<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
__
|_X_| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
__
|__| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________to____________
Commission file number 333-19183
JYRA RESEARCH INC ( A Development Stage Enterprise )
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 98-0167341
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
HAMILTON HOUSE,111 MARLOWES, HEMEL HEMPSTEAD, HERTFORDSHIRE HP1 1BB UK
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(address of principal executive offices) (Zip Code)
(44) 1442 403600
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(Registrant's telephone number, including area code)
Indicate by check whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------ ------
As of June 30, 2000 there were outstanding 13,997,586 shares of the
Registrant's Common Stock (par value $0.001 per share).
<PAGE>
Jyra Research Inc.
FORM 10-Q
INDEX
PAGE NO.
--------
Cover Page 1
Index 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1999, June 30, 2000 and December 31, 1999 3
Condensed Consolidated Statements of Income -
three months ended June 30 1999, June 30 2000
six months ended June 30 1999, June 30 2000
and Cumulative since Incorporation May 2, 1996 4
Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 1999, June 30, 2000,
and Cumulative since Incorporation May 2, 1996 5
Consolidated Statement of Stockholders' Equity 6 - 8
from Incorporation through June 30, 2000
Notes to Condensed Consolidated Financial
Statements 9 - 10
Item 2. Management's Discussion and Analysis of Financial 11 - 22
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures 23
about market risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 2. Changes in Securities and Use of Proceeds. 24
Item 3. Defaults upon Senior Securities 24
Item 4. Submission of Matters to Vote of Security Holders 25
Item 5. Other Information 25
Item 6. Exhibits and Reports 25
Signatures 26
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
June 30, 99 June 30,00 December 31, 99
<S> <C> <C> <C>
Current Assets
Cash & Cash Equivalents 231,161 1,695,233 673,372
Prepaid Expenses 76,519 54,856 51,655
Accounts Receivable 135,487 170,911 249,414
---------- ---------- ----------
Total Current Assets 443,167 1,921,000 974,441
Property & Equipment
Computers, Equipment & Motor Vehicles 687,693 599,542 666,381
Less Accumulated Depreciation 357,232 461,665 429,922
---------- ---------- ----------
Net Property & Equipment 330,461 137,877 236,459
Other Assets
Available For Sale 1,059,875 1,059,875 1,059,875
---------- ---------- ----------
Total Assets 1,833,503 3,118,752 2,270,775
========== ========== ==========
Current Liabilities
Accounts Payable 157,280 98,646 121,010
Accruals & Deferred Income 78,453 149,339 153,042
Deferred Taxation on Investments 312,782 312,782 312,782
Current Portion Of Long Term Lease Obligations 24,987 18,146 24,987
---------- ---------- ----------
Total Current Liabilities 573,502 578,913 611,821
Creditors
Long Term Lease Obligations 26,087 0 15,101
Stockholders' Equity
Common Stock $.001 par value
Authorised 20,000,000 shares
Issued 13,116,560 shares at 30 June 1999
and 13,997,586 shares at 30 June 2000
Issued Ordinary Share Capital 6,840 7,720 7,095
Paid In Capital 7,993,805 11,566,140 9,784,415
---------- ---------- ----------
8,000,645 11,573,860 9,791,510
Deficit Accumulated During
The Development Stage (7,480,745) (10,277,385) (8,814,132)
Accumulated other Comprehensive income 714,014 1,243,364 666,475
---------- ---------- ----------
Total Stockholders' Equity 1,233,914 2,539,839 1,643,853
---------- ---------- ----------
Total Liabilities & Stockholders' Equity 1,833,503 3,118,752 2,270,775
========== ========== ==========
</TABLE>
The Balance Sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and foot notes required by generally accepted accounting principles for
complete financial statements.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
Period January 1,2000 Through June 30, 2000
Cumulative Period May 2, 1996(Date Of Inception) Through June 30, 2000
<S> <C> <C> <C> <C> <C>
Three Months Three Months Six Months Six Months Inception to
---------- ---------- ---------- ---------- ----------
June 30, 99 June 30, 00 June 30, 99 June 30, 00 June 30, 2000
Revenue 93,073 111,031 208,455 545,988 2,004,651
---------- ---------- ---------- ---------- ----------
Total Revenue 93,073 111,031 208,455 545,988 2,004,651
Cost Of Revenue 71 (384) 2,373 17,000 59,479
---------- ---------- ---------- ---------- ----------
Total Cost Of Revenue 71 (384) 2,373 17,000 59,479
---------- ---------- ---------- ---------- ----------
Gross Margin 93,002 111,415 206,082 528,988 1,945,172
Operating Expenses
Sales & Marketing Costs 317,797 250,085 634,841 492,650 3,273,454
General & Administration 182,546 160,594 335,842 289,047 2,910,283
Research & Development 313,921 285,844 622,067 551,935 4,849,132
---------- ---------- ---------- ---------- ----------
Total Operating Costs (814,264) (696,523) (1,592,750) (1,333,632) (11,032,869)
Other Income/(Expenses)
Taxes other than Income Taxes (1,020) (190) (1,479) (3,585) (19,490)
Currency Exchange Differences (74,543) (395,014) (195,893) (614,732) (704,291)
Provision for Doubtful Debts 0 0 0 0 (164,699)
Interest Income/(Expense) 9,246 41,070 8,045 40,325 277,418
Depreciation (43,209) (27,038) (86,942) (79,369) (568,634)
Loss on Disposal of
Motor Vehicles 0 501 0 (1,248) (9,992)
---------- ---------- ---------- ---------- ----------
Total Other Expense (109,526) (380,671) (276,269) (658,609) (1,189,688)
---------- ---------- ---------- ---------- ----------
Loss Before Income Taxes (830,788) (965,779) (1,662,937) (1,463,253) (10,277,385)
Provision for Income Taxes 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Net Loss (830,788) (965,779) (1,662,937) (1,463,253) (10,277,385)
========== ========== ========== ========== ==========
Earnings Per Share Of Common Stock
Average Shares Of 13,090,964 13,649,659 13,054,424 13,511,072
Common Stock Outstanding
Loss Per Share Of (0.06) (0.07) (0.13) (0.11)
Common Stock
Consolidated Statement Of Comprehensive Losses (Unaudited)
Three Months Ended June 30Six Months Ended June 30 Inception To
1999 2000 1999 2000June 30, 2000
---------------------------------------------------------------
Net Loss (830,788) (965,779) (1,662,937) (1,463,253) (10,277,385)
Foreign Currency 54,884 359,391 164,022 576,888 662,481
Unrealised Gains on Securities 0 0 0 0 580,882
---------- ---------- ---------- ---------- ----------
Comprehensive Loss (775,904) (606,388) (1,498,915) (886,365) (9,034,022)
---------- ---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Period January 1,2000 Through June 30, 2000
Cumulative Period May 2, 1996(Date Of Inception) Through June 30, 2000
<TABLE>
<CAPTION>
Six Months
-------------------------
June 30, 99 June 30, 00 Cumulative
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net Loss (1,662,937) (1,463,253) (10,277,385)
Adjustments To Reconcile Net Loss To Net Cash
Used For Operating Activities:
Depreciation 76,193 31,743 461,665
Decrease/(Increase) In Prepaid Expenses 44,247 (3,201) (54,856)
(Decrease)/Increase In Deferred Income (89,356) (3,703) 149,339
& Accruals
Increase/(Decrease) In Accounts Payable (3,355) (44,306) 116,792
Decrease/(Increase) In Accounts Receivable 93,300 78,503 (170,909)
Decrease In Other Receivable 322,500 0 0
---------- ---------- ----------
(1,219,408) (1,404,217) (9,775,354)
Cash Flows From Investment Activities
Purchase/Disposal 8,347 66,839 (599,542)
of Computers, Equipment & Vehicles
Cash Flows From Financing Activities
Proceeds From The Issuance Of Common Stock 723,750 1,782,350 11,407,648
---------- ---------- ----------
Effects Of Exchange Rate Changes On Cash 164,022 576,888 662,480
---------- ---------- ----------
Net (Decrease)/Increase In Cash & Cash (323,289) 1,021,860 1,695,232
Equivalents
Cash & Cash Equivalents At Beginning 554,450 673,372 0
of Period ---------- ---------- ----------
Cash & Cash Equivalents At End of Period 231,162 1,695,232 1,695,232
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
Consolidated Statement of Stockholders' Equity
Period from Inception Through June 30, 2000 (Unaudited)
<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 - - - - 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 $7.50 Per Share 5,110 5 38,320 - -
Issuance Expenses Of Captial Stock - - (45,824) - -
Net Loss For The Period To 31-December-98 - - - (3,047,410) -
Translation Adjustment
for the Period - - - - (23,437)
Unrealised gain - - - - 580,882
---------- ---------- ---------- ---------- ----------
Balance At 31-December-98 13,014,360 6,738 7,270,156 (5,817,809) 549,993
---------- ---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE>
Consolidated Statement of Stockholders' Equity (con't)
Period from Inception Through June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated Other
Common Stock Paid-In During Comprehensive
Shares Amount Capital Development Income
0$ $ $ $
<S> <C> <C> <C> <C> <C>
Brought forward Balance as
at 31- December -98 13,014,360 6,738 7,270,156 (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
To 31-Dec-99 - - - (2,996,323) -
Translation Adjustment
For The Period - - - - 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.
7
<PAGE>
Consolidated Statement of Stockholders' Equity
Period from Inception Through June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated Other
Common Stock Paid-In During Comprehensive
Shares Amount Capital Development Income
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
Brought forward Balance as
at 31- December -99 13,372,486 7,095 9,784,415 (8,814,132) 666,475
May Issuance of Common Stock 208,700 209 626,100 - -
at $3.00 Per Share
June Issuance of Common Stock 416,400 416 1,249,200 - -
at $3.00 Per Share
Issuance Expenses of Capital Stock - - (92,950) - -
Net Loss For The Period
To June 30, 00 - - - (1,463,254) -
Translation Adjustment
For The Period - - - - 576,888
---------- ---------- ---------- ---------- ----------
Balance at June 30, 2000 13,997,586 7,720 11,566,765 (10,277,386) 1,243,363
---------- ---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
8
<PAGE>
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
A. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Jyra
Research Inc ("Jyra" or the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, the unaudited condensed consolidated financial
statements reflect all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the financial position,
results of operations and cash flows for the interim periods presented. These
unaudited condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements, and notes thereto, for
the year ended December 31, 1999 included in the Company's Form 10K. The
results of operations for the three months ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2000.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
B. CASH AND CASH EQUIVALENTS
For purposes of the condensed consolidated balance sheets and statements of
cash flows, the Company considers money market funds and other similar
financial instruments with an original maturity date of three months or less
to be cash equivalents.
C. EARNINGS PER SHARE
Earnings per share are computed using the weighted average number of shares of
common stock outstanding during the period.
D. STOCK OPTION PLAN
The Company has adopted two separate stock option plans. The first is for key
employees and the second for key executives.
Stock option plan for Key Employees
The Plan for key employees was adopted July 20, 1996. The Plan provides for
the granting of incentive stock options as defined in Section 422 of the
Internal Revenue Code, as well as non incentive stock options. All options
are awarded at not less than the market price of the Company's common stock on
the date of grant. Such options expire on the fifth anniversary of the date
on which the option was granted. On March 30, 1997, the original Stock Option
Plan dated July 20, 1996 allowing for the grant of up to a total of 300,000
common shares was amended to allow for the grant of up to a total of 500,000
common shares. The stock option plan has been adjusted for the 100% stock
dividend and allows for the grant of up to a total of 1,000,000 common shares.
9
<PAGE>
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000 (Cont)
During the 2nd quarter 2000, no shares were granted to key employees.
The number of shares for which options may be granted cannot exceed 1,000,000
shares of the Company's common stock. The Plan shall terminate on the tenth
anniversary of its original effective date, July 20, 1996, after which no
awards may be granted.
At June 30, 2000 there were 814,000 shares under option plan for key
employees.
At June 30, 2000 there were 186,000 shares available for future grants under
the option plan for key employees.
Stock option plan for key executives
The Plan for key executives was adopted Sept 1, 1998. 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. The Plan allows for the grant of up to a total of 300,000
common shares.
During the 2nd quarter 2000, no shares were granted to Key executives.
At June 30, 2000, there were 255,000 shares under option plan for key
executives.
At June 30, 2000 there were 45,000 shares available for future grants under
the option plan for key executives.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements within the meaning
of section 27A of the Securities and Exchange Act of 1933, as amended, and
Section 21E of the Securities and Exchange Act of 1934, as amended, which
reflect the Company's current judgement on those issues. Because such
statements apply to future events, they are subject to risks and uncertainties
that could cause the actual results to differ materially. Important
factors which could cause actual results to differ materially are described in
the following paragraphs and are particularly noted under BUSINESS RISKS on
page 22 and in the Company's Annual Report on Form 10K for the year ended
December 31, 1999 which is on file with the Securities and Exchange
Commission.
Certain Statements contained in this Quarterly Report on Form 10-Q, and the
Annual Report on Form 10-K referred to above, including, without limitation,
statements containing the words "believes", "anticipates", "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 RISKS on Page 22 and the "Financial Risk
Management, "Potential Volatility in Operating Results, "Investments and
Alliances, "Competition", "Research and Development", "Manufacturing",
"Patents, Intellectual Property, and Licensing", "Future Growth Subject to
Risks" and "Other Risk Factors" sections contained within the Annual Report,
which identify important risk factors that could cause actual results to
differ from those contained in the forward looking statements.
BUSINESS (INTRODUCTION)
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 with its requirement for a highly reliable service.
- 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 and
escalating costs across the corporate spectrum. We believe that current
network management systems do not have the capability to directly detect and
to effectively deal with these problems.
The Company's executive offices are located at Hamilton House, 111 Marlowes,
Hemel Hempstead, United Kingdom and its telephone number at that location is
+44 1442 403600. The Company can also be reached by visiting its web-site at
http://www.jyra.com. For general inquiries, the reader may also email
[email protected].
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (cont)
Jyra has developed Service Management software for providing direct
measurement of the quality of end-to-end application performance. This allows
customers to effectively deliver reliable and fast e-commerce services,
implement tangible service level agreements (SLAs), and to measure the
improvements which technology investment has on user response time and hence
business efficiency.
Networking and e-commerce is a multi-billion dollar global market where growth
is spurred by the belief that the Internet is changing the way all people
work, live, play and learn. Over the last few years, there has been a key
shift in the role of the Internet and in how the Internet is perceived. What
was once a fairly complex tool used by an elite group of highly technical
individuals is now an everyday technology driving economic change globally by
creating new jobs and market opportunities. Management believes that this
trend and the response to this trend by the major telecommunications operators
is the largest factor which will drive future sales of the Company's
distributed application performance management products.
Background - History
We believe that existing network management devices are expensive, while being
limited to carrying out a single function. Existing networks probe devices or
network analysers 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
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (cont)
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 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.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (cont)
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.
We had a number of telecommunications companies at the initial stages of the
sales process and had progressed with SwissCom, Switzerland and Teledanmark,
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.
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 charged 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 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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (cont)
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 it could provide a strong basis for future sales growth.
The end of the third quarter ended September 30,1999, the Company started
focussing, initially with PSINet, on delivering e-commerce monitoring services
as a result of the growth in demand for monitoring e-commerce performance.
This decision was reinforced in the light of the freeze in IT capital
expenditure put in place by many companies in preparation for the millennium.
It was anticipated that the freeze would have adverse affect on product sales.
Management believes the fact that many companies are restricted from
implementing new IT related projects during the millennium period will be
offset by the demand for organisations to deliver e-Commerce services.
Companies restricted by the freeze in IT capital expenditure consider services
offered by a third party to be unaffected by the freeze. The Company sees
this growth in e-commerce driving the need for Application Hosters to deliver
service commitments based around the Company's products. The Management sees
this resulting in increasing service revenues.
During the fourth quarter 1999 PSINet Inc launched Jyra In-Site, a performance
monitoring solution from the Company. Jyra In-Site enables PSINet's customers
to proactively manage the response times experienced by the exploding number
of visitors to their web-site, thereby maximising their sales opportunity.
Jyra charges PSINet a monthly fee per customer per Web page monitored. PSINet,
one of the largest and Europe's fastest growing Application Service Providers
"ASPs", selected Jyra as the basis for its customer "paid-for" service
monitoring. This joint initiative is available 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.
Jyra In-Site was a first-to-market 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.
15
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (cont)
PSINet's Jyra In-Site Service was chosen during first Quarter 2000 by the
Electronic Telegraph, one of Europe's largest electronic publications, to
monitor their primary eCommerce web sites for user performance. PSINet's Jyra
In-Site provides the Telegraph with a precise view of the extent and the
frequency of peaks in reader interest. Jyra also provides a graphical view of
performance for each component of the web process including networks,
persistent sessions and load balancing. PSINet's Jyra In-Site service also
helps the Electronic Telegraph perform at all times, delivering better service
to readers and advertisers alike. This allows the Electronic Telegraph to
expand their registered user base and market to expand while making optimal
use of their IT systems. We believe that performance at peak times is critical
to sites as they expand their commercial opportunities and grow their
registered user base.
During the second quarter 2000 we announced that PSINet were expanding their
Jyra In-Site service to include additional monitoring locations in the US and
Europe. This carries it across to PSINet's Hosting Centres in Herndon,
Virginia, United States and Amsterdam, Holland. Jyra has sales staff stationed
at PSINet's London sales and hosting centre capitalising on the increasing
interest in the Company's product and working with PSINet on new Jyra based
services. While there has been a slower than expected uptake for this service
management believes that there is a strong demand for this kind of service.
During the first quarter 2000 we announced the release of Version 3 of our
Service Management Architecture that monitors the performance of a complete
eCommerce shopping experience. This new version embraces the functionality and
security principles now being implemented by the world's most successful e-
Commerce companies. Our Version 3 is geared towards companies who actually
transact business over the Internet, satisfying the growing demand to be able
to monitor all aspects of on-line shopping, on-line trading and e-commerce
processes. Jyra has made significant progress since the release of Jyra's
Version 3 product. The company has won contracts for its network performance
solutions software both from European wireless service providers and from a
new high performance carrier in the USA. The company has been developing a new
addition to the core product. Jyrascope was released during the second quarter
2000. JyraScope provides a new and innovative view of performance, providing
multiple reports on a single view.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (cont)
During the first quarter 2000, we announced the launch of JyraTime, a new
"Pay-as-you-use" time based licensing solution. JyraTime enables JyraTime
Certified Partners to conduct short-term performance audits and
troubleshooting. Jyra appointed 3net Ltd as the first accredited JyraTime
Certified Partner. The JyraTime program allows a Certified Partner to buy
short-term licenses of Jyra's high-end Version 3 product to conduct
performance audits and troubleshooting. JyraTime will increase Jyra's reach
and provides a means for the Company to derive value from the increasing
number of short-term performance audit requirements. These consultancy
assignments are expected to be the precursor to a full product purchase. In
Europe, a German Internet Service Provider (ISP) has successfully deployed
JyraTime within its national network, while, in the USA, new prospective
partners have begun evaluating JyraTime as a replacement for traditional, less
flexible alternatives. The JyraTime solution continues to generate a
significant amount of interest from major computer manufactures and
professional services consultancies. Consultant training has now been
completed with a number of partners. Management anticipates significant
accelerated interest in the rental option of its software during 2000.
During the second quarter 2000, YIPES Communications Inc., a leading
optical IP network provider, announced that it had selected Jyra to ensure
network quality of service, since Jyra helps guarantee superior management of
Yipes' leading-edge optical IP network. Yipes selected our Service Management
Architecture (SMA) as part of its premier network service management
portfolio. Jyra software agents will be placed at every major point of
presence (POP) on Yipes' next-generation network to monitor end-to-end network
and application response time for its customers.
Yipes is one of the first national provider of fully scalable bandwidth-on-
demand for business applications. With true bandwidth-on-demand, Yipes
customers pay only for what they need. Yipes is the defining provider of
a new class of managed optical IP networks. Yipes leverages the elegance of
native Ethernet technology to provide service that is smoothly scalable (in 1
Mbps increments) from 1 Mbps to 1 Gbps, enabling the next generation of
Internet services. Yipes' networks provide roughly twice the bandwidth at 80
percent of the price of traditional data communications services. Yipes
received $90 million in funding from various financial investors and strategic
investors Juniper Networks, Inc., Extreme Networks and Intel Capital.
Jyra wireless solutions are being used to monitor performance of next
generation interactive mobile services such as General Packet Radio Service
"GPRS"- data over mobile telephones, as well as WAP based services.
Performance of wireless applications is increasingly regarded as a
differentiator for mobile telecommunication companies delivering innovative
interactive services. Management believes the general public sees performance
of these services as critical for wider acceptance and historically, poor
performance has restricted the roll-out of e-commerce applications over mobile
technology. Now, as a result of GPRS, mobile telecommunication companies can
deliver high bandwidth services but must focus on delivering quality of
service and improved content. We believe Jyra's ability to monitor wireless
applications is increasingly seen as a key differentiator and an essential
component for wider acceptance of these services.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (cont)
New mobile services are creating revolutionary business opportunities by
providing a new channel to market for existing services and the possibility
for totally new services that can reach customers 24 hours a day wherever they
are. It has been estimated that in excess $15 Billion will be spent on GSM
transmission equipment this year as mobile telecommunication companies compete
to offer the best performing services delivering high speed e-commerce related
Internet applications to the mobile user.
Europe, for the moment, leads the world in wireless service delivery. European
manufacturers dominate the handset market and European wireless operators are
delivering among the worlds most sophisticated services to a greater density
of customers than anywhere else. The USA has led the Internet phenomenon. A
new era is approaching in which the two biggest growth trends the Internet
and Wireless is converging. As a result of this convergence wireless
operators, to remain competitive, must deliver networks that support higher
and higher performance Internet services to mobile phones. Management believe
the company is well positioned to take advantage of this emerging market with
the implementation of a customised system already taking place on client site.
Management believe the company is now well positioned to partner with either
marketing led companies, without Jyra's product capabilities or with more
established companies looking to cement their position in the wireless sector
by offering a broad range of wireless products and services as soon as
possible.
The company has historically emphasised product development over sales and
marketing. Management's current Business Plan for 2000 is heavily geared
towards implementing an aggressive Sales & Marketing strategy to capitalise
on its leading technology. Intrinsic to this strategy is the requirement to
have a strong and highly skilled sales force. During the Quarter ended
June 30, 2000 the Company has aggressively prosecuted the initial programme of
changes which Management believe to be required to provide a high calibre
sales force.
On 23rd June, 2000 the Company was pleased to announce the appointment of
Roderick "Archie" Adams as its C.E.O. Mr Adams took up the role from Paul
Robinson allowing Mr Robinson to focus on vital Business development
activities. The Company believes Mr Adams forthright style is necessary
to drive the ongoing changes in structure and focus required by the Business
Plan. One of the immediate results has been the engagement of Alttitude to
provide process and direction at this critical time for Jyra. In addition,
Murdo Macdonald a partner and Director of Alttitude is acting as the Company's
Sales Director. The Company believes Mr Macdonald brings to bear considerable
sales and sales management experience in the telecommunications and networking
industry.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (cont)
Shortly after the appointment of ALTTITUDE the Company was pleased to announce
that Mr Joop van Kammen has joined Jyra as Chief Operating Officer (COO) and
member of the Company's Board. Mr van Kammen principally carries the overall
responsibility of the sales strategy necessary to aggressively and effectively
drive Jyra's Performance Solution into a dominant position initially in the
European Service Provider market. Mr van Kammen brings unprecedented knowledge
and experience from the European Service provider market. Previously Mr van
Kammen held the position as Vice President Technology/Business Strategy of
World Online International B.V reporting directly to the CEO, until he tended
his resignation in March 2000, prior to the World Online Initial Public
Offering (IPO) when it raised in excess of $2.5 Billion. In concert with these
appointments an aggressive recruitment campaign was initiated to furnish the
Company with high calibre sales executives required for the Companies sales
force. The Company believes that this rapid pace of change will continue
through 2000.
The few changes which have occurred already have dramatically increased the
Companies coverage and understanding of the Service Provider market allowing
a focused drive in the Service Provider space to occur.
RESULTS OF OPERATIONS
Revenues for the six months ended June 30, 2000 was $545,988 compared to
$208,455 for the six months ended June 30, 1999. Revenues for the second
quarter ended June 30, 2000 was $111,031 compared to $93,073 for the quarter
ended June 30, 1999. The revenues for the quarter ended June 30, 2000
initiated radical steps to be taken to accelerate the reorganisation of the
salesforce.
Sales and Marketing expenses for the quarter ended June 30, 2000 was $250,085
compared to $317,797 for the quarter ended June 30, 1999. Sales and Marketing
expenses for the six months ended June 30, 2000 was $492,650 compared to
$634,841 for the six months ended June 30, 1999. During the Quarter management
took action to restructure its sales force to reflect the changing
requirements and business demands of the customers that we serve. These
changes have been aggressively perused after the quarter end June 30, 2000.
Management continues the challenging task of building a world class sales team
that the Company's technology requires. We anticipate releasing further
confirmation of these positive changes during the current quarter.
General and administrative expenses for the quarter ended June 30, 2000 was
$160,594 compared to $182,546 for the quarter ended June 30, 1999. General
and administrative expenses for the six months ended June 30, 2000 was
$289,047 compared to $335,842 for the six months ended June 30, 1999.
19
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (cont)
Research and Development expenses for the quarter ended June 30, 2000 was
$285,844 compared to $313,921 for the quarter ended June 30, 1999. Research
and Development expenses for the six months ended June 30, 2000 was $551,935
compared to $622,067 for the six months ended June 30, 1999. The Company
continued to work on its existing development program, and is actively
recruiting additional development staff.
Interest income was $41,070 in the quarter ended June 30, 2000. The interest
was generated from funds held on deposit and fixed term of one month or less.
Earnings(Loss) per share for the quarter ended June 30, 2000 was ($0.07).
The number of weighted average common shares outstanding was 13,649,659.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operating activities was ($1,404,217) for the six months
ended June 30, 2000. The primary expenditure of this cash was to fund the
operating expenses offset against initial revenue adjusted for depreciation,
offset by Prepaid Expenses, Accounts Payable and Accounts receivable.
Net cash used in investing activities was $66,839 for the six months ended
June 30, 2000. These funds were principally invested in additions to property
and equipment.
RECENT SALES OF UNREGISTERED SECURITIES
During the quarter ended June 30, 2000 the Company sold 625,100 common shares
at $3.00 per share to financial institutions and accredited investors for
total proceeds of $1,875,300.
As of June 30, 2000, the Company's principal sources of liquidity included
cash, cash equivalents, totalling $1,695,233. 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. Management's current Business Plan for 2000 is
heavily geared towards implementing an aggressive Sales & Marketing strategy
to capitalise on its leading technology. The Company plans to fund its
aggressive campaign through a mixture of sales revenue, strategic alliances
and equity funding.
20
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (cont)
We believe that we will have sufficient working capital to fund current levels
of operations through 2001, 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.
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 is developing technology
to 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.
21
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (cont)
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
third quarter of fiscal 2000.
BUSINESS RISKS
The Company's future operating results may be adversely affected by certain
factors and trends of its market which are beyond its control. The market for
Jyra's products is characterized by rapidly changing technology and evolving
industry standards. Jyra believes its future success will depend, in part, on
its ability to continue to develop, introduce and sell new products. The
Company is committed to continuing investments in research and development;
however, there is no assurance these efforts will result in the development of
products for the appropriate platforms or operating systems, or the timely
release or market acceptance of new products.
The Company's results may be adversely affected by the actions of existing or
future competitors including established and emerging computer,
communications, intelligent network wiring, network management and test
instrument companies. New and competitive entrants into the field of network
fault and performance management may come from such diverse entities as
established network hardware companies which have embedded systems in their
network hardware and smaller companies which market their software products as
having "network management" functionality. There can be no assurance Jyra
will be able to compete successfully in the future with existing or future
competitors. New entrants, new technology and new marketing techniques may
cause customer confusion, thereby lengthening the sales cycle process for the
Company's products, particularly the Company's system products. Increased
competition may also lead to downward pricing pressure on the Company's
products.
Service provider sales are characterized by long sales cycles and highly
variable quarter-on-quarter revenues. The company's operating results may vary
accordingly.
22
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Item 3 Quantitative and Qualitative Disclosures 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.
23
<PAGE>
PART II. OTHER INFORMATION
Jyra Research Inc
Item 1. Legal Proceedings
On September 20, 1999, PATH 1 NETWORK TECHNOLOGY filed a complaint against
several of its present and former officers, including Franklin Felber, former
Treasurer and a former director, in the San Diego County (Calif.) Superior
Court. This complaint, and all counterclaims arising out of it, have since
been resolved as to all parties other than Dr. Felber.
The Path 1 complaint against Dr. Felber is for breach of oral contract, breach
of fiduciary duty, breach of the covenant of good faith and fair dealing, and
unfair business practices, primarily in connection with the allocation of
founders' stock of Path 1. Path 1 is seeking damages. 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 defence
expenses from Path 1. Pursuant to a November 9, 1999 filing with the Delaware
Chancery Court, Dr. Felber is seeking to enforce his asserted rights to
indemnification and advancement of defence expenses from Path1.
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.
We have not yet determined any potential financial impact of the litigation.
There can be no assurance that it may not have a material adverse impact on
our financial position and results of operations.
As of June 30, 2000, 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 2. Changes in Securities and Use of Proceeds.
There has been no change or modification in the constituent instruments
defining the rights of holders of neither the corporation's sole class of
registered security nor any modification of the rights evidenced by such class
by issuance or modification of any other class of securities.
Item 3. Defaults Upon Senior Securities
There has been no default of any nature upon any form neither of senior
security nor in payment of interest or sinking or purchase fund instalment
with respect to any indebtedness of the registrant, nor any other form of
default upon any financial obligation.
24
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PART II. OTHER INFORMATION (Con't)
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Form 8-K
The Company did not file any reports on Form 8-K during the three
months ended June 30,2000.
25
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JYRA RESEARCH INC
(Registrant)
By: /s/ Roderick Adams
____________________
Roderick Adams
Chief Executive Officer
Director (Principal Financial
and Accounting Officer)
August 14, 2000
By: /s/ Paul Robinson
_____________________
Paul Robinson
Director
Vice President
- Business Development
August 14, 2000
26
