<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
__
|_X_| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
__
|__| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________to____________
Commission file number 333-19183
JYRA RESEARCH INC ( A Development Stage Enterprize )
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(Exact name of registrant as specified in its charter)
Delaware 98-0167341
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
HAMILTON HOUSE,111 MARLOWES, HEMEL HEMPSTEAD, HERTFORDSHIRE HP1 1BB UK
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(address of principal executive offices) (Zip Code)
(44) 1442 403600
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(Registrant's telephone number, including area code)
Indicate by check whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
------ ------
As of September 30, 1997, there were outstanding 12,553,200 shares of the
Registrant's Common Stock (par value $0.001 per share).
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FORM 10-Q
INDEX
PAGE
Cover Page 1
Index 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
Sept 30, 1997, December 31, 1996 and Sept 30, 1996 3
Condensed Consolidated Statements of Income -
three and nine months ended Sept 30, 1997,
Sept 30,1996 and Cumulative since
Incorporation May 2,1996 4
Condensed Consolidated Statements of Cash Flows -
nine months ended Sept 30, 1997, Sept 30, 1996
and Cumulative since Incorporation May 2,1996 5
Consolidated Statement of Stockholders Equity 6
from Incorporation through Sept 30, 1997
Notes to Condensed Consolidated Financial
Statements - Sept 30, 1997 7 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 10
PART II. OTHER INFORMATION
ITEM 2. Change in Securities 11
ITEM 6. Form 8-K 11
Signatures 12
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET SEPT 30, 1997
<TABLE>
<CAPTION>
Sept 30, 1996 Sept 30, 1997 Dec 31, 1996
------------- ------------- ------------
(Unaudited) (Note)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents 682,696 1,402,071 3,398,855
Prepaid expenses 5,081 49,347 50,634
Accounts receivable 0 302,189 0
---------- ---------- ----------
Total current assets 687,777 1,753,607 3,449,489
Property and Equipment, at cost:
Computers, Equipment & Motor Vehicles 46,527 497,360 104,743
Less accumulated depreciation and 2,147 86,853 6,537
amortization
---------- ---------- ----------
Net property and equipment 44,380 410,507 98,206
---------- ---------- ----------
Total Assets $732,157 $2,164,114 $3,547,695
---------- ---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable 9,765 $106,472 $100,994
Taxation 3,649 72,378 0
---------- ---------- ----------
Total current liabilities 13,414 178,850 100,994
Stockholders' Equity:
Common stock
Issued :
12,553,200 shares at Sept 30,1997
6,276,600 shares at Dec 31,1996
and 5,142,500 at Sept 30, 1996 5,143 6,277 6,277
Additional paid-in-capital 954,607 3,819,405 3,819,405
Deficit Accumulated During the
development stage (241,742) (1,771,596) (347,692)
Foreign Currency Transaction Adjustment 735 (68,822) (31,289)
---------- ---------- ----------
Total stockholders' equity 718,743 1,985,264 3,446,701
---------- ---------- ----------
Total liabilities & stockholders' equity $732,157 $2,164,114 $3,547,695
---------- ---------- ----------
</TABLE>
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date but does not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three and Three Months Nine Months Cumulative since
NINE* Months Ended Ended Incorporation
ended Sept 96 Sept 30,1997 Sept 30,1997 May 2,1996
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Product & Services 0 118,010 344,286 344,286
-------- -------- -------- --------
Total Revenues 0 118,010 344,286 344,286
-------- -------- -------- --------
Cost of Revenues:
Product & Services 0 (48) 9,865 9,865
-------- -------- -------- --------
Total Cost of Revenues 0 (48) 9,865 9,865
-------- -------- -------- --------
Gross margin 0 118,058 334,421 334,421
Operating Expenses:
General and admin 135,272 149,320 627,032 821,598
Research and development 111,921 612,995 1,143,886 1,404,253
-------- -------- -------- --------
Total Operating Expenses 247,193 762,315 1,770,918 2,225,851
-------- -------- -------- --------
Income from operations (247,193) (644,257) (1,436,497) (1,891,430)
Other Income(Expense):
Currency Exchange differences 0 58,953 (484) 82,928
Interest Income 7,598 22,661 93,393 123,759
Depreciation (2,147) (42,054) (80,316) (86,853)
-------- -------- -------- --------
Total other Income(Expenses) 5,451 39,560 12,593 119,834
Income before provision
for income taxes (241,742) (604,697) (1,423,904) (1,771,596)
Provision for Income Taxes 0 0 0 0
-------- -------- -------- --------
Net Profit (Loss) (241,742) (604,697) (1,423,904) (1,771,596)
-------- -------- -------- --------
Earnings Per Share (0.06) (0.08) (0.21)
-------- -------- -------- --------
Weighted Average Common 4,336,331 7,845,750 6,805,398
and Common Equivalent -------- -------- -------- --------
Shares Outstanding
</TABLE>
NOTE
Although the company was incorporated on May 2, 1996 it did not make any
transactions until July 1996 and as such the nine month figure and three month
figure are identical for 1996
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
Three and NINE Nine Months since
months Ended Ended Incorporation
Sept 30,1996 Sept 30,1997 May 2,1996
--------- --------- ---------
(Note) (Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income(Expense) (241,742) (1,423,904) (1,771,596)
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation 2,147 80,316 86,853
Increase in Prepaid Expenses (5,081) 1,287 (49,347)
Decrease in Accounts Payable (13,414) 77,856 (106,472)
Increase in Accounts receivable 0 (302,189) (302,189)
--------- --------- ---------
Net cash provided by operating activities (258,090) (1,566,634) (2,142,751)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Computers, Equipment & (46,527) (392,617) (497,360)
Vehicles
--------- --------- ---------
Net cash used in investing activities (46,527) (392,617) (497,360)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock,
net of issuance costs 959,750 0 3,825,682
Effects of exchange rate changes on Cash 27,563 (37,533) 216,500
--------- --------- ---------
Net cash from financing activities (987,313) (37,533) 4,042,182
Net increase/(decrease) in cash and cash
equivalent 682,696 (1,996,784) 1,402,071
Cash and cash equivalents at beginning 0 3,398,855 0
of period --------- --------- ---------
Cash and cash equivalents at end of period 682,696 1,402,071 1,402,071
--------- --------- ---------
--------- --------- ---------
</TABLE>
Although the company was incorporated on May 2, 1996 it did not make any
transactions until July 1996 and as such the nine month figure and three month
figure are identical for 1996
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
FROM INCORPORATION THROUGH SEPT 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated Foreign
Common Stock Paid-In During Currency
Shares Amount Capital Development Translation
<S> <C> <C> <C> <C> <C>
Balance At Incorporation 0 0 0 0 0
Net Loss from May 2, 96 to
Dec 31, 96 (347,692)
Issuance of Common Stock
to Dec 31, 96 Public And
Private Offerings:
May 1996 At $.001/Sh 2,750,000 2,750
August 1996 At $.40/ Sh 2,392,500 2,393 954,607
December 1996 At $3/ sh 1,000,000 1,000 2,999,000
Stock Issued As Commissions:
August, 1996 At $.40 /Sh 91,000 91 36,309
November, 1996 At $3 /Sh 43,100 43 129,257
Issuance Expenses Of Capital
Stock (299,768)
Translation Adjustment For
The Period (31,289)
____________________________________________________
Balance At Dec 31, 96 6,276,600 6,277 3,819,405 (347,692) (31,289)
Scrip Divided Sept 97 6,276,600
Net Loss For The Period (1,423,904)
To Sept 30, 97
Translation Adjustment (37,533)
For The Period
______________________________________________________
Total For The Period 12,553,200 6,277 3,819,405 (1,771,596) (68,822)
----------------------------------------------------
----------------------------------------------------
</TABLE>
6
<PAGE>
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Sept 30, 1997
A. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Jyra Research Inc ("Jyra" or the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, the unaudited condensed consolidated financial
statements reflect all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the financial position, results of
operations and cash flows for the interim periods presented. These unaudited
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements, and notes thereto, for the year ended
December 31, 1996 included in the Company's Registration Statement on Form S-1.
The results of operations for the three and nine months ended Sept 30, 1997 are
not necessarily indicative of the results that may be expected for the fiscal
year ending December 31, 1997.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amount 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.
B. CASH AND CASH EQUIVALENTS
For purposes of the condensed consolidated balance sheets and statements of
cash flows, the Company considers money market funds and other similar
financial instruments with an original maturity date of three months or less
to be cash equivalents.
C. EARNINGS PER SHARE
Earnings per share are computed using the weighted average number of shares of
common stock and common stock equivalents outstanding during the period.
D. 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 non incentive 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. The stock option
plan has been adjusted for the 100% stock dividend and allows for the
grant of up to a total of 1,000,000 common shares.
7
<PAGE>
During the 3rd quarter 1997, 20,000 shares were granted at a option price per
share of $8.50 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%
During the 3rd quarter 1997, 108,000 shares were granted at a option price per
share of $8.50 to the following schedule:
PERCENT
EXERCISABLE
EXERCISE EVENT
One Year From Grant Date 50%
Two Years From Grant Date 25%
Three Years From Grant Date 25%
The number of shares for which options may be granted cannot exceed
1,000,000 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.
At Sept 30, 1997 there were 887,000 shares under option.
At Sept 30, 1997 there were 113,000 shares available for future grants under
the Plan.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements within the meaning
of section 27A of the Securities and Exchange Act of 1933, as amended, and
Section 21E of the Securities and Exchange Act of 1934, as amended, which
reflect the Company's current judgement on those issues. Because such
statements apply to future events, they are subject to risks and uncertainties
that could cause the actual results to differ materially. Important factors
which could cause actual results to differ materially are described in the
following paragraphs and are particularly noted under BUSINESS RISKS on page 10
and in the Company's Registration Statement on Form S1 which is on file with
the Securities and Exchange Commission.
RESULTS OF OPERATIONS
Revenues for the third quarter ended Sept 30, 1997 were $118,010. Since the
company did not generate any revenue during the quarter ended Sept 30, 1996,
there are no comparable figures. During the quarter ended Sept 30, 1997
revenues were derived from sales of the Mid Level Manger (MLM) component of the
first version of Jyra's Service Management Architecture (SMA). In late July
the company announced the launch, to be held in late September, of the new more
advanced SMA Version (2). The SMA Version 2 reflected specific additional value
requested by major customers such as MCI Telecommunications Corp, BT ("British
Telecommunications plc")and Cap Gemini. During the ended Sept 30, 1997 the
company's sales & marketing efforts were principally focused on the forth
coming launch of Version 2, which took place in the final week of the third
quarter. Since Sept 30, 1997, the company has received orders for its
version 2 product from customers in Europe and US who include, amongst others,
MCI Telecommunications Corp, Perotsystems and BT ("British Telecommunications
plc").
Research and development expenses increased 447% to $612,995 for the quarter
ended September 30,1997 compared to $111,921 for the quarter and nine month
period ended September 30, 1996. For the nine months ended September 30, 1997,
research and development expenses was $1,143,886 there are no comparable
previous years figures due to the nine month figures only covering an operating
period of less than three months. The substantial increase in spending was the
result of increased staffing and equipment expense to support the development
of the existing SMA and additional new products expected to be released in the
first quarter of fiscal year 1998 and beyond. The Company believes continued
commitment to research and development is required to remain competitive.
General and administrative expenses for the quarter ended September 30, 1997
increased 10.4% to $149,320 compared to $135,272 for the quarter ended
September 30, 1996. For the nine months ended September 30, 1997, general and
administrative expenses were $627,032 there are no comparable previous years
figures due to the nine month figures only covering an operating period of less
than three months. These marginal increases in general and administrative
expenses were primarily due to increased administration staffing and related
expenses to support operations.
Interest income was $22,661 in the third quarter of fiscal year 1997. The
interest was generated from funds held on deposit and fixed term of one month
or less.
Earnings(Loss) per share for the quarter ended Sept 30,1997 was ($0.08). The
number of weighted average common shares outstanding was 7,845,750.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operating activities was ($1,566,634) for the nine
months ended Sept 30, 1997. The primary expenditure of this cash was to fund
the operating expenses offset against initial revenue adjusted for
depreciation, offset by Prepaid Expenses, Accounts Payable and Accounts
receivable.
Net cash used in investing activities was $392,617 for the nine months ended
Sept 30, 1997. These funds were principally invested in additions to property
and equipment.
The company did not raise any funds through the issue of equity therefore
net cash provided by financing activities was nil.
As of Sept 30, 1997, the Company's principal sources of liquidity included
cash, cash equivalents, totalling $1,402,071. The Company currently has no
outstanding bank borrowings and has no established lines of credit. The
Company believes cash to be generated from operations, together with existing
cash and investment balances, will be sufficient to satisfy operating cash and
capital expenditure requirements through at least the next twelve months.
BUSINESS RISKS
The Company's future operating results may be adversely affected by certain
factors and trends of its market which are beyond its control. The market
for Jyra's products is characterized by rapidly changing technology and
evolving industry standards. Jyra believes its future success will depend,
in part, on its ability to continue to develop, introduce and sell new
products. The Company is committed to continuing investments in research
and development; however, there is no assurance these efforts will result
in the development of products for the appropriate platforms or operating
systems, or the timely release or market acceptance of new products.
The Company's results may be adversely affected by the actions of existing or
future competitors including established and emerging computer, communications,
intelligent network wiring, network management and test instrument companies.
New and competitive entrants into the field of network fault and performance
management may come from such diverse entities as established network hardware
companies which have embedded systems in their network hardware and smaller
companies which market their software products as having "network management"
functionality. There can be no assurance Jyra will be able to compete
successfully in the future with existing or future competitors. New entrants,
new technology and new marketing techniques may cause customer confusion,
thereby lengthening the sales cycle process for the Company's products,
particularly the Company's system products. Increased competition may also
lead to downward pricing pressure on the Company's products.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. Change in Securities
On August 14, 1997 the company announced a two for one stock split in
the form of a 100 percent stock dividend. The stock dividend was
distributed on September 5, 1997, on the basis of one new share for
every existing share, to shareholders of record as of August 25, 1997.
The effective (ex) date of the dividend was Sept 8, 1997. Immediately
after the issue the company had 12,553,200 shares issued and outstanding.
ITEM 6. Form 8-K
The Company did not file any reports on Form 8-K during the three
months ended Sept 30, 1997.
11
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JYRA RESEARCH INC
(Registrant)
By: /s/ Paul Robinson
____________________
Paul Robinson
President & CEO
November 12, 1997
By: /s/ Roderick Adams
_____________________
Roderick Adams
Chief Financial Officer,
Director (Principal Financial
and Accounting Officer)
November 12, 1997
12
