UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
  FORM
10-Q
  (Mark
One)
  þ
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For the quarterly period
ended March
31, 2009
  or
  o
              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: 000-52624
  CYBRA
CORPORATION
 (Exact
Name of Registrant as Specified in Its Charter)
  New York
              
              13-3303290(State or Other Jurisdiction of Incorporation
      or Organization)
              
              (I.R.S.
      Employer Identification No.)One
      Executive Blvd., Yonkers, NY
              
              10701(Address
      of Principal Executive Offices)
              
              (Zip
      Code)Registrant’s
      Telephone Number, Including Area Code
              
              (914)
       963-6600
  Not
Applicable
 (Former
Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
  Indicate
by check mark 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.
 þ Yes                 o
No
  Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
 o Yes                 o
No
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
  Large
      accelerated filer
                    o
                    Accelerated
      filer
                    oNon-accelerated
      filer
                    o
                    Smaller
      reporting company
                    þ
  Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes  ̈  No
þ
  As of May
12, 2009 the registrant had 13,572,143 shares of Common Stock
outstanding.
  
  CYBRA
Corporation
  Table
of Contents
  PagePart
      I.
                Financial
      Information
                1Item
      1.
                Financial
      Statements
                1Balance
      Sheets as of March 31, 2009 and December 31, 2008
                1Statements
      of Operations for the three months ended March 31, 2009 and
      2008
                2Statements
      of Cash Flows for the three months ended March 31, 2009 and
      2008
                3Notes
      to Financial Statements
                4Item
      2.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                15Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                18Item
      4T.
                Controls
      and Procedures
                18Part
      II.
                Other
      Information
                19Item
      2.
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                19Item
      6.
                Exhibits
                19Signatures
   i
  PART
I. FINANCIAL INFORMATION
  ITEM
1. FINANCIAL STATEMENTS
  CYBRA CORPORATION
  BALANCE
SHEETS
  March
      31,
                                
                                
                                December
      31,2009
                                
                                
                                2008ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                                
                                $
                                80,558
                                
                                
                                $
                                70,591Accounts
      receivable, less allowance for doubtful accounts of $17,000 at both
      dates
                                
                                
                                164,823
                                
                                
                                
                                331,021Total
      Current Assets
                                
                                
                                245,381
                                
                                
                                
                                401,612PROPERTY
      AND EQUIPMENT
                                
                                
                                73,664
                                
                                
                                
                                78,831SOFTWARE
      DEVELOPMENT
                                
                                
                                496,638
                                
                                
                                
                                553,071DEFERRED
      FINANCE COSTS
                                
                                
                                11,937
                                
                                
                                
                                113,010SECURITY
      DEPOSITS AND OTHER ASSETS
                                
                                
                                18,711
                                
                                
                                
                                18,711TOTAL
      ASSETS
                                
                                $
                                846,331
                                
                                
                                $
                                1,165,235LIABILITIES
      AND STOCKHOLDERS' DEFICITCURRENT
      LIABILITIESAccounts
      payable and accrued expenses
                                
                                $
                                369,263
                                
                                
                                $
                                437,088Accrued
      interest
                                
                                
                                587,291
                                
                                
                                
                                537,290Deferred
      revenue
                                
                                
                                351,517
                                
                                
                                
                                346,416Accrued
      liquidated damages - registration rights agreement
                                
                                
                                110,000
                                
                                
                                
                                110,0008%
      Convertible Debentures - Notes 3 and 13
                                
                                
                                2,481,143
                                
                                
                                
                                2,402,791TOTAL
      CURRENT LIABILITIES
                                
                                
                                3,899,214
                                
                                
                                
                                3,833,585STOCKHOLDERS'
      DEFICITPreferred
      Stock, Class A 1,000 shares authorized, Class B 1,000
    sharesauthorized,
      no shares outstanding at March 31, 2009 and December 31,
    2008
                                
                                
                                -
                                
                                
                                
                                -Common
      stock, par value $0.001 per share, 100,000,000 shares
      authorized;13,572,143
      and 13,512,143 shares issued and outstanding, respectively
                                
                                
                                13,572
                                
                                
                                
                                13,512Additional
      Paid - in capital
                                
                                
                                2,797,561
                                
                                
                                
                                2,752,621Accumulated
      deficit
                                
                                
                                (5,864,016
                                )
                                
                                
                                (5,434,483
                                )Total
      Stockholders' Deficit
                                
                                
                                (3,052,883
                                )
                                
                                
                                (2,668,350
                                )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
                                
                                $
                                846,331
                                
                                
                                $
                                1,165,235
  The
accompanying notes are an integral part of these financial
statements.
  -1-
   CYBRA
CORPORATION
  STATEMENTS
OF OPERATIONS
  Three
      Months EndedMarch
      31,2009
                        
                        
                        2008reclassified
      forcomparabilityREVENUESProducts
                        
                        $
                        256,098
                        
                        
                        $
                        148,139Services
                        
                        
                        162,575
                        
                        
                        
                        128,318TOTAL
      REVENUES
                        
                        
                        418,673
                        
                        
                        
                        276,457COST
      OF GOODS SOLDEquipment
      purchases
                        
                        
                        135,775
                        
                        
                        
                        33,492Royalties
      and consulting
                        
                        
                        16,036
                        
                        
                        
                        11,537151,811
                        
                        
                        
                        45,029GROSS
      PROFIT
                        
                        
                        266,862
                        
                        
                        
                        231,428RESEARCH
      AND DEVELOPMENT COSTS
                        
                        
                        52,333
                        
                        
                        
                        221,591SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES
                        
                        
                        414,647
                        
                        
                        
                        443,231TOTAL
      OPERATING EXPENSES
                        
                        
                        466,980
                        
                        
                        
                        664,822LOSS
      FROM OPERATIONS
                        
                        
                        (200,118
                        )
                        
                        
                        (433,394
                        )OTHER
      INCOME (EXPENSE)Interest
      expense, includes $101,073 and $63,364 of amortizationof
      deferred finance costs for the periods, respectively
                        
                        
                        (229,426
                        )
                        
                        
                        (151,062
                        )Interest
      income
                        
                        
                        11
                        
                        
                        
                        3,576(229,415
                        )
                        
                        
                        (147,486
                        )LOSS
      BEFORE INCOME TAXES
                        
                        $
                        (429,533
                        )
                        
                        $
                        (580,880
                        )DEFERRED
      INCOME TAXES (BENEFIT)
                        
                        
                        -
                        
                        
                        
                        (93,250
                        )NET
      LOSS
                        
                        $
                        (429,533
                        )
                        
                        $
                        (487,630
                        )PER
      SHARE DATABasic
      and diluted net loss per share
                        
                        $
                        (0.03
                        )
                        
                        $
                        (0.04
                        )Basic
      and diluted weighted-average shares outstanding
                        
                        
                        13,544,143
                        
                        
                        
                        12,610,954
  The
accompanying notes are an integral part of these financial
statements.
  -2-
  CYBRA CORPORATION
  STATEMENTS
OF CASH FLOWS
  Three
      Months EndedMarch
      31,2009
                    
                    
                    2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                    
                    $
                    (429,533
                    )
                    
                    $
                    (487,630
                    )Adjustments
      to reconcile net loss to net cash provided by (used in) in operating
      activitiesDepreciation
      and Amortization
                    
                    
                    62,988
                    
                    
                    
                    6,912Stock
      based compensation
                    
                    
                    45,000
                    
                    
                    
                    -Deferred
      income tax credit
                    
                    
                    -
                    
                    
                    
                    (93,250
                    )Interest
      expense - amortization of debt discount
                    
                    
                    78,352
                    
                    
                    
                    37,142Amortization
      of deferred finance cost
                    
                    
                    101,073
                    
                    
                    
                    63,364Changes
      in operating assets and liabilitiesAccounts
      receivable
                    
                    
                    166,198
                    
                    
                    
                    140,793Loan
      Receivable
                    
                    
                    -
                    
                    
                    
                    6,000Security
      deposits and other assets
                    
                    
                    -
                    
                    
                    
                    127Accounts
      payable and accrued expenses
                    
                    
                    (67,823
                    )
                    
                    
                    (259,014
                    )Accrued
      interest
                    
                    
                    50,001
                    
                    
                    
                    50,556Deferred
      revenue
                    
                    
                    5,101
                    
                    
                    
                    5,264Net
      Cash Provided by (Used in) Operating Activities
                    
                    
                    11,357
                    
                    
                    
                    (529,736
                    )CASH
      FLOWS FROM INVESTING ACTIVITIESAcquisition
      of property and equipment
                    
                    
                    (1,390
                    )
                    
                    
                    (4,986
                    )Net
      Cash Used in Investing Activities
                    
                    
                    (1,390
                    )
                    
                    
                    (4,986
                    )INCREASE
      (DECREASE) IN CASH AND CASH EQUIVALENTS
                    
                    
                    9,967
                    
                    
                    
                    (534,722
                    )CASH
      AND CASH EQUIVALENTSBeginning
      of period
                    
                    
                    70,591
                    
                    
                    
                    787,156End
      of period
                    
                    $
                    80,558
                    
                    
                    $
                    252,434SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash
      paid during the period for:Interest
                    
                    $
                    -
                    
                    
                    $
                    -Income
      Taxes
                    
                    $
                    2,194
                    
                    
                    $
                    -
  The
accompanying notes are an integral part of these financial
statements.
  -3-
  CYBRA
CORPORATION
  NOTES TO
FINANCIAL STATEMENTS
  1.  ORGANIZATION,
DESCRIPTION OF OPERATIONS, FINANCIAL STATUS OF THE COMPANY AND BASIS OF
PRESENATION
  Organization
and Description of Operations
  CYBRA
Corporation (“the Company”) was incorporated under the laws of the State of New
York on September 6, 1985. The Company is a software developer, publisher, and
systems integrator in the IBM midrange market. Its flagship product,
MarkMagicTM, is an
online bar code software product for IBM System i (formerly known as the AS/400)
computers. EdgeMagic®, first
released February 2008, is an integrated radio frequency identification (“RFID”)
control solution for IBM System i customers that is capable of deployment on
other platforms and is highly scalable. It is designed to manage edge readers
and analog control devices, commission, read, filter and verify RFID tags to
comply with Electronic Product Code (EPC) compliance mandates, as well as for
asset tracking applications and integrate with popular ERP and Warehouse
Management application packages.
  Substantially
all of the Company’s accounts receivables are due from manufacturing companies
and software vendors located throughout the United States.
  Financial
Status of the Company
  At March
31, 2009, the Company had cash and cash equivalents of $80,558, and a working
capital deficit of $3,653,833, which includes certain current liabilities that
are not expected to require near term cash settlement. Additionally, the Company
has incurred a net loss of $429,533 for the period ended March 31, 2009, and has
a stockholders deficit of $3,052,887 at March 31, 2009. Management has taken
several steps that it believes will improve sales and reduce costs in order
to ensure that its cash flows will meet its operating cash requirements for
2009. These steps include increasing sales of EdgeMagic®, which
management believes has revenue potential far in excess of the current product
mix, as well as the formation of a field level sales team.
  The
Company, as further discussed in Note 3, is obligated under 8% Convertible
Debentures that became due on April 10, 2009.  The Company presently
does not have the resources to pay the Debentures.  Furthermore, the
Company can provide no assurance that it will be able to refinance the
Debentures through new debt or equity financing or extend the term of the
Debentures.  If the Company is able to refinance or extend the term of
the Debentures, the terms of such a refinancing or extension of the term may be
burdensome and result in substantial dilution to its shareholders.
  Although
the terms of the Debentures permit the Company to force conversion, subject to
certain conditions, the Company was not able to satisfy those conditions and
force conversion of the Debentures by the maturity date.  The Company
is currently attempting to renegotiate the terms of the Debentures, either by
extending the maturity date of the Debentures or by exchanging the Debentures
for a new series of preferred stock. However, there can be no assurance that the
Company will be able to successfully renegotiate the terms of the Debentures or
that one or more Debenture holders will not demand payment of their
Debentures.  In such a case, the Company may be required to seek
protection under the federal or state bankruptcy laws or take other actions that
could impair its ability to continue its operations. While management of the
Company is currently continuing to negotiate with Debenture holders in good
faith and remains optimistic of a positive result, the Company remains
vulnerable in the near term to the possibility that one or more Debenture
holders will demand payment, which could lead to a bankruptcy
filing.
  Basis
of Presentation
  The
accompanying interim financial statements have been prepared by the Company
without audit, in accordance with the instructions for Form 10‐Q
pursuant to the rules and regulations of the SEC and therefore do not include
all information and notes normally provided in the annual financial statements
and should be read in conjunction with the audited financial statements and the
notes thereto included in the Company’s Annual Report on Form 10‐K
for the fiscal year ended December 31, 2008, as filed with the SEC on April 2,
2009.
  In the
opinion of management, the accompanying unaudited financial statements contain
all adjustments (which consist of normal and recurring adjustments) necessary
for a fair presentation of the financial statements. The results of operations
for the three months ended March 31, 2009 are not necessarily indicative of the
results to be expected for the full year.
   -4-
 
 2.  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
  Software
Costs
  The Company accounts for
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
(“SFAS 86”). SFAS 86 requires that costs related to the development of
enhancements to MarkMagic be capitalized as an asset when incurred subsequent to
the point at which technological feasibility of the enhancement is established.
SFAS 86 specifies that “technological feasibility” for purposes of SFAS 86 can
only be established by the completion of a “detailed program design” or if no
such design is prepared, upon the completion of a “working model” of the
software. The Company’s development process does not include a detailed program
design. Management believes that such a design could be produced in the early
stages of development but would entail significant wasted expense and delay.
Consequently, SFAS 86 requires the development costs to be recorded as expense
until the completion of a “working model”. In the Company’s case, the completion
of a working model does not occur until almost the time when the software is
ready for sale.
  Research
and Development Costs
  Research and development
costs incurred after completion of development of a product are expensed as
incurred. Total research and development expense for the three months ended
March 31, 2009 and 2008 were $52,333 and $221,591, respectively.
  Accounting
for Warrants Classified as Equity Issued to Purchase Company Common
Stock
  Warrants issued in
conjunction with equity financings were accounted for under the Emerging Issues
Task Force FSP (“EITF”) Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company’s Own Stock. In December 2006, the FASB
approved FSP EITF 00-19-2, Accounting for Registration Payment Arrangements, which
establishes the standard that contingent obligations to make future payments
under a registration rights arrangement shall be recognized and measured
separately in accordance with Statement 5 and FASB Interpretation No. 14,
Reasonable Estimation of the Amount of a Loss. The Company has
evaluated the effect of FSP EITF 00-19-2 and FSP EITF Topic D-98 on the
accompanying financial statements. The adoption of FSP EITF 00-19-2 on January
1, 2007 changed the classification of the warrant liability, which was $551,910
at January 1, 2007, to stockholders’ equity (additional paid-in
capital).
 
 Derivative
Financial Instruments
  The Company accounts for
the Warrants that were issued in a private placement of the 8% Convertible
Debentures with detachable Warrants on April 10, 2006, as derivatives under the
guidance of Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities
(“SFAS 133”), and Emerging Issues Task Force Issue 00-19, Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company’s Own Stock (“EITF 00-19”). The Company
considers these standards applicable by adopting “View A” of the Issue Summary
relating to Emerging Issues Task Force Issue 05-04, The Effect of a Liquidated Damages Clause on a Freestanding Financial
Instrument Subject to Issue No. 00-19 (“EITF 05-04”) in which the
Warrants and the related registration rights agreement are viewed together as a
combined instrument that is indexed to the Company’s stock. The embedded
conversion feature of the Debentures has not been classified as a derivative
financial instrument because the Company believes that they are “conventional”
as defined in Emerging Issues Task Force Issue 05-02,The Meaning of “Conventional Convertible Debt Instrument” in Issue No.
00-19  (“EITF 05-02”).
  Depreciation
and Amortization
  Depreciation
and amortization are provided by the straight-line and accelerated methods over
the estimated useful lives indicated in Note 5.
  Income
Taxes
  Income taxes are accounted
for under the asset and liability method in accordance with SFAS No. 109, Accounting for Income Taxes. Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial carrying amounts of existing assets and liabilities and
their respective tax bases as well as operating loss and tax credit carry
forwards. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the periods in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. Deferred tax assets are
reduced by a valuation allowance to the extent that the recoverability of the
asset is unlikely to be recognized.
   -5-
 
 During
its prior year ended December 31, 2008, the Company adopted FASB Interpretation
No. 48, Accounting
for Uncertainty in Income Taxes – an Interpretation of FASB Statement No.
109 (“FIN 48”). This interpretation provides guidance for recognizing and
measuring uncertain tax positions, as defined in SFAS No. 109, Accounting
for Income Taxes. FIN 48 prescribes a threshold condition that a tax
position must meet for any of the benefits of the uncertain tax position to be
recognized in the financial statements. FIN 48 also provides accounting guidance
on derecognizing, classification and disclosure of these uncertain tax
positions.
  Interest
costs and penalties related to income taxes are classified as interest expense
and selling, general and administrative costs, respectively, in the Company’s
financial statements. For the three months ended March 31, 2009 and 2008, the
Company did not recognize any interest or penalty expense related to income
taxes. The Company is currently subject to a three-year statute of limitations
by major tax jurisdictions. The Company files income tax returns in the U.S.
federal jurisdiction and New York State.
  Advertising
Costs
  Advertising
costs are charged to expense as incurred. Total advertising amounted to $2,051
and $26,345 for the three months ended March 31, 2009 and 2008,
respectively.
  Use
of Estimates
  The
preparation of financial statements, in conformity with accounting principles
generally accepted in the United States of America, 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 revenue and expenses
during the reporting period. Actual results could differ from those estimates.
The most significant estimates relate to valuation of stock grants and stock
options, the net operating loss carry-forward, the valuation allowance for
deferred taxes and various contingent liabilities. It is reasonably possible
that these above-mentioned estimates and others may be adjusted as more current
information becomes available, and any adjustment could be significant in future
reporting periods.
  Cash
and Cash Equivalents
  We
classify marketable securities that are highly liquid and have maturities of
three months or less at the date of purchase as cash equivalents. We manage our
exposure to counterparty credit risk through specific minimum credit standards,
diversification of counterparties and procedures to monitor our credit risk
concentrations.
  Revenue
Recognition
  The
Company recognizes revenues in accordance with AICPA Statement of Position (SOP)
97-2, Software
Revenue Recognition, as amended by SOP 98-9 (Modification
of SOP 97-2, Software
Revenue Recognition, With Respect to Certain Transactions).
  License
revenue allocated to software products generally is recognized upon delivery of
the products or deferred and recognized in future periods to the extent that an
arrangement includes one or more elements to be delivered at a future date and
for which fair values have not been established. Revenue allocated to
maintenance agreements is recognized ratably over the maintenance term and
revenue allocated to training and other service elements is recognized as the
services are performed. If evidence of fair value does not exist for all
elements of a license agreement and post customer support (PCS) is the only
undelivered element, then all revenue for the license arrangement is recognized
ratably over the term of the agreement as license revenue. If evidence of fair
value of all undelivered PCS elements exists but evidence does not exist for one
or more delivered elements, then revenue is recognized using the residual
method. Under the residual method, the fair value of the undelivered elements is
deferred and the remaining portion of the arrangement fee is recognized as
revenue.
  Cost of
license revenue primarily includes product, delivery, and royalty costs. Cost of
maintenance and service revenue consists primarily of labor costs for engineers
performing implementation services, technical support, and training personnel as
well as facilities and equipment costs.
   -6-
 
 Deferred
Finance Costs
  Deferred
finance costs are being amortized over the term of the 8% Convertible Debentures
on the effective interest method.
  Accounts
Receivable
  We record
trade accounts receivable at net realizable value. This value includes an
appropriate allowance for estimated uncollectible accounts to reflect any loss
anticipated on the trade accounts receivable balances and charged to the
provision for doubtful accounts. We calculate this allowance based on our
history of write-offs, level of past-due accounts based on the contractual terms
of the receivables, and our relationships with and the economic status of our
customers.
  Trade
receivables are presented net of an allowance for doubtful accounts of $17,000
as of March 31, 2009 and December 31, 2008.
  Stock-Based
Compensation
  In
December 2004, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123R (FAS-123R), Share-Based
Payment, which is a revision of Statement of Financial Accounting
Standards No. 123 (FAS-123), Accounting
for Stock-Based Compensation. In addition to requiring supplemental
disclosures, FAS-123R addressed the accounting for share-based payment
transactions in which a company receives goods or services in exchange for (a)
equity instruments of the company or (b) liabilities that are based on the fair
value of the company’s equity instruments or that may be settled by the issuance
of such equity instruments. FAS-123R focuses primarily on accounting for
transactions in which a company obtains employee services in share-based payment
transactions. FAS-123R eliminates the ability to account for share-based
compensation transactions using Accounting Principles Board Opinion No. 25
(APB-25), Accounting
for Stock Issued to Employees, and generally requires that such
transactions be accounted for using a fair value based method. Accordingly,
pro-forma disclosure is no longer an alternative.
  Under
FAS-123R, the Company was required to recognize compensation cost for the
portion of outstanding awards previously accounted for under the provisions of
APB-25 for which the requisite service had not been rendered as of the adoption
date for this Statement. The Statement also required companies to estimate
forfeitures of stock compensation awards as of the grant date of the
award.
  The
Company adopted FAS-123R on January 1, 2006, using the modified prospective
method. Stock issued to consultants for consulting services was valued as of the
date of the agreements with the various consultants, which in all cases was
earlier than the dates when the services were committed to be performed by the
various consultants.
  References
to the issuances of restricted stock refer to stock of a public company issued
in private placement transactions to individuals who are eligible to sell all or
some of their shares of restricted Common Stock pursuant to Rule 144,
promulgated under the Securities Act of 1933 (“Rule 144”), subject to certain
limitations. In general, pursuant to Rule 144, a stockholder who is not an
affiliate and has satisfied a six-month holding period may sell all of his
restricted stock without restriction, provided that the Company has current
information publicly available. Rule 144 also permits, under certain
circumstances, the sale of restricted stock, without any limitations, by a
non-affiliate of the Company that has satisfied a one-year holding
period.
  Fair
Value of Financial Instruments
  The
Company is required to estimate the fair value of the stock-based financial
instruments issued in connection with the sale of the Debentures, which were
issued at the time that the Company was privately held. Estimating the values of
the stock-based financial instruments of privately held companies, which cannot
be referenced to a quoted market price, even to establish the value of the
underlying common shares, involves significant uncertainty. It also involves the
application of assumptions that may vary substantially from those that would be
applied by actual buyers and sellers of the instruments. Without a quoted stock
price to use as a basis of measurement, the Company has estimated the value of
the Common Stock, Warrants and the conversion feature of the Debentures based on
a value of approximately $0.13 per share. This value was estimated by 1)
assuming that the $2,500,000 received from investors, as an arm’s-length
transaction, represented the total fair value of the instruments issued to those
investors, 2) estimating the fair value of the Debentures issued if there were
no conversion feature or Warrants, 3) allocating the remainder to the derivative
financial instruments, and 4) using a 147% volatility factor, as discussed
below, to derive the implied Common Stock value, the value of conversion feature
(included as part of the initial value of the Debentures) and values for the two
classes of Warrants that are accounted for as separate derivative financial
instruments.
   -7-
 
 The
estimated initial fair value of the Debentures payable (separated from the
embedded conversion feature) is based on the discounted contractual cash flows
with the discount rate of 27.1%. This discount rate is based on the 22.6% mean
return on United States equity for companies with market capitalizations of
under $1,500,000 and then adding 4.5% as the long-term risk premium on software
companies as published in a respected independent source. An equity-related
discount rate was used because, in the Company’s situation, unsecured debt at
this amount would entail equity-like risks. The estimated initial value of the
embedded conversion feature was then added to this value to arrive at the total
initial value of the convertible debenture.
  In
valuing the embedded conversion features and Warrants, in the absence of quoted
market prices or historical volatilities for the Company’s stock, the total fair
value of the financial instruments issued in the April 10, 2006 financing was
considered to be equal to the proceeds, representing a valuation provided by an
arm’s-length transaction. Allocating the total, however, required estimation
subject to significant uncertainty. First, proceeds were allocated to the values
of the principal and interest payable on the Debentures based on a 27.1% p.a.
discount rate as described in the last paragraph. The remainder was allocated
between the conversion feature and the Warrants based on Black-Scholes related
option pricing models. The Black-Scholes computations used a volatility factor
of approximately 147%. The volatility was the average calculated volatility, for
the one-year period ended April 10, 2006, of a sample of software companies with
market capitalizations of over $1,000,000. The implied Common Stock value that
resulted in a value for the derivatives equal to the difference between the
debenture value and the gross proceeds was approximately $0.13 per share. This
value, less an estimated 26% discount for lack of marketability for a net value
of approximately $0.096 per share, was used to estimate the fair value of the
1,826,000 shares of Common Stock sold at a discount to three individuals
involved in finding investors for the Company. Management believes that the
discount on the finders’ stock is appropriate because 1) there are no liquidated
damages provisions associated with that stock, and 2) although they were
included among the shares being registered by the Company for sale by the
holders to the public, there was no certainty that the registration will become
and remain effective.
  In
December 2006, the Financial Accounting Standards Board (“FASB”) issued FASB
Staff Position EITF 00-19-2 FSP 00-19-2, Accounting
for Registration Payment Arrangements. This FSPaddresses
an issuer’s accounting for registration payment arrangements by specifying that
the contingent obligation to make future payments or otherwise transfer
consideration under a registration payment arrangement, whether issued as a
separate agreement or included as a provision of a financial instrument or other
agreement, should be separately recognized and measured in accordance with FASB
Statement No. 5, Accounting
for Contingencies. FSP 00-19-2 became effective for fiscal periods
beginning after December 15, 2006, and interim periods within those fiscal
periods.
  Basic
and Diluted Loss per Share
  In
accordance with Financial Accounting Standards Board (“FASB”) Statement of
Financial Accounting Standard No. 128 (“SFAS 128”), Earnings
Per Share, the basic loss per common share is computed by dividing net
loss available to common stockholders by the weighted average number of common
shares outstanding. Diluted loss per common share is computed in a manner
similar to basic loss per common share except that the denominator is increased
to include the number of additional common shares that would have been
outstanding if the potential common shares had been issued and if the additional
common shares were dilutive. At March 31, 2009 and 2008, the Company stock
equivalents were anti-dilutive and excluded in the diluted loss per share
computation.
  Commitments
and Contingencies
  Liabilities
for loss contingencies arising from various claims, assessments, litigation,
fines and penalties and other sources are recorded when it is probable that a
liability has been incurred and the amount of the assessment can be reasonably
estimated.
  Adopted
Accounting Standards
  In
October 2008, the FASB issued FSP FAS 157-3, Determining
the Fair Value of a Financial Asset When the Market for That Asset Is Not
Active (“FSP 157-3”), to clarify the application of the provisions of
SFAS 157 in an inactive market and how an entity would determine fair value in
an inactive market. FSP 157-3 was effective upon issuance and applies to the
Company’s current financial statements. The application of the provisions of FSP
157-3 did not materially affect the Company’s results of operations or financial
condition for the period ended March 31, 2009.
  In June
2008, the FASB issued EITF No. 07-5, Determining
Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own
Stock, effective for financial statements issued for fiscal periods and
interim periods beginning after December 15, 2008. EITF No.07-5 provides
guidance for determining whether an equity-linked financial instrument (or
embedded feature) is indexed to an entity’s own stock. The adoption of EITF No.
07-5 did not have a material effect on the Company’s financial
statements.
   -8-
 
 Pending
Accounting Standards
  FSP
SFAS 132(R)-1, Employers’
Disclosures about Postretirement Benefit Plan Assets
  In
December 2008, the FASB issued FSP SFAS 132(R)‐1,
Employers’Disclosures about Postretirement Benefit Plan Assets. FSP SFAS
132(R)‐1
requires an employer to provide certain disclosures about the assets held
by its defined benefit pension or other postretirement plans. The required
disclosures include the investment policies and strategies of the plans,
the fair value of the major categories of plan assets, the inputs and
valuation techniques used to develop fair value measurements and a
description of significant concentrations of risk in plan assets. FSP SFAS
132(R)‐1
is effective for fiscal years ending after December 15, 2009. The Company
does not expect the adoption of FSP SFAS 132(R)‐1
to have a material impact on its Financial Statements.
  FSP
SFAS No. 157-4,
Determining Fair Value When the Volume and Level of Activity for the Asset
or Liability Have Significantly Decreased and Identifying Transactions That
Are Not Orderly
  In April
2009, the FASB issued FSP SFAS No. 157‐4,
Determining
Fair Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly. Under FSP SFAS No. 157‐4,
transactions or quoted prices may not accurately reflect fair value if an
entity determines that there has been a significant decrease in the volume and
level of activity for the asset or the liability in relation to the normal
market activity for the asset or liability (or similar assets or
liabilities). In addition, if there is evidence that the transaction for the
asset or liability is not orderly, the entity shall place little, if any
weight on that transaction price as an indicator of fair value. FSP SFAS
No. 157‐4
is effective for periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009 subject to the
early adoption of FSP SFAS No. 115‐2 and
SFAS No. 124‐2.
The Company did not elect to early adopt FSP SFAS No. 157‐4;
however, it does not expect the adoption to have a material impact on its
Financial Statements.
  FSP
SFAS No. 115-2
and SFAS No. 124-2,
Recognition and Presentation of
Other-Than-Temporary Impairments
  In April
2009, the FASB issued FSP SFAS No. 115‐2
and SFAS No. 124‐2,
Recognition
and Presentation of Other‐Than‐Temporary
Impairments (“FSP SFAS No. 115‐2”).
FSP SFAS No. 115‐2
provides new guidance on the recognition and presentation of other‐than‐temporary
impairments (“OTTI”) for fixed maturity securities that are classified as
available‐for‐sale
and held‐to‐maturity
if management does not intend to sell the impaired security and it is more
likely than not it will not be required to sell the impaired security
before the recovery of its amortized cost basis. The Company does not
have investments in fixed maturity securities and, accordingly, expects no
impact from adoption of this pronouncement.
  FSP
SFAS No. 107-1
and APB No. 28-1,
Interim Disclosures about Fair Value of Financial Instruments
  In April
2009, the FASB issued FSP SFAS No. 107‐1
and Accounting Principles Board (“APB”) No. 28‐1, Interim
Disclosures about Fair Value of Financial Instruments (“FSP SFAS No.
107‐1”).
FSP SFAS No. 107‐1
amends SFAS No. 107, Disclosures
about Fair Value of Financial Instruments to require fair value of
financial instrument disclosure in interim financial statements and amends APB
No. 28, Interim
Financial Reporting, to require those disclosures in all interim
financial statements. The provisions of FSP SFAS No. 107‐1
are effective for interim periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. The Company did
not elect to early adopt FSP SFAS No. 107‐1; however,
it does not expect the adoption to have a material impact on its Financial
Statements.
  Reclassifications
  Certain
reclassifications have been made to the 2008 financial statements included
herein to conform to the 2009 presentation.  These reclassifications
had no material effect on the financial position, results of operations, or cash
flows of the Company.
  3.  8%
CONVERTIBLE DEBENTURES AND DERIVATIVE FINANCIAL
INSTRUMENTS
  On April
10, 2006, the Company issued 8% Convertible Debentures (the “Debentures”) with a
principal (“face”) value of $2,500,000, along with 7,500,000 detachable Stock
Warrants (the “Warrants”) to several investors. The gross proceeds of this
transaction were $2,500,000, consisting of $2,080,000 cash, $151,000 from the
cancellation of debt incurred in 2005, $19,000 from the cancellation of debt
incurred earlier in 2006 and $250,000 applied as finders’ fees.  The
convertible debenture balances at March 31, 2009 and December 31, 2008 were
$2,481,143 and $2,402,791, respectively. The amortization of deferred finance
costs was $101,073 and $63,364 for the three months ended March 31, 2009 and
2008, respectively. The deferred finance cost balances at March 31, 2009 and
2008 were $11,937 and $113,010, respectively.
   -9-
 
 Interest
on the Debentures is due semiannually at 8% per annum beginning December 31,
2006. Interest is also due upon conversion, redemption and maturity. The
Debentures matured on April 10, 2009 (see Note 1).
  Through
April 10, 2008 the Company had the right, subject to certain conditions, to
redeem the Debentures for 120% of the principal value. The Company declined to
do so.
  The
investors also received 7,500,000 Warrants, 2,500,000 of Class A and 5,000,000
of Class B. Each Class A Warrant gives the holder the right to buy one share of
Common Stock for $0.75. Each Class B Warrant gives the holder the right to buy
one share of Common Stock for $1.75. The Warrants are exercisable at any time
through April 10, 2011. The 7,500,000 Warrants are the only outstanding Warrants
at March 31, 2009 that were issued in connection with the sale of the
Debentures.
  As part
of the transaction, $250,000 principal amount of the Debentures were issued
along with 125,000 Class A Warrants and 250,000 Class B Warrants as finders’
fees. The finders will also receive additional fees equal to 5% of any cash
collected as on the exercise of any of the Warrants. To date, no Warrants have
been exercised.
  The
shares of Common Stock that underlie the conversion feature of the Debentures
and those that underlie the Warrants are subject to a registration rights
agreement. Pursuant to the registration rights agreement, the Company was
obligated to file a registration statement with the United States Securities and
Exchange Commission by June 8, 2006 registering the shares for public sale, and
to have the registration statement become effective by September 7, 2006 and to
keep the registration statement continuously effective. Failure to achieve these
registration requirements will result, in addition to other possible claims by
the holders for damages, partial liquidated damages equal to 1.5% per month
(pro-rated by day) of the aggregate purchase price originally paid by the
investors (i.e., the monthly partial liquidated damages would be $37,500 per
month). Any claims and liquidated damages that might have been due as a result
of filing the registration statement on June 16, 2006 have been waived by the
holders. The registration statement did not become effective until December 6,
2006. Liquidated damages of $110,000 for the period September 7 through December
6, 2006 and $3,151 of related interest have been accrued through March 31,
2009.
  The
Warrants have been classified as derivative financial instruments as a result of
the issuance of a registration rights agreement that includes a liquidated
damages clause, which is linked to an effective registration of such securities.
Accordingly, the Company applied EITF 00-19 and accounted for the Warrants as
liabilities at estimated fair value. The Company’s value estimation methods
which, in the case of a private company, must inherently involve significant
uncertainly are described in the “fair value of financial instruments” section
of Note 1, above.
  The fair
value of the financial instrument as shown on the balance sheet assumes that the
shares will be registered. The liability under the alternative of the shares
never being registered and paying the full cash liquidated damages is estimated
to be approximately $892,000 greater than the fair value recorded on the balance
sheet. This estimate of value is subject to an extra level of uncertainty
concerning the amount at which a willing seller and buyer would exchange such
instruments. The estimated value represents discounting the $450,000 p.a.
($2,500,000 at 18%) liquidated damages, in perpetuity, at a rate of 33.875% and
adding a separate value of the Warrants. The separate value of the Warrants was
in turn, based on the Black-Scholes calculation used for the balance sheet (if
registered estimate) but reducing the current share value assumption by 45% for
lack of marketability. The 45% was based on published long-term
studies.
  The
derivative financial instruments have not been designated as hedges. The purpose
of their issuance was to raise additional capital in a more advantageous fashion
than could be done without the use of such instruments. In addition to expecting
the overall cost of capital to be less, the use of the derivative instruments
reduces the cost to the common shareholders when the value of their shares
declines in exchange for increasing the cost to the common shareholders when the
value of their shares increase, all of which should tend to reduce the
volatility of the value of the Company’s common shares.
  4.
STOCK BASED COMPENSATION
  During
the period ended March 31, 2009, the Company issued 60,000 shares of Common
Stock for services rendered as a director and investor relations services,
valued at $0.75 per share for total compensation of $45,000.
  The
Company has adopted the CYBRA Corporation 2006 Incentive Stock Plan, a
stock-based compensation plan to reward for services rendered by officers,
directors, employees and consultants. The Company has reserved 5,000,000 shares
of Common Stock of its unissued share capital for issuance under the
plan.
   -10-
 
 The
Company recognizes share-based compensation expense for all service-based awards
with graded vesting schedules on a straight-line basis over the requisite
service period for the entire award. Initial accruals of compensation expense
are based on the estimated number of shares for which requisite service is
expected to be rendered. Estimates are revised if subsequent information
indicates that forfeitures will differ from previous estimates, and the
cumulative effect on compensation cost of a change in the estimated forfeitures
is recognized in the period of the change.
  Total
stock options outstanding at March 31, 2009 were 100,000, all of which were
vested.
  Stock
option transactions to the employees, directors, and consultants are summarized
as follows:
  Stock
      Options OutstandingOutstanding
      at January 1, 2008
                
                
                100,000Granted
                
                
                0Exercised
                
                
                0Outstanding
      at December 31, 2008
                
                
                100,000Options
      exercisable at December 31, 2008
                
                
                100,000Options
      outstanding at January 1, 2009
                
                
                100,000Granted
                
                
                0Exercised
                
                
                0Outstanding
      at March 31, 2009
                
                
                100,000Options
      exercisable at March 31, 2009
                
                
                100,000
  The
100,000 options outstanding at March 31, 2009 were issued in December 2007, have
a remaining outstanding life of 4 years and have an exercise price of $0.75 per
share.
  Following
is a summary of the warrant activity:
  Class
      A and B Warrants
                Total
      Number of  Shares
                Class
      A
                Class
      B
                Average
      Exercise Price per Share
                Weighed
      Average Remaining Contractual
                  Term
      In YearsOutstanding
      at December 31, 2008
                10,571,003
                3,523,669
                7,047,334
                1.42
                3.49Total
      Outstanding Warrants – December 31, 2008
                10,571,003
                3,523,669
                7,047,334
                1.42
                3.49Exercisable
      at December 31, 2008
                10,571,003
                3,523,669
                7,047,334
                1.42
                3.49Granted
                -
                -
                -Exercised
                -
                -
                -Forfeited
                -
                -
                -Outstanding
      at March 31, 2009
                10,571,003
                3,523,669
                7,047,334
                1.42
                3.24Total
      Outstanding Warrants – March 31, 2009
                10,571,003
                3,523,669
                7,047,334
                1.42
                3.24Exercisable
      at March 31, 2009
                10,571,003
                3,523,669
                7,047,334
                1.42
                3.24
  5.
PROPERTY AND EQUIPMENT AND SOFTWARE DEVELOPMENT
  At March
31, 2009 and 2008, property and equipment consisted of the
following:
 March
      31,
                        
                        
                        December
      31,
                        
                        
                        Estimated
      Useful Life2009
                        
                        
                        2008
                        
                        
                        in 
      YearsFurniture
      and office equipment
                        
                        $
                        186,869
                        
                        
                        $
                        185,479
                        
                        
                        
                        5Computer
      software
                        
                        
                        109,244
                        
                        
                        
                        109,244
                        
                        
                        
                        3Leasehold
      Improvements
                        
                        
                        21,294
                        
                        
                        
                        21,294
                        
                        
                        Life
      of Lease317,407
                        
                        
                        
                        316,017Less:
      Accumulated Depreciation
                        
                        
                        243,743
                        
                        
                        
                        237,186$
                        73,664
                        
                        
                        $
                        78,831
  -11-
 
 March
      31,
                        
                        December
      31,
                        
                        Estimated
      Useful Life2009
                        
                        2008
                        
                        in 
      YearsSoftware
      Development Costs
                        
                        $
                        677,200
                        
                        
                        $
                        677,200
                        
                        
                        
                        3Less:
      Accumulated Amortization
                        
                        
                        180,562
                        
                        
                        
                        124,129$
                        496,638
                        
                        
                        $
                        553,071
  The
Company’s policy is to capitalize software development costs in accordance to
SFAS No. 86 (See Note 2).
  6.
INCOME TAXES
  The
Company had the following deferred tax assets and liabilities at March 31, 2009
and December 31, 2008:
  March
      31, 2009
                                      
                                      
                                      December
      31, 2008Current
      assets and liabilities:Accounts
      receivable
                                      
                                      $
                                      (67,000
                                      )
                                      
                                      $
                                      (135,000
                                      )Accounts
      payable and accrued expenses
                                      
                                      
                                      21,000
                                      
                                      
                                      
                                      57,000Deferred
      revenues
                                      
                                      
                                      142,000
                                      
                                      
                                      
                                      141,00096,000
                                      
                                      
                                      
                                      63,000Valuation
      allowance
                                      
                                      
                                      (96,000
                                      )
                                      
                                      
                                      (63,000
                                      )Net
      current deferred tax asset
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      -Noncurrent
      assets and liabilities:Net
      operating loss carryforwards
                                      
                                      $
                                      2,187,000
                                      
                                      
                                      $
                                      2,117,000Depreciation
                                      
                                      
                                      (69,000
                                      )
                                      
                                      
                                      (94,000
                                      )2,118,000
                                      
                                      
                                      
                                      2,023,000Valuation
      allowance
                                      
                                      
                                      (2,118,000
                                      )
                                      
                                      
                                      (2,023,000
                                      )Net
      deferred deferred tax asset
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      -
  The
valuation allowance for the deferred tax asset increased by $128,000 for the
three months ended March 31, 2009.
  The
Company has net operating losses amounting to approximately $5,400,000 that
expire in various periods from 2024 through 2029. The ultimate realization of
the net operating losses is dependent upon future taxable income, if any, of the
Company and may be limited in any one period by alternative minimum tax rules.
Although management believes that the Company will have sufficient future
taxable income to absorb the net operating loss carryovers before the expiration
of the carryover period, the current global economic crisis imposes additional
profitability risks that are beyond our control. Accordingly, management has
determined that a full valuation allowance of the deferred tax asset is
appropriate at this time.
  Internal
Revenue Code Section 382 imposes limitations on the use of net operating loss
carryovers when the stock ownership of one or more 5% shareholders (shareholders
owning 5% or more of the Company’s outstanding capital stock) has increased by
more than 50 percentage points. Management intends to carefully monitor share
ownership of 5% shareholders but cannot control the ownership changes occurring
as a result of public trading of the Company’s Common Stock. Accordingly, there
is a risk of an ownership change beyond the control of the Company that could
trigger a limitation of the use of the loss carryover.
   -12-
 
 The
Company has no uncertain income tax positions under FIN No. 48.
  7.
PREFERRED STOCK
  The
Company is authorized to issue 1,000 Class A Preferred shares and 1,000 Class B
Preferred shares, each of which has a par value of $1.00.  No shares
of preferred stock are currently outstanding.
  8.
COMMITMENTS AND CONTINGENCIES
  a. Operating
lease
 The
Company occupies office space in Yonkers, New York under a lease agreement that
expires on January 31, 2010. They also rent space in West Seneca. This lease
agreement expires on May 31, 2010.
  The
minimum rental commitment is as follows:
  2009
                  
                  $
                  66,1142010
                  
                  
                  10,978$
                  77,092
  Rent
expense amounted to $23,312 and $23,111 for the three months ended March 31,
2009 and 2008, respectively. This includes additional expense for
storage.
  b. Line
of Credit
 The
Company has a $115,000 credit line available through its bank. No money was
drawn from this line of credit in 2009 or 2008. In the event of borrowing, the
repayment period is 36 months. The line of credit is personally guaranteed by
Harold Brand, Chairman and Chief Executive and majority shareholder of the
Company. The Company’s right to draw on the credit line is subject to approval
of holders of Debentures constituting 60% of the principal amount of Debentures
outstanding.
  c. Litigation
 A
complaint was filed against the Company and its CEO on December 28, 2006 in
Magistrate’s court in Herzliya, Israel, by Raz-Lee Security Ltd. (“Raz-Lee”), a
former distributor of the Company’s products (Case No. 8443/06). The action
seeks $50,000 in damages plus interest, court costs and attorneys’
fees.  The action against the Company’s CEO was dismissed and an
appeal of such dismissal is pending. The Company has counter-claimed against
Raz-Lee for failure to report sales and royalties and seeks an accounting, with
damages estimated at $50,000. Each of the parties has asked the court to order a
deposit of security for costs. The Company has provided a security deposit of
$7,000 as requested by the court. At a pre-trial conference, the Court suggested
that the Company pay Raz-Lee $25,000 in settlement of the claim and
counter-claim. This suggestion was rejected by both parties. The Company intends
to vigorously defend the claim and prosecute its counter-claim. The case is
still pending. Management has consulted with counsel and at March 31, 2009 and
December 31, 2008, the balance sheet reflects a reserve of $25,000 against the
potential settlement, which is included in accrued expenses. The Company is not
a party to any other pending or threatened legal proceedings.
  d. Executive
Employment Contract
 Effective
April 30, 2006, the Company entered into a five-year Employment Agreement with
Mr. Brand, with base salary set at $180,000 per annum. In addition to this
salary, Mr. Brand is entitled to incentive compensation an amount equal to two
percent (2%) of annual gross sales of the Company on sales in excess of one
million dollars ($1,000,000). In addition, Mr. Brand will be entitled to
standard benefits: four weeks of paid vacation, accident and health insurance,
sick leave benefits, holidays and personal days, personal expenses
reimbursement, life insurance, disability insurance and the use of a corporate
car.
  9.
PROFIT SHARING PLAN
  The
Company has a qualified 401(k) profit sharing plan covering all eligible
employees. The plan provides for contributions by the Company in such amounts as
the Board of Directors may annually determine but subject to statutory
limitations.
  No
contributions to the plan by the Company have been provided for either the three
months ended March 31, 2009 or 2008.
   -13-
  10.
RELATED PARTY TRANSACTIONS
  Profit
Horizon, Inc., a company controlled by Robert J. Roskow, Executive Vice
President and Director of the Company, provides sales consulting services.
During the three months ended March 31, 2009 and 2008, the Company incurred
approximately $7,500 and $11,500 respectively, in sales commissions to Profit
Horizon, Inc.
  11.
FAIR VALUE OF FINANCIAL INSTRUMENTS
  The
Company’s financial instruments consisted of the following at March 31, 2009 and
2008:
  March
      31, 2009
                          
                          
                          December
      31, 20088%
      Convertible Debentures
                          
                          
                          2,481,143
                          
                          
                          
                          2,402,791
  The fair
value of the Debentures does not differ significantly from their carrying amount
because of their short-term maturity.
  12.
LOSS PER SHARE
  Loss per
share for the three months ended March 31, 2009 and 2008 does not include the
effects of the 10,571,003 Warrants or the 5,000,000 shares into which the 8%
Convertible Debentures are convertible because the effects would be
anti-dilutive.
  13.
SUBSEQUENT EVENTS
  On April
10, 2009, the Company did not pay outstanding 8% Convertible Debentures (the
“Debentures”), in the aggregate principal amount of $2,490,000, which became due
on that date.  The three-year Debentures were issued on April 10,
2006, pursuant to a Securities Purchase Agreement, also dated April 10, 2006
(the “Securities Purchase Agreement”).
  The
Company’s failure to pay the full principal amount of the Debentures on their
Maturity Date constituted an “Event of Default” under the Debentures. Upon an
Event of Default, the full principal amount of the Debenture, together with
interest and other amounts owing in respect thereof, to the maturity date will
become, at the Debenture holder’s election, immediately due and payable in cash.
The aggregate amount payable upon an Event of Default is referred to in the
Debentures as the “Mandatory Prepayment Amount.”
  The
Mandatory Prepayment Amount of a Debenture is equal to the sum of: (i) the
greater of: (A) 120% of the principal amount of such Debenture, plus all accrued
and unpaid interest thereon, or (B) the principal amount of such Debenture, plus
all other accrued and unpaid interest thereon, divided by the Conversion Price
on (x) the date the Mandatory Prepayment Amount is demanded or otherwise due or
(y) the date the Mandatory Prepayment Amount is paid in full, whichever is less,
multiplied by the VWAP on (x) the date the Mandatory Prepayment Amount is
demanded or otherwise due or (y) the date the Mandatory Prepayment Amount is
paid in full, whichever is greater, and (ii) all other amounts, costs, expenses
and liquidated damages due in respect of such Debentures. The current Conversion
Price of the Debentures is $0.50. VWAP is the volume-weighted average price of
our common stock on the day in question.
  “VWAP”
means, for any date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a Trading
Market, the daily volume weighted average price of the Common Stock for such
date (or the nearest preceding date) on the Trading Market on which the Common
Stock is then listed or quoted as reported by Bloomberg Financial L.P. (based on
a Business Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if
the Common Stock is not then listed or quoted on a Trading Market and if prices
for the Common Stock are then reported in the “Pink Sheets” published by the
Pink Sheets LLC (or a similar organization or agency succeeding to its functions
of reporting prices), the most recent bid price per share of the Common Stock so
reported; or (c) in all other cases, the fair market value of a share of Common
Stock as determined by an independent appraiser selected in good faith by the
Purchasers and reasonably acceptable to the Company.
  Management
has determined, based on the provisions set forth in the Debenture, that, as of
April 10, 2009, the Mandatory Prepayment Amount is approximately
$3,700,000.  Management is unable to determine, at this time, any
adjustments to said amount that may need to be made if demand for repayment is
made at a later date, as such amount would be based on variables only available
at such future date.  Such adjustments, if any, may be material in
amount.
  Commencing
five days after a holder demands payment of a Debenture, the interest rate on
that Debenture will accrue at the rate of 15% per annum, or such lower maximum
amount of interest permitted to be charged under applicable law. The
foregoing is a summary of the terms of the Debentures and the consequences of an
Event of Default thereunder.  The Company is currently attempting to
renegotiate the terms of the Debentures, either by extending the maturity date
of the Debentures or by exchanging the Debentures for a new series of preferred
stock. However, there can be no assurance that the Company will be able to
successfully renegotiate the terms of the Debentures or that one or more
Debenture holders will not demand payment of their Debentures.
 
 -14-
  ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
  FORWARD-LOOKING
STATEMENTS
  This
Quarterly Report on Form 10-Q contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). The words “believe,” “expect,” “anticipate,”
“project,” “target,” “optimistic,” “intend,” “aim,” “will” or similar
expressions are intended to identify forward-looking statements. Such statements
include, among others, those concerning our expected financial performance and
strategic and operational plans, as well as all assumptions, expectations,
predictions, intentions or beliefs about future events. These statements are
based on the beliefs of our management as well as assumptions made by and
information currently available to us and reflect our current view concerning
future events. As such, they are subject to risks and uncertainties that could
cause our results to differ materially from those expressed or implied by such
forward-looking statements. Such risks and uncertainties include, among many
others: our significant operating losses; uncertainty of capital resources; the
speculative nature of our business; our ability to successfully implement new
strategies; present and possible future governmental regulations; operating
hazards; competition; the loss of key personnel; any of the factors in the “Risk
Factors” section of the Company’s Annual Report on Form 10-K; other risks
identified in this Report; and any statements of assumptions underlying any of
the foregoing. You should also carefully review other reports that we file with
the SEC. The Company assumes no obligation and does not intend to update these
forward-looking statements, except as required by law.
  The
following discussion should be read in conjunction with our financial
statements, together with the notes to those statements, included elsewhere in
this report. Our actual results may differ materially from those discussed in
these forward-looking statements because of the risks and uncertainties inherent
in future events.
  CYBRA
Corporation (“the Company”) is a software developer, publisher, and systems
integrator in the IBM midrange market. Its flagship product, MarkMagic®, is an
online bar code software product for IBM System i (formerly known as the AS/400)
computers. This software lets businesses design and print all types of
documents, such as bar code labels, radio frequency identification (“RFID”)
tags, e-forms, and other media, using live data, with little or no programming
necessary. MarkMagic’s “what-you-see-is-what-you-get” design component, JMagic,
was developed in Java specifically in order to be deployed across the Internet,
as well as on diverse computing platforms, including Windows, UNIX and
Linux.
  The Company’s newest
product, EdgeMagic®,
released in February 2008, is an RFID control solution for IBM System i
customers that is capable of deployment on other platforms and is highly
scalable. It is designed to manage edge readers and analog control devices;
commission, read, filter and verify RFID tags to comply with Electronic Product
Code (EPC) compliance mandates; and integrate with popular System i ERP and
Warehouse Management application packages.
   -15-
  Comparison
of the three months ended March 31, 2009 to the three Months Ended March 31,
2008
  The
following table summarizes certain aspects of our results of operations for the
three months ended March 31, 2009 to the three months ended March 31,
2008.
  three
      months Ended March 31,2009
                  
                  
                  2008
                  
                  
                  Change $
                  
                  
                  Change %Revenues
                  
                  $
                  
                  
                  
                  $
                  
                  
                  
                  
                  
                  
                  $Products
                  
                  
                  256,098
                  
                  
                  
                  148,139
                  
                  
                  
                  107,959
                  
                  
                  
                  73
                  %Services
                  
                  
                  162,575
                  
                  
                  
                  128,318
                  
                  
                  
                  34,257
                  
                  
                  
                  27
                  %Total
      Revenues
                  
                  $
                  418,673
                  
                  
                  $
                  276,457
                  
                  
                  $
                  142,216
                  
                  
                  
                  51
                  %Direct
      Costs
                  
                  $
                  
                  
                  
                  $
                  
                  
                  
                  
                  
                  
                  
                  $Hardware
      and Supplies
                  
                  
                  135,775
                  
                  
                  
                  33,492
                  
                  
                  
                  102,283
                  
                  
                  
                  305
                  %Royalties
      & Consulting
                  
                  
                  16,036
                  
                  
                  
                  11,537
                  
                  
                  
                  4,499
                  
                  
                  
                  39
                  %Total
      Direct Costs
                  
                  $
                  151,811
                  
                  
                  $
                  45,029
                  
                  
                  $
                  106,782
                  
                  
                  
                  237
                  %%
      of total revenues
                  
                  
                  36
                  %
                  
                  
                  16
                  %Gross
      Margin
                  
                  $
                  266,862
                  
                  
                  $
                  231,428
                  
                  
                  $
                  35,434
                  
                  
                  
                  15
                  %%
      of total revenues
                  
                  
                  64
                  %
                  
                  
                  84
                  %Research
      and development costs
                  
                  $
                  52,333
                  
                  
                  $
                  221,591
                  
                  
                  $
                  (169,258
                  )
                  
                  
                  -76
                  %%
      of total revenues
                  
                  
                  12
                  %
                  
                  
                  80
                  %Sales
      and marketing expenses
                  
                  $
                  44,080
                  
                  
                  $
                  69,783
                  
                  
                  $
                  (25,703
                  )
                  
                  
                  -37
                  %%
      of total revenues
                  
                  
                  11
                  %
                  
                  
                  25
                  %General
      and administrative expenses
                  
                  $
                  370,567
                  
                  
                  $
                  373,448
                  
                  
                  $
                  (2,881
                  )
                  
                  
                  -1
                  %%
      of total revenues
                  
                  
                  89
                  %
                  
                  
                  135
                  %Interest
      expense
                  
                  $
                  229,426
                  
                  
                  $
                  151,062
                  
                  
                  $
                  78,364
                  
                  
                  
                  52
                  %%
      of total revenues
                  
                  
                  55
                  %
                  
                  
                  55
                  %Other
      Income (Expenses)
                  
                  $
                  11
                  
                  
                  $
                  3,576
                  
                  
                  $
                  (3,565
                  )
                  
                  
                  -100
                  %%
      of total revenues
                  
                  
                  0
                  %
                  
                  
                  1
                  %Loss
      Before Taxes
                  
                  $
                  (429,533
                  )
                  
                  $
                  (580,880
                  )
                  
                  $
                  151,347
                  
                  
                  
                  -26
                  %Income
      Taxes (Benefit)
                  
                  $
                  -
                  
                  
                  $
                  (93,250
                  )
                  
                  $
                  93,250
                  
                  
                  
                  -100
                  %Effective
      tax rate
                  
                  
                  0
                  %
                  
                  
                  16
                  %Net
      loss
                  
                  $
                  (429,533
                  )
                  
                  $
                  (487,630
                  )
                  
                  $
                  58,097
                  
                  
                  
                  -12
                  %%
      of total revenues
                  
                  
                  -103
                  %
                  
                  
                  -176
                  %
  Revenues
  The
increase in total revenues for the three months ended March 31, 2009, as
compared to the same three months in 2008, is primarily due to higher demand for
software and hardware products. There was a decrease in revenues from CYBRA’s
OEM partners, which was offset by an increase in direct and reseller sales. We
expect that our revenues will increase due to sales of our new product,
EdgeMagic, as well as new MarkMagic features to be released at end of second
quarter.
   -16-
 
 Direct
Costs
  The costs
for hardware and supplies for the three months ended March 31, 2009 were higher,
as compared to the same three months in 2008, due to more demand for these
product types.
  Gross
Margin
  Gross
Margin as a percentage of sales decreased to 64% in the three months ended March
31, 2009 as compared to 84% in the same three-month period in 2008. This was due
to a number of low margin hardware sales.
  We expect
that our gross margin will improve over the course of 2009 as sales of software
products continue to increase.
  Software
Development Costs
  Software
development costs consist primarily of compensation of development personnel,
related overhead incurred to develop EdgeMagic and upgrades, and to enhance our
current products and fees paid to outside consultants. Substantially all of
these expenses have been incurred by us in the United States. Software
development costs are accounted for in accordance with SFAS No. 86, Accounting
for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed, under which we are required to capitalize software development
costs between the time technological feasibility is established and the product
is ready for general release. Costs that do not qualify for capitalization are
charged to research and development expense when incurred. EdgeMagic software is
now available for general release and all costs incurred after September 1, 2008
are expensed in accordance with SFAS No. 86. During the periods ended March 31,
2009 and 2008, the software development costs that were expensed were $52,333
and $210,298, respectively.
  Sales
and Marketing Expenses
  Sales and
marketing expenses consist primarily of commissions and advertising and
promotional expenses. The decrease in absolute dollars for the three months
ended March 31, 2009 as compared to the same three months in 2008 is due to
cutbacks in advertising and trade show activity.
  General
and Administrative Expense
  General
and administrative expenses consist primarily of costs associated with our
executive, financial, human resources and information services functions.
General and administrative expenses decreased slightly in absolute dollars for
the three months ended March 31, 2009 as compared to the same three months in
2008 primarily due to fewer employees and the attendant reduction in related
expenses.
  Interest
Expense
  Interest
expense represents interest accrued on, and amortization of deferred financing
cost related to, the 8% convertible debentures.
 
 Other
Income, Net
  Interest
and other income decreased for the three months ended March 31, 2009 as compared
to the same three months in 2008. The decrease is due primarily to a decline in
interest bearing bank balances.
  Provision
for Income Taxes
  The
provision for income taxes consists of provisions for federal and state income
taxes.
  We
recorded income tax expense(benefit) of $-0- and ($93,250) for the three months
ended March 31, 2009 and 2008. The effective income tax rates were 0% and 16%
for the three months ended March 31, 2009 and 2008. The effective tax rate
differs from the statutory U.S. federal income tax rate of 35%, primarily due to
state income tax increase in valuation allowance for deferred tax asset and
permanent differences between GAAP pre-tax income and taxable
income.
   -17-
 
 Liquidity
and Capital Resources
  As of
March 31, 2009, the Company’s principal sources of liquidity included cash of
$80,558. Our operations provided $11,357 in cash during the three months ended
March 31, 2009 as compared to funds used for operations of $529,736 for the
three months ended March 31, 2008. In approximate dollar amounts, the
improvement of $541,000 is largely the result of a decrease in our pre-tax loss
of $151,000 coupled with increases in non-cash expenses of $180,000, a net
increase in our cash flows from trade and other receivables of $19,000 and the
slowing of our net pay down rate on accounts payable by $191,000.
  To
sustain operations under our current structure, we need cash of approximately
$60,000 per month to fund research and administrative expenses. We believe that
we will be able to meet that continuing obligation at our current sales level
while continuing to pay down existing trade obligations at a moderate
rate.
  Our
working capital deficiency was approximately $3,654,000 at March 31, 2009. The
deficiency on working capital included approximately $2,481,000 in amounts due
on 8% convertible debentures that are expected to be renegotiated and not
require cash settlement as well as $352,000 in deferred revenues that require
settlement in future services rather than cash.
  During
2009 we issued 60,000 shares of common stock for services.
  As of the
second quarter of 2009, we are operating at close to break-even on a cash flow
basis. However, we did not have the resources to repay the Debentures when they
came due April 10, 2009. We are in the process of renegotiating the terms of the
Debentures, either by extending the due date of the Debentures or by exchanging
the Debentures for a new series of preferred stock. There is no guarantee that
it will be successful in the renegotiating. If it is successful, management
believes the Company can sustain its cash flow at break-even and will not need
additional sources of financing for the short term.
   ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Not
applicable to smaller reporting companies.
 
  ITEM
4T. CONTROLS AND PROCEDURES
  Evaluation
of Disclosure Controls and Procedures.
  The
Company’s Management under the supervision and with the participation of the
Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”)
are responsible for establishing and maintaining “disclosure controls and
procedures” (as defined in rules promulgated under the Securities Exchange Act
of 1934, as amended) for the Company.  Based on their evaluation of
the Company’s disclosure controls and procedures as of March 31, 2009, the CEO
and CFO have concluded that the Company’s disclosure controls and procedures
were effective to ensure that the information required to be disclosed by the
Company in this Quarterly Report on Form 10-Q was (i) recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and (ii) accumulated and communicated to the
Company’s management, including the Company’s principal executive and principal
financial officers, to allow timely decisions regarding required
disclosure.
  Changes
in Internal Control over Financial Reporting.
  During
the first quarter of the Company’s 2009 fiscal year, there were no changes
in the Company’s internal control over financial reporting during the period
covered by this report that have materially affected, or are reasonably likely
to materially affect, the Company’s internal control over financial
reporting.
  Limitations
on the Effectiveness of Controls.
  A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met.
Because of the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues, if any, within
a company have been detected.
  The Company’s disclosure controls and procedures are designed to provide
reasonable assurance of achieving their objectives, and the CEO and CFO have
concluded that these controls and procedures are effective at the “reasonable
assurance” level.
 
 -18-
 
 PART
II. OTHER INFORMATION
 
 ITEM
2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS.
  During
the quarterly period ended March 31, 2009, the Company issued 60,000 shares of
the Company’s Common Stock in exchange for services rendered as a director and
investor relations services, valued at $0.75 per share for total compensation of
$45,000.
  The
securities were issued in the following transactions:
  Provider
      of Services
                      
                      Shares
      of Common Stock
                      
                      Type
      of Services
                      
                      Cost
      Basis
                      
                      Date
      of IssuanceDamon
      Testaverde
                      
                      
                      40,000
                      
                      
                      Investor
      Relations
                      
                      $
                      30,000.00
                      
                      
                      2/11/2009Network
      1 Financial Securities, Inc.
                      
                      
                      10,000
                      
                      
                      Investor
      Relations
                      
                      $
                      7,500.00
                      
                      
                      2/11/2009Jonathan
      Rubin
                      
                      
                      5,000
                      
                      
                      Director
                      
                      $
                      3,750.00
                      
                      
                      2/11/2009Matthew
      Rothman
                      
                      
                      5,000
                      
                      
                      Director
                      
                      $
                      3,750.00
                      
                      
                      2/11/2009
  The
issuance of above shares of Common Stock was made pursuant to the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as
amended.
 
 
 ITEM 6.  
EXHIBITS.
 
 (a)
  Exhibits.
  31.1
                Certification of the Chief Executive Officer
      required by Rule 13a-14(a) or Rule 15d-14(a).31.2
                Certification of the Chief Financial Officer
      required by Rule 13a-14(a) or Rule 15d-14(a).32.1
                Certification of the Chief Executive Officer
      required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C.
      1350.32.2
                Certification of the Chief Financial Officer
      required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C.
      1350.






-19-
    SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
 
 Date:
      May 13, 2009
                
                CYBRA
      CorporationBy:
                /s/
      Harold BrandHarold
      BrandChief
      Executive Officer andInterim
      Chief Financial Officer