<PAGE>

                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, 1998


                              OR

      __
     |__|      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
               OF THE SECURITIES EXCHANGE ACT OF 1934

          For the transition period from _____________to____________


          Commission file number   333-19183


           JYRA RESEARCH INC. ( A Development Stage Enterprize )
          -----------------------------------------------------
          (Exact name of registrant as specified in its charter)


          Delaware                                    98-0167341
------------------------------------------------------------------------------
    (State or other jurisdiction of       (I.R.S. Employer Identification No.)
     incorporation or organization) 


    HAMILTON HOUSE,111 MARLOWES, HEMEL HEMPSTEAD, HERTFORDSHIRE    HP1 1BB  UK
------------------------------------------------------------------------------
(address of principal executive offices)                      (Zip Code)


                           (44) 1442 403600
   -----------------------------------------------------------------------
           (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  
                                       ------        ------



<PAGE>
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 26 March 1999, was $82,000,000 based on 
the closing sales price of the Company's Common Stock as reported on The OTC
Bulletin Board National Market. As of 26 March 1999, the registrant had 
outstanding 13,014,360 shares of Common Stock, par value $0.001, of which the
Company believes 8,614,360 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.










































<PAGE>

                               JYRA RESEARCH INC.
 
                             1998 FORM 10-K REPORT
 
                               TABLE OF CONTENTS
 
<TABLE>
<S>           <C>
PART I
  ITEM 1.     Business
  ITEM 2.     Properties
  ITEM 3.     Legal proceedings
  ITEM 4.     Submission of matters to a vote of security holders
 
PART II
  ITEM 5.     Market for the registrant's common equity and related
              stockholder
              matters
  ITEM 6.     Selected financial data
  ITEM 7.     Management's discussion and analysis of financial condition and 
              results of operations
  ITEM 7a     Quantitative and Qualitative disclosure about market risk 
  ITEM 8.     Financial statements and supplementary data
  ITEM 9.     Changes in and disagreements with accountants on accounting and 
              financial disclosures
 
PART III
  ITEM 10.    Directors and executive officers of the registrant
  ITEM 11.    Executive compensation
  ITEM 12.    Security ownership of certain beneficial owners and management
  ITEM 13.    Certain relationships and related transactions
PART IV
  ITEM 14.    Exhibits, financial statement schedules and reports on Form 8-K
</TABLE>
 



















                                       1
<PAGE>
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 I
 

(1)    Reference is made to "Glossary of Terms" at pages 18-20, for description
of terms used in this Annual Report.

ITEM 1. BUSINESS


Certain Statements contained in this Annual Report on Form 10-K, 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 "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 herein, 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. The Company is in the business of designing, 
developing, and marketing computer network management systems to (i) maximize 
network productivity, (ii) minimize network downtime, and (iii) solve network 
problems caused by the constant increase in network traffic, combined with the 
growing complexity of networks. These problems result in escalating costs and 
major systems failures across the corporate spectrum. Management believes that 
current network management systems do not have the capability to effectively 
deal with these problems. 

Jyra has developed a Service Management Architecture for providing a 
verifiable measurement of the quality of end-to-end application performance 
experienced by users connected through corporate networks or via the Internet. 
This allows customers to effectively deliver robust e-commerce solutions, 
implement tangible service level agreements (SLAs) and to measure their return 
on network investment against performance achieved. Networking is a multi-
billion dollar global market whose growth is spurred by the belief that the 


                                      2
<PAGE>
Internet is changing the way people all work, live, play and learn. Over the 
last year, 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 a 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.

The Company markets its products through its direct sales force to public 
network operators and other IT service providers, and to corporate customers 
through IT system integrators and consultancies ("resellers"). 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 
info@jyra.com.


STRATEGY

Jyra's strategy is to provide end-to-end distributed application performance 
management products to help its customers improve productivity and gain 
competitive advantage through realizing greater value from their investments 
in networking products and services.
The Company's current product line is a single range of distributed 
application and network performance monitoring products called the "Service 
Management Architecture".


SERVICE MANAGEMENT ARCHITECTURE

The SMA is a distributed network management architecture capable of providing 
detailed, accurate overviews of the network service being delivered to the 
actual end-user. It is this focus on the end-user that allows the SMA to be 
used as a tool to ensure both the integrity of the network and the ability to 
provide justification of Service Level Agreements to customers - be they 
internal or external. By persistently monitoring the services that are being 
provided the SMA can identify weak spots in the network configuration, brought 
on by hardware failure, congestion, or other causes.  

Key features of SMA include: 
*     All web-based configuration and reporting - manage from anywhere 
*     Remote summarization and thresholding to reduce network traffic 
*     Reliable alerting to upstream management stations 
*     Automated update of remote agents based on configuration to reduce 
      network management workload 
*     Easy integration into HP and Cisco management solutions. 
This section gives a summary of each of the products available from Jyra. All 
the products are developed in the Java language providing innovative, 
platform-independent network management solutions for the users of today's 
increasingly powerful and flexible computer networking environments.


                                      3
<PAGE>
By constantly monitoring the services that are being provided, the SMA is 
designed to identify weak spots in the network configuration brought on by 
hardware failure, congestion, or other causes. The SMA is comprised of: the 
Mid-Level Manager; and the Service Level Monitor. The SMA mounts on the 
Windows NT 4.0, platform and adheres to industry standards for SNMPv1 & 
SNMPv2. Requirements for dedicated PC and workstations are dependent upon 
specific traffic and monitoring environments. The SMA provides a suite of 
tools and agents to the network manager through an ordinary browser. These 
include: Network equipment availability monitoring; End-to-end application 
response time monitoring and trending of today's client server based 
applications; Internet/Intranet/Extranet response time monitoring of HTTP 
servers and proxy agents; Detailed end-to-end network latency monitoring and 
trending; Network bottleneck/slow link identification; Distributed SNMP data 
collection; Distributed trap relay; and Standard World Wide Web browser-based 
configuration and reporting. 

Mid Level Manager (MLM)

The MLM is the key unit of the Jyra Service Management Architecture (SMA). It 
allows individual agents to be configured en-masse to collect response time 
data against application services by distributing the tasks across its 
management architecture. In this way response time data can be collected from 
the various SLMs (see below) and summarized into reports that highlight either 
geographical or service-specific issues. The distributed nature of the 
management system allows all networks, regardless of size, to be managed 
effectively and efficiently without impacting user response time to the 
available services.

Service Level Monitor (SLM)

An SLM gathers remote application response time data for a network using 
scheduled Java agents, and carries out local summarization against the 
business reporting categories defined by the manager. It tests the response 
time data against configured thresholds and forwards any threshold events 
reliably through the MLM to upstream management stations. The SLM can also be 
responsible for local reporting, further reducing the workload and network 
traffic. Furthermore it has the ability to report the collected data to a Mid 
Level Manager (MLM) which collates and summarizes the acquired data from 
multiple SLMs into higher-level report structures for accurate pinpointing of 
network shortcomings and critical performance areas in large-scale networks.  
The SLM also includes support for distributed SNMP data collection.

Jyra HP OpenviewTM* Plug-In

The Jyra HPOV plugin allows the systems manager to have an application 
performance management view of the network alongside the traditional SNMP 
polled view in a familiar format, maintaining the value of their investment in 
HP Openview.







                                      4
<PAGE>
Intranet Service Monitor (ISM)

The Company sold the Jyra Intranet Service Monitor (ISM) in 1998 as a 
standalone monitoring solution for Internet Service Providers. It is no longer 
offered for sale. Existing customers are in the process of being upgraded to 
the distributed MLM/SLM solution. The Company may re-introduce a standalone 
entry-level monitoring solution during 1999.


CUSTOMERS AND MARKETS

Management believes that the Company's market is best described as the end-to-
end application performance management market, and believes that this market 
for additional management solutions will grow rapidly for three reasons:
1) the growth in importance to enterprise customers of Internet e-commerce, 
2) the competitive market for telecommunications services that has resulted 
from deregulation, and 3) the standardization driven by the growth of the 
Internet.
This market has recently been described by Bear Stearns as the "Business 
Oriented Network Management" market and a preliminary forecast by IDC 
(International Data Corporation) suggested that this market would grow at 70% 
per year to $3.1B worldwide by the year 2001 whilst the growth rate of 
traditional network management tools was forecast to decrease. Jyra is a 
founder member of the Application Performance Management Forum which was 
established in January 1999 to increase potential customer recognition of this 
market sector.
The market for LAN and WAN fault and performance management tools and 
systems is subject to changing competitive forces and new functionality in 
products; therefore, it is difficult for the Company to precisely estimate the 
requirements of its customers and, therefore, the size of its potential 
market. To date, the Company has sold products to customers primarily in the 
following industries - telecommunications, information providers and 
pharmaceuticals. The market for network monitoring equipment is a result of 
the general globalization of business. Management believes that the market for 
end-user oriented network management equipment is growing and that the 
opportunity exists for new products to find acceptance in the marketplace.
Management has limited forecasting resources, and cannot guarantee that this 
market growth will actually occur, or that the Company's products will be 
successful within this market if it develops.

Market Sectors

The Company divides its global market into two sectors: enterprise and service 
providers. 

Enterprise

Enterprise customers include corporations, government agencies, utilities and 
educational institutions. Enterprise customers tend to be those that place a 
high value either on information services, specifically, or on indicators of 
delivered quality, generally, such as banks and pharmaceutical companies.




                                       5
<PAGE>
Enterprise customers generally are large organizations with complex networking 
needs, usually spanning multiple locations and types of computer systems. 
Enterprises are major consumers of network management technology. Networks are 
crucial to the success of these companies. Although networks are important 
strategic assets for these companies, they also present major risks and 
constitute major expenses. Enterprises would typically deploy the Company's 
product for one of two reasons: to monitor the performance of some business-
critical application, typically web-based; or to evaluate the performance of 
an external service provider.  The Company's strategy is to target Enterprises 
through telecommunications companies as a delivery channel. The Company's 
sales force promotes its products within an Enterprise but steers the customer 
towards either a systems integrator or a telecommunications partner such as 
British Telecom or MCI. However, there can be no assurance that the Company 
will be able to successfully market its products to telecommunications 
companies or that these companies would distribute the Company's products to 
their customers

Service Providers

These customers provide data communication services, including 
telecommunication carriers, Internet Service Providers, cable companies, 
wireless communication providers, and IT outsourcers. Service Providers 
typically deploy the Company's products to demonstrate the provision of 
premium service to their large corporate customers, although as large IT 
consumers in their own right, may also deploy the Company's products to 
monitor internal applications. In 1997 the Company approached major 
telecommunications companies in the United Kingdom and the United States with 
a view to initiating trials of the Company's systems in the areas of 
networking and Internet problem solving in 1997. Trials continue in British 
Telecom and in January 1998, the Company's 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. Jyra receives 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 is still at an early stage, MCI has reorganized after the Worldcom 
merger, and although the Company's management believes it is accepted that this
service may begin generating revenue for the Company there can be no guarantee 
that any significant revenue will be received. However, Tele Danmark has 
purchased and is using the Company's products to monitor a specific large 
customer network; management therefore believes that other network operators 
will replicate this model.

Major Customers
In 1998, the Company's largest customers were Tele Danmark, Siemens, 
SmithKlineBeecham and Vodaphone. Tele Danmark accounted for almost 20% of the 
Company's revenue in 1998. Management believes that, at this stage in the 
Company's development of its business to service providers, revenues from 
service providers will be characterized by larger, sporadic purchases.







                                      6
<PAGE>
Sales Overview
The Company established a sales presence in the United States during April 
1997 and attended Interop in Las Vegas, Nevada in May 1997. At this show the 
Company publicly launched its first product, the MLM 1.0. In addition, 
during May 1997, the Company opened a sales office in San Jose, California. 
The Company hired two people for its United States operations. The Company has 
continued to market its products within the United States and Europe. 
The Company's Sales & Marketing organization consisted of eight persons as 
of 31st December, 1998. This has increased by two in Quarter 1 1999 and 
management plans to continue to increase the direct sales force. The Company 
currently operates 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. The US East Coast sales office was established in January 1999 The 
Company had an agreement with Socrates Inc, who were the exclusive marketer of 
Jyra's software products and applications into East Coast markets but this 
reseller agreement with Socrates has now ended.


The Company may take preliminary steps to expand its operations to Asia during 
1999, however there can be no guarantee that it will be successful. In 
addition, the Company is actively seeking additional sales staff in its 
existing markets. Additionally, the Company's sales are currently being made 
through multiple channels including resellers. These resellers provide system 
installation, technical support, and follow-up services to end-customers. 
Generally, the Company's international distributors have nonexclusive, 
countrywide agreements. 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's resellers sell and represent 
other companies' products that may be competitive with those of the Company. 
While the Company encourages these integrators and resellers to focus on 
its 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 the Company's products. In addition, these systems 
integrators and resellers may not have the resources to expand their 
operations to meet increased demand for the Company's products. 
The Company operates a single global pricing strategy, where product is 
priced in United States dollars. Additionally, the Company will accept 
international orders in United Kingdom pounds sterling, and may accept 
orders in Euros from 1999.
There can be no assurance that the Company will be able to attract 
additional qualified salespeople or that any salespeople hired will be 
successful. Moreover, there can be no assurance that the Company's products 
will be well received in the markets in which it operates or that its sales 
activities will result in significant revenues for the Company.

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.





                                     7
<PAGE>
Marketing

The Company's marketing efforts focus on the Company's products and services 
to meet customers' changing needs for service performance and fault 
management. Some of the programs in which the Company are involved include 
participation in industry trade shows, advertising in the trade press, 
conducting seminars and electronic marketing through the Internet. In 1998, 
the Company attended four US tradeshows including Interop. In common with 
many larger vendors, the Company has begun to question the value of 
tradeshows as a means of generating business rather than market awareness, 
and plans to attend fewer tradeshows in 1999. It has, however, booked space 
at Telecom'99 in Geneva as this only takes place once in four years and is 
primarily oriented towards service providers. The Company plans to focus its 
marketing resources on more tactical events with its partners. In 
particular, the Company has joined the Cisco Management Showcase, a US-wide 
roadshow taking place in March and April, 1999.


INVESTMENTS AND ALLIANCES

The end-to-end strategy pursued by Jyra requires a wide variety of 
technologies, products and capabilities. Additionally, the pace of change in 
the industry is very rapid. The combination of complexity and rapid change 
make it difficult for one company, no matter how large, to develop all 
technological solutions alone. Investments and alliances are 
tools used by the Company to fill gaps in its offerings and enable it to 
deliver complete solutions to its customers and prospects in target markets.
Satisfying customers' networking needs requires a constant monitoring of 
market and technology trends, plus an ability to act quickly. Jyra has a 
four-part approach to satisfying the need for new or enhanced networking 
products and solutions. In order of preference, this approach is to: develop 
new technologies and products internally; to make minority investments in 
other development stage companies and to form alliances with major vendors.


Minority Investments

The Company's strategy is to make minority investments in development stage 
companies whose technology it believes may be complementary to its existing 
products. The Company also typically takes a board position in these 
companies to supervise its investment.

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 






                                      8
<PAGE>
as a "traffic cop," prioritizing 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 Offering 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 did not bear interest. After the nine months, it was 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 will not be unreasonably 
withheld. 


Strategic Alliances
In the Quarter ended September 30 1998, Management 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. Management 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 29th October 1998, Jyra and Cisco announced a joint marketing campaign to 
target European service providers. The effect of this is that both Jyra and 
Cisco sales teams will 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. Management believes that the joint marketing 
arrangement with Cisco provides the Company with the reach and credibility to 
succeed in becoming a standard tool among telecommunications companies over the
course of next year. The Company views its relationship with Cisco as an 
important element of its sales strategy to service providers. The Company is 
actively seeking relationships with other parties to enhance this sales 
strategy. However, there can be no guarantee that any significant relationships
will materialise.

Jyra is 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 publicize 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.



                                      9
<PAGE>
Jyra SMA 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. The Company has trained Cisco staff in the 
selling of Jyra products, and will participate in a Cisco co-marketing program 
for management applications in 1999


Cisco Systems also, during the third quarter, chose Jyra's SMA as  offering 
value to their next generation web based management system Cisco Works 2000. 
Jyra provides a connection to Cisco Works 2000 customers with allows them to 
monitor performance of e-commerce and web sites.  CiscoWorks 2000 is a suite of
Web-based products offering a new method of integrating management 
applications with a vast scope of network information across various vendor 
platforms. Through standards-based Web technologies, third party applications 
are now easily integrated with CiscoWorks 2000 giving users unparalleled 
management capabilities.

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 1998. 


SUPPORT SERVICES

The Company supports its products domestically on a direct basis and 
internationally through a combination of direct support and with the 
assistance of systems integrators. The Company currently offers a range of 
services, including product support, education and network consulting, 
although management expects that its systems integrators will be the primary 
providers of services associated with the Company's product range. The 
Company's products are typically sold with a support agreement of up to one 
year included in the sales price. The Company also offers support services 
for its products beyond this initial period, for a fixed fee, through its 
support program. Customers whose products are covered under support 
agreements receive software updates, phone-in technical support, and various 
electronic support options. Warranty costs to date have not been 
significant.







                                    10
<PAGE>
COMPETITION

Jyra competes in the application, network and systems management markets, 
providing solutions for verifying the performance of applications across 
Intranets, Extranets, and the Internet. Rapid growth, converging 
technologies, and a conversion to new solutions that offer superior 
advantages characterize these markets.
Jyra's competitors include Computer Associates, Hewlett Packard, BMC and IBM 
as well as smaller niche companies, and large network management consultancies 
such as INS.
Several of the Company's current and potential competitors have greater 
financial, marketing and technical resources than the Company. The principal 
competitive factors in the markets in which the Company presently competes 
and may compete in the future are: price; performance; the ability to 
provide end-to-end solutions and support; conformance to standards; the 
ability to provide added value features such as security, reliability, and 
investment protection; and market presence.
Typical customers spend in excess of $250,000 on systems management 
products, and an additional $250,000 to make the products perform. Jyra's 
distributed approach, once implemented, will allow customers to buy 
individual components as required with an entry-level solution available 
from $30,000. The Company competes for revenue within the network and 
systems management market both with established and emerging; computer, 
communications, intelligent network wiring, network management and test 
equipment companies. The Company offers an alternative to these approaches 
and has not had its pricing eroded by direct like for like competition; 
however there can be no guarantee that such competition will not appear in 
the future. Currently, the primary competitors for the Company's products 
are Hewlett-Packard Company ("Hewlett-Packard") and the Tivoli product range 
from IBM. IBM and Hewlett-Packard have greater name recognition, more 
extensive engineering, manufacturing and marketing organizations and 
substantially greater financial, technological and personnel resources than 
those available to the Company. In addition to its current principal 
competitors, the Company expects substantial competition from established 
and emerging computer, communications, intelligent network wiring, network 
management, embedded systems and test instrument companies. Jyra expects 
that the overall number of competitors providing niche product solutions 
will increase due to the market's attractive growth. On the other hand, the 
Company expects the number of vendors supplying end-to-end 
telecommunications solutions will decrease, due to the rapid pace of 
acquisitions in the industry. There can be no assurance the Company will be 
able to compete successfully in the future with existing or anticipated 
competitors. Moreover, there can be no assurance that the Company's products 
will ever receive commercial acceptance or that there will ever be any 
meaningful sales of its products. Furthermore, new companies may emerge at 
any time with products that are superior, or that the marketplace perceives 
are superior, to the Company's products. New entrants, new technology and 
new marketing techniques may cause customer confusion, thereby lengthening 
the sales cycle process for the Company. Increased competition may also lead 
to downward pricing pressure on the Company's products. The LAN and WAN 
industries are characterized by rapid technological advances and can be 
significantly affected by product introductions and market activities of 



                                    11
<PAGE>
industry participants. Competitive pressures from companies which offer 
lower prices or introduce new products may, in some instances, result in 
delayed or deferred purchasing decisions by potential customers of the 
Company. Purchase delays or deferrals by potential customers of the 
Company's products may require the Company to reduce its prices. These 
competitive scenarios could materially adversely affect the Company's 
revenues and operating margins.


RESEARCH AND DEVELOPMENT

The Company is engaged in research and development efforts to develop 
customer solutions for each of its two market sectors: Enterprises and 
Service Providers. The Company focuses its product development activities on 
products that are responsive to customer requirements and that provide end-
to-end performance management solutions. The Company's 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. In 1998, the Company 
focussed its R&D efforts on two major activities: increasing its 
capabilities within Cisco based networks; and increasing scalability and 
robustness to meet the needs of network service providers. There can be no 
assurance that Jyra 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 the Company's expenditures 
for research and development costs have been expensed as incurred.


MANUFACTURING

The Company does not currently manufacture any hardware products. Its 
software products are currently supplied on compact disc (CD) but are capable 
of being distributed electronically via the Internet. The Company has no 
immediate plans to package its products into a hardware platform, but the 
Company may choose to do so if market opportunity dictates. The Company's 
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 the Company's products.


PATENTS, INTELLECTUAL PROPERTY AND LICENSING

At the present time, the Company does not own any patents relating to any of 
its products. 
Jyra's success is dependent in part upon its proprietary technology. The 
Company generally relies upon copyrights, trademarks and trade secret laws 
to establish and maintain its proprietary rights in its technology and 
products. There can be no assurance that any of these rights will not be 
challenged, invalidated or circumvented, or that any rights will provide 
competitive advantages to Jyra. In addition, the laws of some foreign 
countries may not permit the protection of Jyra's proprietary rights to the 
same extent as do the laws of the United States or the European Union. 



                                     12
<PAGE>
Although Jyra believes the protection afforded by its copyrights and 
trademarks has value, the rapidly changing technology in the network 
management industry makes Jyra's future success dependent primarily on the 
innovative skills, technological expertise and management abilities of its 
employees rather than on patent, copyright and trademark protection.
Jyra's products are designed to include software or other intellectual 
property licensed from third parties, specifically a Java Runtime 
Environment freely licensed by Sun Microsystems. 
While it may be necessary in the future to seek or renew licenses relating 
to various aspects of its products, Jyra believes that based upon past 
experience and standard industry practice, such licenses generally could be 
obtained on commercially reasonable terms. 
Because of the existence of a large number of patents in the networking 
field and the rapid rate of issuance of new patents, it is not economically 
practical to determine in advance whether a product or any of its components 
infringe patent rights of others. In future, Jyra may receive notice from or 
be sued by third parties regarding patent claims. If infringement is 
alleged, Jyra believes that, based upon industry practice, any necessary 
license or rights under such patents may be obtained on terms that would not 
have a material adverse effect on Jyra's business, operating results and 
financial condition. Nevertheless, there can be no assurance that the 
necessary licenses would be available on acceptable terms, if at all, or 
that Jyra would prevail in any such challenge. The inability to obtain 
certain licenses or other rights or to obtain such licenses or rights on 
favourable terms, or the need to engage in litigation could have a material 
adverse effect on Jyra's business, operating results and financial 
condition.


EMPLOYEES

The Company had 20 employees as of 31st December, 1998: 8 in Research & 
Development, 8 in Sales & Marketing, 3 in General Management and 1 in 
Finance and Administration.
None of the employees are represented by a labor union, and the Company 
considers its relations with its employees to be positive. The Company has 
experienced no work stoppages.
Competition for personnel in the Company's industry is intense. The Company 
believes that its future success depends in part on its continued ability to 
hire, assimilate, and retain qualified personnel. In 1998, the Company 
experienced difficulty in recruiting technical staff within the United 
Kingdom and sales staff within the United States. Although recruitment of 
technical staff in Quarter 1 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 the Company's 
sales, research and development and consequently its financial performance.









                                      13
<PAGE>
HISTORY OF THE COMPANY'S DEVELOPMENT

The Company was incorporated on May 2, 1996 under the laws of Delaware. The 
Company is in the business of designing, developing, and marketing computer 
network management systems to (i) maximize network productivity, (ii) 
minimize network downtime, and (iii) solve network problems caused by the 
constant increase in network traffic, combined with the growing complexity 
of networks. These problems result in escalating costs and major systems 
failures across the corporate spectrum. Management believes that current 
network management systems do not have the capability to effectively deal 
with these problems. 

Background

Over the past ten years corporations have moved rapidly from using mainframe 
computers with numerous access terminals to individual personal computers 
("PCs"), interconnected by networks. This has resulted in the network 
traffic increasing to the point where it outstrips the capacity of the 
existing networks. A corporate network may connect thousands of individual 
PCs together. The network, rather than a mainframe computer, now connects 
all the parts of the organization together. This resulting increase in 
network use can result in increased costs to a company including (i) 
uncontrolled and unknown network traffic, (ii) unnecessary telephone costs, 
and (iii) poor usage accounting. Management believes there a number of 
problems with the management of networks today. One major problem with 
existing network management systems is their inability to determine the 
reason why the link between two PCs is busy, or which type of traffic is 
causing the congestion (i.e., processing, spreadsheets, dealer feeds, games, 
etc.). Management believes that another major problem with existing network 
management systems is their inability to efficiently and cost-effectively do 
anything other than real-time sampling. Real time sampling will only 
describe the current state of the system, which immediately after a failure 
is "down". Management believes that a real-time view is not effective for 
long-term solving or diagnosis 

Management believes that existing network management devices are expensive, 
while being limited to carrying out a single function. Existing networks 
probe devices or network analyzers require other devices for these products 
to work most effectively. Accordingly, the cost of deploying these network 
probes and related devices can be quite expensive. 
Reference is made to "Glossary of Terms" at pages 18-20, for description of 
terms used in this Annual Report.

Planned Initial Products 
Initially, during 1997 the Company planned to design a range of portable 
software tools and centralized 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:





                                     14
<PAGE>
PRODUCT APPLICATION

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

Service Level Monitoring

As the Company began detailed design work for each of the products listed 
above, the Company shared its plans with a number of its major potential 
customers, in order to obtain their input at an early stage. The Company 
learned from this input and from its own research that customer demand was 
much stronger for service level monitoring products than it was for 
diagnostic products. In particular, Management of the Company 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, Management emphasized 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 present 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 Management of the Company 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 



                                  15
<PAGE>
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, Management of the 
Company 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. Management made the decision 
to redesign the service level and mid level manager to be components of a 
potentially large distributed system. Accordingly, the Company 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 Jyra's primary focus, during the quarter ended  March 31, 1998, 
was to encourage telecommunications companies to begin pilot  testing of 
Jyra's product with a view to developing new customer service  offerings 
around Jyra's service level reporting tools. Jyra's 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. Jyra continued to work closely with MCI in an effort to 
develop  product to incorporate within MCI's Advanced Trouble Analysis 
Center (ATAC)  service and as a result MCI confirmed its intention to 
include Jyra's initial response monitoring agents as a key component within 
its then forth coming ATAC service. In addition to being selected by MCI in 
the quarter ended March 31, 1998, Jyra's 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. Jyra's management 
refined its market view to reflect that while interest for its 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. Product development continued during the quarter ended March 31, 
1998, to focus on addressing inherent scaling requirements of the 
telecommunication sector. With specific guidance from MCI, the Company began 
designing into its service monitoring tools an automated means of collecting 
response time between multiple groups of any two Cisco routers in the 
Internet. The Company was, subsequent to end of quarter, able to announce 
this feature for June availability.
The Company had trials underway at British Telecom and in January 1998, the 
Company's 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. Jyra receives no revenues for the service sold by MCI to their 
customers, but charges MCI for software licenses used in deployed in support 




                                    16
<PAGE>
of the service. The Jyra element of the ATAC service is still at an early 
stage, the MCI business has been subject to reorganization as a result of 
its merger with WorldCom, and although it is expected that this service may 
begin generating revenue for the Company there can be no guarantee that any 
significant revenue will be received. The Company retains an active working 
relationship both with British Telecom and with MCI, but there can be no 
guarantee that these relationships will result in future sales.

Service Management Architecture

The Company 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. The Company's strategy 
in focusing on telecommunication companies had 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.  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 the second half of the year, the Company improved product 
performance and reliability, and added features specifically to meet the 
needs of the telecommunications industry. The Company's  Management now 
feels confident that it has a product set that can 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. 



























                                  17
<PAGE>
          Following is a glossary of terms used in this annual report.
          
                                  GLOSSARY OF TERMS
 

              
                    
 Access Terminal     A screen and keyboard solely to access information; 
                     incapable of independent operation.

 Agent               A software component that can be loaded into different 
                     parts of the network.
                    
 ATM                 Asynchronous Transfer Mode.  A new method of allowing far 
                     greater volumes of data to be passed through a network.
                    
 Backbone            A series of devices used to guide and direct data 
 Routers             efficiently to its destination by the most appropriate 
                     path.
                    
 Bridges             Devices that prevent local traffic from being flooded to 
                     an entire network.
                    
 Broadcast           Any data or signal that is transmitted throughout the 
                     Entire network.
                    
 Code                Language in which software programs are written.
                    
 Control             Methods to inhibit the flow of data Mechanisms 
                     communications traffic.
                    
 Dealer Feeds        Electronic supply of financial market data.
                    
 Ethernet            A standard that defines the way data is transmitted.
                    
 FDDI                A standard that defines the way data is transmitted over 
                     fiber optic cable.
                    
 Global Network      A data communications network that connects interconnects
                     international operations worldwide.
                    
 IBM SNA             A standard that defines the way in IBM computers are 
                     connected.
                    
 Interface           Adapters that connect a device to Modules the network.

                    
 Interop             A major international trade show attended by leading 
                     Internet and networking technology companies.
                    
 LAN                 Local Area Network.  This is a network designed to 
                     interconnect personal computers within a localized
                     environment by a type of highspeed data communications 
                     arrangement.
                    
                                       18
<PAGE>
 Management          General term that refers to any system for administering 
 System              network devices or traffic.
                    
 Mbps                Millions of bits per second.  A measurement of the amount 
                     Of data passed.  A bit is the smallest unit of data.
                    
 Modern              Generic term for new applications that use the network. 
 Network             Current applications are video, image and multi-media 
 Applications        applications.

 Network             The infrastructure that interconnects computers to one 
                     another.
                    
 Novell Netware      A widely used network operating  system that allows users 
                     to share data. 
                    
OEM                  Original Equipment Manufacturer. An industry term for 
                     equipment originally manufactured by a third party, but 
                     branded and sold by a separate vendor.
                    
 On-line             Active live connection.
                    
 Outsourcers         Companies that are responsible for operating and 
                     Maintaining networks on behalf of clients.
                    
 Probe               A device that is connected to a network for the proper 
                     Monitoring of networks.
                    
 Protocols           The sets of rules or standards that describe the way in 
                     which traffic is presented to devices on a network. 
                     The most widely used of which are IP (often called 
                     TCP/IP) and IPX (most often used by Novell Netware)
                    
 Protocols           The ability to breakdown and analyze the way in which 
 Decoder             traffic is presented to a network device.
                    
 RMON                A standard for describing what should be monitored by a 
                     Network device.
                    
 RMON 2              A revision of the RMON standard.
                  
                                                                        
                    
 Serial Line         Probe devices that monitor the lines that connect serial 
 Analyzers           networks at different locations.
                    
 SNMP                Simple Network Management Protocol.  A Standard for 
                     monitoring network hardware.
                                       
                    
                    
 TCP/IP              A standard that describes the way in which data traffic 
                     is transmitted across a network.
                    

                                      19
<PAGE>
 Trunk               A line that connects remote locations over 
                     Telecommunications networks.
                    
 Token Ring          A form of Local Area Network (LAN).     
                                                  
 Traffic             The data that passes across a network.
                    
 UNIX                A standard operating system for computers.
                    
 Usage               The ability to identify the origin of Accounting traffic 
                     and thereby charge back network costs to the source.
                    
 WAN                 Wide Area Network. A network that connects users via 
                     telecommunications lines.
                    

                     






































                                     20
<PAGE>
ITEM 2.  PROPERTIES
 
The Company's principal executive administrative, marketing and product 
development facilities consist of approximately 2,700  square feet in 
buildings in Hemel Hempstead, Hertfordshire HP1 1BB England. The Company pays 
an annual rental of 23,500 pounds sterling. The lease expires in August 1999.  
In addition, the Company is leasing an office in San Jose, California, on a 
month-to- month basis, at a rental of $1,800 per month. The Company opened 
a sales representative office in Boston Massachusetts in January, 1999, also 
rented on a month-to-month basis. These rental agreements have a 60 day notice 
period.


ITEM 3.  LEGAL PROCEEDINGS
 
As of 30 March 1999, there are no 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.
 
































                                       21
<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 the Company's shares is the National 
Association of Securities Dealers Over the Counter Bulletin Board ("OTC 
Bulletin  Board"), on which the Company's shares have traded since 
September 24, 1996.  The price range of trading in the Shares, on a quarterly 
basis, since that time, is as follows:
<TABLE>
<CAPTION>
                 OTC BULLETIN BOARD
                                                    1996 Trades         Volume
                                                    Low |High          
                 <S>                                   <C>                <C>
                 3rd Quarter                       0.45 | 0.8125       364,400
                 4th Quarter                       0.75 | 6.00       8,993,000

                                                    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

                                                     1998 Trades        Volume
                                                     Low |High
                  1st Quarter                      8.50 | 13.50      3,162,800
                  2nd Quarter                      6.88 | 14.13      5,208,200
                  3rd Quarter                      4.88 | 11.10      2,350,200
                  4th Quarter                      4.63 | 10.47      2,595,000

                                    Jan 2 - 26 March 1999 Trades        Volume
                                                     Low |High
                  1st Quarter                      6.44. | 12.38    2,807,200
</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 26 March 1999 
was $9.50.








                                      22
<PAGE> 
GERMAN TRADING
Jyra shares began trading on the Frankfurt Stock Exchange on Friday, 
12th March, 1999 Jyra shares will continued to be listed on the Berlin (OTC), 
and 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

                                    Jan 2 - 26 March 1999 Trades        Volume
                                                     Low |High
                  1st Quarter                      6.00 | 10.40      1,676,890
</TABLE>
(1) Prices in Euros. As at 31 March 1999 one Euro equalled 1.074 United States
Dollar, source - Reuters.

HOLDERS OF RECORD
As at 26 March 1999 the Company had 34 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.


RECENT SALES OF UNREGISTERED SECURITIES

During December 1998 the Company sold 103,000 common shares at $7.50 per share
to financial institutions and accredited investors for  total proceeds of
$772,500. The Company received $450,000 prior to December 31, 1998 and $322,500
subsequent to December 31, 1998.








                                       23
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
 
CONSOLIDATED STATEMENTS OF INCOME DATA
<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31,
                                    -----------------------------------------
<S>                                         <C>        <C>            <C>
                                                                Eight months
                                                               ended December
                                           1998         1997        1996
                                      ----------    ----------   ----------
<CAPTION>

Revenues...............        .    .     536,021       392,083           0
Net income............  ...            (3,047,410)   (2,422,705)   (347,692)
Earnings per share..(2)....    ...          (0.24)       $(0.19)      (0.04)
Weighted average common and common     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>
                                                                 Eight months
                                                                ended December
                                           1998         1997         1996
                                       ----------  ----------   ----------  
 
<CAPTION>
<S>                                        <C>          <C>          <C>
Working capital....................  $  1,226,503    3,323,030    3,449,489
Total assets.......................     2,701,378    3,811,266    3,547,695
Long-term obligations..................... 13,893       26,335            0
Total stockholders' equity............  2,009,078    3,567,833    3,446,701
</TABLE>
 
(1) Fiscal year 1997 and prior periods 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 Sept 1997.
 











                                       24
<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

                              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, Vodaphone 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 the Company's 
product has continued to be adjusted throughout 1998 in order to meet these 
larger customers requirements. The first significant distributed components of 
SMA were planned to be available for customer release at the end of May 1998 
and became generally available in August 1998. Field tests of these 
distributed components were conducted with select group of initial strategic 
customers during April 1998. In preparation for this release Jyra's primary 
focus during the quarter ended  March 31, 1998, was to encourage 
telecommunications companies to begin pilot  testing of Jyra's product with a 
view to developing new customer service offerings around Jyra's service level 
reporting tools. Management believes that Jyra's 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 
provides a means of justifying high value added data transport services. The 
testing and piloting phase is the first step in a  process in which Jyra 
engages telephone companies with a view to having them  deploy Jyra's product, 
initially in a limited way to customers on a trial basis and subsequently it 
is hoped more widely to all of their corporate customers.  The Company now has 
a number of telecommunications companies at the initial  stages of the process 
and has progressed with one in Switzerland and one in Denmark, to the initial 
customer deployment. Product development continued during the quarter ended 
March 31, 1998, to focus on addressing inherent scaling requirements of the 
telecommunication sector. With specific guidance from MCI, the Company began 
designing into its service monitoring tools an automated means of collecting 
response time between multiple groups of any two Cisco routers in the 
Internet. The Company was, subsequent to end of quarter, able to announce this 
feature for June availability. Jyra continued to work closely with MCI in an 
effort to develop product to incorporate within MCI's Advanced Trouble 
Analysis Center (ATAC)  service and as a result MCI confirmed its intention to 
include Jyra's initial  response monitoring agents as a key component within 
its then forth coming ATAC service. Although MCI and Jyra retain a working 
relationship, management believes that rollout of the ATAC service has been 
affected by the MCI/Worldcom merger. The Company's 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. In addition to being selected 
by MCI in the quarter ended March 31, 1998, Jyra's 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.



                                      25
<PAGE>
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.  The Company's  Management now feels confident that it has a 
product set that can 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.
In order to exploit the Company's product's  capabilities in the Service 
Provider space, the Company allocated significant resource in the 3rd 
quarter 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.
Management 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. Management 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  will 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.

Cisco Systems also, during the third quarter, chose Jyra's SMA as  offering 
value to their next generation web based management system Cisco Works 2000. 
Jyra provides a connection to Cisco Works 2000 customers with allows them to 
monitor performance of e-commerce and web sites.
Management believes that the joint marketing arrangement with Cisco provides 
the Company with the reach and credibility to succeed in becoming a standard 
tool among telecommunications companies over the course of next year.
During the third quarter ended Sept 30, 1998 the Company also began to see 
some initial results of its efforts to target high-end resellers. The 
Company was  able in this period to announce a significant arrangement with 
Siemens whereby  Siemens would resell Jyra's product to major users in 
Switzerland.  Management believes that Siemens has the technical and sales 
capability to be an effective channel to the corporate sector for the 
Company's product. Siemens have already installed Jyra product on a trial 
basis with four major Swiss financial institutions. 

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>
In the Company's  December year end 1997 audited accounts, included in the 
Company's 10K, the  Company allowed and acknowledged that subsequent to the 
three months period  ended June 30, 1997 approximately $160,000 in revenue 
from a distributor in the United Kingdom recorded during such 3 month period 
had to become a doubtful  debt and full provision was made at the December 
year end 1997. 

Management continues to believes that the Jyra solution being provided to 
Tele Danmark and  their customers has universal application among 
telecommunications companies  and Service Providers. 
Management feels that acceptance by the telecommunications industry and  
endorsement by Cisco Systems are highly significant and now feel confident 
in  scaling sales and marketing operations to address a global market.

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.








                                         27
<PAGE>
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 31st 
December, 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


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. The Company plans to continue to expand its direct sales force 
in both Europe and the USA as it refines its distribution model, and expects 
sales and marketing costs to continue to increase as the Company continues 
to develop.


GROSS MARGIN
 
    Cost of revenues consists of manufacturing costs, relating to the 
Packaging and printing of CD's. 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. 
 





                                      28
<PAGE>
EARNINGS (LOSS) PER SHARE
 
    Earnings (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 1997 was 
12,903,798 as compared to 12,587,367 in the year ended 31st December, 1997


LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 1998, the Company's principal sources of liquidity 
included cash, cash equivalents, totalling $554,450. 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. Subsequent to December 31, 1998 the 
Company received approximately US$500,000 as the initial proceeds of the 
current private placement to fund Jyra's sales and marketing relationship with 
Cisco and provide additional working capital.  Management believes that it 
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 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.

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 






                                      29
<PAGE>
as a "traffic cop," prioritizing 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 Offering 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 did not bear interest. After the nine months, it was 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 will not be unreasonably 
withheld. 

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
 
None



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 
OPERATIONS 1997/96


                                 1997/96

During 1997 the Company commenced marketing its initial products the MLM and 
Service Level Manager and Mid Level Manager.

Revenues for the fiscal year ended December 31, 1997 were $392,083 compared to 
the eight months ended December 1996 (5 operating months) revenues of $0. 
During the eight months ended December 1996 (5 months of operations) the 
Company was purely developing its product range and hence did not generate any 
revenue.

During the fiscal year ended December 31, 1997 the Company's revenue 
derived 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. During the fiscal year ended December 31, 1997 the Company's 
product was re-engineered in order to meet its larger customers requirements. 
The Company built relationships with among others: BT (" British Telecom) and 
MCI as described (page 6 - Business). The Company sees each of these 
relationships as strategic, as these accounts have potential to grow 
substantially during 1998 as the Company has, subsequent to year end adapted 
and scaled its product to meet their initial requirements. The Company expect 
that this process will be ongoing and provide new product ranges in the future.
The Company believes that these relationships will position Jyra at 
the forefront of the emerging Internet service management market in effect 
becoming the enabling technology for new carrier services.


                                        30
<PAGE>
GROSS MARGIN
 
    Cost of revenues consists of manufacturing costs, relating to the 
packaging and printing of CD's. Gross margin as a percentage of revenues was 
97% for fiscal year 1997. During the eight months ended December 1996 (5 
months of operations) the Company did not generate any revenue or incur any 
costs associated with it. During fiscal year 1997, the Company incurred costs 
associated with the sale of software these tend to be considerably lower that 
selling Hardware. 
 

SALES AND MARKETING EXPENSES
 
    Sales and marketing expenses were $476,336 in fiscal year 1997 compared to 
$0 in the eight months ended December 1996. The Company did not establish its 
sales operation until the first quarter of 1997 and therefore did not incur 
any costs during 1996. The Sales and marketing expenses primarily relates to 
the recruitment of experienced sales executives from establish networking 
companies, commission expenses and promotional activities required to support 
the introduction of the Company's early products.


RESEARCH AND DEVELOPMENT EXPENSES
 
Research and development expenses were $1,293,667 in fiscal year 1997 
compared to $260,367 in the eight months ended December 1996 (5 months of 
operations). As a percentage of revenues, research and development expenses 
was 329% for fiscal year 1997. The increase in actual spending was a result of 
increased staffing and equipment expense to support growth in the Company's 
breadth of product and services offerings, in particular in fulfilling the 
Company's commitment to build a scalable service management architecture 
capable of monitoring a carriers global network operations. Specific carrier 
requirements, such as Router to Router response time (Ping MIB) for MCI, and 
response time monitoring for Oracle 8 for British Telecom, have also been 
staffed for with the result that these important features will be available 
for customer release during 1998.


GENERAL AND ADMINISTRATIVE EXPENSES

 
    General and administrative expenses for fiscal year 1997 were $774,051 
compared to $194,566 for the eight months ended December 1996 (5 months of 
operations). The increase in general and administrative expenses in the fiscal 
year was primarily due to increased staffing to support operations. General 
and administrative expenses as a percentage of revenues were 197% in fiscal 
year 1997.
 







                                    31
<PAGE>
INTEREST INCOME, NET
 
    Interest income, net was $112,576 in fiscal year 1997 compared to $30,336 
in the eight months ended December 1996 (5 months of operations). The increase 
in interest income is primarily the result of higher balances of cash 
equivalents during fiscal year 1997. 
 

EARNINGS (LOSS) PER SHARE
 
    Earnings (loss) per share for fiscal year 1997 was ($0.19) per share 
compared to ($0.04) per share in the eight months ended December 1996 (5 
months of operations).  The number of weighted average common shares 
outstanding for fiscal year 1997 was 12,587,367 as compared to 8,876,364 in 
the eight months ended December 1996 (5 months of operations)


    Net cash used in operations in fiscal year 1997 was $2,422,705 compared to 
$347,692 in the eight months ended December 1996 (5 months of operations). 

Net cash used in investing activities was $490,312 in fiscal year 1997 
compared to $104,743 in the eight months ended December 1996 (5 months of 
operations). These funds were principally invested in additions to property 
and equipment.































                                     32
<PAGE>
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, 1998 (the "1998 10-K").
 

FLUCTUATIONS IN PERIODIC RESULTS.

The Company's operating results can vary substantially from period to period.
Planned operating expenses are normally targeted to planned revenue levels for 
the period and are incurred rateably throughout the period. If expenses remain 
relatively fixed, but the Company's revenues are less than planned in any 
quarter, Jyra's operating results would be adversely affected for that
quarter. In addition, incurring unplanned expenses could adversely affect 
operating results for the period in which such expenses are incurred.
 
    Failure to achieve periodic revenue, earnings and other operating and 
financial results as anticipated by brokerage firms or industry analysts could 
result in an immediate and adverse effect on the market price of the Company's 
common stock. The Company may not discover, or be able to confirm, revenue or 
earnings shortfalls until the end of a quarter, which could result in a 
greater immediate and adverse effect on the Company's stock price.


PRODUCT DEVELOPMENT.  

Jyra's long-term success will depend on its ability to enhance its product 
offerings and to introduce new products on a timely and cost-effective 
basis which meet the needs of its current and future customers. The Company 
remains committed to adding new technologies and products through continued 
investments in research and development and through strategic acquisitions. 
During fiscal year 1998, the Company announced its SMA Version 2.0 service 
management architecture intended to provide enterprise-wide management of 
complex heterogeneous client-server environments. The success of the 
architecture is dependent on the development of applications to help manage 
key areas of interest for users and customer acceptance of those applications.
However, there can be no assurance Jyra will be successful in developing new 
products or in enhancing existing products or that new or enhanced products 
will meet market requirements. Jyra has, from time to time, experienced 
delays in introducing new products. Future delays could adversely impact 
acceptance of and revenue generated from the sale of any delayed products.












                                     33
<PAGE>
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS.

The Company's operations are currently headquartered in the United Kingdom,
from where it also engages in its European marketing effort. United States 
sales and marketing are conducted from a separate sales office in San Jose 
California and Boston, Massachusetts. There are certain risks inherent in 
international operations including, but not limited to, remote management, 
unexpected changes in regulatory requirements, export restrictions, export 
controls relating to technology, tariffs and other trade barriers, 
difficulties in staffing and managing foreign operations, longer payment 
cycles, problems in collecting accounts  receivable, political instability, 
fluctuations in currency exchange rates, seasonal reductions in business 
activity during the summer months in Europe, and potential adverse tax 
consequences, which could materially adverse affect the Company's business, 
operating results, and financial condition.


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.


RETENTION OF KEY PERSONNEL.  

The Company's ability to achieve its revenue and operating performance 
objectives will depend in large part on its ability to continually attract and 
retain technically qualified and highly skilled sales, consulting, technical, 
marketing and senior management executives. Jyra competes for engineers for 
its development organization principally in the London, England area and in 
the future within California's Silicon Valley against companies in the 
networking industry with far greater resources. It vies for all of its 
personnel with other members of the networking product industry, where 
competition for such personnel is intense and is expected to remain so for the 
foreseeable future. Failure to retain and grow its key employee population 
could adversely affect Jyra's business and operating results.









                                   34
<PAGE>
INTELLECTUAL PROPERTY.  

The Company relies on a combination of trade secret, copyright, and trademark 
laws and contractual provisions to protect its proprietary rights in its 
products. There can be no assurance these protections will be adequate or that 
competitors will not independently develop technologies that are substantially 
equivalent or superior to Jyra's products. There has been a trend toward 
litigation regarding patent and other intellectual property rights in 
the software industry. Although there are currently no lawsuits pending 
against the Company regarding possible infringement claims, there can be no 
assurance such claims will not be asserted in the future or that such 
assertions will not materially adversely affect the Company's business, 
financial condition and results of operation. Any such suit, whether or not 
having merit, would be costly to the Company in terms of employee time and 
defence costs and could materially adversely affect Jyra and its business, 
financial condition and results of operations. If an infringement or 
misappropriation claim is asserted against Jyra, the Company may need to 
obtain a license from the claimant to use the intellectual property rights. 
There can be no assurance that such a license will be available on reasonable 
terms or at all. Failure to obtain a license on commercially reasonable terms 
could materially adversely affect the Company's business, financial condition 
and results of operations.


SALES CHANNELS.  

The Company has both 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 the Company's products and reductions in the 
Company's gross margin and operating profit. For certain countries, the 
Company maintains a resale agreement with a single reseller that either has 
exclusive distribution rights for the territory or has no other Jyra reseller 
competing with it in the territory. The failure of such a reseller to perform 
its sales generation and support obligations under the distribution agreement 
could adversely affect the Company's revenue from, and reputation with, 
customers in the territory.


SUPPLIER DEPENDENCE.  

Certain of the Company's products may contain critical components supplied by 
a single or a limited number of third parties. The Company may be required to 
purchase and inventory certain of the computer platforms around which it 
designs its products so as to ensure an available supply of the product for 
its customers. Any significant shortage of these platforms or other components 
or the failure of the third party supplier to maintain or enhance these 
products could lead to cancellations of customer orders or delays in placement 
of orders which could materially adversely affect the Company's results of 
operations. If the Company's purchase of such components or platforms exceeds 
demand, the Company could incur losses or other charges in disposing of excess 
inventory, which could also materially adversely affect the Company's 
operating results.


                                      35
<PAGE>
FINANCIAL CONDITION OF COMPANY; DIFFICULTY IN FUNDING OPERATIONS. 

Although Management believes it will receive significant revenues from sales of
its products during 1999, there can be no assurance that the Company will 
be able to sell any products or ever receive any future revenues.  Management 
believes that it 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 near term demand or insufficient level of equity funding 
would adversely affect the Company's results of operations in 1999.


DEPENDENCE UPON TECHNOLOGY FROM SUN MICROSYSTEMS - JAVA

The Company licenses Java technology from Sun Microsystems.  The quality of 
this technology can affect the Company's ability to deliver and market its 
products in many ways, including, but not limited to, timely delivery of 
product to market, quality of finished goods, and market acceptance
of the Company's products. If the Company's agreement with Sun Microsystems is 
terminated, the Company would be required to cease selling any products 
incorporating Java Technology immediately, at which point the Company would 
very likely have no practical alternative but to rewrite its products based 
upon alternative technology. There can be no assurance that such alternative 
technology would prove equally suitable for the Company's products.  It is 
possible for either party to terminate the Agreement on grounds of the other 
party's breach, or upon grounds stated in the Agreement.  The Company also has 
the contractual right, at its option, to elect to terminate Agreement  for its 
convenience effective as early as the end of the second year of the initial 
term. 

The Company is currently dependent on Sun Microsystems and the other Java 
licensees to provide mutually consistent and high quality implementations of 
Java for commonly used software platforms such as Microsoft Windows 95, 
Microsoft Windows NT, and Sun Solaris, and also for Internet browsers such as 
Microsoft Information Explorer and Netscape Navigator. This consistency and 
quality of implementation did not exist for Java 1.1 within 1997, and there 
can be no guarantee that this will be achieved in the future, particularly as 
this is the subject of litigation between Microsoft and Sun Microsystems. The 
impact of this inconsistency has been and will be to reduce the available 
market for the Company's products until additional development resources have 
been applied to achieve a consistent and high quality of implementation by 
other means.









                                     36
<PAGE>
REGULATION OF THE INTERNET

There are currently few laws or regulations that apply directly to access or 
commerce on the Internet. The Company 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 the Company's products, and at the same 
time increase the Company's cost of selling its products. Changes in laws or 
regulations governing the Internet and Internet commerce could have a 
material adverse effect on the Company's business, operating results and 
financial condition.


JAVA LITIGATION BETWEEN SUN MICROSYSTEMS AND MICROSOFT

The Company's software products are written using the Java language and 
runtime environment. This is the subject of active litigation between Sun 
Microsystems and Javasoft. Although the Company shares this risk with many 
software companies, and thus management would expect general computer 
industry pressure to result in the avoidance of major  problems, the 
resolution of this lawsuit may have an adverse effect on the Company's 
ability to market or to develop its products, and thus may have an adverse 
effect on operating results.


YEAR2000

Jyra is a new company, without a large installed base of customer products 
or internal business systems and data. Management thus believes that the 
bulk of traditional Y2K risks do not exist within the Company. Management 
expects little if any cost of remediation. Where the Company's business 
systems and processes depend on electronic equipment, this equipment is from 
major manufacturers - primarily Microsoft, Dell, Cisco, Siemens and 
SageSoft. The software and hardware in use by the Company from these and 
other manufacturers has already been reported to be Y2K compliant. 
Management therefore has some justification for its belief that its 
remediation costs will be low, but cannot guarantee that this risk does not 
exist. To date, remediation costs have been zero. The Company's business is 
based on the sale of software products which were written to be Y2K compliant 
from the outset. The Company has no products older than 1996. Management 
therefore expects little if any cost to be incurred other than the normal cost 
of supporting its customers, but cannot guarantee that the risk of incurring 
these costs does not exist. In particular the successful operation of the 
Company's products depends upon the successful operation of Microsoft Windows 
NT and the PC platform on which Windows NT runs. Considerable resources could 
be required to  determine a solution to a problem which may be caused 
elsewhere. Jyra has inspected Y2K statements made by Microsoft and some PC 
vendors. To provide some level of assurance, the Company has completed limited 
testing of its products in Quarter 1 1999 Management believes that the costs of
external business disruption due to general millennium problems far 




                                      37
<PAGE>
outweigh any internal costs which are likely to occur, and so Jyra suffers 
little specific risk compared to the market as a whole. The market is already 
widely aware of this general risk to business. However, the Company operates 
within a global market for IT products and services which is currently making 
extensive contingency plans to deal with Y2000 issues. If IT spending is 
adversely affected by the need to deal with planning for and the aftermath of 
Y2000 problems, or there are possible negative perceptions of IT on the 
business, or there are negative perceptions of IT within the investment 
community, it could have a material adverse effect on the Company's business, 
operating results and financial condition.

The Company has confirmed its willingness to some of its key customers
to remedy any Y2000 defects in its products in the event that these 
occur, and thus there remains the possibility of unbounded remediation
cost with the possibility of negative impact on product development
and operating results.

Management has not developed a comprehensive contingency plan to deal with Y2K 
issues. No separate budget has been established for Y2K issues. Y2K 
expenditure to date has been insignificant, but management can give no 
guarantees that future Y2K expenditure either on its internal systems or on 
its products may not impact operating results, business or the Company's
financial condition.


STRATEGIC ALLIANCES

The Company has a strategic alliance with Cisco and a is a member of alliance 
programs with companies including Hewlett-Packard and Microsoft as well as its 
membership of the Application Performance Management Forum. 
The computer and telecommunications industries is characterized by rapidly 
shifting alliances for business advantage. There can be no guarantee that 
the Company's existing relationships will be successful in generating sales, 
nor that they will even continue, nor that the Company will successfully 
form new alliances. 
These arrangements are generally limited to specific projects, the goal of 
which is generally to facilitate product compatibility and adoption of 
industry standards. If successful, these relationships will be mutually 
beneficial and result in industry growth. However, these alliances carry an 
element of risk because, in most cases, the Company must compete in some 
business areas with a company or partner companies of those with which it 
has strategic alliances, and at the same time, co-operate with such companies 
in other business areas. Also, if these companies fail to perform, or if 
these relationships fail to materialize as expected, Jyra could suffer 
delays in product development or other operational difficulties.
Industry Consolidation
There has been a trend toward industry consolidation among the Company's 
competitors, partners and customers for several years, which has continued 
during fiscal 1998. The Company expects this trend toward industry 
consolidation to continue as companies attempt to strengthen or hold their 





                                        38
<PAGE>
market positions in an evolving industry. The Company believes 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 the Company competes with a single major 
product line within an overall systems management solution and could have a 
material adverse effect on the Company's business, operating results, and 
financial condition.

VARIABILITY IN SERVICE PROVIDER SALES

Although sales to the service provider market have continued to grow, this 
market is characterized 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 
country of operations. A decline or delay in sales orders from this industry 
could have a material adverse effect on the Company's business, operating 
results and financial condition.


RISKS ASSOCIATED WITH INTERNET INFRASTRUCTURE AND MARKET

The Company's management believes that there will be performance problems 
with Internet communications in the future which could receive a high degree 
of publicity and visibility. As the Company is a supplier of monitoring 
solutions for the Internet infrastructure, customers' perceptions of the 
Internet and the marketplace's perception of Jyra as a supplier of Internet 
products, may be materially adversely affected, regardless of whether or not 
these problems are due to the capabilities of Jyra's products. Such an event 
could also result in a material adverse effect on the market price of Jyra's 
Common Stock and could materially adversely affect the Company's business 
operating results and financial condition.


VOLATILITY OF STOCK PRICE

The Company's Common Stock has experienced substantial price volatility, 
particularly as a result of variations between the Company's actual or 
anticipated financial results and the published expectations of analysts and 
as a result of announcements by the Company and its competitors. In 
addition, the stock market has experienced extreme price and volume 
fluctuations that have affected the market price of many 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 the 
Company's Common Stock in the future.









                                    39
<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.





























                                        40
<PAGE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                                    PAGE NUMBER
                                                            -----------------
<S>                                                                   <C>
Consolidated Balance Sheets............................................42
Consolidated Statements of Operations..................................43
Consolidated statement OF Comprehensive Income.........................44
Consolidated Statements of Cash Flows..................................45
Consolidated Statements of Stockholders' Equity........................46
Notes to Consolidated Financial Statements.............................48
Report of Independent Auditors          ...............................58
Report of Independent Public Accountants...............................59
</TABLE>
 





































                                       41
<PAGE>
                     Consolidated Balance Sheet 31-Dec-98 
<TABLE><CAPTION>
                                                   $                     $
                                               31-Dec-98            31-Dec-97
<S>                                              <C>                    <C> 
Current Assets:
Cash & Cash Equivalents                          554,450             3,244,101
Prepaid Expenses                                 120,766                26,867
Accounts Receivable (net of provision for        228,787                52,062
doubtful debt of $nil, (1997-$165,425) 
Other receivables                                322,500                     0
                       TOTAL CURRENT ASSETS    1,226,503             3,323,030

Property & Equipment:
Computers, Equipment & Motor Vehicles            696,039               595,055
Less Accumulated Dep'n                           281,039               106,819
                                                --------              --------
Net Property & Equipment                         415,000               488,236

Other Assets
Available for sale securities                  1,059,875                     0
                                                --------              --------
                       TOTAL ASSETS            2,701,378             3,811,266

Current Liabilities
Accounts Payable                                 184,972               125,463
Accruals and deferred income                     167,809                80,134
Deferred Taxation                                312,782                     0
Current Portion of long term lease obligations    12,844                11,501
Total                                            678,407               217,098

Creditors: Amount falling due                     13,893                26,335
after more than one year

Stockholders Equity
  Common stock -$.001 par value
  Authorised - 20,000,000 shares
  Issued 13,014,360 shares at 31 December 1998 
  and 12,890,250shares at 31 December 1997
Ordinary Share                                     6,738                 6,614
Capital
Paid In Capital                                7,270,155             6,339,068
                                               7,276,893             6,345,682

Deficit Accumulated During 
The Development Stage                         (5,817,807)           (2,770,397)
Accumulated other Comprehensive income           549,992                (7,452)
Total Stockholders Equity                      2,009,078             3,567,833
Total Liabilities & Stockholders Equity        2,701,378             3,811,266
</TABLE>
The accompanying notes are an integral part of these financial statements




                                         42
<PAGE>
                          Consolidated Statement of Operations
                           Period 1-Jan-98 Through 31-Dec-98 
          Cumulative Period 2-May-96(Date Of Inception) Through 31-Dec-.98
<TABLE>
<CAPTION>
                                      Twelve Months      Eight months       $
                                  31-Dec-98  31-Dec-97    31-Dec-96 Cumulative
<S>                                 <C>        <C>              <C>       <C>

Revenue                             536,021     392,083          0     928,104
                                    -------     -------     ------     -------
Total Revenue                       536,021    392,083           0     928,104

Cost Of Revenue                      29,774     10,307           0      40,081
                                    -------    -------      ------     -------
Total Cost Of Revenue                29,774     10,307           0      40,081
                                    -------    -------      ------     -------
Gross Margin                        506,247    381,776           0     888,023


Operating Expenses
Sales & Marketing                 1,055,499    476,336           0   1,531,835
General and Administrative          896,809    774,051     194,566   1,865,426
Research and Development          1,526,142  1,293,667     260,367   3,080,176
                                  ---------  ---------    --------  ----------

Total operating expenses          3,478,450  2,544,054     454,933   6,477,437


Other Income/Expense
Taxes                                 4,335    (15,978)          0     (11,643)
Currency Exchange Differences        44,257    (82,212)     83,412      45,475
Provision for doubtful debt               0   (164,699)          0    (164,699)
Interest Income                      81,255    112,576      30,366     224,197
Depreciation                       (198,538)  (110,114)     (6,537)   (315,189)
Loss on disposal of motor vehicle    (6,516)         0           0      (6,516)
Total Other Income/Expense          (75,207)  (260,427)    107,241    (228,393

Loss Before Income Taxes         (3,047,410)(2,422,705)   (347,692) (5,817,807)

Provision for Income Taxes                 -            -            -

Net Loss                         (3,047,410)(2,422,705)   (347,692) (5,817,807)

Earnings Per Share Of Common
Stock

Average Shares of Common Stock
Outstanding                      12,903,798 12,587,367   8,876,364
Earnings/(Loss) Per Share Of 
Common Stock - Basic and Diluted      (0.24)     (0.19)      (0.04)
</TABLE>
The accompanying notes are an integral part of these financial statements


                                      43
<PAGE>
                    Consolidated statement OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>

                                     Twelve Months      Eight months        $
                                  31-Dec-98  31-Dec-97    31-Dec-96 Cumulative
<S>                                 <C>        <C>              <C>      <C>


Net loss                        (3,047,410)(2,422,705)   (347,692)  (5,817,807)



Other comprehensive income net of tax

Foreign currency translation       (23,438)    23,837     (31,289)     (30,890)
adjustment

Unrealised gains on securities     580,882          0           0      580,882
                                 ---------  ---------    --------   ----------
COMPREHENSIVE LOSS              (2,489,966)(2,398,868)   (378,981)  (5,267,815)
                                 ---------  ---------    --------   ----------
</TABLE>
































                                      44
<PAGE>
                        Consolidated Statement Of Cash Flows
                         Period 1-Jan-98 Through 31-Dec- 98 
            Cumulative Period 2-May-96(Date Of Inception) Through 31-Dec-98 

<TABLE>
<CAPTION>

                                          $                                $
                                      Twelve Months    Eight months Cumulative
                                  31-Dec-98  31-Dec-97   31-Dec-96
<S>                                  <C>        <C>          <C>        <C>

Cash Flows From Operating Activities
Net Income (Loss)                (3,047,410) (2,422,705)  (347,692) (5,817,807)

Adjustments To Reconcile Net Loss To 
Net Cash Used For Operating Activities:

Increase In Depreciation            174,220     100,282      6,537     281,039
Decrease/(Increase) In Prepaid      (93,899)     23,767    (50,634)   (120,766)
Expenses
Increase in Accrued Expenses         87,675      80,134          0     167,809
Increase in Accounts Payable         48,410      62,305    100,994     211,709
Increase  In Accounts receivable   (176,725)    (52,062)         0    (228,787)
Increase  In other receivables     (322,500)                          (322,500)
                                 (3,330,229) (2,208,279)  (290,795) (5,829,303)


Cash Flows From Investment Activities

Purchase of Computers Equipment    (100,984)   (490,312)  (104,743)   (696,039)
& Vehicles


Cash Flows From Financing Activities

Proceeds From The Issuance Of       765,000   2,520,000  3,825,682   7,110,682
Common Stock 

Effects Of Exchange Rate 
Changes On Cash                     (23,438)     23,837    (31,289)    (30,890)


Net (Decrease)/Increase In Cash  (2,689,651)   (154,754) 3,398,855     554,450
& Cash Equivalents 


Cash & Cash Equivalents At        3,244,101   3,398,855          0           0
Beginning of Period 
Cash & Cash Equivalents At End      554,450   3,244,101  3,398,855     554,450
of Period                                

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

                                     45
<PAGE>
                Consolidated Statement of Stockholders Equity
                   Period From Inception Through 31-Dec-98
<TABLE>
<CAPTION>
                                                      Deficit
                                                    Accumulated     Foreign
                       Common   Stock     Paid-In     During        Currency
                       Shares   Amount    Capital   Development    Translation
                        $         $          $           $             $   
<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
Script Div 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 $8.00 Per Share      22,050        22    176,378            -             -
  Issuance Expenses                        (176,400) 
of Capital stock
  Net Loss For The
Period To 31-Dec-97          -         -          -    (2,422,705)           -
  Translation Adjustment 
For The Period for Cash      -         -          -             -       23,837
  Balance At 
31-Dec-97           12,890,250     6,614   6,339,068   (2,770,397)      (7,452)
</TABLE>
The accompanying notes are an integral part of these financial statements
                                        46

<PAGE>
                 Consolidated Statement of Stockholders Equity
                   Period From Inception Through 31-Dec-98
<TABLE>
<CAPTION>
                                                      Deficit
                                                    Accumulated     Foreign
                       Common   Stock     Paid-In     During        Currency
                       Shares   Amount    Capital   Development    Translation
                        $         $          $           $             $   
<S>                      <C>     <C>        <C>         <C>           <C>


Brought forward
Balance At 
31-Dec-97           12,890,250     6,614   6,339,068   (2,770,397)      (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
Commissions:
  November 1997
At $7.50 Per Share       5,110         5     38,320             -            -
  Issuance Expenses                         (45,825) 
of Capital stock
  Net Loss For The
Period To 31-Dec-98          -         -          -    (3,047,410)           -
  Translation Adjustment 
For The Period for Cash      -         -          -             -      (23,438)
Unrealised gain on                                                     580,882
available for sale 
security
  Balance At 
31-Dec-98           13,014,360     6,738   7,270,155   (5,817,807)     549,992



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














                                        47
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.   OPERATIONS
Jyra Research Inc ("Jyra" or the "Company") was incorporated on 2 May 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. 






                                        48
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


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 split 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 
split.

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) maximize 
network productivity, (ii) minimize network downtime, and (iii) solve network 
problems caused by the constant increase in network traffic, combined with the 
growing complexity of networks. 

Comprehensive Income (Loss).
In June 1997, the Financial Accounting Standards Board issued Statement of 
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" 
("SFAS 130").  SFAS 130 requires that all items that are required to be 
recognized under accounting standards as components of comprehensive income be 
reported in a financial statement that is displayed with the same prominence as
other financial statements.  This statement is effective for the Company's 1998
fiscal year.  Prior year financial statements have been reclassified to conform
to the requirements of Statement 130.  Adoption of this pronouncement did not 
have a material impact on the Company's financial statements.  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 recognized 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 June 15, 1999, and will be adopted by
the Company for its fiscal year 2000.  The Company is currently assessing the 
impact of adoption of this pronouncement on its financial statements.







                                         49
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


3.   CONCENTRATIONS OF CREDIT RISK

Foreign currency translation
Through 31 December 1998, the Company had determined that the US dollar was 
the "functional currency" of its operations.  All foreign currency assets and 
liability amounts were remeasured into US dollars at end - of - period 
exchange rates.  Foreign currency income and expenses were 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.
The Company has entered into an agreement with another corporation pursuant to 
which the Company was granted a worldwide non-exclusive license to develop and 
distribute products based upon the Corporation's technology.  Also pursuant to 
the agreement, the Company is required to meet three principal payment 
obligations consisting of : a) upfront license fees; b) per unit royalties; 
and c) support and update fees, described as follows:
As an "upfront license fee", the Company has paid $50,000 for the first 
package chosen by the Company.   For each additional package that may be 
chosen by the Company, the Company will be required to pay an additional 
"upfront license fee" of $50,000.  

In addition, as "per unit royalties", for each of the first 5,000 products 
utilising the Corporation's technology to be sold by the Company, the Company 
will be required to pay a royalty of $66 per unit; for each such product in 
excess of the first 5,000, the Company will be required to pay a royalty of 
$20 per unit.

In addition, as "support and update fees", the agreement requires the Company 
to pay: i) $50,000 per year for the period during which the Company is paying 
"per unit royalties" of $66; and ii) $300,000 per year for the period when the 
Company is paying "per unit royalties" of $20.
The agreement is capable of ending either by expiration or termination.  The 
agreement is scheduled to expire at the end of its stated initial term of five 
(5) years, after which the Company may, at its option, elect to renew the 





                                         50
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


agreement for as many as five successive terms of one (1) year each.  If the 
agreement ends by expiration of any such term, then, after expiration, the 
Company may continue to sell its products incorporating the Corporation's 
technology as such technology existed at the time of expiration, subject 
always to the Company's continuing obligation to pay "per unit royalties".


4.   SUMMARY INFORMATION FOR THE COMPANY'S OPERATIONS BY GEOGRAPHIC LOCATION

<TABLE>
<CAPTION>
                                     Twelve          Twelve           Eight
                                     Months          Months          Months
<S>                                 <C>             <C>                 <C>

Revenue                           31-Dec-98       31-Dec-97       31-Dec-96
To Customers from US operations     162,786          55,775               0
To Customers from UK operations     373,235         336,308               0
Total Revenue                       536,021         392,083               0
                                                                           
Operating Loss                                                             
US operations                      (558,522)       (790,339)         (8,087)
UK Operations                    (2,413,681)     (1,371,939)       (446,846)
Total operating loss             (2,972,203)     (2,162,278)       (454,933)
                                                                            
Identifiable Assets                                                         
US operations                     2,056,537       3,303,564       3,395,299
UK operations                       644,841         507,702         152,346
Total Identifiable Assets         2,701,378       3,811,266       3,547,645
</TABLE>

5. COMMITMENTS AND CONTINGENCIES

Leases
Property plant and equipment includes the following amounts for leases that 
have been capitalised at 31 December 1998.
                                                   1998       1997
                                                  $             $

Vehicles                                         91,165      47,708
Less allowance for amortisation                  17,804       5,744
                                                 ------      ------
                                                 73,361      41,964
                                                 ------      ------








                                      51
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


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 31 December 1998:

                                                        British Pounds

1999                                                         30,607
2000                                                         30,557
2001                                                         15,507
                                                             ------
Minimum lease payments                                       76,671
Interest                                                    (10,497)
Fees                                                           (216)
                                                             ------
Present value of net minimum lease payments                  65,958

The Company leases its United Kingdom facilities from a third party.  The 
lease is for three years at a rental rate of $38,666 per year.   The current 
lease expires August 1999.  


6.   INCOME TAX
The Company's deferred tax assets, deferred tax liabilities and deferred tax 
valuation allowances at 31 December are as follows:
                                               1998         1997
                                                $             $

Deferred tax asset                                 0            0
US Federal                                         0            0
US State                                           0            0
Outside US                                 1,400,000      600,000
                                           ---------      -------
Total deferred tax asset                   1,400,000      600,000
Less: valuation allowance                 (1,400,000)    (600,000)
                                           ---------      -------
Net deferred tax asset                             0            0

Deferred tax liability                       312,782            0


The deferred tax asset arises due to the net operating loss carry forwards.  
Management has based the valuation allowance on the fact that it is in 
development stage and because of the risky nature of the industry.
The deferred tax liability arises due to the unrealised gain on available for 
sale securities.
For tax purposes, the subsidiary company has approximately $4,600,000 (1997: 
$1,900,000) of net operating loss carry forwards, which expire in the year 
2011 through 2013.




                                        52
<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 is non-assignable for 2 years, non-voting and 
will not bear interest.  After nine months, it will be convertible, at Jyra's 
option, into 277,018 shares.  The Preferred Stock will be 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 $3 13/16.  The accounting treatment is therefore as follows:

                                                                  $

Purchase consideration                                     166,211
Less 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
                                                           -------





                                        53
<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 954,000 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 20 July 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 954,000 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 954,000 shares granted, 689,000 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 
 









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


Of the 954,000 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 954,000 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 954,000 shares granted, 80,000 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, 20 July 1996, after which no 
awards may be granted.






















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


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


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
 
OUTSTANDING AT  DECEMBER 31, 1997, 954,000
                    OF WHICH 303,500 ARE 
                    EXERCISABLE AT 
                    DECEMBER 31, 1997 


(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.


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 




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


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 Executive Plan and the type, extent and terms of the stock 
option grants and awards of restricted. The Executive Plan was adopted 1 
September 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, 1998 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 summarized as follows:
                
             
          
<TABLE>
<CAPTION>

                                                                         
                                                           AVERAGE         
                                                           OPTION PRICE
                                           OPTION PRICE    PER
 OPTION SHARE         SHARES     RANGE     PER SHARE       SHARE  
 <S>                     <C>                   <C>             <C>
Outstanding (1) At Beginning
 Of Period                   0 
Granted                255,000               $5.50           $5.50
Exercise                     -                 -                 -
Forfeited                    -                 -                 -
</TABLE>

OUTSTANDING AT  DECEMBER 31, 1998, 255,000 OF WHICH 255,000 ARE EXERCISABLE AT 
DECEMBER 31, 1998

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 1998, 1997 and 1996,
respectively: risk-free interest rates of 5.5%, 6.3% and 6.1%; volatility
factors of the expected market price of the Company's Common Stock of 64% 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 1998,
1997 and 1996 was $3.63, $3.84 and $1.04.



                                     57
<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 31 December 1998 and 1997 and the 
related consolidated statements of income, stockholders' equity, and cash 
flows for each of the years then ended and for the period 2 May 1996 
(inception) through 31 December 1998.  These financial statements are the 
responsibility of the Company's management.  Our responsibility is to express 
an opinion on these financial statements based on our audit.  The financial 
statements for the period 2 May 1996 (inception) through 31 December 1996 were 
audited by other auditors whose report dated 10 March 1997 expressed an 
unqualified opinion on those statements.  The financial statements for the 
period 2 May 1996 (inception) through 31 December 1998 include a net loss of 
$5,817,807.  Our opinion on the consolidated statement of operations, 
shareholders' equity and cash flows for the period from 2 May 1996 (inception) 
through 31 December 1996, is based solely on the report of other auditors.  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 of material misstatement.  An audit includes examining, on a test 
basis, evidence supporting the amounts and disclosures in the financial 
statements.  An audit also includes assessing the accounting principles used 
and significant estimates made by management, as well as evaluating the 
overall financial statement presentation.  We believe that our audit and the 
report of other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the 
financial statements referred to above present fairly, in all material 
respects, the consolidated financial position of Jyra Research Inc at 
31 December 1998 and 1997 and the consolidated results of its operations and 
its consolidated cash flows for each of the years then ended and for the 
period 2 May 1996 (inception) through 31 December 1998, in conformity with 
United States generally accepted accounting principles.












Ernst & Young
Luton, England
DATE March 31, 1999






                                      58
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

                         INDEPENDENT AUDITORS REPORT



BOARD OF DIRECTORS
JYRA RESEARCH INC & SUBSIDARY
London, England


We have audited the accompanying consolidated balance sheet of Jyra Research 
Inc. And its Subsidiary as of December 31, 1996, and the related consolidated 
statements of operations, stockholders equity and cash flows and the 
supplementary information as listed in the Table of Contents for the period 
then ended.   These consolidated financial statements are the responsibility of
the Corporation's management.  Our responsibility is to express an opinion on 
these consolidated financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free of 
material misstatement.  An audit includes examining, on a test basis, evidence 
supporting the amounts and disclosures in the financial statements.  An audit 
also includes assessing the accounting principles used and significant 
estimates made by management, as well as evaluating the overall financial 
statements presentation.  We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements and supplementary 
information referred to above present fairly, in all material respects, the 
financial position of Jyra Research Inc and its Subsidiary, at December 31, 
1996, and the results of its operations and its cash flows for the period then 
ended, in conformity with generally accepted accounting principles.


Faw Casson & Co., LLP
Dover, Delaware.

















                                     59
<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 26 March 1999 
are as follows:



NAME                          AGE               POSITION


Paul Robinson                  36             President, CEO, Chairman
                                              of the Board

Peter Lynch                    43             Director, VP - Technology

Roderick Adams                 35             Director, VP-Corp. Development


Robin Elsom                    39             Director -VP Product Development


Nigel Williams                 33             Director -VP-Business 
                                                        Development

Philip Smith                   41             Director

Andy Mulholland                49             Director - Jyra Research Ltd.




     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 plans to be 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.




                                      60
<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 plans to be 
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 utilized by I-Net, the outsourcing division of Wang.  Mr. 
Elsom was part of the technology evaluation team which undertook the $250 
million acquisition of I-Net in 1996.  Previously, Mr. Elsom was a founder 
and, from 1991, a Technical Director of BISS Ltd.  In 1993, he was one of the 
directors who secured funding for, and successfully completed a management 
buy-out of, BISS Ltd.  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. 

Philip Smith has served as a director of the Company since December 23, 1997. 
In 1996, after six years with Philips Systems, he moved to IBM at Warwick, 
leading a team which was responsible for building IBM's internal and customer 
value added networks. At IBM he specialized in network performance and 
modelling, including a time in development, later moving into the design and 
architecture of international TCP/IP and multi-protocol networks. In 1994 Mr 
Smith moved to Cisco Systems as a Network Consultant specialized in network 
design and delivery of large and complex networks. In 1997 Mr Smith resigned to
join the Company. In December 1997 he joined the Board of Directors of the 
Company, and returned to work full-time for Cisco Systems where he also holds 
the position of UK Marketing Director

Mr. Andy Mulholland has served as a director of Jyra  Research Ltd., the 
Company's wholly-owned English subsidiary,  since January 14, 1997.  Since 
July 1996, Mr. Mulholland has been  a divisional director of Cap Gemini UK, 
part of Europe's largest  computer services business.  From 1989, Mr. 
Mulholland was a founder and marketing director (executive) of BISS Ltd.  In 





                                       61
<PAGE>
1993 he was a key figure in raising more than 5.5 million pounds  sterling 
for a management buy out of BISS Ltd.  BISS Ltd. was  subsequently sold to 
Wang Laboratories, USA in 1995.  Mr.  Mulholland is an experienced senior 
manager with strong skills in strategic, tactical, and management aspects of 
technology and  services provisions. 

















































                                       62
<PAGE>


Item  11.          EXECUTIVE  COMPENSATION.

<TABLE>
<CAPTION>

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.................1998    46,500          0           0       30,000               0
  President and Chief         1997    46,500          0           0         -                  0
  Executive Officer
Peter Lynch (5)...............1998    46,500          0           0       30,000               0
  Director, VP-Technical      1997    46,500          0           0            0               0
Roderick Adams................1998    43,000          0           0       30,000               0
  Director, VP-Corp,          1997    43,000          0           0            -               0
  Development
Robin Elsom...................1998    46,500          0           0       30,000               0
  Director -VP Product        1997    46,500          0           0      330,000               0
  Development
Nigel Williams................1998    55,000     20,000           0      155,000               0
  Director VP Business        1997    13,750      5,000           0      125,000               0
  Development

</TABLE>


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





                                            63
<PAGE>
OPTION GRANTS

   The following table contains information concerning the stock option grants
made to each of the Named Executive Officers in the fiscal year ended December
31, 1998. No stock appreciation rights were granted to these individuals during
such year.

<TABLE>
<CAPTION>
                                                                                   POTENTIAL    
                                                     INDIVIDUAL GRANT           REALIZABLE VALUE
                                              --------------------------------     AT ASSUMED   
                                               % OF TOTAL                       ANNUAL RATES OF
                                    NUMBER OF    OPTIONS                           STOCK PRICE
                                    SECURITIES   GRANTED                           APPRECIATION
                                    UNDERLYING     TO                           
                                     OPTIONS    EMPLOYEES  EXERCISE             FOR OPTION TERM(4)
                                     GRANTED       IN        PRICE   EXPIRATION -------------------
               NAME                  (#)(1)      1998(2)   ($/SH)(3)     DATE      5% ($)   10% ($)
- ------------------------------------------------------------------------------ -------------------
<S>                                    <C>        <C>        <C>           <C>       <C>       <C>
Paul Robinson.........................30,000      6.6%      $5.50       09/01/03  $45,586   $100,734
Peter Lynch...........................30,000      6.6%      $5.50       09/01/03  $45,586   $100,734
Roderick Adams........................30,000      6.6%      $5.50       09/01/03  $45,586   $100,734
Robin Elsom...........................30,000      6.6%      $5.50       09/01/03  $45,586   $100,734
Nigel Williams........................30,000      6.6%      $5.50       09/01/03  $45,586   $100,734
</TABLE>
(1) On September 1, 1998, the Company granted Messrs. Robinson, Lynch, Adams, 
    Elsom option shares at an exercise price of $8.75 per share, which is the 
    closing price, as reported by the OTC Bulletin Board on the option grant 
    date.

(2)  Based on an aggregate of 455,000 option shares granted in fiscal 1998.

(3) The exercise price per share of options granted represented the fair market
    value of the underlying shares of Common Stock on the option grant date,
    which is equal to the closing price, as reported by the OTC Bulletin Board
    on the option grant date. 

                                                  64
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(4) The 5% and 10% assumed annual rates of compounded stock price appreciation
    are mandated by rules of the Securities and Exchange Commission. There can
    be no assurance provided to any executive officer or any other holder of 
    the Company's securities that the actual stock price appreciation over the
    7-year option term will be at the assumed 5% or 10% levels or at any other
    defined level. Unless the market price of the Common Stock appreciates over
    the option term, no value will be realized from the option grants made to
    the executive officers.

(5) Each of the options is immediately exercisable. 



























                                               65
<PAGE>
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 1998

<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      93,750          -
Peter Lynch........................................30,000          0      93,750          -
Roderick Adams.....................................30,000          0      93,750          -
Robin Elsom.......................................105,000    225,000     140,625    140,625
Nigel Williams....................................123,750     31,250     158,718     21,655
</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 ($8.625 per share), and such value is equal to the closing price, as
    reported by the OTC Bulletin Board, less the exercise price
    payable for such shares.



                                                 66
<PAGE>


Item  12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

                SECURITY OWNERSHIP OF MANAGEMENT (1) (2)
<TABLE>
<CAPTION>
<S>        <C>            <C>       <C>    <C>
                               
TITLE OF CLASS            NAME OF   AMOUNT AND              PERCENT   
                 BENEFICIAL OWNER    NATURE OF                OF    
                                     BENEFICIAL              CLASS  
                                     OWNERSHIP         

Common            Paul Robinson       1,500,000 (3)             11.4%
                  Hamilton House      Direct
                  111 Marlowes
                  Hemel Hempstead
                  Herts  HP1 1BB
                  United Kingdom


Common            Peter Lynch         1,500,000 (4)             11.4%
                  Hamilton House      Direct
                  111 Marlowes
                  Hemel Hempstead
                  Herts  HP1 1BB
                  United Kingdom

Common            Roderick Adams      1,490,000 (5)             11.3%
                  Hamilton House      Direct
                  111 Marlowes
                  Hemel Hempstead
                  Herts  HP1 1BB
                  United Kingdom

Common            Robin Elsom           180,000  (6)             1.4%
                  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
 (6 persons)                          4,975,000              38.2% 
    

</TABLE>


                                      67
<PAGE>
Notes

*  Less than one percent of the outstanding shares of Common Stock.

(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 26, 1999 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 13,014,360 shares of Common Stock
  outstanding on March 26, 1999.

(3) Includes 30,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable or exercisable within 60 days of March 26,1999.

(4) Includes 30,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable or exercisable within 60 days of March 26,1999.
 
(5) Includes 30,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable or exercisable within 60 days of March 26,1999.

(6) Includes 180,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable or exercisable within 60 days of March 26,1999.

(7) Includes 123,750 shares of Common Stock issuable upon exercise of options
that are currently exercisable or exercisable within 60 days of March 26,1998.























                                         68
<PAGE>
Item 13.  Certain Relationships and Related Transactions.

     During the first quarter of 1999, the Company loaned to Path 1 Network 
Technologies Inc. ("Path 1")  $150,000.  The loan, which did not bear 
interest, was repaid during the first quarter of 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 owns Preferred Stock in Path 1 
which is convertible into 277,018 shares of Path 1, which represents 
approximately 5% of Path 1's outstanding shares.













































                                        69
<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

(c) Exhibits

     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.  SEC File No. 333-19183


           10.05   Heads of Agreement dated July 24, 1998 between Jyra 
Research Inc. and Siemens Nixdorf Informationssysteme AG.

           10.06   Executive Stock Option Plan dated September 1, 1998.



                                  70
<PAGE>
21.01   Subsidiaries of the Registrant.

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



















































                                       71
<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 31 March 1999. 
                                                 Jyra Research Inc.


                                                 ____________________
                                                 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.

                                              
                                                  ____________________
                                                  Paul Robinson
                                                  President & CEO


                                              
                                                  _____________________
                                                  Roderick Adams
                                                  Chief Financial Officer,
                                                  Director 
                                                  (Principal Financial
                                                 
 and Accounting Officer)



                                                  _____________________
                                                  Peter Lynch 
                                                  Director 



                                                  _____________________
                                                  Robin Elsom 
                                                  Director 









                                        72
<PAGE>