Share As Reported $ (.08)
Proforma $ (.26)
Fully Diluted Earnings Per
Share As Reported $ (.08)
Proforma $ (.25)
62
<PAGE>
The fair value of each option is estimated on the
date of grant using the minimum value pricing model
with the following weighted average assumptions used
for grants in 1996: no dividend yield, a risk free
interest rate of 6% and an expected life of four
years.
63
<PAGE>
JYRA RESEARCH INC. AND SUBSIDIARY
(DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996
_____________________________________________________________
_____________
NOTE E - STOCK OPTION PLAN - CONTINUED
Transactions involving the Plan are summarized as follows:
<TABLE
[CAPTION]
[S] [C] [C] [C] [C]
AVERAGE
OPTION PRICE
OPTION PRICE PER
OPTION SHARE SHARES RANGE PER SHARE SHARE
Outstanding At Beginning
Of Period - $ -
Granted 175,000 .40 - 7.00 $3.30
Exercise - -
OUTSTANDING AT DECEMBER 31, 1996,
OF WHICH NONE ARE
EXERCISABLE AT
DECEMBER 31, 1996 175,000
Weighted Average Fair Value
Of Options Granted During
The Year $4.37
Weighted Average Remaining Contractual Life (Years) 4.33
At December 31, 1996, there were 125,000 shares available for
future grants under the Plan.
64
<PAGE>
UNAUDITED FINANCIAL
STATEMENTS AT MARCH 31, 1997
64
<PAGE>
JYRA RESEARCH, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Unaudited - Prepared by Management
Consolidated Balance Sheet 31-Mar-97 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
$
Current Assets 31-Mar-97
Cash & Cash Equivalents 2,863,835
Prepaid Expenses 2,970
Total Current Assets 2,866,805
Property & Equipment
Computers, Equipment & Motor Vehicles 199,402
Less Accumulated Dep'n 18,795
Net Property & Equipment 180,607
Total Assets 3,047,412
Current Liabilities
Accounts Payable 39,657
(39,657)
Stockholders Equity
Ordinary Share Capital 6,277
Paid in Capital 3,819,405
3,825,682
Deficit Accumulated During The Development Stage (678,041)
Foreign Currency Translation Adj (139,886)
Total Stockholders Equity 3,007,755
Total Liabilities & Stockholders Equity 3,047,412
</TABLE>
JYRA RESEARCH, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Unaudited - Prepared by Management
Consolidated Statement of Operations
Period 1-Jan-97 Through 31-Mar-97 (Unaudited)
Cumulative Period 2-May-96 (Date Of Inception)
Through 31 Mar 97 Unaudited
<TABLE>
<CAPTION>
<S> <C> <C>
$ $
31-Mar-97 Cumulative
Revenue -
Development & Admin Expenses
Admin Expenses 174,700 369,266
Development Costs 227,624 487,991
Total Development & Admin Costs (402,324) (857,257)
Other Income/Expense
Currency Exchange Differences 57,241 140,653
Interest Income 26,993 57,359
Depreciation (12,258) (18,795)
Total Other Income/Expenses 71,976 179,217
Loss Before Income Taxes (330,348) (678,040)
Provision for Income Taxes - -
Net Loss (330,348) (678,040)
Earnings Per Share of Common Stock
Average Shares of Common Stock O/S 6,276,600
Earnings Per Share of Common Stock (0.05)
JYRA RESEARCH, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Unaudited - Prepared by Management)
Consolidated Statement of Cash Flows
Period 1-Jan-97 Through 31-Mar-97 (Unaudited)
Cumulative Period 2-May-96 (Date of Inception)
Through 31 Mar 97 Unaudited
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
$ $
31-Mar-97 Cumulative
Cash Flows From Operating Activities
Net Loss (330,348) (678,040)
Adjustments to Reconcile Net Loss To Net Cash
Used for Operating Activities:
Depreciation 12,258 18,795
Decrease (Increase) in Prepaid Expenses 53,002 (2,970)
Increase (Decrease) in Accounts Payable (61,337) (39,657)
(326,425) (701,872)
Cash Flows From Investment Activities
Purchase of Computers, Equipment (94,659) (199,402)
& Vehicles
Cash Flows From Financing Activities
Proceeds From The Issuance of Common Stock 0 3,825,682
Effects of Exchange Rate Changes On Cash (113,935) (60,572)
Net Decrease in Cash & Cash Equivalents (535,019) 2,863,836
Cash & Cash Equivalents At Beginning 3,398,855 0
of Period
Cash & Cash Equivalents At End of 2,863,836 2,863,836
Period
</TABLE>
JYRA RESEARCH, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Unaudited - Prepared by Management
Consolidated Statement of Cash Flows
Period 1-Jan-97 Through 31-Mar-97 (Unaudited
Cumulative Period 2-May-96 (Date Of Inception)
Through 31 Mar 97 Unaudited
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Deficit
Accumulated Foreign
Common Stock Paid-in During Currency
Capital Development Translation
Shares Amount
$ $ $ $ $
Balance
At
Inception - - - - -
Net Loss from
2-May-96 to
31-Dec-96 - - - (347,692) -
Issuance of Common Stock to 31-Dec-96
Public And Private Offerings:
May 1996
At $.001
Per Share 2,750,000 2,750 - - -
August
1996 At
$.40 Per
Share 2,392,500 2,393 954,607 - -
December
1996 at
$3 Per
Share 1,000,000 1,000 2,999,000 - -
Stock Issued As Commissions:
August
1996 At
$.40 Per
Share 91,000 91 36,309 - -
November
1996 At
$3 Per
Share 43,100 43 129,257 - -
Issuance
Expenses Of
Capital Stock - - (299,768) - -
Translation
Adjustment For
The Period - - - - (31,289)
______________________________________________________________
Balance At
31-Dec-96 6,276,600 6,277 3,819,405 (347,692) (31,289)
Net Loss
For The
Period To
31-Mar-97 - - - (330,349) -
Common
Stock Issued - - - - -
Translation
Adjustment For
The Period - - - - (108,597)
Total
For The
Period 6,276,600 6,277 3,819,405 (678,041) (139,886)
</TABLE>
JYRA RESEARCH, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Unaudited - Prepared by Management
Development & Admin Expenses
Period 1-Jan 97 Through 31-Mar-97 (Unaudited)
Cumulative Period 2-May-96 (Date of Inception)
Through 31-Mar-97 (Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
$ $
31-Mar-97 Cumulative
ADMINISTRATION EXPENSES
Advertising & Promotion 25,956 32,456
Bank Charges 484 2,185
Federal Tax 2,500 4,030
Miscellaneous Expenses 375 1,545
Directors Fees 61,371 152,608
Insurance 910 2,645
Leases 9,985 30,126
Printing & Stationery 5,403 13,391
Professional Fees 25,284 42,137
Repairs, Maintenance & Security 8,231 14,396
Travel & Entertainment 33,151 72,360
Utilities 1,051 1,388
Total Admin Expenses 174,700 369,266
Development
Licenses & Software Fees 2,767 103,054
Salaries & National Ins 161,291 233,468
Staff Costs 26,709 90,762
Subcontractors 26,215 36,977
Telephones & Internet 10,643 23,731
Total Development Expens 227,624 487,991
Total Operating Expenses 402,324 857,257
REVENUE
Interest Income 26,993 57,369
Depreciation (12,258) (18,795)
14,735 38,564
C/F Deficit 387,589 818,693
</TABLE>
NOTE A - Basis of preparation
The condensed consolidated Financial statements as of and for the three months
ended March 31, 1997 are unaudited, but include all adjustments (consisting of
normal recurring adjustments) which the Company considers necessary for a fair
presentation of the financial position at that date and the operating results
and cash flows for the three months ended March 31, 1997 are not necessarily
indicative of the results for the year ending December 31, 1997.
NOTE B - Stock Option Plan
The Company has a stock option plan for key employees of the Company.
The Plan was adopted July 20, 1996. The Plan provides for the granting
of incentive stock options as defined in Section 422 of the Internal
Revenue Code, as well as nonincentive stock options. All options
are awarded at not less than the market price of the Company's common
stock on the date of grant. Such options expire on the fifth anniversary
of the date on which the option was granted. On March 30th 1997,
the original Stock Option Plan dated July 20th 1996 allowing for the
grant of up to a total of 300,000 common shares was amended to allow
for the grant of up to a total of 500,000 common shares.
During the 1st quarter 1997, 7,500 shares were granted to the
following schedule:
PERCENT
EXERCISABLE
EXERCISE EVENT
One Year From Grant Date 25%
Two Years From Grant Date 25%
Three Years From Grant Date 25%
Four Years From Grant Date 25%
The number of shares for which options may be granted cannot exceed
500,000 shares of the Company's common stock. The Plan shall terminate on
the tenth anniversary of its original effective date, July 20, 1996, after
which no awards may be granted.
Transactions involving the Plan are summarized as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
AVERAGE
OPTION
Grant Expiry OPTION PRICE PRICE PER
OPTION SHARE Date Date SHARES PER SHARE SHARE
Outstanding At Beginning 180,000 $0.40 - $7.00 $3.40
of Period
Granted 27 Jan 97 26 Jan 02 7,500 $9.00 $9.00
Exercised " " 0 - -
Cancelled (25,000) ($0.40 - $7.00) $1.72
Total 162,500 $0.40 - $9.00
</TABLE>
* Oustanding at March 31, 1997 of which none are exercisable at March 31 1997
162,500
At March 31, 1997 there were 337,500 shares available for future grants
under the Plan.
NOTE C - Subsequent events
Stock Option Plan
Transactions involving the Plan since March 31, 1997 are summarized as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
AVERAGE
OPTION
Grant Expiry OPTION PRICE PRICE PER
OPTION SHARE Date Date SHARES PER SHARE SHARE
Granted 30 Apr 97 29 Apr 02 227,000 $16.00 $16.00
Granted 05Jun 97 04 Jun 02 10,000 $18.50 $18.50
Total 237,000 $16.00-$18.50 $16.10
</TABLE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . 2
THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . 2
THE OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . 3
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . 3
DESCRIPTION OF OFFERING. . . . . . . . . . . . . . . . . . . . 3
SELLING SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . 4
GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
GLOSSARY OF TERMS. . . . . . . . . . . . . . . . . . . . . . . 7
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . 11
New Business; Continued Dependence on Securing Addi-
tional Financing . . . . . . . . . . . . . . . 11
Limited Operations . . . . . . . . . . . . . . . . . . 11
Dependence Upon Key Personnel. . . . . . . . . . . . . 11
Inexperience of Management . . . . . . . . . . . . . . 11
Financial Condition of Company; Difficulty in Funding
Operations . . . . . . . . . . . . . . . . . . 12
Protection of Intellectual Property; Competition . . . 12
Proposed Products are at the Conceptual or Software Prototype
Stages . . 12
Manufacturing of Product . . . . . . . . . . . . . . . 13
Limited Experience of Management in Manufacturing. . . 13
Delays in Development of Software and Related Products
are Common in Computer Industry. . . . . . . . 13
Competitive Disadvantage of Company. . . . . . . . . . 14
Changes in Technology; Risk of Competing Technologies. 14
Substantial Additional Funds May be Required; Substan-
tial Shareholder Dilution. . . . . . . . . . . 14
Risks Associated with International Operations . . . . 15
70
<PAGE>
Competition. . . . . . . . . . . . . . . . . . . . . . 15
Dependence Upon Developing New Products. . . . . . . . 16
Impact of General Economic Conditions on Operations and
Dependence Upon Other Company's Products and
their Availability . . . . . . . . . . . . . . 16
Need of Company to Comply with Electrical, Emissions,
and Other Applicable Safety Requirements . . . 17
Dependence upon Technology from Sun Microsystems . . . 17
Dependence of the Company Upon Unproven Products . . . 17
Limited Market For Shares; Potential Sales of Substantial
Amounts of Shares. . . . . . . . . . . . . . . 17
Significant Control and Influence by Existing Share-
holders. . . . . . . . . . . . . . . . . . . . 18
Limitation of Officers' and Directors' Liabilities
under Delaware Law . . . . . . . . . . . . . . 18
Consequential Loss . . . . . . . . . . . . . . . . . . .18
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . 18
DIVIDEND POLICY. . . . . . . . . . . . . . . . . . . . . . . . 19
THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . 20
Background . . . . . . . . . . . . . . . . . . . . . . 20
Planned Initial Products . . . . . . . . . . . . . . . 21
Mid-Level Manager . . . . . . . . . . . . . . 21
Jyra Diagnosis Pack. . . . . . . . . . . . . . 21
Jyra Analysis Pack . . . . . . . . . . . . . . 21
Jyra Probe . . . . . . . . . . . . . . . . . . 22
Service Management . . . . . . . . . . . . . . . . . . .22
MANUFACTURING. . . . . . . . . . . . . . . . . . . . . . . . . 22
LICENSE FROM SUN MICROSYSTEMS . . . .. . . . . . . . . . . . . 23
PROPRIETARY RIGHTS AND LICENSES. . . . . . . . . . . . . . . . 24
MARKET FOR COMPANY'S PROPOSED PRODUCTS . . . . . . . . . . . . 24
Fortune 500 Corporations . . . . . . . . . . . . . . . . . . . 24
Telecommunications Providers . . . . . . . . . . . . . .25
71
<PAGE>
Outsourcers. . . . . . . . . . . . . . . . . . . . . . 25
Third Party Application Developers and Consultants . . 25
Existing Data Communications Equipment and Probe Ven-
dors . . . . . . . . . . . . . . . . . . . . . 26
UNITED STATES MARKETING OPERATIONS . . . . . . . . . . . . . . 26
COMPETITIVE TECHNOLOGY . . . . . . . . . . . . . . . . . . . . 26
NETWORK DIAGNOSIS AND ANALYSIS . . . . . . . . . . . . . . . . 27
Portable Packet Capture. . . . . . . . . . . . . . . . 27
Triticom LANDecoder. . . . . . . . . . . . . . 27
Wandel and Goltermann. . . . . . . . . . . . . 28
Hewlett-Packard. . . . . . . . . . . . . . . . 28
Local Network Analysis . . . . . . . . . . . . . . . . 28
Network General. . . . . . . . . . . . . . . . 28
Global Network Analysis. . . . . . . . . . . . . . .28
ECONet . . . . . . . . . . . . . . . . . . . . 28
Desktalk TrendSNMP+. . . . . . . . . . . . . . 29
REMOTE MONITORING. . . . . . . . . . . . . . . . . . . . . . . 29
Frontier Software. . . . . . . . . . . . . . . . . . . 30
SYSTEMS MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . 31
Timetable. . . . . . . . . . . . . . . . . . . . . . . 31
FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . 32
Management's Discussion and Analysis of Financial Con-
dition and Results of Operations . . . . . . . 34
Selected Financial Data. . . . . . . . . . . . . . . . 34
OFFICE FACILITIES. . . . . . . . . . . . . . . . . . . . . . . 35
DIRECTORS, OFFICERS AND KEY PERSONNEL. . . . . . . . . . . . . 35
Management . . . . . . . . . . . . . . . . . . . . . . 35
REMUNERATION . . . . . . . . . . . . . . . . . . . . . . . . . 37
STOCK OPTION PLAN. . . . . . . . . . . . . . . . . . . . . . . 38
72
<PAGE>
RELATED PARTY TRANSACTIONS . . . . . . . . . . . . . . . . . . 38
PRINCIPAL STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . 39
TRADING MARKET OF COMPANY'S SHARES . . . . . . . . . . . . . . 40
LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . 41
CAPITALIZATION AND DESCRIPTION OF SECURITIES . . . . . . . . . 41
INDEMNIFICATION OF OFFICERS AND DIRECTORS. . . . . . . . . . . 41
DELAWARE LAW . . . . . . . . . . . . . . . . . . . . . . . . . 42
TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . . . . . 43
SHARES ELIGIBLE FOR FUTURE SALE. . . . . . . . . . . . . . . . 43
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 44
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . 45
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 46
INDEPENDENT AUDITORS REPORT. . . . . . . . . . . . . . . . . . 49
UNAUDITED FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . .65
73
<PAGE> PART II
INFORMATION NOT REQUIRED IN
PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND
DISTRIBUTION.
The following table sets forth the Company's estimates of the
expenses to be incurred by it in connection with the issuance
and distribution of the securities being registered, other than
underwriting discounts and commissions:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission registration fee.... $2,587
Fees and expenses of Registration................ 45,000*
Accounting fees and expenses...................... 10,000*
-----------
Total................................................. $57,587
</TABLE>
===========
- ---------
* Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND
OFFICERS.
Section 145 of the General Corporation Law of Delaware,
as amended ("DGCL"), authorizes a Delaware corporation to
indemnify its officers, directors, employees and agents against
expenses and liabilities incurred in legal proceedings involving
such persons because of their holding or having held such
positions with the corporation and to purchase and maintain
insurance for such indemnification. The Company's By-Laws and
Article 8 of its Certificate of Incorporation, as amended,
substantively provide that the Company indemnify its officers,
directors, employees and agents to the fullest extent permitted by
Section 145 of the DGCL.
In accordance with Section 102(b)(7) of the DGCL, Article
8 of the Company's Certificate of Incorporation eliminates the
personal liability of directors to the Company or its stockholders
for monetary damages for breach of fiduciary duty as a director
with certain limited exceptions set forth in Section 102(b)(7).
74
<PAGE>
The Company has also entered into indemnification
agreements with each of its directors and executive officers. The
indemnification agreements provide that the directors and
executive officers will be indemnified to the fullest extent
permitted by applicable law against all expenses (including
attorneys' fees), judgments, fines and amounts reasonably paid or
incurred by them for settlement in any threatened, pending or
completed action, suit or proceeding, including any derivative
action, on account of their services as a director or officer of the
Company or of any subsidiary of the Company or of a or
enterprise in which they are serving at the request of the
Company. No indemnification will be provided under the
indemnification agreements, however, to any director or
executive officer in certain limited circumstances, including on
account of knowingly fraudulent, deliberately dishonest or willful
misconduct. To the extent the provisions of the indemnification
agreements exceed the indemnification permitted by applicable
law, such provisions may be unenforceable or may be limited to
the extent they are found by a court of competent jurisdiction to
be contrary to public policy.
ITEM 15. RECENT SALES OF UNREGISTERED
SECURITIES.
Described below is information regarding all securities
that have been issued by the Company since its incorporation on
May 2, 1996.
1. On May 10, 1996, the Company sold a total of 2,750,000
Shares to Messrs. Paul Robinson, Peter Lynch, Roderick Adams
and Timothy A.B. Mills, founders of the Company, at a price of
$.001 per share, for an aggregate offering price of $2,750. The
Shares were offered and sold pursuant to the exemption from
registration set forth in Rule 504, promulgated under the
Securities Act of 1933, as amended (the "Securities Act").
2. During July 1996, the Company sold a total of 2,483,500
Shares to approximately 50 investors, located in various
countries in Europe, at a price of $.40 per Share, receiving
proceeds of $993,400. The Shares were offered and sold
pursuant to the exemption from registration set forth in Rule
504, promulgated under the Securities Act.
3. During October and November 1996, the Company sold a
total of 1,043,100 Shares to 29 investors, located in various
countries in Europe, at a price of $3.00 per Share, receiving
proceeds of $3,129,300. The Shares were offered and sold
pursuant to the exemption from registration set forth in the rules
comprising Regulation S, promulgated under the Securities Act.
75
<PAGE>ITEM 16. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
**3.01(i) -- Certificate of Incorporation of the Registrant.
**3.01(ii)-- By-Laws of the Registrant.
**4.01 --Specimen Certificate representing the Common Stock,
par value $0.001 per share.
**5.01 --Opinion of Berns & Berns.
**10.01 -- Amended and Restated Stock Option Plan
**10.02 --Technology License and Distribution Agreement dated
July 19, 1996 with Sun Microsystems, Inc. (Confidential
information has been omitted and filed separately with the
SEC)
**10.03 --Form of Indemnification Agreement of Directors.
**21.01 --Subsidiaries of the Registrant.
</TABLE>
76
<PAGE> <TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
**23.01 --Consent of Berns & Berns (included in Exhibit 5)
*23.02 --Consent of Faw, Casson & Co. LLP
*27.01 --Financial Data Schedule
</TABLE>
--------
* Filed herewith
** Previously filed
ITEM 17. UNDERTAKINGS.
The Company hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement;
(iii) and to include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
77
<PAGE>
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof;
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering;
(4) insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and
controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company in the
successful defense of any action suit or proceeding) is asserted
by such director, officer or controlling person in connection with
the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue;
(5) for purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of pro the Company pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it
was declared effective;
(6) for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
78
<PAGE>SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE
SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 3 TO THE
REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED IN THE CITY OF HEMEL HEMPSTEAD,
ENGLAND, ON JULY 14, 1997.
Jyra Research Inc.
By: /Paul Robinson/
Paul Robinson,
President
PURSUANT TO THE REQUIREMENTS OF THE
SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES
INDICATED.
/s/ Paul Robinson
Paul Robinson
President, Chief Executive-
Officer, Director
(Principal Executive
Officer)
July 15 , 1997
/s/ Roderick Adams
Roderick Adams
Chief Financial Officer,
Director (Principal Financial and Accounting
Officer)
July 15, 1997
/s/ Peter Lynch
Peter Lynch
Director
July 15, 1997
79
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE NUMBER
------- ----------------------
<S> <C>
**3.01(i) --Certificate of Incorporation of the Registrant.
**3.01(ii) --By-Laws of the Registrant.
**4.01 --Specimen Certificate representing the Common Stock,
par value $0.001 per share.
**5.01 --Opinion of Berns & Berns.
**10.01 --Amended and Restated Stock Option Plan.
**10.02 --Technology License and Distribution Agreement dated
July 19, 1996 with Sun Microsystems, Inc. (Confidential
information has been omitted and filed separately with the
SEC)
**10.03 --Form of Indemnification Agreement of Directors.
**23.01 --Consent of Berns & Berns (included in Exhibit 5)
*23.02 --Consent of Faw, Casson & Co. LLP
*27.01 --Financial Data Schedule
</TABLE>
* Filed herewith
CONSENT AND REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANT
We hereby consent to the use in this Registration Statement of our
report dated March 10, 1997, relating to the financial statements
of Jyra Research Inc., and Subsidiary and to the reference to our
firm under the caption "Experts" in the Prospectus.
Faw, Casson & Co. LLP
Dover, Delaware
July 10, 1997
