JYRA RESEARCH INC, 10-K, 2000-03-29

JYRA RESEARCH INC
10-K, 2000-03-29
COMPUTER COMMUNICATIONS EQUIPMENT

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

(Mark One)

__
|_X_| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999

__
|__| 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.
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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 England
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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
------ ------

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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /

The approximate aggregate market value of the voting stock held by
non-affiliates of the registrant on 27 March 2000, was $70,097,546 based on
the closing sales price of the Company's Common Stock as reported on The OTC
Bulletin Board National Market. As of 27 March 2000, the registrant had
outstanding 13,372,486 shares of Common Stock, par value $0.001, of which the
Company believes 8,972,486 are owned by persons other than the Company's
executive officers and members of the Board of Directors and the beneficial
owners of 5% or more of the voting stock of the Company.

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JYRA RESEARCH INC.

1999 FORM 10-K REPORT

TABLE OF CONTENTS

<TABLE>
<S> <C>
PART I
ITEM 1. Business 2

ITEM 2. Properties 19

ITEM 3. Legal proceedings 19

ITEM 4. Submission of matters to a vote of security holders 19

PART II
ITEM 5. Market for the registrant's common equity and related 20
Stockholder matters

ITEM 6. Selected financial data 22

ITEM 7. Management's discussion and analysis of financial 23
condition and results of operations

ITEM 7A Quantitative and Qualitative disclosure about 45
market risk

ITEM 8. Financial statements and supplementary data 46

ITEM 9. Changes in and disagreements with accountants on 64
accounting and financial disclosures

PART III
ITEM 10. Directors and executive officers of the registrant 65

ITEM 11. Executive compensation 67

ITEM 12. Security ownership of certain beneficial owners 70
and management

ITEM 13. Certain relationships and related transactions 70

PART IV
ITEM 14. Exhibits, financial statement schedules and reports 73
on Form 8-K
</TABLE>

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This Form 10-K contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities 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 and, therefore, the actual
results may 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 contained under "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
Below and in other reports filed with the U.S. Securities and Exchange
Commission from time to time.

PART 1

ITEM 1. BUSINESS

Certain Statements contained in this Annual Report on Form 10-K, including,
without limitation, statements containing the words "believes", "estimates",
"expects", and words of similar import, constitute forward looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Readers are referred to the Business Risk section on page 30., which identify
important risk factors that could cause actual results to differ from those
contained in the forward looking statements.

GENERAL

Jyra Research Inc. ("Jyra" or the "Company") was incorporated on May 2, 1996
under the laws of Delaware. We are in the business of designing, developing,
and marketing performance management solutions to:

- provide a business oriented users view of network and internet
performance for delivering networked applications, especially
e-commerce

- maximize network productivity, and

- solve network and internet problems caused by the constant increase
in traffic, combined with the growing complexity of networks and
internet.

We believe these network and internet problems result in lost revenues,
escalating costs and major systems failures across the corporate spectrum. We
believe that current network management systems do not have the capability to
effectively deal with these problems.

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OUR INDUSTRY

Networking and e-commerce is a multi-billion dollar global market where growth
is spurred by the belief that the Internet and mobile working are changing the
way all people work, live, play and learn. There has been a key shift in the
role of the Internet and in how the Internet is perceived. What was once a
complex tool used by an elite group of technical individuals is now a
technology driving economic change globally by creating new jobs and market
opportunities. We believe Enterprises have shifted from treating investment
in IT as a necessary evil to viewing e-commerce as a strategic tool for
increasing revenue and gaining market share. We believe that this trend to
continuous Internet availability and the response to this trend by the major
telecommunications operators is the largest factor which will drive future
sales of our distributed application performance management products.

OUR PRODUCTS AND SERVICES

The traditional element management approach has been superseded by the need to
view IT performance from a business perspective rather than from the technical
perspective. Jyra achieves this business goal by measuring the performance of
systems as an end user would experience them.

We have developed a Service Management Architecture (SMA) that provides a
verifiable measurement of the end-to-end performance of IT services. This
allows customers to monitor the speed at which users can interact with IT
systems; and identify when and why the interaction has slowed down, thereby
ensuring the consistent flow of business transactions. Jyra's SMA allows
customers to monitor the speed with which systems can meet customer demand
(such as the length of time it takes to make an on-line purchase, bank query,.
ticket reservation, etc), which is generally represented by the response time
of the service.

The response time of e-Commerce services is now likened to keeping people
hanging on the phone - the longer you keep them waiting, the less likely they
are to spend money with you. This is especially the case on the web, where
your competition is only a mouse click away. Our technology allows customers
to effectively manage e-commerce solutions, to implement tangible service
level agreements (SLAs) and to measure their return on IT investment against
the performance levels achieved. We provide a flexible and proactive approach
to monitoring the speed with which business is transacted electronically.

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Our packaged software solutions allow customers to quickly and easily set up
monitoring of their mission critical on-line services. These customers are
broadly categorised into the following three sections:

CORPORATES - companies that have a mission critical dependence on
their own, internal IT systems or infrastructure.

dot.COM COMPANIES - companies who derive a majority of their
revenue through the internet

SERVICE PROVIDERS - telecommunications and hosting companies
who provide connectivity and advanced services such as mobile
wireless voice/data services, managed network services, network
outsourcing, application and web hosting.

As a result, we sell our solutions in various ways - from simply selling or
renting software through to providing fully managed solutions for customers.
These solutions are broadly categorized into the following three sections:

JYRATIME - this allows our certified JyraTime Partners to rent
a complete suite of monitoring software to achieve a specific
project goal for individual customers.

JYRA IN-SITE - This is a service provider hosted on-line web
monitoring service that provides companies with a detailed
business orientated view of e-commerce performance and revenue
opportunities.

JYRA PERFORMANCE PRODUCTS - allow organisations to quickly and
easily deploy global performance monitoring agents cost
effectively within their own corporate networks.

The Jyra SMA is a distributed application performance management architecture
capable of providing detailed, accurate overviews of global IT services being
delivered to the end-user. It is this focus on the end-user that allows the
SMA to be used as a tool to make continuous improvements in the performance of
your systems and the ability to provide justification of Service Level
Agreements to your important customers, be they internal or external. By
persistently monitoring the services that are being provided the SMA can
identify weak spots in the configuration, brought on by hardware failure,
congestion, or other causes.

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Key features of SMA include:

All web-based configuration and reporting - manage from anywhere

Remote summarisation and thresholding to reduce network traffic

Reliable alerting to upstream management stations

Automated update of remote agents based on configuration to reduce
System management workload

Multiple timezone support. Global scheduling and synchronised reporting

Easy integration into HP and Cisco management solutions

Examples of the core Jyra functionality are:

Time taken for a WEB page to be completely down loaded and available for
viewing. This includes links into back-end systems and hyper linked
objects. Special features have been included for secure web sites.

Ability of SQL databases to respond to a query

DNS lookup times

Response times of file servers

Application performance

Network latency with the ability to show individual router hops and the
delay each hop induces

Alerting to Enterprise Management systems if a monitored service
breaches a set SLA, as it occurs.

SNMP device and interface availability

PRODUCT LICENSING/PRICING

We issue both perpetual and time limited licenses for our solutions based on
customer needs. Product licenses are priced both by the number of remote
software agents and by the amount/type of work these agents are licensed to
perform.

This flexible approach to licensing allows us to scale the pricing in line
with the business benefit our customers derive from our solutions. This
effective pricing model allows us to gain entry level orders starting at
$15,000 and allows the license to scale up to $150,000 and beyond for
particular customised and tailored hosted service provider solution.

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JYRA HEWLETT-PACKARD "HP" OPENVIEW PLUG-IN - HPOV PLUG-IN

The Jyra HPOV plug-in allows a network systems manager to have a service view
of the network along side the traditional SNMP polled view, all in a familiar
format. This allows a view of critical network user response time
information, alongside status covering network device (hardware) activity.
Response monitor tasks are categorised into two areas, those based on
application performance (External commands, HTTP(S), DNS and SQL) and those
based on network response information (Ping, Proxy Ping, SNMP and Traceroute).
As with the main HPOV window, each Jyra icon is colour coded with respect to
the status. In the Jyra SMA view the colour reflects the performance for the
services being monitored against customer defined thresholds. E.g. if a DNS
response time falls outside the marginal threshold, then the DNS application
icon would be flagged as yellow. This quickly notifies the system manager
that a service is performing outside its defined limits and allows for
immediate diagnostic steps to be taken. What is more, because the Jyra SMA
world is dividend into application and network views, determining whether the
fault is application, network or server related becomes a straightforward
task.

JYRA SMA TECHNOLOGY BACKGROUND

Our product is developed in the JavaTM language providing an innovative,
platform-independent management solution for the users of today's increasingly
powerful and flexible computer environments. The key to the success of the
product is it's ability to run in a truly distributed hierarchical
configuration. Any system that measures performance from multiple sources
will create considerable network traffic if it needs to send the results back
to a central server. The SMA keeps all data distributed at each agent
location and only sends a summarised result up to its parent agent, thereby
minimising the impact on the network and removing the requirement to have a
large central server. An additional benefit of this distributed approach is
the technology's ability to scale to a customer's network. Managing the
management tool is also an important consideration. Once deployed, SMA can be
configured from any location via a WEB browser. The top level agent is given
the configuration which in turn automatically distributes relevant tasks to
underlying agents.

The distributed directory within Jyra SMA enables rapid creation of business-
oriented reports and minimises the cost of reconfiguring reporting in response
to network and business change. Summarised results are produced as HTML
reports and are again kept distributed at each agent location. The report
will only transit the network when a conscious decision is made to view it.
SLA monitoring is also handled at each agent with performance breaches being
securely notified up through the architecture. The higher level agent is then
tasked with delivery of the SLA breach notification to an Enterprise
Management System.

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CUSTOMERS AND MARKETS

We believe that our market is best described as the end-to-end application
performance management market. Greatest opportunity exists for our product in
those markets which use applications to carry revenue bearing, mission
critical services. It is in these markets that board level recognition exists
that the performance of applications has a direct impact upon revenue and
productivity. As such, the need for monitoring the performance of such
applications is seen as very important to the business.

The market in which we operate has been described by Bear Stearns as the
"Business Oriented Network Management" "BONM" market. A preliminary forecast
by IDC (International Data Corporation) suggested that this BONM market would
grow at 70% per year to $3.1B world-wide by the year 2001, whilst the growth
rate of traditional network management tools was forecast to decrease.

The market for performance management tools and systems is subject to changing
competitive forces and technological advances in products. Therefore, it is
difficult for us to predict market requirements and to estimate the size of
our market.

We believe that the market for end-user oriented service management solutions
is growing rapidly and that the opportunity exists for new products to find
acceptance in the marketplace. There are three key markets that our software
addresses. These are;

Application Service Providers

Application Service Providers own and operate shared networks and computer
facilities. They sell the use of these facilities to their customers and
provide a network connection between the customers and the remote computer
facility. Management has also been encouraged by the trend for both ISPs and
traditional computer vendors to enter the ASP (application service provider)
market. ASPs host customer's computers, including their web sites, within
specially designed hosting centres. They lease to their customers reliable
Web servers that host web sites. This removes the need for customers to worry
about security, additional staffing, or making significant capital investment.
The growing complexity and growing importance of e-commerce is driving more
and more organisations to outsource their web sites to ASPs.

PSINet - An example of Application Service Provider

The growth of Application Service Providers in Europe has been dramatic.
PSINet, one of the largest and Europe's fastest growing ASPs, chose Jyra as
the basis for its "paid-for" customer service monitoring. This joint
initiative is anticipated to provide PSINet customers with new performance
assured e-commerce services and opens up the rapidly growing e-commerce market
for Jyra's performance monitoring solutions.

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PSINet is one of the world's largest and most experienced providers of IP-
based communications and ASP services for business. PSINet delivers this full
line of services to small and medium-sized businesses as well as a quarter of
the Fortune 500. PSI customers also include government agencies, educational
institutions, and information services companies.

Jyra In-Site is a service from PSINet which allows their hosted customers to
receive performance reports detailing the response times experienced by their
online visitors. This level of information allows PSINet's customers to scale
their ability to serve customers in-line with their market opportunity. The
need to manage the speed with which users can access web services is becoming
critical. This is especially the case in the burgeoning e-Commerce market,
whereby the speed of conducting a transaction is likened to waiting in a queue
or holding on a phone.

The PSINet Jyra In-site service is now successfully generating a growing
revenue stream. The growing success has encouraged both companies to plan a
broader range of Jyra based services such as web site stress testing and web
health check. Early stage agreement has been reached to bundle Jyra's
performance services with other PSINet on-line services. During the latter
part of the current first Quarter 2000, Jyra has seen significant revenue
growth from the PSINet Jyra In-site service. This resulted from an initial
period of extensive sales training and production of sales and marketing
materials for the Jyra In-site service.

NETWORK SERVICE PROVIDERS

Network service providers view our products as both a unique diagnostic tool
for resolving issues in complex service offerings and as a competitive tool
for gaining and retaining market share by differentiating their service
offerings to premium customers. We are targeting other major ASPs and ISPs
and expect a wide audience for our monitoring software within the ASP
community. We also target existing and new network operators offering other
value-added services in addition to IP and wireless networking.

Dot.COM CUSTOMERS

Dot.com customers are those organisations attempting to sell products and
services over the internet - sometimes known as e-Tailers, the latest breed of
retailer. The speed and performance of an e-commerce site is acknowledged as
the fundamental means of ensuring that site visits convert through to on-line
purchases. Indeed, we believe that unless a web site responds in under eight
seconds, the customer will move away, potentially onto a competitors site.
e-Commerce customers would typically deploy our product across their network
in order to monitor the speed and performance of e-Commerce services, as
perceived by those who use the service. One example of this is a
International investment bank who is attempting to deliver on-line business to
business equity trading services. In this sort of environment, the speed that
their service can process a transaction is key to a competitive edge. This
bank has purchased our products to deploy into various offices around the
world, and will monitoring their on-line trading service so as to ensure a
fast, consistent and successful business.

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ENTERPRISE

Enterprise customers tend to be those that place a high value either on
information services or on indicators of delivered quality. Examples of an
enterprise customers are banks, pharmaceutical companies and government
bodies. Enterprise customers generally are large organisations with complex
networking needs, usually spanning multiple locations and types of computer
systems. Enterprises are major consumers of network management technology
because networks are crucial to the success of these organisations. Although
networks are important strategic assets for these companies, they also present
major risks and constitute major expenses.

Enterprises would typically deploy the Company's product for one of two
reasons: to monitor the performance of some business-critical application,
such as an order processing system; or to evaluate the performance of an
external service provider in the form of a Service Level Agreement.
Our strategy is to target Enterprises through system integration companies as
a delivery channel. Our sales force promotes our products within the
Enterprise customer and steers the customer towards either a systems
integrator or a telecommunications partner, such as Siemens or Logica.
However, there can be no assurance that we will be able to successfully market
our products to enterprise companies or that the system integration companies
would distribute our products to their customers.

SALES OVERVIEW

We plan to rapidly increase the sales force to meet the current demand. We
currently operate on two continents: in the USA, with a sales office on each
coast, and in Europe, where the sales operation is based in the United
Kingdom. We continue to market our products within the United States and
Europe.

We are actively seeking additional sales staff within our existing markets.
Our sales are currently being made through multiple channels including systems
integrators and resellers. These resellers provide system installation,
technical support, and follow-up services to end-customers. Generally, our
resellers have nonexclusive agreements within a territory. Resellers do not
receive sales commissions, but are entitled to purchase at a discount
(relative to suggested end-user prices) for the products, which they resell.
The company continues to seek and to attract additional service partners,
primarily in the telecommunications industry. These permit Jyra to
participate in larger deals as part of an overall service management solution.

INTERNATIONAL OPERATIONS

We have operated internationally from the first launch of our service
monitoring product. We generally offer 30 day net terms in the United States
and Europe. We operate a single global pricing strategy, where product is
priced in United States dollars. Additionally, we will accept international
orders in United Kingdom pounds sterling, and may accept orders in euros. We
are subject to additional risk as a result of international operations, and
this is covered more fully in "Business Risks" on page 30.

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Strategic Alliances

During 1998, we identified Cisco Systems as an ideal company with which to
work. Cisco has a strong and growing presence in the telecommunications
space, and the most effective sales force in the industry. We assigned
specific executives to work exclusively on achieving an arrangement with Cisco
Systems, and by October 1998 were successful in reaching a joint marketing
arrangement with Cisco Systems. On October 29, 1998, Jyra and Cisco
announced a joint marketing campaign to target European service providers.
The effect of this was that both Jyra and Cisco sales teams would position
Jyra's product to telecommunications companies as a part of Cisco Service
Management System, (CSM). The Cisco Service Management (CSM) system delivers
a modular suite of service management solutions integrated within a scalable,
reliable, and high-performance infrastructure. CSM enables service providers
to effectively plan, provision, operate and bill for a wide range of value
added services, while increasing revenue and reducing cost. We believed that
the joint marketing arrangement with Cisco provided the Company with the reach
and credibility to succeed in becoming a standard tool among
telecommunications companies. We view our relationship with Cisco as an
important element of our sales strategy to service providers.

We are also a member of the Cisco Network Management Partner Program. The
Cisco Network Management Partner Program is designed for network management
application developers to encourage the development and deployment of network
management solutions that support Cisco-based networks and to publicise these
solutions to Cisco Systems customers and Cisco sales channels. To be eligible
for this program, developers must either be currently developing or marketing
a commercially available network management solution that uses data coming to,
through, or from a Cisco device. Only applications that are shipping will be
included in the comarketing components of the program. Alpha- and beta-level
applications are eligible for the developer support components of the program.

Jyra software also has a certified Cisco Management Connection. Cisco
Management Connection, a feature of Resource Manager Essentials, delivers a
toolkit and an ongoing program for the integration of network management
applications using Internet-based standards and technologies. The toolkit
allows users to link Web-based management applications to Essentials, and
enables application developers to make their Web-based applications easily
linkable through a certified registration mechanism. The toolkit has been
used by Cisco and over 20 network management vendors, including Computer
Associates, Hewlett-Packard, Sun Microsystems and Tivoli Systems to create
certified Cisco Management Connections for their applications.

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The Company continues to extend the areas of joint activity with Cisco
Systems. Among the first of these was the Cisco Enabled Network Solutions
(CENS) program. The CENS program is a key component of Cisco's channel
partner enablement strategy, ensuring that end-users have access to the
support required to deploy emerging technologies, and to address complex
network deployments. Through the use of Jyra in the CENS professional
services program, Cisco customers gain a valuable service and resource view of
their IT networks. Jyra's Service Management software is used by Cisco
Professional Services group and CENS participating partners, to offer specific
network performance solutions to major customers providing exposure of the
Jyra product to the Cisco customer base. This program has allowed the Company
to extend the range of Cisco teams who can offer the company's Service
Management software to customers. These now also include the Cisco Network
Supported Accounts Group and the Cisco Critical Accounts Group.

The Cisco-Enabled Network Solutions CENS) partnership started to result in
business during the third quarter of 1999, and has led directly to new service
provider opportunities. We are confident that this trend will continue
as Cisco are starting to deploy new technologies that are more dependent on
the monitoring capabilities that the Company develops. An example of this is
Cisco's heavy commitment to the Voice over IP market, where phone calls can be
made over their Internet equipment. We believe a pre-requisite for this to
work is that a monitoring solution is in place to ensure that sufficient
network bandwidth is available to support Voice over the Internet (IP
network).

MARKETING

Our limited marketing efforts focus on our products and services to meet the
customer's changing needs for service performance and fault management. We
are planning an aggressive marketing campaign for 2000 as a result of the
increase of interest in our products. Some of the programs in which we plan
include participation in industry trade shows, advertising in the trade press,
conducting seminars and electronic marketing through the Internet. We plan to
focus our marketing resources on tactical events with our partners and to
launch an aggressive European and US marketing campaign during 2000.

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SUPPORT SERVICES

We support our products domestically on a direct basis and internationally
through a combination of direct support and with the assistance of systems
integrators. We currently offer a range of services, including product
support, education and network consulting, although management expects that
our systems integrators will be the primary providers of services associated
with our product range. The Company's products are typically sold with a
support agreement of up to one year included in the sales order. We also
offer support services for our products beyond this initial period, for a
fixed fee, through our support program. Customers whose products are covered
under support agreements receive software updates, phone-in technical support,
and various electronic support options.

COMPETITION

The market for Internet performance measurement and diagnostic services is new
and rapidly evolving. The global nature of the Internet makes it easier for
existing and new competitors to become visible to our customers and prospects.
We expect competition in this market to intensify in the future. Our
competitors vary in size and in the scope and breadth of the products and
services that they offer. Our primary business is the supply of enterprise-
scale solutions to corporates and to network operators. Our primary
competitors are the Netcare division of Lucent (previously known as INS
InSoft), and Hewlett-Packard. Other competitors include Computer Associates,
BMC, Compuware, Concord, and Micromuse. The company also may experience
competition from niche suppliers such as Freshwater, Nextpoint, Ganymede,
Inverse Network Technology. Mercury Interactive, and Segue Software.

Some of our competitors have, and our future competitors may have:

longer operating histories;

larger customer bases;

greater brand recognition in similar businesses; and

significantly greater financial, marketing, technical and other
resources.

In addition, some of our competitors may be able to:

devote greater resources to marketing and promotional campaigns;

adopt more aggressive pricing policies; and

devote more resources to technology and systems development.

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For our service provider hosted on-line web monitoring service business, we
compete against a wide range of consultancy and service offerings, including
WebCriteria, MIDS MatrixIQ Service and free services such as the Web Site
Garage unit of Netscape, NetMechanic and Internet Weather Report. While the
services may not be as comprehensive or complete as ours, and they may have
less flexibility in reporting than we do, customers could still choose to use
these services.

We also suffer indirect competition from increased competition and investment
in network capacity. Customers may choose to spend more on additional
capacity rather than better management of the existing capacity.

We suffer indirect competition from suppliers that offer to control or shape
the network traffic on all or part of the network. Customers may choose to
believe that expenditure solely on control rather than independent measurement
is an adequate solution.

Increased competition may result in price reductions, increased costs of
providing our services and loss of market share, any of which could seriously
harm our business. We may not be able to compete successfully against our
current and future competitors.

RESEARCH AND DEVELOPMENT

We are engaged in research and development efforts to develop customer
solutions for each of our main markets. We focus our product development
activities on products that are responsive to customer requirements and that
provide end- to-end performance management solutions. Our research and
development investments are currently made internally and in addition, the
Company makes minority equity investments in early stage technology
development entities to develop complementary products. Our R&D focus is on
two major activities: increasing our capabilities within wireless networks and
and e-Commerce. There can be no assurance that we will be able to
successfully develop new products to address new customer requirements and
technological changes, or that such products will achieve market acceptance.
All of our expenditures for research and development costs have been expensed
as incurred.

MANUFACTURING

We do not currently manufacture any hardware products. Our software products
are currently supplied on compact disc (CD) but are capable of being
distributed electronically via the Internet. We have no immediate plans to
package our products into a hardware platform, but the Company may choose to
do so if market opportunity dictates. Our processes and procedures are not
ISO 9001 certified, and there can be no guarantee that absence of ISO9001
certification will not affect future sales of our products.

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EMPLOYEES

We had 22 employees as of March 27, 2000: 11 in Research & Development, 7 in
Sales & Marketing, 2 in General Management and 2 in Finance and
Administration. None of the employees are represented by a labour union, and
we consider our relations with our employees to be positive. We have
experienced no work stoppages. Competition for personnel in our industry is
intense. We believe that our future success depends in part on our continued
ability to hire, assimilate, and retain qualified personnel. In 1998, we
experienced difficulty in recruiting technical staff within the United Kingdom
and sales staff within the United States. Although recruitment of technical
staff in 1999 has been easier, there is no assurance staff recruitment will
not continue as a major issue. Failure to recruit appropriately qualified
staff may have a material impact on our sales, research and development and
consequently our financial performance.

PROPRIETARY RIGHTS AND LICENSES

At the present time, we do not own any patents relating to any of our
products. We rely on copyright, trademark and trade secret laws to establish
our proprietary rights in our products. The company seeks to protect its
brand and services through trademarking. Because the Local area network "LAN"
and Wide Area Network "WAN" industry is characterised by rapid technological
change, we will be relying upon our innovative management, technical
expertise, and marketing skills to develop, enhance and market our products.

HISTORY OF THE COMPANY'S DEVELOPMENT

We were incorporated on May 2, 1996, under the laws of Delaware, with the
objective of designing, developing, and marketing computer network management
systems to:

(i) maximise network productivity,

(ii) minimise network downtime, and

(iii) solve network problems caused by the constant increase in network
traffic, combined with the growing complexity of networks.

These network problems result in escalating costs and major systems failures
across the corporate spectrum. Management believed and remain of the opinion
that network management systems do not have the capability to effectively deal
with these problems.

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Background - History

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 organisation 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". We believe that a real-time view is not effective for long-term
solving or diagnosis

We believe 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 of deploying these network probes and
related devices can be quite expensive.

PLANNED INITIAL PRODUCTS
Initially, during 1997 we planned to design a range of portable software tools
and centralised systems that would combine advanced protocol decode and expert
analysis capabilities. These tools were planned to facilitate identification,
diagnosis and resolution of network problems. The Company's planned initial
products had diagnostic and service level monitoring components and are listed
below:

PRODUCT APPLICATION

1. Mid-Level Manager Service Level Monitoring
2. Diagnosis Pack Diagnostic
3. Analysis Pack Diagnostic
4. Probe Diagnostic
5. Service Level Manager

15
<PAGE>
Service Level Monitoring

As the Company began detailed design work for each of the products listed
above, we shared our plans with a number of its major potential customers, in
order to obtain their input at an early stage. We learned from this input and
from our own research that customer demand was much stronger for service level
monitoring products than it was for diagnostic products. In particular, we
believed that the demand for products that monitored network performances in
support of commercial service level agreements would be much greater than
purely diagnostic devices. Accordingly, we emphasised development of the Mid-
Level Manager and Service Level Manager and launched an initial version of the
Mid-Level Manager during the second quarter of 1997. The Mid-Level Manager
was designed to provide an interface between the raw statistics gathered at a
probe and the presentation layer software used to display this data. The Mid-
Level Manager supports (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. At the that time the Company is not
expending any material resources on the development of the Diagnosis Pack,
Analysis Pack or Probe. Version 1.0 of the Mid-Level Manager was purchased,
in small quantities, by, among others, MCI, Glaxo and British Telecom. The
Service Level Manager initially focused on measuring and reporting on response
time as experienced by network users. Throughout 1997 we continued to work
closely with major potential customers, particularly telecommunications
companies, to learn more about their needs, with a view towards incorporating
their requirements in the Company's products. This process resulted in the
Company arriving at the concept of a Services Management Architecture ("SMA").

SERVICE MANAGEMENT ARCHITECTURE

The Service Management Architecture ("SMA") is a distributed network
management architecture designed to provide detailed, accurate overviews of
the network service being delivered to the actual end-user. It is intended
that this focus on the end-user allows the SMA to be used as a tool to
ensure both the integrity of a network and the ability to provide
justification of Service Level Agreements to important customers.
SMA is an architecture in which multiple Service Level Managers and Mid-
Level Managers act as a single distributed system reporting on network
response time, or network performance, as experienced by users at different
locations. The initial version of the SMA was released in the third quarter
of 1997, and Version 2.0 of the SMA was launched in September 1997. After
Version 2.0 of the SMA was launched the Company continued to communicate
with customers and potential customers to ascertain how well the product was
meeting their needs. Based upon feedback and the constantly evolving market
place and needs of customers and potential customers, we determined that the
greatest potential for revenue growth was in monitoring large networks. This
meant that the SMA needed to operate in a distributed manner whereby semi-
autonomous components of the software could be spread across a large network
to monitor network response times from multiple locations, reporting back to a
central console as required, and so scaling to manage up to carrier class
networks. We made the decision to redesign the service level and mid level
manager to be components of a potentially large distributed system.

16
<PAGE>
Accordingly, we began redesigning Version 2.0 of the SMA to meet the
requirements of distributed and scalable operations. The first significant
distributed components of SMA were planned to be available for customer
release at end of May 1998. Field tests of these distributed components were
conducted with select group of initial strategic customers during April 1998.
In preparation for this release our primary focus, during the quarter ended
March 31, 1998, was to encourage telecommunications companies to begin pilot
testing of our product with a view to developing new customer service
offerings around our service level reporting tools.

Our ability to monitor and prove actual application response times across
large networks, facilitates a basis on which telecommunications companies can
bill for improved service and also a means of justifying high value added data
transport services. We had trials underway at British Telecom and in January
1998, our Mid-Level Manager and Service Level Manager were chosen by MCI to
serve as a component in MCI's new Advanced Trouble Analysis Center (ATAC)
service. However we received no revenues for the service sold by MCI to their
customers, but charges MCI for software licenses used in deployed in support
of the service. The Jyra element of the ATAC service was at an early stage,
the MCI business was then subject to reorganisation as a result of its merger
with WorldCom.

In addition to being selected by MCI, our monitoring tools were installed and
were being evaluated by among others two of continental Europe's
telecommunications companies and also in several major European banking
customers of a significant systems integrator in Europe. We refined our
market view to reflect that while interest for our service monitoring tools
comes from many sectors, including hotel and leisure, banking, pharmaceutical,
transport amongst others; by far the most important sectors are the
international telecommunications companies, service providers and system
integrators, which each believe that they must be able to deliver a measured
quality of service to their customer base in order to remain competitive.

Our product development continued during the first quarter 1998, to focus on
addressing inherent scaling requirements of the telecommunication sector. With
specific guidance from MCI, we began designing into our service monitoring
tools an automated means of collecting response time between multiple groups
of any two Cisco routers in the Internet. We were then able to announce this
feature in June 1998.

Service Management Architecture

We had a number of telecommunications companies at the initial stages of the
sales process and had progressed with one in Switzerland and one in Denmark,
to initial customer deployment. Our strategy in focusing on telecommunication
companies had provided us with a number of significant partners with whom we
hoped that the Company could scale its revenues as they deploy product across
their own customer base. In order to partner with these kinds of companies we
took the decision at the beginning of 1998 to develop and engineer its Version
2 product to meet the telephone company requirements of distributed monitoring
and scalability.

17
<PAGE>
In the second half of 1998, we improved product performance and reliability,
and added features specifically to meet the needs of the telecommunications
industry. We felt confident that we had a product set that could be delivered
through a scaleable business model involving telecommunications companies, and
high end value added resellers such as Siemens Nixdorf Informationssysteme AG,
Switzerland. The Company's ability to attract significant telecommunications
partners and established companies such as Siemens is encouraging and
management believes provides a strong basis for future sales growth.

MINORITY INVESTMENT - Share exchange with Path 1 Network Technologies Inc.

Path 1 is developing technology to enable existing and new computer, telephone
and video broadcast (including cable TV) networks and systems to each transmit
all three types of information over one line at the same time with excellent
quality of service, and provide expanded capabilities. Path 1's technology
will act as a "traffic cop," prioritising packet flow, eliminating traffic
congestion and packet collision of digital information.

The Agreement allowed for Jyra to make a strategic investment in Path 1 and
for Path 1 to make a strategic investment in Jyra by Path 1 exchanging its
Preferred Stock for common stock of Jyra. The agreement became effective on
April 21, 1998. The Board of Directors of Path 1 approved the creation of a
class of Preferred Stock to be issued upon the completion of the Path 1
initial Offering (April 1998 at $0.60 per common share) in order to fulfil its
obligations under the agreement for the purpose of Path 1 making a strategic
investment in Jyra, and for Jyra making a strategic investment in Path 1. The
Preferred Stock issued to Jyra is non-assignable for 2 years, non-voting and
does not bear interest. The Preferred Stock could be converted at Jyra's
option, into 277,018 Shares. The Preferred Stock also provided that Path 1
shall neither issue any debt securities for a period of two (2) years from the
completion of the Offering, nor issue any warrants in connection with an
equity financing, without Jyra's consent, which would not be unreasonably
withheld. We converted our 10 preference shares into common shares and
received a certificate for 277,018 common shares during December 1999.

During the 1999 we received an option from a shareholder of Path 1, Franklin
Felber, to acquire 255,640 common shares of Path 1 at a price of $4.00. Prior
to the expiry date , July 31, 1999, the company assigned the total option at
nil value to a number of non-affiliated parties. See Item 3 - Legal
proceedings

18
<PAGE>
ITEM 2. PROPERTIES

Our 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 40,000 pounds sterling. The lease expires in August 2004. In
addition, we are leasing an office in San Jose, California, and Boston
Massachusetts on a month-to-month basis, at a rental of $1,800 per month.

ITEM 3. LEGAL PROCEEDINGS

On September 20, 1999, PATH 1 NETWORK TECHNOLOGY filed a complaint against
several of its present and former officers in the San Diego County (Calif.)
Superior Court. The complaint is against (i) Michael Berns, who at various
times has held the positions of Chairman of the Board of Path 1, Executive
Chairman and Chief Executive Officer of Path 1, (ii) Franklin Felber, former
Treasurer and a former director of Path 1, (iii) James Berns, a current
director and former Secretary of Path 1, (iv) Rona Berns, wife of Michael
Berns and holder of record of 1,148,720 shares of common stock of Path 1, and
(v) the law firm of Berns & Berns, former general counsel to Path 1 and Jyra.
The Path 1 complaint is for breach of oral contract, professional negligence,
breach of fiduciary duty, constructive trust, breach of the covenant of good
faith and fair dealing, and unfair business practices, primarily in connection
with the allocation of founder's stock of Path 1. Path 1 is seeking damages
and/or the return of stock. The present and former officers and directors of
Path 1 under this complaint and cross-complaint are seeking or are expected to
seek indemnification and advancement of defense expenses from Path 1. Michael
Berns, James Berns and Felber sued Path 1 in Delaware Chancery Court on
November 9, 1999 to seek to enforce their asserted rights to indemnification
and advancement.

On November 29, 1999 Franklin Felber filed a cross-complaint (case no. GIC
735665) in the San Diego County (Calif.) Superior Court. The cross-complaint
was against Path 1, Ron Fellman, Doug Palmer, Roderick Adams and Jyra for
fraud, breach of fiduciary duty, breach of the covenant of good faith and fair
dealing, and misrepresentation in connection with the exercise in July 1999 by
Jyra of its private option to purchase from Felber, for $4.00 per share,
255,640 shares of Path 1 common stock. We answered Franklin Felber's cross-
complaint on February 7, 2000 by denying, generally and specifically, each and
every allegation contained in the Cross-Complaint

As of March 27, 1999, there are no other material legal proceedings pending
against the Company that will have a material adverse effect on the
consolidated financial position, liquidity or results of operations of the
Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

NONE.

19
<PAGE>
PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

TRADING MARKET OF COMPANY'S SHARES
The principal trading market for our shares is the National Association of
Securities Dealers Over the Counter Bulletin Board ("OTC Bulletin Board"), on
which our 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
<S> <C> <C>
1997 Trades Volume
Low |High
1st Quarter 3.56 | 12.00 5,512,600
2nd Quarter 7.94 | 10.375 10,053,600
3rd Quarter 6.69 | 16.31 14,917,000
4th Quarter 7.25 | 11.75 5,503,600

2000 Trades Volume
Low |High
1st Quarter (Jan 3-Mar 27) 5.93 | 8.94 2,792,900

</TABLE>
(1) Prices have been adjusted to reflect the 2-for-1 stock Dividend, in
the form of a stock dividend on September 8, 1997.

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 March 27, 2000
was $7.82.

20
<PAGE>
GERMAN TRADING

Jyra shares began trading on the Frankfurt Stock Exchange on Friday, March 12,
1999, prior to that our shares were quoted in Munich and Hamburg exchanges.
The trading statistics for Germany are:

<TABLE>
<CAPTION>
1998 Trades(1) Volume
Low |High
<S> <C> <C>
2nd Quarter 6.65 | 13.45 1,209,528
3rd Quarter 4.88 | 10.10 684,143
4th Quarter 4.63 | 9.59 494,723

2000 Trades Volume
Low |High
1st Quarter (Jan 3-Mar 27) 6.00 | 9.00 834,358

</TABLE>
1) Prices in euros. As at March 27, 2000 one euro equalled 1.035 United
States Dollar, source - Reuters.

HOLDERS OF RECORD

As at March 27, 2000 the Company had 51 Holders of Record on its shareholder
register.

DIVIDEND INFORMATION

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.

21
<PAGE>
RECENT SALES OF UNREGISTERED SECURITIES

During 1999 the Company sold 358,126 common shares at $7.50 per share to
financial institutions and accredited investors for total proceeds of
$2,685,945.

ITEM 6. SELECTED FINANCIAL DATA

CONSOLIDATED STATEMENTS OF INCOME DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Eight months
since ended December
Inception 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
<CAPTION>

Revenues................... 1,458,663 530,559 536,021 392,083 0
Net Loss ................. (8,814,130) (2,996,323) (3,047,410) (2,422,705) (347,692)
Loss per share..(1). ... (0.23) (0.24) $(0.19) (0.04)
Weighted average common and common 13,169,323 12,903,798 12,587,367 8,876,364
equivalent shares outstanding..
</TABLE>

CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------
<S> <C> <C> <C> <C>

1999 1998 1997 1996
---------- ---------- ---------- ----------

<CAPTION>
Working capital.................... $ 974,441 1,226,503 3,323,030 3,449,489
Total assets....................... 2,270,775 2,701,378 3,811,266 3,547,695
Long-term obligations.............. 15,101 ... 13,893 26,335 0
Total stockholders' equity........ . 1,643,853 2,009,078 3,567,833 3,446,701
</TABLE>

(1) Fiscal year 1997 and prior period reflect the 2-for-1 stock Dividend, in
the form of a stock dividend, approved by the Company's Board of Directors
which was effective September 1997.

22
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
1999-1998

Revenues for the year ended December 31, 1999 were $530,559, a decrease of 1%
from $536,021 for the year end December 31, 1998. The commercial success of
our new software released midway through the year was offset by a general
freeze of purchasing in Jyra's key markets during the fourth quarter 1999.
Although we had anticipated that the Year 2000 problem would affect our
business, we were surprised, like many software suppliers, by the severity of
the freeze. Many of our existing and potential customers had implemented up
to a four month freeze. During this period of commercial inactivity, many
potential Jyra customers used the time to undertake pilot projects and test
solutions for software to be purchased once the freeze was lifted. However,
as the world was to discover, the millennium came and went with little effect.
As a result, we are now experiencing unprecedented growth in our sales
activity during the current first quarter 2000.

Sales and Marketing
Sales and Marketing expenses for the year ended December 31, 1999, increased
18.3% to $1,248,969 compared to $1,055,499 for the year ended December 31,
1998. This increase reflects the general increase in sales activity during
the year.

General and administrative
General and Administrative expenses decreased by 15.7% to $755,810 for the
year ended December 31, 1999 from $896,809 for the year ended December 31,
1998. This decrease reflected the level of general business efficiency and
consolidation within the Company.

Research and development
Research and development expenses decreased 20% to $1,217,021 for the year
ended December 31, 1999 compared to $1,526,142 for the year ended December
31, 1998. The decrease in spending was due to the ongoing replacement of
contract staff with full time employees. The development team focus for 1999
was implementation of advanced new features required by the e-commerce and
wireless mobile data markets. Releases of the Companies software products
during 1999 incorporated additional functionality aimed at significant areas
of demand from the e-commerce market. In particular the Company incorporated
into its products the security features used by e-commerce operators enabling
the direct measurement of secure e-commerce transactions. Further features
which began development during 1999 are scheduled for release in the first
half of 2000 which will provide greater flexibility in viewing and analysing
the data generated by the SMA. Against expectation, management experienced
difficulty in technical recruitment throughout 1999 as the demand caused by
Y2K continued to the end of 1999. Undaunted by the competition for staff an
active recruitment campaign continues.

23
<PAGE>
GROSS MARGIN
Cost of revenues consists of manufacturing costs, relating to the
Packaging and printing of CDs. Gross margin as a percentage of revenues was
99% for fiscal year 1999 as compared to a Gross margin of 94% for the 12
months ended December 1998. During fiscal year 1999, the Company incurred
costs associated with the sale of software and its packaging, these tend to be
considerably lower that selling Hardware.

INTEREST INCOME, NET
Interest income, net was $12,896 in fiscal year 1998 compared to $81,255
in fiscal year 1997. The decrease in interest income is primarily the result
of lower balances of cash equivalents and lower interest rates during fiscal
year 1999.

EARNINGS (LOSS) PER SHARE
Earnings (loss) per share for fiscal year 1999 was ($0.23) per share
compared to ($0.24) per share in the fiscal year ended December 1998. The
number of weighted average common shares outstanding for fiscal year 1999 was
13,169,323 as compared to 12,903,798 in the year ended December 31, 1998.

LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operations in fiscal year 1999 was $2,996,323 compared to
$3,047,410 in the fiscal year ended December 1998.

Net cash raised from investing activities was $29,658 in fiscal year 1999
compared to the investment of $100,984 in the fiscal year ended December 1998.
These funds were principally received from the disposal of redundant
equipment.

As of December 31, 1999, the Company's principal sources of liquidity
included cash and cash equivalents totalling $673,372. The Company
currently has no outstanding bank borrowings and has no established lines of
credit. The Company continues to meet its working capital requirements
through its product sales revenue and financing transactions involving the
private placement of equity securities.

During 1999 the Company sold 358,126 common shares at $7.50 per share to
financial institutions and accredited investors for total proceeds of
$2,685,945.

We believe that we will have sufficient working capital to fund current levels
of operations through 1999, assuming the Company receives at least $3 million
from product sales and financing transactions involving the private placement
of equity securities. There can be no assurance the Company will be able to
raise the necessary funds. The Company establishes its expenditure level
based upon its expectations as future revenues and if revenue levels were
below expectations this could cause expenses to be disproportionately high.
Therefore, a decrease in near term demand or insufficient level of equity
funding would adversely affect the Company's results of operations in 2000.

24
<PAGE>
In addition, in the event that the Company receives a larger than anticipated
number of purchase orders the Company may require resources greater than our
available cash or than are otherwise available. In such event, the Company
may be required to raise additional capital. The Company believes that, if
needed, it will be able to obtain additional funds required for future needs.

Share exchange with Path 1 Network Technologies Inc.

The Company has entered into an agreement dated March 16, 1998 (the
"Agreement") with Path 1 Network Technologies Inc. ("Path 1"). Path 1 was
incorporated on January 30, 1998 under the laws of Delaware. Path 1 is
developing technology to enable existing and new computer, telephone and video
broadcast (including cable TV) networks and systems to each transmit all three
types of information over one line at the same time with excellent quality of
service, and provide expanded capabilities. Path 1's technology will act
as a "traffic cop," prioritising packet flow, eliminating traffic congestion
and packet collision of digital information. The Agreement allowed for Jyra
to make a strategic investment in Path 1 and for Path 1 to make a strategic
investment in Jyra by Path 1 exchanging its Preferred Stock for common stock
of Jyra. The agreement became effective on April 21, 1998. The Board of
Directors of Path 1 approved the creation of a class of Preferred Stock to be
issued upon the completion of the Path 1 initial Offering (April 1998 at $0.60
per common share) in order to fulfil its obligations under the agreement for
the purpose of Path 1 making a strategic investment in Jyra, and for Jyra
making a strategic investment in Path 1. The Preferred Stock issued to Jyra
was non-assignable for 2 years, non-voting and does not bear interest. The
Preferred Stock could be converted at Jyra's option, into 277,018 Shares. The
Preferred Stock also provided that Path 1 shall neither issue any debt
securities for a period of two (2) years from the completion of the Offering,
nor issue any warrants in connection with an equity financing, without Jyra's
consent, which would not be unreasonably withheld. We converted our 10
preference shares into common shares and received a certificate for 277,018
common shares during December 1999.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements".

During December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements".
SAB 101 provides guidance on the recognition, presentation and disclosure of
revenue in the financial statements. The Company is still in the process of
assessing the detailed impact of SAB 101 on its financial statements
Implementation of guidance prescribed in the Bulletin and which all
registrants are expected to apply, may result in a change in the Company's
revenue recognition policy. Because the Company has complied with US generally
accepted accounting principals for its historical revenue recognition, any
change in its revenue recognition policy resulting from SAB 101, as amended in
March 2000 by SAB 101A, will be reported in the quarter ending June 30, 2000.
Any change in accounting policy will result in a cumulative adjustment in the
second quarter of fiscal 2000.

25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 1998/97

1998 - 1997

Revenues for the year ended December 31, 1998 were $536,021, an increase of
36.7% over 1997. The most significant customers during the year were Tele
Danmark, Siemens, Vodafone and SmithKlineBeecham.

The Company's revenue continued to derive from the sale of initial software
to a number of international companies who either own or operate large
networks where measuring the quality of service delivered to the desktop is
mission critical in order to remain competitive. As a result our product
continued to be adjusted throughout 1998 in order to meet these larger
customers requirements. Our strategy in focusing on telecommunication
companies has provided Jyra with a number of significant partners with whom it
is hoped the Company can scale its revenues as they deploy product across
their own customer base. Our reporting tools were installed and evaluated by
both Tele Danmark and another continental European Telecommunications Company.
By 31st December, 1998, Tele Danmark had resold and installed a Jyra-based
solution to monitor a multinational network for one of its large corporate
customers.

In order to partner with these kinds of companies Jyra took the decision at
the beginning of the year to develop and engineer its Version 2 product to
meet the telephone company requirements of distributed monitoring and
scalability. In order to exploit the Company's product's capabilities in the
Service Provider space, the Company allocated significant resource in the 3rd
quarter 1998 to build a sales alliance with Cisco Systems and to establish our
product as the basis of an applications monitoring service that could be
provided by major telecommunications companies to all of their major
customers. We identified Cisco Systems as an ideal company with which to
work. Cisco has a strong and growing presence in the telecommunications
industry, and the most effective sales force in the industry. We assigned
specific executives to work exclusively on achieving an arrangement with Cisco
Systems, and by October 1998 were successful in reaching a joint marketing
arrangement with Cisco Systems. The effect of this is that both Jyra and
Cisco sales teams started positioning our product to telecommunications
companies as a part of Cisco Service Management System, (CSM). The Cisco
Service Management (CSM) system delivers a modular suite of service management
solutions integrated within a scalable, reliable, and high-performance
infrastructure. CSM enables service providers to effectively plan, provision,
operate and bill for a wide range of value added services, while increasing
revenue and reducing cost.

The Company's sales efforts during this period were focused primarily on
strategic goals, specifically on establishing the relationship with Cisco
Systems, and establishing Jyra SMA as a mainstream service offered by a
major telecommunications company or Service provider. Jyra's sales team was
successful in achieving both of these strategic aims. However, the process
consumed more time and resources than anticipated at the outset and did
impact revenues for the period.

26
<PAGE>
Research and development

Research and development expenses increased 18% to $1,526,142 for the year
ended December 31, 1998 compared to $1,293,667 for the year ended December
31, 1998. The substantial increase in spending was due to a temporary
increase in staffing, as a result of resolving the technical components of
its architecture and the Company's ability to move to broaden the range of
applications available as a part of its Service Management Architecture.
This spending program began towards the end of 1997 and continued throughout
1998. In particular, the Company allocated resources in the first quarter to
add new graphical interfaces to the product. This work, when complete, will
offer users a graphic means of describing the network monitoring tasks and of
easily understanding causes of service level violations. Some results from
the new graphic user interface (GUI) have been developed to a pre-delivery
stage and will be released at the end of Quarter 1 1999. In addition, the
Company also allocated resource to provide telecommunications companies with a
new means of obtaining network transit times between any two Cisco routers.
This application became available as a product feature in Quarter 3 1998. In
Quarter 3 the Company continued to expand its technical components of its
Architecture, while moving to broaden the range of applications available. In
addition to continued work on the Company's existing development program, the
Company expanded its ability to respond to the requirements of networking
equipment manufacturers, continued to update the core of the product for
enhanced scalability. Spending levelled towards the end of the year but
management plans to increase R&D spending in 1999 as it continues to work on
the its existing development program whilst expanding its ability to respond
to the requirements of Cisco and its major customers and also continues to
update the core of the product for enhanced scalability. Although management
experienced difficulty in technical recruitment throughout 1998, management
believes that the UK market for technical staff has now softened as the
competition for staff generated by Y2K and Euro activities decreases. Two
additional staff have been recruited since December 31st, 1998, and an active
recruitment campaign continues.

General and administrative

General and Administrative expenses increased by 15.8% to $896,809 for the
year ended 31st December 1998 from $774,051 for the year ended December 31,
1997. This increase reflected the increased level of business activity within
the Company as well as salary inflation. This increase in general and
administrative expenses was also due to the Company's implementation of a
Management and Administrative structure to allow the Company to deal with the
anticipated future growth of customer requirements. In addition during the
third quarter expenses were incurred specifically because of the protracted
contractual and technical negotiations with Tele Danmark and Cisco

27
<PAGE>
Sales and Marketing

Sales and Marketing expenses for the year ended December 31, 1998, increased
122% to $1,055,499 compared to $476,336 for .the year ended December 31, 1997.
The Company invested in additional sales and marketing staff from late 1997,
and the Company's investment in a sales force has allowed the Company both to
focus on the strategic telecommunications sector and to develop a sales
process that takes advantage of the telephone Company's own sales force and
customer base to provide the Company with the potential to build revenues.
In addition the Company incurred expenses associated with increased sales &
marketing and training activities to in Europe and the US. In addition,
significant costs were incurred in creating and supporting the Cisco
relationship.

GROSS MARGIN

Cost of revenues consists of manufacturing costs, relating to the
Packaging and printing of CDs. Gross margin as a percentage of revenues was
94% for fiscal year 1998 as compared to a Gross margin of 97% for the 12
months ended December 1997. During fiscal year 1998, the Company incurred
costs associated with the sale of software and its packaging, these tend to be
considerably lower that selling Hardware.

INTEREST INCOME, NET

Interest income, net was $81,255 in fiscal year December 1998 compared to
$112,576 30 in fiscal year December 1997. The decrease in interest income is
primarily the result of lower balances of cash equivalents and lower interest
rates during fiscal year 1998.

LOSS PER SHARE

Loss per share for fiscal year 1998 was $0.24 per share compared to $0.19
per share in the fiscal year ended December 1997. The number of weighted
average common shares outstanding for fiscal year 1998 was 12,903,798 as
compared to 12,587,367 in the year ended December 31, 1997

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LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 1998, the Company's principal sources of liquidity
included cash, cash equivalents, totalling $554,450. We had no outstanding
bank borrowings and has no established lines of credit. We continued to meet
our working capital requirements through product sales revenue and financing
transactions involving the private placement of equity securities. Subsequent
to December 31, 1998 we received approximately US$500,000 as the proceeds a
private placement We believed that we would have sufficient working capital
to fund current levels of operations through 1999, assuming the Company
receives at least $3 million from product sales and financing transactions
involving the private placement of equity securities. There can be no
assurance the Company will be able to raise the necessary funds. We
established our expenditure level based upon our expectations as future
revenues and if revenue levels were below expectations this could cause
expenses to be disproportionately high. Therefore, a decrease in near term
demand or insufficient level of equity funding would adversely affect the
Company's results of operations in 1999.

Net cash used in operations in fiscal year 1998 was $3,047,410 compared to
$2,422,705 in the fiscal year ended December 1997

Net cash used in investing activities was $100,984 in fiscal year 1998
compared to $490,312 in the fiscal year ended December 1997. These funds were
principally invested in additions to property and equipment.

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BUSINESS RISKS

The following is a summary of risks affecting the business and results of Jyra
Research Inc. ("Jyra" or "the Company") and should be read in conjunction with
the description of the Company's business contained in the other sections of
the Company's Form 10-K for the year ended December 31, 1999 (the "1999 10-
K").

OUR LIMITED OPERATING HISTORY AND THE RAPIDLY EVOLVING MARKET WE SERVE MAKES
EVALUATING OUR BUSINESS PROSPECTS DIFFICULT

We were incorporated in May 1996 but because of our limited operating history
and the uncertain nature of the rapidly changing market that we serve, we
believe the prediction of future results of operations is difficult. As an
investor in our common stock, you should consider the risks and difficulties
that we face as an early stage company in a new and rapidly evolving market.
Some of the specific risks we face include our ability to:

execute our sales and marketing strategy;

expand our domestic and international sales efforts;

introduce competitive products in a timely fashion;

continue to finance our operations

To date, we have only recently received a limited number of orders for our
products. There can be no assurance that we will ever have enough sales or
receive sufficient revenues to be profitable.

WE HAVE A HISTORY OF LOSSES, EXPECT OUR EXPENDITURES TO INCREASE AND OUR
LOSSES TO CONTINUE, AND MAY NEVER ACHIEVE PROFITABILITY

We have incurred losses since we commenced operations in 1996 and may never
achieve profitability. Furthermore, we currently expect that our operating
expenditures will continue to increase significantly and we may not generate a
sufficient level of revenues to offset these expenditures or be able to adjust
spending in a timely manner to respond to any unanticipated decline in
revenues.

If revenues grow slower than we anticipate or if operating expenditures exceed
our expectations or cannot be adjusted accordingly, we may continue to
experience losses on a quarterly and annual basis. Even if we achieve
profitability, we cannot assure you that we can sustain or increase
profitability on a quarterly or annual basis in the future.

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THE UNPREDICTABILITY OF OUR QUARTERLY OPERATING RESULTS MAY ADVERSELY AFFECT
THE TRADING PRICE OF OUR COMMON STOCK.

Period-to-period comparisons of our operating results cannot be relied upon as
an indicator of our future performance. Our operating results may be below
the expectations of public market analysts or investors in some future
quarter. If this occurs, the price of our common stock would be likely to
decrease. Our operating results are likely to fluctuate significantly in the
future on both a quarterly and an annual basis due to a number of factors,
many of which are outside our control Factors that could cause our operating
results to fluctuate include variations in:

fluctuations in the demand for our products and services;

our success in expanding our customer support and marketing and sales
organisations;

the mix of channels through which those products are sold;

the average selling prices of our products;

the timing and size of orders and shipments of our products;

the length of our sales cycle;

delays in, or cancellations of, customer implementations;

customers' budget constraints;

the level of product and price competition in our markets;

market perception of our products compared to our competitors;

the timing and market acceptance of new product introductions and
upgrades by us or our competitors;

the amount and timing of our operating expenses;

our ability to control costs;

the level of product development expenditures; and

general economic conditions.

In the past, we have experienced fluctuations in operating results.
Research and development expenses have fluctuated due to increased capital
expenditure on development equipment and consulting fees related to the launch
of new products and increased personnel expenses.

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LACK OF GROWTH OR DECLINE IN INTERNET USAGE OR THE LACK OF ACCEPTANCE OF
COMMERCE CONDUCTED VIA THE INTERNET COULD BE DETRIMENTAL TO OUR FUTURE
OPERATING RESULTS.

Our products enhance companies' ability to transact business and conduct
operations utilising the Internet. Therefore, our future sales and any future
profits are substantially dependent upon the widespread acceptance and use of
the Internet as an effective medium of commerce by consumers and businesses.
If use of the Internet does not continue to grow or grows more slowly than
expected, if the infrastructure for the Internet does not effectively support
growth that may occur, if government regulations change, or if the Internet
does not become a viable commercial marketplace, our business could suffer.
Rapid growth in the use of the Internet and other online services is a recent
development and we are unsure whether that acceptance and use will continue to
develop or that a sufficiently broad base of consumers will adopt and continue
to use the Internet and other on-line services as a medium of commerce. To be
successful, we must rely on consumers and businesses, who have historically
used traditional means of commerce to purchase products, accepting and
utilising new ways of conducting business and exchanging information over the
Internet.

In addition, the Internet may not be accepted as a viable commercial
marketplace for a number of reasons, including potentially inadequate
development of the necessary network infrastructure or delayed development of
enabling technologies and Web performance improvements. If the Internet
continues to experience significant growth in the number of users, frequency
of use or an increase in bandwidth requirements, the Internet's infrastructure
may not be able to support the demands placed upon it. In addition, the
Internet could lose its viability due to delays in the development or adoption
of standards and protocols required to handle increased levels of Internet
activity, or due to increased governmental regulation. If Congress, or other
governing bodies both within and outside the United States, decides to alter
materially the current approach to, and level of, regulation of the Internet,
we may need to adapt our technology. Any required adaptation could cause us
to spend significant amounts of time and money.

IF THE E-COMMERCE SOLUTIONS MARKET FAILS TO GROW, OUR BUSINESS MAY FAIL

The market for e-commerce performance management solutions is in an early
stage of development and its success is not guaranteed. Therefore, we cannot
accurately assess the size of the market, the products needed to address the
market, the optimal distribution strategy, or the competitive environment that
will develop. In order for us to be successful, our potential customers must
recognise the value of more sophisticated e-commerce performance management
solutions, decide to invest in the management of their e-commerce networks and
the performance of important business software applications and, in
particular, adopt our performance management solutions. The growth of the e-
commerce performance management solutions market also depends upon a number of
factors which affect e-commerce in general, including the availability of
inexpensive bandwidth, especially in international markets, the growth of wide
area networks, and reduction in artificial trade barriers. Any restriction of
growth in e-commerce will damage our business.

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WE FACE GROWING GLOBAL COMPETITION WHICH COULD MAKE IT DIFFICULT FOR US TO
ACQUIRE AND RETAIN CUSTOMERS.

Some of our competitors have, and our future competitors may have:

longer operating histories;

larger customer bases;

greater brand recognition in similar businesses; and

significantly greater financial, marketing, technical and other
resources.

In addition, some of our competitors may be able to:

devote greater resources to marketing and promotional campaigns;

adopt more aggressive pricing policies; and

devote more resources to technology and systems development.

For our service provider hosted on-line web monitoring service business, we
compete against a wide range of consultancy and service offerings, including
WebCriteria, MIDS MatrixIQ Service and free services such as the Web Site
Garage unit of Netscape, NetMechanic and Internet Weather Report. While the
services may not be as comprehensive or complete as ours, and they may have
less flexibility in reporting than we do, customers could still choose to use
these services.

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Increased competition may result in price reductions, increased costs of
providing our services and loss of market share, any of which could seriously
harm our business. We may not be able to compete successfully against our
current and future competitors.

INDUSTRY CONSOLIDATION MAY HARM OUR BUSINESS

There has been a trend towards industry consolidation among our competitors,
partners and customers for several years, which has continued during 1999. We
expect this trend towards industry consolidation to continue as companies
attempt to strengthen or hold their market positions in an evolving industry.
We believe that industry consolidation may provide stronger competitors that
are better able to compete as sole-source vendors for customers. This could
lead to more variability in operating results as we compete with a single
major product line within an overall systems management solution and could
have a material adverse effect on our business, operating results, and
financial condition.

JYRA SMA SOFTWARE IS CURRENTLY OUR ONLY OFFERING, AND GENERATES ALL OF OUR
CURRENT REVENUES. OUR BUSINESS DEPENDS ON ITS COMMERCIAL SUCCESS

All of our current revenues and our future growth depends on the commercial
success of our SMA software, which is the only solution that we currently
offer. If our target customers do not widely adopt, purchase and successfully
deploy the SMA software, our revenues will not grow significantly and our
business may fail. The software industry is characterised by changing
fashions. Failure to grow rapidly in the short term may affect our future
prospects.

VARIABILITY IN SERVICE PROVIDER SALES

The company markets its products to telecommunications and internet service
providers. This market is characterised by large, and often sporadic
purchases. Sales activity in this industry depends upon the stage of
completion of expanding network infrastructures, the availability of funding,
and the extent that service providers are affected by regulatory and business
conditions in the market of operations. A decline or delay in sales orders
from this industry could have a material adverse effect on our business,
operating results and financial condition.

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<PAGE>
THE AVERAGE SELLING PRICES OF OUR PRODUCTS COULD DECREASE RAPIDLY WHICH MAY
NEGATIVELY IMPACT GROSS MARGINS AND REVENUES

We may experience substantial period-to-period fluctuations in future
operating results due to the erosion of our average selling prices. The
average selling prices of our products could decrease in the future in
response to competitive pricing pressures, increased sales discounts, new
product introductions by us or our competitors or other factors. Therefore,
to maintain our gross margins, we must develop and introduce on a timely basis
new products and product enhancements and continually reduce our product
costs. Our failure to do so may cause our revenue and gross margins to
decline.

OUR PARTIAL RELIANCE ON SALES OF OUR PRODUCTS BY OTHERS MAKES IT HARDER TO
PREDICT OUR REVENUES AND RESULTS OF OPERATIONS

Our integrators and resellers sell and represent other companies' products
that may be competitive with those of the Company. While we encourage these
integrators and resellers to focus on our products through marketing and
support programs, there is risk they may give higher priority to products of
other suppliers, thus reducing their efforts to sell our products. In
addition, these systems integrators and resellers may not have the resources
to expand their operations to meet increased demand for our products.
Moreover, there can be no assurance that our products will be well received in
the markets in which it operates or that our sales activities will result in
any revenues for the Company.

The timing of our revenues is difficult to predict because of our partial
reliance on indirect sales channels and the variability of our sales cycle.
The length of our sales cycle for sales through our indirect channel partners
to our end users may vary substantially depending upon the size of the order
and the distribution channel through which our products are sold.

If revenues forecasted in a particular quarter do not occur in that quarter,
our operating results for that quarter could be adversely affected.
Furthermore, because our expense levels are based on our expectations as to
future revenue and to a large extent are fixed in the short term, a reduction
or delay in sales of our products or the loss of any indirect channel partner
could harm our business.

IF WE ARE UNABLE TO DEVELOP AND MAINTAIN STRONG PARTNERING RELATIONSHIPS WITH
OUR INDIRECT CHANNEL PARTNERS, OR IF THEIR SALES EFFORTS ON OUR BEHALF ARE NOT
SUCCESSFUL, OUR SALES MAY SUFFER AND OUR REVENUES MAY NOT INCREASE

The achievement of large-scale sales to major corporations by new entrants to
the market like Jyra typically requires the establishment of strong
relationships with incumbent suppliers and consultants. Failure to establish
these relationships may harm our business.

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<PAGE>
We currently use indirect and direct product resale channels in both the USA
and Europe. The existence of direct and indirect sales channels may lead to
conflict for the same customer, pressure by current and prospective customers
for price reductions on our products and reductions in the Company's gross
margin and operating profit. We cannot assure you that our indirect channel
partners will market our products effectively or continue to devote the
resources necessary to provide us with effective sales, marketing and
technical support. In order to support and develop leads for our indirect
distribution channels, we plan to expand our sales and support staff. We
cannot assure you that this internal expansion will be successfully completed,
that the cost of this expansion will not exceed the revenues generated or that
our expanded sales and support staff will be able to compete successfully
against the significantly more extensive and well-funded sales and marketing
operations of many of our current or potential competitors.

WE ARE EXPOSED TO RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS WHICH MAY
HARM OUR BUSINESS.

Our operations are currently headquartered in the United Kingdom, from where
we also engage in our European marketing efforts. United States sales and
marketing are conducted from separate sales offices in San Jose, California.
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;

fluctuations in currency exchange rates;

seasonal reductions in business activity during the summer months
in Europe and potential adverse tax consequences;

which could materially adversely affect our business, operating
results, and financial condition.

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<PAGE>
Our international sales are currently all U.S. dollar-denominated. As a
result, an increase in the value of the U.S. dollar relative to foreign
currencies could make our products less competitive in international markets.
We invoice some of our international customers in local currency. Doing so
exposes us to fluctuations in exchange rates between the U.S. dollar and the
particular local currency.

IF WE ARE UNABLE TO EFFECTIVELY MANAGE OUR GROWTH, WE MAY EXPERIENCE OPERATING
INEFFICIENCIES AND HAVE DIFFICULTY MEETING DEMAND FOR OUR PRODUCTS WHICH COULD
HARM OUR BUSINESS

We anticipate that further expansion will be required to address potential
growth in our customer base and market opportunities. This expansion could
place a strain on our management, products and support operations, sales and
marketing personnel and other resources, which could harm our business.

In the future, we may experience difficulties meeting the demand for our
products and services. The installation and use of our products requires
training. If we are unable to provide training and support for our products,
the implementation process will be longer and customer satisfaction may be
lower. In addition, our management team may not be able to achieve the rapid
execution necessary to fully exploit the market for our products and services.
We cannot assure you that our systems, procedures or controls will be adequate
to support the anticipated growth in our operations.

We may not be able to install management information and control systems in an
efficient and timely manner, and our current or planned personnel, systems,
procedures and controls may not be adequate to support our future operations.

COMPETITION FOR EXPERIENCED PERSONNEL IS INTENSE AND OUR INABILITY TO ATTRACT
AND RETAIN QUALIFIED PERSONNEL COULD SIGNIFICANTLY INTERRUPT OUR BUSINESS
OPERATIONS

Our future success will depend, on the ability of our management to operate
effectively, both individually and as a group. Given our early stage of
development, we are dependent on our ability to attract, retain and motivate
high calibre key personnel. We have recently expanded our sales force, and we
are actively searching for systems engineers, research and development
engineers and sales and marketing personnel, all of whom are in short supply.
Additionally, we rely on qualified systems engineers and service and support
personnel to provide pre- and post-sales technical support for our products.
We compete for engineers for our development organisation principally in the
London, England area and in the future in the United States against companies
in the networking industry with far greater resources. There may be only a
limited number of persons with the requisite skills to serve in these key
positions and it may become increasingly difficult to hire such persons. The
company has experienced staffing difficulties in the past. Our business will
suffer if we encounter delays in hiring additional personnel.

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<PAGE>
WE DEPEND ON KEY EMPLOYEES.

At this stage in its growth, the Company is dependent on the services of key
managers. We do not have key man life insurance on the lives of anyone. Even
though the Company has hired experienced sales and technical personnel, in the
event that any of these persons becomes unavailable for any reason, our
business would be materially and adversely affected.

WE ARE AN INEXPERIENCED MANAGEMENT TEAM.

The company's officers and management have 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 the
management team has previously served in a senior managerial role or as an
officer of a public corporation. This inexperience could have a material
adverse effect upon the company's business, operating results, financial
condition and share price.

IF WE FAIL TO DEVELOP NEW PRODUCTS AND SERVICES IN THE FACE OF OUR INDUSTRY'S
RAPIDLY EVOLVING TECHNOLOGY, OUR FUTURE RESULTS MAY BE ADVERSELY AFFECTED.

Due to the recent emergence of the Internet and the Web as a forum for
conducting business, the market for Web application server systems in which we
participate is subject to rapid technological change, changing customer needs,
frequent new product introductions and evolving industry standards that may
render existing products and services obsolete. Our growth and future
operating results will depend in part upon our ability to enhance existing
applications and develop and introduce new applications or components that:
meet or exceed technological advances in the marketplace;

meet changing customer requirements;

achieve market acceptance;

integrate successfully with third party software; and

respond to competitive products.

Our product development and testing efforts have required, and are expected to
continue to require, substantial investment. We may not possess sufficient
resources to continue to make the necessary investments in technology. In
addition, we may not successfully identify new software opportunities and
develop and bring new software to market in a timely and efficient manner. If
we are unable, for technological or other reasons, to develop and introduce
new and enhanced software in a timely manner, we may lose existing customers
and fail to attract new customers, resulting in a decline in revenues.

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<PAGE>
WE ARE EXPOSED TO DELAYS IN DEVELOPMENT OF SOFTWARE AND RELATED PRODUCTS
COMMON IN COMPUTER INDUSTRY WHICH MAY HARM OUR BUSINESS

Delays in the development of software and related products are common in the
computer industry. Any delays in development could cause additional expense
and result in lost sales of our products, having a materially adverse effect
on the Company. If there are delays in bringing our planned products to
market, we could be forced to seek additional financing in order to continue
operations. There can be no assurance that we will be able to raise any
additional funds, or, even if funds are available, on terms that are
acceptable to the Company. There can be no assurance that we will be able to
sell any future products or ever receive any future revenues.

We have in the past experienced delays in product development which to date
have materially adversely affected us. These delays may occur in the future
and could result in a loss of customers and market share and may harm our
business.

INTRODUCTION OF NEW PRODUCTS OR SERVICES MAY CAUSE CUSTOMERS TO DEFER
PURCHASES OF OUR EXISTING PRODUCTS WHICH COULD HARM OUR OPERATING RESULTS

When we announce new products or product enhancements that have the potential
to replace or shorten the life cycle of our existing products, customers may
defer purchasing our existing products. These actions could harm our
operating results by unexpectedly decreasing sales or selling prices, and
exposing us to greater risk of product obsolescence.

OUR SOFTWARE MAY HAVE ERRORS OR DEFECTS THAT WE FIND AFTER THE PRODUCTS HAVE
BEEN SOLD, WHICH COULD NEGATIVELY AFFECT OUR REVENUES, INCREASE OUR COSTS AND
DELAY THE MARKET ACCEPTANCE OF OUR PRODUCTS

Our products are complex and may contain undetected defects, errors or
failures in software. In addition, because our products plug into our end
users' existing networks they can directly affect the functionality of the
network. We have in the past encountered errors in our products. To date,
these errors have resulted in delayed or lost sales. Additional errors may
occur in our products in the future. The occurrence of defects, errors or
failures could result in the failure of our customer's network or mission-
critical applications, delays in installation, product returns and other
losses to us or to our customers or end users. In addition, we would have
limited experience responding to new problems that could arise with any new
products that we introduce. These occurrences could also result in the loss
of or delay in market acceptance of our products, which could harm our
business.

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<PAGE>
PRODUCT LIABILITY MAY HARM OUR BUSINESS.

Our 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 our
software takes explicit steps to avoid this type of fault. Although our
license terms explicitly deny responsibility for losses of this type, the risk
still exists. A claim against the company would incur legal costs, generate
adverse publicity, incur management time and would thus harm our business. A
successful claim may cause our business to fail.

We may also be subject to liability claims for damages related to product
errors. While we carry insurance policies covering this type of liability,
these policies may not provide sufficient protection should a claim be
asserted. A material product liability claim may harm our business.

IMPACT OF GENERAL ECONOMIC CONDITIONS ON OPERATIONS

Our products may be considered by customers to be discretionary capital
purchases. An adverse change in general economic conditions could cause
certain of our potential customers to reduce their capital spending, which may
adversely affect our operating results.

YEAR 2000 PROBLEMS MAY DISRUPT OUR BUSINESS AND THE COSTS TO CORRECT THESE
PROBLEMS MAY BE MATERIAL

In 1998 and 1999, the Company established plans to become Year 2000 ready. In
late 1999, the Company completed its remediation and testing of systems. As a
result of those planning and implementation efforts, the Company experienced
no significant disruptions in mission critical information technology and
non-information technology systems and believes those systems successfully
responded to the Year 2000 date change. The Company incurred minimal expenses
during 1999 in connection with remediating its systems. The Company is not
aware of any material problems resulting from Year 2000 issues, either with
its products, its internal systems, or the products and services of third
parties. The Company will continue to monitor its mission critical computer
applications and those of its suppliers and vendors throughout the year 2000
to ensure that any latent Year 2000 matters that may arise are addressed
promptly.

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IF OUR PRODUCTS DO NOT COMPLY WITH EVOLVING INDUSTRY STANDARDS AND GOVERNMENT
REGULATIONS, OUR BUSINESS COULD BE HARMED

The market for network management solutions is characterised by the need to
support industry standards as these different standards emerge, evolve and
achieve acceptance. In the United States, our products may need to comply
with various future regulations and standards defined by the Federal
Communications Commission and others. Internationally, products that we
develop may be required to comply with standards established by
telecommunications authorities in various countries as well as with
recommendations of the International Telecommunication Union. To remain
competitive we must continue to introduce new products and product
enhancements that meet these emerging U.S. and International standards.
However, in the future we may not be able to effectively address the
compatibility and interoperability issues that arise as a result of
technological changes and evolving industry standards. Failure
to comply with existing or evolving industry standards or to obtain timely
domestic or foreign regulatory approvals or certificates could harm our
business.

OUR FUTURE OPERATING RESULTS MAY BE AFFECTED BY REGULATION OF THE INTERNET

There are currently a limited number of laws or regulations that apply
directly to access or commerce on the Internet. We could be materially
adversely affected by proposed regulation on voice over the Internet,
encryption technology and access charges for Internet service providers, as
well as the continuing deregulation of the telecommunication industry. The
adoption of such measures could decrease demand for our products, and at the
same time increase our cost of selling our products. Changes in laws or
regulations governing the Internet and Internet commerce could have a material
adverse effect on our business, operating results and financial condition.

RELIANCE ON COMPUTER PLATFORMS MANUFACTURED BY OTHERS

The company's products are designed around specific computer platforms which
are only available from certain manufacturers. Any significant shortage of
computer platforms or components could lead to cancellations or delays of
purchases of our products which would materially adversely affect our
operating results. Our software depends on commonly available computer
operating systems for its successful operation. These are subject to widely
published reliability or security issues. This publicity may adversely affect
sales of our products and result in product liability claims.

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FAILURE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY WOULD RESULT IN
SIGNIFICANT HARM TO OUR BUSINESS

Our success depends significantly upon our proprietary technology and our
failure or inability to protect our proprietary technology would result in
significant harm to our business. We rely on a combination of copyright and
trademark laws, and on trade secrets and confidentiality provisions and other
contractual provisions to protect our proprietary rights. These measures
afford only limited protection. Our means of protecting our proprietary
rights in the U.S. or abroad may not be adequate and competitors may
independently develop similar technologies. Our future success will depend in
part on our ability to protect our proprietary rights and the technologies
used in our principal products.

Despite our efforts to protect our proprietary rights and technology,
unauthorised parties may attempt to copy aspects of our products or to obtain
and use trade secrets or other information that we regard as proprietary.
Legal proceedings to enforce our intellectual property rights could be
burdensome and expensive and could involve a high degree of uncertainty.
These legal proceedings may also divert management's attention from growing
our business. In addition, the laws of some foreign countries do not protect
our proprietary rights as fully as do the laws of the U.S. If we do not
enforce and protect our intellectual property, our business will suffer
substantial harm.

CLAIMS BY OTHERS THAT WE INFRINGE ON THEIR INTELLECTUAL PROPERTY RIGHTS COULD
BE COSTLY TO DEFEND AND COULD HARM OUR BUSINESS

We may be subject to claims by others that our products infringe on their
intellectual property rights. These claims, whether valid or not, could
require us to spend significant sums in litigation, pay damages, delay product
shipments, reengineer our products or acquire licenses to such third-party
intellectual property. We may not be able to secure any required licenses on
commercially reasonable terms, or at all. We expect that we will increasingly
be subject to infringement claims as the number of products and competitors in
the performance management solutions market grows and the functionality of
products overlaps. Any of these claims or resulting events could harm our
business.

OUR GROWTH AND OPERATING RESULTS WOULD BE IMPAIRED IF WE ARE UNABLE TO MEET
OUR FUTURE CAPITAL REQUIREMENTS

We may need to raise additional funds if our estimates of revenues, working
capital or capital expenditure requirements change or prove inaccurate or in
order for us to respond to unforeseen technological or marketing hurdles or to
take advantage of unanticipated opportunities

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SUBSTANTIAL ADDITIONAL FUNDS MAY BE REQUIRED; SUBSTANTIAL SHAREHOLDER DILUTION

Although we believe that the Company can continue to raise sufficient funds to
continue develop and bring our products to the market, there can be no
assurance that our current plans and projections are correct. In the event
the Company's plans or the basis for our 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) we 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. To
obtain any necessary financing, we could sell additional Shares or other
financial instruments convertible or exchangeable into Shares, resulting in
substantial dilution to all shareholders

WE WILL BE ABLE TO CONTROL AND INFLUENCE ALL MATTERS REQUIRING STOCKHOLDER
APPROVAL INCLUDING DELAYING OR PREVENTING A CHANGE IN OUR CORPORATE CONTROL

At this time, our executive officers together control approximately 35.0% of
the outstanding common stock. As a result, we will be able to control most
matters requiring shareholder approval, such as the election of directors, or
a merger or consolidation of the Company. This concentration of ownership may
have the effect of delaying, preventing or deterring a change in control of
Jyra, could deprive our stockholders of an opportunity to receive a premium
for their common stock as part of a sale of Jyra and might affect the market
price of our common stock.

LIMITATION OF OFFICERS' AND DIRECTORS' LIABILITIES UNDER DELAWARE LAW.

Pursuant to the Company's Certificate of Incorporation, as authorised 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.

43
<PAGE>
VOLATILITY OF OUR STOCK PRICE COULD ADVERSELY EFFECT THE VALUE OF AN
INVESTMENT IN OUR SHARES

Our Common Stock has experienced substantial price volatility, particularly as
a result of variations between our actual or anticipated financial results and
as a result of materially negative or positive announcements by the Company
and our competitors. In addition, the stock market has experienced extreme
price and volume fluctuations that have affected the market price of
technology companies in particular, and that have often been unrelated to the
operating performance of these companies. These factors, as well as general
economic and political conditions, may adversely affect the market price of
our Common Stock in the future.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under "Prospectus Summary", "Risk Factors",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", "Business" and elsewhere in this prospectus constitute forward-
looking statements. In some cases, you can identify forward-looking
statements by terms such as "may", "might", "could", "will", "should",
"expect", "plan", "intend", "forecast", "anticipate", "believe", "estimate",
"predict" , "potential"" "continue" or the negative of these terms or other
comparable terminology. The forward-looking statements contained in this
prospectus involve known and unknown risks, uncertainties and other factors
that may cause our or our industry's actual results, level of activity,
performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied
by these statements. These factors include, among others, those listed under
"Risk Factors" and elsewhere in this prospectus.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. You should not place undue reliance on
these forward-looking statements.

44
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company is exposed to financial market risks, and foreign currency
exchange rates.

International Operations
The Company is subject to the normal risks of conducting business
internationally, including longer payment cycles and greater difficulty in
accounts receivable collection. The Company generally offers 30 day net
terms in the United States and Europe.

COMPETITION.

As described in the Business section of this document, the Company competes
with an array of established and emerging computer, communications,
intelligent network wiring, network management and test equipment companies.
Many of these companies have greater financial, technological and personnel
resources than those of Jyra. The smaller competitors are often willing to
offer lower pricing or other favourable terms for products competitive with
those of the Company. This could result in pressure on the Company to reduce
pricing on its products unless it is able to prevail on the sale by
successfully differentiating the benefits and functionality of the Company's
products compared to those of the competitor. Moreover, new competitors, new
technology and new marketing techniques may cause customer confusion, thereby
lengthening the sales cycle process for the Company's products.

45
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE NUMBER
-----------------
<S> <C>
Consolidated Balance Sheets............................................47
Consolidated Statements of Operations..................................48
Consolidated statement OF Comprehensive Income.........................49
Consolidated Statements of Cash Flows..................................50
Consolidated Statements of Stockholders' Equity........................51
Notes to Consolidated Financial Statements.............................53
Report of Independent Auditors. .......................................63

</TABLE>

46
<PAGE>
Consolidated Balance Sheet December 31, 1999
<TABLE><CAPTION>
$ $
December 31
1999 1998
<S> <C> <C>
Current Assets
Cash & Cash Equivalents 673,372 554,450
Prepaid Expenses 51,655 120,766
Accounts Receivable 249,414 228,787
Other Receivables 0 322,500
Total Current Assets 974,441 1,226,503

Property & Equipment
Computers, Equipment & Motor Vehicles 666,381 696,039
Less Accumulated Depreciation 429,922 281,039
---------- ----------
Net Property & Equipment 236,459 415,000

Other Assets
Available For Sale 1,059,875 1,059,875
---------- ----------
TOTAL ASSETS 2,270,775 2,701,378
========== ==========
Current Liabilities
Accounts Payable 121,010 184,972
Accruals & Deferred Income 153,042 167,809
Deferred Taxation on Investments 312,782 312,782
Current Portion Of Long Term Lease Obligations 24,987 12,844
---------- ----------
Total Current Liabilities 611,821 678,407

Creditors
Long Term Lease Obligations 15,101 13,893

Stockholders' Equity
Common Stock $.001 par value
Authorised 20,000,000 shares
Issued Ordinary Share Capital 7,095 6,738
Paid In Capital 9,784,415 7,270,155
---------- ----------
9,791,510 7,276,893

Deficit Accumulated During
The Development Stage (8,814,132) (5,817,807)
Accumulated other Comprehensive income 666,475 549,992
---------- ----------

Total Stockholders' Equity 1,643,853 2,009,078
---------- ----------

Total Liabilities & Stockholders' Equity 2,270,775 2,701,378
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

47
<PAGE>
Consolidated Statement of Operations
Cumulative Period May 2, 1996(Date Of Inception) Through December 31, 1999
<TABLE><CAPTION>
<S> <C> <C> <C> <C>
Twelve Months Cumulative to
=============================== -------------
1999 1998 1997 Dec 31, 99

Revenue 530,559 536,021 392,083 1,458,663
---------- ---------- ---------- ----------
Total Revenue 530,559 536,021 392,083 1,458,663

Cost Of Revenue 2,397 29,774 10,307 42,479
---------- ---------- ---------- ----------
Total Cost Of Revenue 2,397 29,774 10,307 42,479
---------- ---------- ---------- ----------
Gross Margin 528,162 506,247 381,776 1,416,184

Operating Expenses
Sales & Marketing Costs 1,248,969 1,055,499 476,336 2,780,804
General & Administration 755,810 896,809 774,051 2,621,236
Research & Development 1,217,021 1,526,142 1,293,667 4,297,197
---------- ---------- ---------- ----------

Total Operating Costs (3,221,800)(3,478,450)(2,544,054)(9,699,237)

Other Income/(Expenses)
Taxes other than Income Taxes (4,262) 4,335 (15,978) (15,905)
Currency Exchange Differences (135,015) 44,257 (82,212) (89,559)
Provision for Doubtful Debts 0 0 (164,699) (164,699)
Interest Income 12,896 81,255 112,576 237,093
Depreciation (174,076) (198,538) (110,114) (489,265)
Loss on Disposal of
Motor Vehicles (2,228) (6,516) 0 (8,744)
Total Other Income/(Expense) (302,685) (75,207) (260,427) (531,079)
---------- ---------- ---------- ----------
Loss Before Income Taxes (2,996,323)(3,047,410)(2,422,705)(8,814,132)

Provision for Income Taxes 0 0 0 0
---------- ---------- ---------- ----------
Net Loss (2,996,323)(3,047,410)(2,422,705)(8,814,132)
========== ========== ========== ==========
Earnings Per Share Of Common Stock
Average Shares Of 13,169,323 12,903,798 12,587,367
Common Stock Outstanding
Loss Per Share Of (0.23) (0.24) (0.19)
Common Stock

</TABLE>
The accompanying notes are an integral part of these financial statements

48
<PAGE>
Consolidated statement of Comprehensive Income
<TABLE>
<CAPTION>

Cumulative to
1999 1998 1997 December 31, 99
=============================== -------------
<S> <C> <C> <C> <C>
$ $ $ $
Net Loss (2,996,323)(3,047,410)(2,422,705) (8,814,132)

Foreign Currency 116,482 (23,438) 23,837 85,593

Unrealised Gains on Securities 0 580,882 0 580,882
(Net of Tax)
---------- ---------- ---------- ----------
Net Loss after (2,879,841)(2,489,966)(2,398,868) (8,147,657)
Foreign Currency ---------- ---------- ---------- ----------
Translation Adjustment.

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

49
<PAGE>
Consolidated Statement Of Cash Flows
Period January 1,1999 to December 31, 1999
Cumulative Period May 2, 1996(Date Of Inception) Through December 31, 1999

1999 1998 1997 Cumulative
Dec 31, 99
<S> <C> <C> <C> <C>
$ $ $ $
Cash Flows From Operating Activities
Net Loss (2,996,323)(3,047,410)(2,422,705)(8,814,132)
Adjustments To Reconcile Net Loss To Net Cash
Used For Operating Activities:
Depreciation 148,883 174,220 100,282 429,922
Decrease/(Increase) In Prepaid Expenses 69,111 (93,899) 23,767 (51,655)
(Decrease)/Increase In Deferred Income (14,767) 87,675 80,134 153,042
& Accruals
(Decrease)/Increase In Accounts Payable (50,611) 48,410 62,305 161,098
(Increase) In Accounts Receivable (20,625) (176,725) (52,062) (249,412)
Decrease/(Increase) In Other Receivable 322,500 (322,500) 0 0
---------- ---------- ---------- ----------
(2,541,833)(3,330,229)(2,208,279)(8,371,136)

Cash Flows From Investment Activities
Disposal/(Purchase) 29,658 (100,984) (490,312) (666,381)
of Computers, Equipment & Vehicles
Cash Flows From Financing Activities
Proceeds From The Issuance Of Common Stock 2,514,616 765,000 2,520,000 9,625,298
---------- ---------- ---------- ----------
Effects Of Exchange Rate Changes On Cash 116,482 (23,438) 23,837 85,592
---------- ---------- ---------- ----------
Net Increase/(Decrease) In Cash & Cash 118,922 (2,689,651) (154,754) 673,372
Equivalents
Cash & Cash Equivalents At Beginning 554,450 3,244,101 3,398,855 0
of Period ---------- ---------- ---------- ----------
Cash & Cash Equivalents At End of Period 673,372 554,450 3,244,101 673,372
---------- ---------- ---------- ----------

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

50
<PAGE>
Condensed Consolidated Statement of Stockholders Equity
Period From Inception Through December 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated Other
Common Stock Paid-In During Comprehensive
Shares Amount Capital Development Income
0 $ $ $ $
<S> <C> <C> <C> <C> <C>
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)

September 8, 1997 Scrip Dividend
Share Issue 1 for 1 6,276,600

November 25 Issuance of Common
Stock at $8 Per Share 315,000 315 2,519,685 - -

Stock Issued As Commissions:
November. 1997 At $8 Per Share 22,050 22 176,378 - -

Issuance Expenses Of Capital Stock (176,400) - -

Net Loss For The Period To 31-Dec-97 - (2,422,707) -

Translation Adjustment
for the Period for Cash 23,837

Balance At 31-Dec-97 12,890,250 6,614 6,339,068 (2,770,399) (7,452)

May 1 Issuance of Common Stock
at $10.38 Per Share. 16,000 16 166,195 - -

December 23 Issuance of Common Stock
at $7.50 Per Share 103,000 103 772,397 - -

Stock Issued as Commission
December. 1998 At $7.50 Per Share 5,110 5 38,320 - -

Issuance Expenses Of Captial Stock (45,825) - -

Net Loss For The Period To 31-December-98 - (3,047,410) -

Translation Adjustment
for the Period for Cash - - (23,437)

Unrealised gain - - 580,882
---------- ----- --------- ---------- --------
Balance At 31-December-98 13,014,360 $6,738 $7,270,155 ($5,817,809) $549,993
---------- ----- --------- ---------- --------

51
<PAGE>
Condensed Consolidated Statement of Stockholders Equity (Con't)
Period From Inception Through 31-Dec-99
Deficit
Accumulated Other
Common Stock Paid-In During Comprehensive
Shares Amount Capital Development Income
0 $ $ $ $
Brought forward Balance as
at 31- December -98 13,014,360 6,738 7,270,155 (5,817,809) 549,993

March 23 Issuance of Common Stock
at $7.50 Per Share. 30,000 30 224,970 - -
Issuance Expenses Of Capital Stock (11,250) - -

March 31 Issuance of Common Stock
at $7.50 Per Share. 10,000 10 74,990 - -

April 6 Issuance of Common Stock
at $7.50 Per Share 11,000 11 82,489 - -

April 12 Issuance of Common Stock
at $7.50 Per Share 7,000 7 52,493 - -

May 19 Issuance of Common Stock
at $7.50 Per Share 40,000 40 299,960 - -

June 6 Issuance of Common Stock
at $7.50 Per Share . 4,200 4 31,496 - -
Issuance Expenses of Capital Stock (31,500) - -

July Issuance of Common Stock
at $7.50 Per Share. 70,000 70 524,930 - -
Issuance Expenses of Capital Stock (23,125) - -

Aug Issuance of Common Stock
at $7.50 Per Share. 14,000 14 104,986 - -

Sept Issuance of Common Stock
at $7.50 Per Share. 169,966 170 1,277,321 - -
Issuance Expenses of Capital Stock (88,250) - -

Oct Issuance of Common Stock - - -
at $7.50 Per Share . 1,960 1 14,699 - -
Issuance Expenses of Capital Stock (14,700) - -

November Issuance Expenses of Capital Stock - (5,250) - -

Net Loss For The Period - (2,996,323) -
To 31-Dec-99 - - -

Translation Adjustment - - -
For The Period for Cash - - 116,482
---------- ----- --------- ---------- --------
Balance at Dec 31, 1999 13,372,486 $7,095 $9,784,415 ($8,814,132) $666,475
---------- ----- --------- ---------- --------

</TABLE>

The accompanying notes are an integral part of these condensed consolidated
financial statements.

52
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. OPERATIONS
Jyra Research Inc ("Jyra" or the "Company") was incorporated on May 2, 1996
under the laws of Delaware. The Company designs, develops, manufactures, and
markets its "Service management architecture" (SMA) to (i) measure application
response time, and (ii) identify network problems caused by the constant
increase in network traffic combined with the growing complexity of networks
and network ownership scenarios. The problems result in escalating costs and
major systems failures across the corporate spectrum. Management believes
that current devise based network management systems do not have the
capability to effectively deal with these problems.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary after elimination of inter company accounts and
transactions.

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.

Cash and cash equivalents
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.

Property and equipment
Property and equipment are stated at cost less accumulated depreciation.
Major expenditures for property and those which substantially increase useful
lives are capitalised. 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.

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.

53
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Available for sale securities
Securities for which the company does not have the intention to hold for the
long term are classified as available for sale and are carried at fair value
based on quoted market prices at the balance sheet date. Unrealised gains or
losses are reported as part of other comprehensive income.

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.
Diluted earnings per share are the same as primary earnings per share. The
Board of Directors authorised a 2 - for - 1 stock dividend in the form of a
stock dividend of the Company's $0.001 par value common stock which was
effective September 1997. All references in the accompanying consolidated
financial statements to the number of common shares and per share amounts for
fiscal year 1997 prior periods presented have been restated to reflect the
stock dividend.

Income taxes
Income taxes have been provided using the liability method in accordance with
FASB statement No 109, Accounting for income taxes.

Segment and Geographic Information.
The Company operates in one business segment, which is of designing,
developing, and marketing computer network management systems to (i) maximise
network productivity, (ii) minimise network downtime, and (iii) solve network
problems caused by the constant increase in network traffic, combined with the
growing complexity of networks.

Comprehensive Income (Loss).
Accumulated other comprehensive income is primarily comprised of accumulated
translation adjustments.

Derivative Instruments and Hedging Activities.
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities
("SFAS 133"). SFAS 133 establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that
derivatives be recognised in the balance sheet at fair value and specifies the
accounting for changes in fair value. This statement is effective for all
fiscal quarters of fiscal years beginning July 1, 2000, and will be adopted by
the Company for its fiscal year 2001. The Company is currently assessing the
impact of adoption of this pronouncement on its financial statements, but does
not expect it to have a material impact.

54
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. CONCENTRATIONS OF CREDIT RISK

Foreign currency translation
The Company have determined that the US dollar is the "functional currency" of
its operations. All foreign currency assets and liability amounts are
remeasured into US dollars at end - of - period exchange rates. Foreign
currency income and expenses are translated at average exchange rates in
effect during the year. Unrealised currency adjustments in the consolidated
balance sheet are accumulated in stockholders equity. Exchange gains and
losses arising from retranslated of foreign currency - denominated monetary
assets and liabilities were included in income in the period in which they
occur.

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, and SOP 97-2, 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 capitalise 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.

4. SUMMARY INFORMATION FOR THE COMPANY'S OPERATIONS BY GEOGRAPHIC LOCATION
<TABLE>
<CAPTION>
Twelve Months
<S> <C> <C> <C>
$ $ $
1999 1998 1997
Revenue
To Customers from US operations 61,465 162,786 55,775
To Customers from UK operations 469,094 373,235 336,308
---------- ---------- ----------
Total Revenue 530,559 536,021 392,083
---------- ---------- ----------

Operating Loss
US operations (285,187) (558,522) (790,339)
UK Operations (2,408,451) (2,413,681) (1,371,939)
---------- ---------- ----------
Total operating loss (2,693,638) (2,972,203) (2,162,278)
---------- ---------- ----------

Identifiable Assets
US operations 1,754,477 2,056,537 3,303,564
UK operations 516,298 644,841 507,702
---------- ---------- ----------
Total Identifiable Assets 2,270,775 2,701,378 3,811,266
</TABLE>

55
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. COMMITMENTS AND CONTINGENCIES

Leases
Property plant and equipment includes the following amounts for leases that
have been capitalised at December 31, 1999.
1999 1998
$ $

Vehicles 88,310 91,165
Less allowance for amortisation 39,881 17,804
------ ------
48,249 73,361
------ ------

Amortisation of leased assets is included in depreciation expenses. Future
minimum payments under capital leases with initial terms of one year or more
consisted of the following at December 31, 1999:

2000 29,594
2001 15,018
------
Minimum lease payments 44,612
Interest (4,524)
Fees (161)
------
Present value of net minimum lease payments 39,927

The Company leases its United Kingdom facilities from a third party. The
lease is for five years at a rental rate of 40,000 British Pounds per annum
(equivalent to $64,726). The current lease expires August 2004.

56
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. INCOME TAX
No provision for income taxes is required in the periods 1999, 1998 and 1997
due to losses incurred by the company.

The Company's deferred tax assets, deferred tax liabilities and deferred tax
valuation allowances at December 31, are as follows:-
<TABLE>
<CAPTION>
1999 1998
$ $
<S> <C> <C>

Deferred tax asset
US Federal and State net operating loss carry forwards 652,000 550,000
Outside US 2,100,000 1,400,000
--------- ---------
Total deferred tax asset 2,752,000 1,950,000
Less: valuation allowance (2,752,000) (1,950,000)
--------- ---------
Net deferred tax asset 0 0

Deferred tax liability 312,782 312,782
</TABLE>

The deferred tax asset arises due to the net operating loss carry forwards.
Management has based the valuation allowances on the fact that it is in the
development stage and because of the risky nature of the industry. The
valuation allowance has increased by $802,000, $1,350,000 and $600,000 for the
years ended December 31, 1999, 1998 and 1997 respectively.

The deferred tax liability arises due to the unrealised gain on available for
sale securities. This liability may be able to be offset, at least in part,
by US non operating loss carry forwards.

The company has US federal and state non operating losses of approximately
$1,600,000 respectively which expire in years beginning 2005 through 2019.
Utilisation of the US and state net operating loss carry forwards may be
subject to a substantial annual limitation due to the ownership change
limitations provided by the Internal Revenue Code of 1986, as amended, and
similar state provisions. The annual limitation may result in the expiration
of net operating loss carry forwards before full utilisation.

For tax purposes, the UK based subsidiary company has approximately $6,900,000
(1998 $4,600,000) of net operating loss carry forwards that are available for
offset against profits of the same trade indefinitely.

57
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. AVAILABLE FOR SALE SECURITY AND SHARE EXCHANGE

The Company has entered into an agreement dated 16 March 1998 (the
"Agreement") with Path 1 Network Technologies Inc ("Path 1"). Path 1 was
incorporated on 30 January 1998 under the laws of Delaware. Path 1 is
developing technology to enable existing and new computer, telephone and video
broadcast (including cable TV) networks and systems to each transmit all three
types of information over one line at the same time with excellent quality of
service, and provide expanded capabilities. Path 1's technology will act as a
"traffic cop", prioritising packet flow, eliminating traffic congestion and
packet collision of digital information. The Agreement allowed for Jyra to
make a strategic investment in Path 1 and for Path 1 to make a strategic
investment in Jyra by Path 1 exchanging its Preferred Stock for common stock
of Jyra. The agreement became effective on 21 April 1998. The Board of
Directors of Path 1 approved the creation of a class of Preferred Stock to be
issued upon the completion of the Path 1 Public Offering in order fulfil its
obligations under the agreement for the purpose of Path 1 making a strategic
investment in Jyra, and for Jyra making a strategic investment in Path 1. The
Preferred Stock issued to Jyra was non-assignable for 2 years, non-voting and
did not bear interest. After nine months, it could be convertible, at Jyra's
option, into 277,018 shares. The Preferred Stock was also redeemable by Path
1, at its option, at any time after nine months by Path 1 shall neither issue
any debt securities for a period of two (2) years from the completion of the
Offering nor issue any warrants in connection with an equity financing,
without Jyra's consent, which will not be unreasonably withheld.

The Company acquired the shares in Path 1 for $166,211 and is holding these as
available for sale securities. At the year end the market price of the shares
was $10.50. The accounting treatment is therefore as follows:

Purchase consideration 166,211
Add unrealised holding gain 893,664
--------
Aggregate fair value 1,059,875

The holding gain has been recognised as follows:
$

Unrealised holding gain 580,882
Deferred tax liability at 35% 312,782
-------
893,664
-------

58
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. COMPENSATION AND BENEFIT PROGRAMS

EMPLOYEE STOCK PURCHASE PLAN.

Employee stock purchase 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 authorises the
purchase of up to 1,000,000 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 809,000 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. The Plan was adopted on 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.

Of the 809,000 shares granted, 50,000 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

Of the 809,000 shares granted, 594,000 are exercisable according to the
following schedule:
Percent exercisable Exercise event

25% One year from grant date
25% Two years from grant date
25% Three years from grant date
25% Four years from grant date

59
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Of the 809,000 shares granted, 125,000 are exercisable according to the
following schedule:
Percent exercisable Exercise event

50% One year from grant date
25% Two years from grant date
25% Three years from grant date

Of the 809,000 shares granted, 10,000 are exercisable according to the
following schedule:
Percent exercisable Exercise event

25% Four months from grant date
25% Two years from grant date
25% Three years from grant date
25% Four years from grant date

Of the 809,000 shares granted, 30,000 are exercisable according to the
following schedule:
Percent exercisable Exercise event

33 1/3% One year from grant date
33 1/3% Two years from grant date
33 1/3% Three years from grant date

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.

60
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Transactions involving the Plan are summarised as follows:
<TABLE
[CAPTION]
[S] [C] [C] [C] [C]
AVERAGE
OPTION PRICE
OPTION PRICE PER
OPTION SHARE SHARES RANGE PER SHARE SHARE

Balance At Jan 1, 97 350,000 0.20 - 3.50 $1.65
Granted 698,000 4.50 - 9.25 $7.99
Exercise - -
Forfeited 144,000 0.20 - 8.50 $3.09
Balance at 31 Dec 97 904,000

Balance At Jan 1, 98 904,000 0.20 - 9.25 $6.36
Granted 200,000 5.50 - 9.50 $7.78
Exercise - -
Forfeited 150,000 0.20 - 9.25 $5.44
Balance 31 Dec 98, 954,000

Balance At Jan 1, 99 954,000 0.20 - 9.25 $6.93
Granted 55,000 8.00 $8.00
Exercise - -
Forfeited 200,000 3.50 - 8.50 $7.23
Balance 31 Dec 99, 809,000 0.20 - 9.25 $6.83

(1) Fiscal year 1997 and prior periods have been adjusted for the 2-for-1
stock Dividend, in the form of a stock dividend, approved by the Company's
Board of Directors, which was effective Sept 1997.

Of the 809,000 OUTSTANDING AT DECEMBER 31, 1999 448,250 ARE EXERCISABLE AT
DECEMBER 31, 1999 At December 31, 1999 there were 191,000 shares available
for future grants.

Stock option Executive Plan for key executives

The Company has adopted the Executive Stock Option Plan (the "Executive Plan")
to attract and retain Key executive of, or independent Advisors to the Company
or any of its subsidiaries or affiliates. The Executive Plan authorises the
purchase of up to 300,000 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 255,000 shares of the Company's Common Stock at varying
exercise prices. The Executive 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

61
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

participate in the Executive Plan and the type, extent and terms of the stock
option grants and awards of restricted. The Executive Plan was adopted
September 1, 1998. The Executive 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.

Of the 255,000 shares granted, all are fully exercisable from the date of
grant. At Dec 31, 1999 there were 255,000 shares under option plan for key
employees and there were 45,000 shares available for future grants.

Transactions involving the Executive Plan are summarised as follows:

<TABLE>
<CAPTION>
AVERAGE
OPTION PRICE
OPTION PRICE PER
OPTION SHARE SHARES RANGE PER SHARE SHARE
<S> <C> <C> <C>

Balance At Jan 1, 98 - - -
Granted 255,000 $5.50 $5.50
Exercise - - -
Forfeited - - -
Balance 255,000
December 31, 1998

Balance At Jan 1, 99 255,000 $5.50 $5.50
Granted - - -
Exercise - - -
Forfeited - - -
Balance 255,000 $5.50 $5.50
December 31, 1999

</TABLE>

OUTSTANDING AT DECEMBER 31, 1999, 255,000 OF WHICH 255,000 ARE EXERCISABLE AT
DECEMBER 31, 1999

For purposes of the pro forma disclosure, the fair value of each option grant
is estimated on the date of grant using the Black-Scholes option pricing
model with the following assumptions used for grants in 1999, 1998,and 1997,
respectively: risk-free interest rates of 5.75%, 5.5% and 6.3%; volatility
factors of the expected market price of the Company's Common Stock of 60% and
a weighted-average expected life of the options of 4 years. There was no
dividend yield included in the calculation as the Company does not pay
dividends. The weighted-average fair value of options granted during 1999,
1998 and 1997 was $3.26, $3.63 and $3.84.

62
<PAGE>
REPORT OF INDEPENDENT AUDITORS
to the shareholders and Board of Directors Jyra Research Inc.

We have audited the accompanying consolidated balance sheets of Jyra Research
Inc. (a development stage enterprise) as of December 31, 1999 and 1998 and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1999 and for the
period May 2, 1996 (inception) through December 31, 1999. These financial
statement are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with United States 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 from 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 audits provide
a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Jyra Research
Inc. at December 31, 1999 and 1998 and the consolidated results of its
operations and its consolidated cash flows for each of the three years in the
period ended December 31, 1999 and for the period May 2, 1996 (inception)
through December 31, 1999 in conformity with United States generally accepted
accounting principles.

Ernst & Young
Luton, England
March 29, 2000

63
<PAGE>
ITEM 9. Changes in and disagreements with accountants on
accounting and financial disclosures

NONE

64
<PAGE>
ITEM 10. Directors and executive officers of the registrant

EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of Jyra Research Inc and their ages as of March 27,
2000 are as follows:

NAME AGE POSITION

Paul Robinson 37 President, CEO, Chairman
of the Board

Peter Lynch 44 Director, VP-Technology

Roderick Adams 36 Director, VP-Corp. Development

Robin Elsom 39 Director, VP Product Development

Nigel Williams 35 Director -VP-Business
Development

Directors were elected on November 5, 1999 and are expected to hold
these positions until the next Annual General Meeting of Shareholders,
scheduled for 2000. There are no arrangements or understandings among any of
the directors regarding their election as director

Paul Robinson has served as Chairman of the Board of Directors,
President, and Chief Executive Officer of the Company since June 3, 1996. In
March 1998 Mr Robinson was appointed as a Director of Path 1 Network
Technologies Inc., a start-up company, which is engaged in the business
relating to computer, telephone and video networks. 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.

65
<PAGE>
Roderick Adams has served as a director of the Company since its
inception in May 1996. In March 1998, Mr. Adams was appointed as a Director
of Path 1 Network Technologies Inc., a start-up company, which is engaged in
the business relating to computer, telephone and video networks. 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.

Robin Elsom has served as a director of the Company since July 1998,
before that he served as a director of Jyra Research Ltd., 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 utilised 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. Mr Elsom intends to spend all of his time on the
Company's affairs.

Nigel Williams has served as a director of the Company since July 1998 as
VP of Business Development. Prior to that he was the UK Sales Director for
the Company from September 1997 to July 1998. From March 1992 through
September 1997 he held various positions at Cisco Systems rising to the
position of Regional Sales Director for the UK Banking Region. Prior to his
employment with Cisco Systems, Mr Williams was employed by Ungermann Bass
Corp., where he spent four years selling data networking systems to companies
in London England.

66
<PAGE>
Item 11. EXECUTIVE COMPENSATION.

<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE *

LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------------
AWARDS
------------
SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(1) COMPENSATION OPTIONS(#) COMPENSATION
- - ----------------------------- ------ --------- -------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Paul Robinson.................1999 46,500 0 0 0 0
President and Chief 1998 46,500 0 0 30,000 0
Executive Officer 1997 46,500 0 0 0 0

Peter Lynch ...............1999 46,500 0 0 0 0
Director, VP-Technical 1998 46,500 0 0 30,000 0
1997 46,500 0 0 0 0

Roderick Adams................1999 43,000 0 0 0 0
Director, VP-Corp, 1998 43,000 0 0 30,000 0
Development 1997 43,000 0 0 0 0

Robin Elsom...................1999 46,500 0 0 0 0
Director -VP Product 1998 46,500 0 0 30,000 0
Development 1997 46,500 0 0 300,000 0

Nigel Williams................1999 55,000 20,000 0 0 0
Director VP Business 1998 55,000 20,000 0 30,000 0
Development 1997 13,750 5,000 0 125,000 0
</TABLE>

(1) * All monetary amounts in this table are in English pounds sterling.

67
<PAGE>
OPTION GRANTS TO EXECUTIVE OFFICERS

Stock option grants made to any of the Named Executive Officers in the
fiscal year ended December 31, 1999.

NONE

Stock appreciation rights granted to the Named Executive Officers during
such year.

NONE

OPTION EXERCISES AND FISCAL YEAR-END VALUES

The following table sets forth information concerning the year-end number
and value of unexercised options with respect to each of the Named Executive
Officers. No options were exercised by the Named Executive Officers in fiscal
year 1999

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FY-END(#)(1) AT FY-END($)(2)
------------------- -----------------------
NAME VESTED UNVESTED VESTED UNVESTED
- - ---------------------------------------------------------------------- ----------- -----------
<S> <C> <C> <C> <C>
Paul Robinson......................................30,000 0 46,875 -
Peter Lynch........................................30,000 0 46,875 -
Roderick Adams.....................................30,000 0 46,875 -
Robin Elsom.......................................180,000 150,000 46,875 -
Nigel Williams....................................123,750 31,250 46,875 -
</TABLE>

(1) Each of the options listed in the table is immediately exercisable.

(2) Based on the fair market value of the Company's Common Stock at fiscal
year end December 31, 1999 and such value is equal to the closing price
($7.0625 per share), as reported by the OTC Bulletin Board, less the exercise
price payable for such shares.

68
<PAGE>
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 us 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) we believe 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.

NONE

69
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

SECURITY OWNERSHIP OF MANAGEMENT (1) (2)

TITLE OF CLASS NAME OF AMOUNT AND PERCENT
BENEFICIAL OWNER NATURE OF OF
BENEFICIAL CLASS
OWNERSHIP

Common Paul Robinson 1,500,000 (3) 11.2%
Hamilton House Direct
111 Marlowes
Hemel Hempstead
Herts HP1 1BB
United Kingdom

Common Peter Lynch 1,500,000 (4) 11.2%
Hamilton House Direct
111 Marlowes
Hemel Hempstead
Herts HP1 1BB
United Kingdom

Common Roderick Adams 1,490,000 (5) 11.1%
Hamilton House Direct
111 Marlowes
Hemel Hempstead
Herts HP1 1BB
United Kingdom

Common Robin Elsom 255,000 (6) 1.9%
Hamilton House Direct
111 Marlowes
Hemel Hempstead
Herts HP1 1BB
United Kingdom

Common Nigel Williams 123,750 (7) *
Hamilton House Direct
111 Marlowes
Hemel Hempstead
Herts HP1 1BB
United Kingdom

All executive officers and directors as a group
(5 persons) 4,868,750 36.4%

</TABLE>
* Less than one percent of the outstanding shares of Common Stock.

70
<PAGE>
NOTES - SECURITY OWNERSHIP OF MANAGEMENT

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options held by that person that are
currently exercisable or exercisable within 60 days of March 27, 2000 are
deemed outstanding. Such shares, however, are not deemed outstanding for the
purposes of computing percentage ownership of each other person. To the
Company's knowledge, the entities named in the table have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.

(2) Percentage ownership is based on 13,372,486 shares of Common Stock
outstanding on March 27, 2000.

(3) Includes 30,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable or exercisable within 60 days of March 27,
2000.

(4) Includes 30,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable or exercisable within 60 days of March 27,
2000.

(5) Includes 30,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable or exercisable within 60 days of March 27,
2000.

(6) Includes 255,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable or exercisable within 60 days of March 27,
2000.

(7) Includes 123,750 shares of Common Stock issuable upon exercise of options
that are currently exercisable or exercisable within 60 days of March 27,
2000.

71
<PAGE>
Item 13. Certain Relationships and Related Transactions.

During January 1999, the Company loaned to Path 1 Network Technologies
Inc. ("Path 1") $150,000. The loan, which did not bear interest, was repaid
on March 16, 1999 having completed their second round of funding in
February/March 1999. Mr. Paul Robinson, Chairman of the Board and Chief
Executive Officer of the Company, and Mr. Roderick Adams, Director and Vice-
President of Corporate Development of the Company, are directors of Path 1.
The Company 277,018 shares of Path 1, which represents approximately 5% of
Path 1's outstanding shares.

72
<PAGE>
PART IV

Item 14, Exhibits, Financial Statement Schedules and Reports on
Form 8-K

(a) Financial Statements

See list of financial statements set forth in "Item 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA."

(b) Reports on Form 8-K

NONE

3. (i) Articles of Incorporation. Filed as exhibit 3.01 (i) to Jyra
Research Inc. Registration Statement on Form S-1. SEC File No. 333-19183.

4. (ii) By-Laws. Filed as exhibit 3.01 (ii) to Jyra Research Inc.
Registration Statement on Form S-1. SEC File No. 333-19183.

5. Instruments defining the Rights of Security Holders, Including
Indentures. Reference is made to 3 (ii) above.

10. Material Contracts.

10.01 Amended and Restated Stock Option Plan. Filed as exhibit
10.01 to Jyra Research Inc. Registration Statement on Form S-1. SEC File No.
333-19183.

10.02 Technology License and Distribution Agreement dated July 19,
1996 with Sun Microsystems, Inc. Filed as exhibit 10.02 to Jyra Research Inc.
Registration Statement on form S-1. SEC File No. 333-19183. (Confidential
information has been omitted and filed separately with the SEC).

10.03 Form of Indemnification Agreement of Directors. Filed as
exhibit 10.03 to Jyra Research Inc. Registration Statement on Form S-1. SEC
File No. 333-19183.

10.04 Agreement dated March 26, 1998 between Jyra Research Inc.
and Socrates Inc. Filed as exhibit 10.04 to Jyra Research Inc. Annual Report
on Form 10K - filed March 31, 1999. SEC File No. 333-19183

10.05 Heads of Agreement dated July 24, 1998 between Jyra
Research Inc. and Siemens Nixdorf Informationssysteme AG. Filed as exhibit
10.05 to Jyra Research Inc. Annual Report on Form 10K - filed March 31, 1999.
SEC File No. 333-19183

73
<PAGE>
10.06 Executive Stock Option Plan dated September 1, 1998. Filed
as exhibit 10.06 to Jyra Research Inc. Annual Report on Form 10K - filed March
31, 1999.. SEC File No. 333-19183

10.07 Path 1 Option Agreement Between Franklin S. Felber and Jyra
Research Inc. dated January 25, 1999.

10.08 Path 1 Lock-Up Agreement dated January 25, 1999

21.01 Subsidiaries of the Registrant.

The only subsidiary of the Registrant is Jyra Research Ltd., a
corporation organised under the laws of the United Kingdom.

74
<PAGE>
SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 or 15 (d) OF THE SECURITIES ACT OF
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorised. IN THE TOWN OF HEMEL HEMPSTEAD,
ENGLAND, ON March 29, 2000.
Jyra Research Inc.

/s/ Paul Robinson
____________________
Paul Robinson,
President

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant
and in the capacities and on the date indicated.

/s/ Paul Robinson
____________________
Paul Robinson
President & CEO

/s/ Roderick Adams
_____________________
Roderick Adams
(Principal Financial
and Accounting Officer)
Director

/s/ Peter Lynch
_____________________
Peter Lynch
Director

/s/ Robin Elsom
_____________________
Robin Elsom
Director

75
<PAGE>

OPTION AGREEMENT

Agreement made this 25th day of January 1999 among and between
Franklin S. Felber, having an address at 13472 Calle Colina, Poway, CA 92064
("Felber"), Jyra Research Inc., having an address at Hamilton House, 111
Marlowes, Hemel Hempstead HP1 1BB, England ("Jyra"), and, as to paragraphs
(2), (3) and (5) only, Path 1 Network Technologies Inc., having an address at
Suite 230, 9339 Genesee Avenue, San Diego, CA 92121 ("Path 1").

WHEREAS, Felber desires to sell a portion of shares of Path 1
beneficially owned by him ("Shares") and

WHEREAS Felber is willing to grant Jyra an option to purchase said
Shares, and

WHEREAS Jyra desires to acquire an option to purchase said Shares
from Felber,

The Parties hereby understand and agree as follows:

(1) Felber hereby grants Jyra an irrevocable option to purchase up to
a total of 255,640 Shares as follows:

(a) 30,000 Shares may be purchased by Jyra during the
period from February 1, 1999 to February 28, 1999 at
a price of $4.00 per Share; and

(b) up to 225,640 Shares may be purchased by Jyra from
time to time up to and including the date which is
the EARLIER of (a) fifteen days after the date upon
which Path 1 receives a minimum of $2,000,000 from
investors in its current equity offering, or (b)
July 31, 1999, as follows:

(i) if the Shares are purchased on or before
April 30, 1999, the purchase price per
Share is $3.50; and

(ii) If the Shares are purchased between May 1,
1999 and July 31, 1999, the purchase price
per Share is $4.00.

(2) (a) In the event that Jyra does not exercise the option to
purchase all 30,000 Shares from Felber in accordance with
paragraph 1(a), the option to purchase up to 225,640 Shares
from Felber set forth in paragraph 1(b) shall be void and, in
such event, Felber shall have the right to sell all or a
portion of the 255,640 Shares (which are subject to the
option set forth in paragraphs 1(a) and 1(b)) in accordance
with Rule 144.

1
<PAGE>
(b) Path 1 hereby agrees that Felber is not an affiliate of
Path 1, accepts Felber's representations in "Seller's
Representation Letter dated January 25, 1999 (Exhibit 1 A
hereto), and agrees to cooperate in Felber's proposed sales
of Shares as per "Form 144 dated January 25, 1999" (Exhibit 1
B hereto) in the event that Jyra does not exercise the option
to purchase all 30,000 Shares from Felber in accordance with
paragraph 1(a). Path 1 has made its own independent

determination that, as of January 25, 1999, Felber has
satisfied all the conditions in Seller's Representation
Letter dated January 25, 1999, and that, as of January 25,
1999, Path 1 would approve Felber's sale of Shares pursuant
to Rule 144. Path 1 hereby agrees that it will take no steps
to change the status of Felber so that future sales of Shares
pursuant to Rule 144 remain available and approved.

(3) In the event Jyra purchases some but not all of the Shares
subject to the option in accordance with paragraph 1(b),
Felber shall have the right to sell the balance of any such
Shares not purchased by Jyra in accordance with Rule 144.

(4) Payment for the Shares shall be made in U.S. funds by bank or
certified check or by wire transfer, in no event later than
(a) February 28, 1999 with respect to sales under paragraph
1(a), (b) April 30, 1999 with respect to sales under
paragraph 1(b)(i), and (c) July 31, 1999 with respect to
sales under paragraph 1(b)(ii).

(5) This represents the entire Option Agreement between the
parties, superseding all prior agreements, and may only be
modified in writing signed by the parties.

Jyra Research Inc.

By /s/ Roderick Adams /s/ Franklin S. Felber
--------------------- ------------------------
Roderick Adams Franklin S. Felber
Director

Path 1 Network Technologies Inc.
As to paragraphs (2), (3) and (5) only

By /s/ Michael Berns
--------------------
Michael Berns
Director

By /s/ James Berns
------------------
James Berns
Secretary & General Counsel

January 25, 1999

LOCK UP AGREEMENT

The undersigned, holders in the aggregate of 3,595,000 shares of
common stock, $.001 par value of Path 1 Network Technologies Inc. ("Path 1")
("Shares"), hereby agree that until February 1, 2000, none of them shall
either offer for sale or sell any Shares, except for Franklin S. Felber
("Felber") who has the right to sell Shares pursuant to the terms of a
separate Option Agreement dated today (the "Option Agreement") between Felber
and Jyra Research Inc. ("Jyra") pursuant to which Felber has granted to Jyra
an irrevocable option to purchase up to 255,640 Shares. The restrictions
agreed to herein shall automatically lapse and be of no force or effect in the
event of any sales made in the context of a tender offer, merger, or other
takeover involving Path 1.

In the event that Jyra does not exercise that certain option to
purchase up to a total of 255,640 Shares in accordance with the terms of the
Option Agreement, Felber shall not be bound by the resale restrictions herein
respecting any and all such 255,640 Shares optioned to, but not purchased by,
Jyra and, in such event, shall be free to sell any such Shares in accordance
with the provisions of Rule 144.

The balance of the Shares held by Felber, viz. 255,640 Shares, shall
continue to be subject to the terms of this agreement.

This agreement shall not be effective unless signed by all parties
listed below.

/s/ Ronald D. Fellman /s/ Franklin S. Felber
- ----------------------- ------------------------
Ronald D. Fellman Franklin S. Felber

/s/ Rona Berns /s/ James Berns
- - - ---------------- -----------------
Rona Berns James Berns

/s/ Douglas Palmer /s/ John Hooker
- - - -------------------- -----------------
Douglas Palmer John Hooker