<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 June 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
- - ----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
HAMILTON HOUSE,111 MARLOWES, HEMEL HEMPSTEAD, HERTFORDSHIRE HP1 1BB UK
- - ------------------------------------------------------------------------
(address of principal executive offices) (Zip Code)
(44) 171 371 0702
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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 June 30, 1997, there were outstanding 6,276,600 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 -
June 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Income -
three and six months ended June 30, 1997 and
Cumulative since Incorporation May 2,1996 4
Condensed Consolidated Statements of Cash Flows -
six months ended June 30, 1997 and Cumulative
since Incorporation May 2,1996 5
Consolidated Statement of Stockholders Equity 6
from Incorporation through June 30, 1997
Notes to Condensed Consolidated Financial
Statements - June 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 6. Form 8-K 10
Signatures 11
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET JUNE 30, 1997
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
----------------- --------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $2,096,917 $3,398,855
Prepaid expenses 51,976 50,634
Debtors 227,993 0
---------- ----------
Total current assets 2,376,886 3,449,489
Property and Equipment, at cost:
Computers, Equipment & Motor Vehicles 400,612 104,743
Less accumulated depreciation and amortization 45,713 6,537
---------- ----------
Net property and equipment 354,899 98,206
---------- ----------
Total Assets $2,731,785 $3,547,695
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $91,084 $100,994
---------- ----------
Total current liabilities 91,084 100,994
Stockholders' Equity:
Common stock
Issued - - 6,276,600 shares at
June 30, 1997 and : 6,276,600 shares
at December 31, 1996 6,277 6,277
Additional paid-in-capital 3,819,405 3,819,405
Deficit Accumulated During the
development stage (1,166,899) (347,692)
Foreign Currency Transaction Adjustment (18,081) (31,289)
---------- ----------
Total stockholders' equity 2,640,702 3,446,701
---------- ----------
Total liabilities & stockholders' equity $2,731,785 $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 Months Six Months Cumulative since
Ended Ended Incorporation
June 30,1997 June 30,1997 May 2,1996
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Revenues:
Product & Services $226,276 $226,276 $226,276
-------- -------- --------
Total Revenues 226,276 226,276 226,276
-------- -------- --------
Cost of Revenues:
Product & Services 9,913 9,913 9,913
-------- -------- --------
Total Cost of Revenues 9,913 9,913 9,913
-------- -------- --------
Gross margin 216,363 216,363 216,363
Operating Expenses:
General and administrative 303,012 477,712 672,278
Research and development 303,267 530,891 791,258
-------- -------- --------
Total Operating Expenses 606,279 1,008,603 1,463,536
-------- -------- --------
Income from operations (389,915) (792,239) (1,247,173)
Other Income(Expense):
Currency Exchange differences (116,678) (59,437) 23,975
Interest Income 43,739 70,732 101,098
Depreciation (26,004) (38,262) (44,799)
-------- -------- --------
Total other Income(Expenses) (98,943) (26,967) 80,274
Income before provision
for income taxes (488,859) (819,207) (1,166,899)
Provision for Income Taxes 0 0 0
-------- -------- --------
Net Profit (Loss) (488,859) (819,207) (1,166,899)
-------- -------- --------
Earnings Per Share (0.08) (0.13)
-------- -------- --------
Weighted Average Common and Common
Equivalent Shares Outstanding 6,276,600 6,276,600 6,276,600
--------- --------- ---------
</TABLE>
Although the company was incorporated on May 2, 1996 it did not make any
transactions until July 1996 and as such the comparatives are zero for the
Three and Six month ended June 30, 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>
Six Months Cumulative since
Ended Incorporation
June 30, 1997 May 2,1996
--------- ---------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income(Expense) $(819,207) $(1,166,899)
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation 38,262 44,799
Increase in Prepaid Expenses (1,342) (51,976)
Decrease in Accounts Payable (9,910) (91,084)
Increase in Accounts receivable (227,993) (227,993)
--------- ---------
Net cash provided by operating activities (1,020,190) (1,493,153)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Computers, Equipment & Vehicles (295,869) (400,612)
--------- ---------
Net cash used in investing activities (295,869) (400,612)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock, net of
issuance costs 0 3,825,682
Effects of exchange rate changes on Cash 14,121 165,000
--------- ---------
Net cash from financing activities 14,121 3,990,682
Net (decrease)/increase in cash and cash
equivalent (1,301,938) 2,096,917
Cash and cash equivalents at beginning of
period 3,398,855 0
--------- ---------
Cash and cash equivalents at end of period 2,096,917 2,096,917
--------- ---------
--------- ---------
</TABLE>
Although the company was incorporated on May 2, 1996 it did not make any
transactions until July 1996 and as such the comparatives are zero for the
Three and Six month ended June 30, 1996
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
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CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
FROM INCORPORATION THROUGH JUNE 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 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/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)
Net Loss For The Period To 30-June-97 (819,207)
Translation Adjustment For The Period 13,208
_______________________________________________
Total For The Period 6,276,600 6,277 3,819,405 (1,166,899) (18,081)
----------------------------------------------------
----------------------------------------------------
</TABLE>
6
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 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 six months ended June 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.
7
<PAGE>
During the 2nd quarter 1997, 237,000 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
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>
At June 30, 1997 there were 392,000 shares under option of which none are
exercisable as at June 30, 1997
At June 30, 1997 there were 108,000 shares available for future grants
under the Plan.
8
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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 quarter ended June 30, 1997 were $226,276. Since the quarter
ended June 30, 1997 was the first quarter that the company has generated any
revenue there are no historical figure to make comparisons against. This
Revenue was derived from the initial orders for the company's Mid Level Manager
(MLM) launched during May 1997. The MLM is the first version of the company's
Architecture to be released. Significantly all the company's revenue derived
from the sale of this software.
Cost of revenues consists of the manufacturing cost of producing the software
and its packaging. Gross margin as a percentage of revenues were 95% for the
three and six months ended June 30, 1997.
Research and development expenses were $303,267 in the second quarter of fiscal
year 1997. This relates mainly to funding the staffing and equipment
expense to support growth in the Company's product development. The Company
believes continued commitment to research and development is required to remain
competitive.
General and administrative expenses were $303,012 for the quarter ended
June 30,1997. These general and administrative expenses were primarily
the result of staffing to support operations and establish a sales presence
in US and Europe.
Interest income was $43,739 in the second 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 June 30,1997 was ($0.08). The
number of weighted average common shares outstanding was 6,276,600.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operating activities was ($1,020,190) for the six
months ended June 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.
9
<PAGE>
Net cash used in investing activities was $295,869 for the six months ended
June 30, 1997. This fund 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 June 30, 1997, the Company's principal sources of liquidity included
cash, cash equivalents, totalling $2,096,917. The Company currently has no
outstanding bank borrowings and has no established lines of credit. The Company
believes cash 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.
PART II. OTHER INFORMATION
ITEM 6. Form 8-K
The Company did not file any reports on Form 8-K during the three
months ended June 30, 1997.
10
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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
August 14, 1997
By: /s/ Roderick Adams
_____________________
Roderick Adams
Chief Financial Officer,
Director (Principal Financial
and Accounting Officer)
August 14, 1997
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