UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)





x   QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
quarterly period ended September 30,
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            ̈ 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).


 ̈ Yes            ̈ 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  ̈                                                                Accelerated
filer  ̈




Non-accelerated
filer   ̈                                                                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
November13, 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 September 30, 2009 and December 31, 2008
            1Statements
      of Operations for the three and nine months ended September 30, 2009 and
      2008
            2Statements
      of Cash Flows for the nine months ended September 30, 2009 and
      2008
            3Notes
      to Financial Statements
            4Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            16Item
      3.
            Quantitative
      and Qualitative Disclosures About Market Risk
            19Item
      4T.
            Controls
      and Procedures
            20Part
      II.
            Other
      Information
            21Item
      1.
            Legal
      Proceedings
            21Item
      6.
            Exhibits
            21Signatures
            22











PART
I. FINANCIAL INFORMATION





ITEM
1. FINANCIAL STATEMENTS





CYBRA CORPORATION





CYBRA CORPORATION





BALANCE
SHEETS




September
      30
              
              
              December
      31,2009
              
              
              2008(Unaudited)
              
              
              (Audited)ASSETSCURRENT
      ASSETSCash
      and cash equivalents
              
              $
              29,421
              
              
              $
              70,591Accounts
      receivable, less allowance for doubtful accounts of $17,000 at both
      dates
              
              
              152,741
              
              
              
              331,021Total
      Current Assets
              
              
              182,162
              
              
              
              401,612PROPERTY
      AND EQUIPMENT
              
              
              60,531
              
              
              
              78,831SOFTWARE
      DEVELOPMENT
              
              
              383,772
              
              
              
              553,071DEFERRED
      FINANCE COSTS
              
              
              -
              
              
              
              113,010SECURITY
      DEPOSITS AND OTHER ASSETS
              
              
              11,634
              
              
              
              18,711TOTAL
      ASSETS
              
              $
              638,099
              
              
              $
              1,165,235LIABILITIES
      AND STOCKHOLDERS' DEFICITCURRENT
      LIABILITIES8% Convertible Debentures
              
              $
              2,601,275
              
              
              $
              2,402,791Accrued
      liquidated damages - registration rights agreement
              
              
              110,000
              
              
              
              110,000Accounts
      payable and accrued expenses
              
              
              436,023
              
              
              
              437,088Accrued
      interest
              
              
              638,233
              
              
              
              537,290Deferred
      revenue
              
              
              346,494
              
              
              
              346,416TOTAL
      CURRENT LIABILITIES
              
              
              4,132,025
              
              
              
              3,833,585STOCKHOLDERS'
      DEFICITPreferred
      Stock, Class A 1,000 shares authorized, Class B 1,000
    sharesauthorized,
      no shares outstanding at September 30, 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
              
              
              2,797,562
              
              
              
              2,752,621Accumulated
      deficit
              
              
              (6,305,060
              )
              
              
              (5,434,483
              )Total
      Stockholders' Deficit
              
              
              (3,493,926
              )
              
              
              (2,668,350
              )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
              
              $
              638,099
              
              
              $
              1,165,235






See
Accompanying Notes to the Financial Statements and Accountant's
Report
 1








CYBRA CORPORATION





STATEMENTS
OF OPERATIONS




Three
      Months Ended
              
              
              Nine
      Months EndedSeptember
      30
              
              
              September
      302009
              
              
              2008
              
              
              2009
              
              
              2008(Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)reclassified
              
              
              
              
              
              reclassifiedfor
      comparability
              
              
              
              
              
              for
      comparabilityREVENUESProducts
              
              $
              105,065
              
              
              $
              179,639
              
              
              $
              491,207
              
              
              $
              524,923Services
              
              
              175,333
              
              
              
              148,934
              
              
              
              514,044
              
              
              
              434,594TOTAL
      REVENUES
              
              
              280,398
              
              
              
              328,573
              
              
              
              1,005,251
              
              
              
              959,517COST
      OF GOODS SOLDEquipment
      purchases
              
              
              19,486
              
              
              
              22,693
              
              
              
              163,985
              
              
              
              120,110Royalties
      and consulting
              
              
              9,374
              
              
              
              29,049
              
              
              
              39,576
              
              
              
              50,58628,860
              
              
              
              51,742
              
              
              
              203,561
              
              
              
              170,696GROSS
      PROFIT
              
              
              251,538
              
              
              
              276,831
              
              
              
              801,690
              
              
              
              788,821Research
      and Development
              
              
              49,308
              
              
              
              123,594
              
              
              
              150,441
              
              
              
              505,513Selling,
      General and Administrative
              
              
              342,291
              
              
              
              422,653
              
              
              
              1,109,434
              
              
              
              1,316,248TOTAL OPERATING
      EXPENSES
              
              
              391,599
              
              
              
              546,247
              
              
              
              1,259,875
              
              
              
              1,821,761LOSS
      FROM OPERATIONS
              
              
              (140,061
              )
              
              
              (269,416
              )
              
              
              (458,185
              )
              
              
              (1,032,940
              )OTHER
      INCOME (EXPENSE)Loss
      on debenture valuation adjustment
              
              
              (5,041
              )
              
              
              -
              
              
              
              (58,493
              )
              
              
              -Interest
      expense, includes $113,010 and $210,542 ofamortization of deferred finance costsfor
      the nine month periods, respectively
              
              
              (53,754
              )
              
              
              (198,112
              )
              
              
              (353,944
              )
              
              
              (538,485
              )Interest
      income
              
              
              8
              
              
              
              146
              
              
              
              43
              
              
              
              3,802Miscellaneous
      Income
              
              
              -
              
              
              
              78
              
              
              
              -
              
              
              
              413(58,787
              )
              
              
              (197,888
              )
              
              
              (412,394
              )
              
              
              (534,270
              )LOSS
      BEFORE INCOME TAXES
              
              $
              (198,848
              )
              
              $
              (467,304
              )
              
              $
              (870,579
              )
              
              $
              (1,567,210
              )DEFERRED
      INCOME TAXES (BENEFIT)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (356,193
              )NET
      LOSS
              
              $
              (198,848
              )
              
              $
              (467,304
              )
              
              $
              (870,579
              )
              
              $
              (1,211,017
              )PER
      SHARE DATABasic
      and diluted net loss per share
              
              $
              (0.01
              )
              
              $
              (0.04
              )
              
              $
              (0.06
              )
              
              $
              (0.09
              )Basic
      and diluted weighted-average shares outstanding
              
              
              13,277,096
              
              
              
              12,981,130
              
              
              
              13,413,768
              
              
              
              12,750,647






See
Accompanying Notes to the Financial Statements and Accountant's
Report
 2





CYBRA CORPORATION





STATEMENTS
OF CASH FLOWS





Nine
      Months EndedSeptember
      302009
              
              
              2008(Unaudited)
              
              
              (Unaudited)CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
              
              $
              (870,579
              )
              
              $
              (1,211,017
              )Adjustments
      to reconcile net loss to net cash provided by (used in) operating
      activitiesDepreciation
      and Amortization
              
              
              188,989
              
              
              
              46,340Stock
      based compensation
              
              
              45,000
              
              
              
              -Deferred
      income tax credit
              
              
              -
              
              
              
              (356,192
              )Interest
      expense - amortization of debt discount
              
              
              139,992
              
              
              
              175,720Amortization
      of deferred finance cost
              
              
              113,010
              
              
              
              210,542Loss
      on debenture valuation adjustment
              
              
              58,493
              
              
              
              -Changes
      in operating assets and liabilitiesAccounts
      receivable
              
              
              178,280
              
              
              
              170,832Loan
      Receivable
              
              
              -
              
              
              
              6,000Security
      deposits and other assets
              
              
              7,077
              
              
              
              (6,947
              )Accounts
      payable and accrued expenses
              
              
              (1,064
              )
              
              
              (174,361
              )Accrued
      interest
              
              
              100,943
              
              
              
              152,223Deferred
      revenue
              
              
              79
              
              
              
              43,869Net
      Cash Provided by (Used in) Operating Activities
              
              
              (39,780
              )
              
              
              (942,991
              )CASH
      FLOWS FROM INVESTING ACTIVITIESAcquisition
      of property and equipment
              
              
              (1,390
              )
              
              
              (6,671
              )Net
      Cash Used in Investing Activities
              
              
              (1,390
              )
              
              
              (6,671
              )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from private placement
              
              
              -
              
              
              
              428,200Net
      Cash from Financing Activities
              
              
              -
              
              
              
              428,200INCREASE
      (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              (41,170
              )
              
              
              (521,462
              )CASH
      AND CASH EQUIVALENTSBeginning
      of period
              
              
              70,591
              
              
              
              787,156End
      of period
              
              $
              29,421
              
              
              $
              265,694SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash
      paid during the period for:Interest
              
              $
              -
              
              
              $
              -Income
      Taxes
              
              $
              2,194
              
              
              $
              490







See
Accompanying Notes to the Financial Statements and Accountant's
Report
 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 integration with popular ERP and
Warehouse Management application packages.





Substantially
all of the Company’s accounts receivable are due from manufacturing companies
and software vendors located throughout the United States.





Financial Status of the
Company





At
September 30, 2009, the Company had cash and cash equivalents of $29,421, and a
working capital deficit of $3,949,863, which includes certain current
liabilities that are not expected to require near term cash settlement.
Additionally, the Company has incurred a net loss of $870,579 for the nine
months ended September 30, 2009, and had a stockholders’ deficit of $3,493,926
at September 30, 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 the remainder of 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 Notes 3 and 13, 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.
Furthermore, two Debenture holders have demanded payment of their Debentures,
and one has commenced an action in New York Supreme Court for payment. The
Company did not appear in the New York Supreme Court action, and on September
17, 2009, the judge signed an order granting summary judgment in favor of the
plaintiff.  However, the Company is continuing to engage in settlement
negotiations with this Debenture holder.  Although the Company has
continued settlement negotiations with both of the Debenture holders, there can
be no assurance that a settlement will ensue with either of them. If the Company
is unsuccessful in its settlement efforts or if other Debenture holders demand
payment of their Debentures, 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 real possibility that one or more Debenture holders will not
agree to a settlement, 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.






4





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 nine months ended September 30, 2009 are not necessarily indicative of
the results to be expected for the full year.





2.  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES





Software
Costs





The
Company accounts for software development costs in accordance with FASB ASC
985.730, Software Research and
Development. FASB ASC 985.730 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. FASB ASC 985.730 specifies that “technological
feasibility” 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, FASB ASC 985.730 requires the development costs
to be recorded as an expense until the completion of a “working model”. In the
Company’s case, the completion of a working model does not occur until shortly
before 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 nine months
ended September 30, 2009 and 2008 were $150,441 and $505,513,
respectively.





Accounting for Warrants
Classified as Equity Issued to Purchase Company Common Stock





Warrants
issued in conjunction with equity financings were accounted for under accounting
standards, Accounting for
Derivative Financial Instruments Indexed to and Potentially Settled in a
Company’s Own Stock. In December 2006, the FASB approved 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 the standard, Reasonable Estimation of the Amount
of a Loss. The Company has evaluated the effect of these standards on the
accompanying financial statements. The adoption of the accounting pronouncement
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 accounting standards,Accounting for Derivative
Instruments and Hedging Activities, and Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company’s Own
Stock. The Company considers these standards applicable by adopting “View
A” of the Issue Summary, The
Effect of a Liquidated Damages Clause on a Freestanding Financial
Instrument, 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 accounting standards,The Meaning of “Conventional
Convertible Debt Instrument”.





Depreciation and
Amortization





Depreciation
and amortization are provided by the straight-line and accelerated methods over
the estimated useful lives indicated in Note 5.






5





Income
Taxes





Income
taxes are accounted for under the asset and liability method in accordance with
FASB ASC 740,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.





The
Company follows accounting standards for Accounting for Uncertainty in Income
Taxes. This provides guidance for recognizing and measuring uncertain tax
positions, as defined in Accounting for Income Taxes.
This 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. It 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 nine months ended September 30, 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 $11,062
and $55,449 for the nine months ended September 30, 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 six
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).





Revenue
from software license agreements is recognized when persuasive evidence of an
agreement exists, delivery of the software has occurred, the fee is fixed or
determinable, and collectibility is probable. In software arrangements that
include more than one element, the Company allocates the total arrangement fee
among the elements based on the relative fair value of each of the
elements.





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.






6





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.





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 September 30, 2009 and December 31, 2008.





Stock-Based
Compensation





In
addition to requiring supplemental disclosures, FASB ASC 718, Compensation – Stock
Compensation, addresses 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. FASB ASC 718 focuses primarily on accounting for
transactions in which a company obtains employee services in share-based payment
transactions.





The
Company uses 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.





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.






7





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, accounting standards were issued for Accounting for Registration Payment
Arrangements. This addresses 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 Accounting for Contingencies.
This 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 FASB ASC 260, 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 September 30, 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.




Subsequent
Events
 
 We
evaluated events occurring between the end of our fiscal quarter, September 30,
2009, and November 16, 2009 when the financial statements were
issued.





Recently Issued Accounting
Standards





FASB ASC 810.  In
December 2007, the Financial Accounting Standards Board, or FASB, issued
Accounting Standard Codification, or ASC, 810, or FASB ASC 810, which requires
companies to measure non-controlling interests in subsidiaries at fair value and
to classify them as a separate component of equity.  FASB ASC 810 is
effective as of each reporting fiscal year beginning after December 15,
2008, and applies only to transactions occurring after the effective
date.  We do not believe that the adoption of FASB ASC 810 will have a
material effect on our financial position or results of operations.





FASB ASC 805.  In
December 2007, FASB issued FASB ASC 805, which will require companies to
measure assets acquired and liabilities assumed in a business combination at
fair value.  In addition, liabilities related to contingent
consideration are to be re-measured at fair value in each subsequent reporting
period.  FASB ASC 805 will also require the acquirer in
pre-acquisition periods to expense all acquisition-related
costs.  FASB ASC 805 is effective for fiscal years beginning after
December 15, 2008, and is applicable only to transactions occurring after
the effective date.  We do not believe that the adoption of FASB ASC
805 will have a material effect on our financial position or results of
operations.





FASB ASC
350-30-35-1.  In April 2008, FASB issued FASB ASC
350-30-35-1.  This ASC amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset.  FASB ASC 350-30-35-1 improves the
consistency between the useful life of a recognized intangible asset and the
period of expected cash flows used to measure the fair value of the asset under
other applicable accounting literature. We do not believe that the adoption of
FASB ASC 350-30-35-1
will have a material effect on our financial position or results of
operations.





8






FASB ASC 820.  In
April 2009, the FASB issued three related staff positions to clarify the
application of FASB ASC 820 to fair value measurements in the current economic
environment, modify the recognition of other-than-temporary impairments of debt
securities, and require companies to disclose the fair value of financial
instruments in interim periods. The final staff positions are effective for
interim and annual periods ending after June 15, 2009.





·
            FASB
      ASC 820 (transitional 820-10-65-4) provides guidance on how to determine
      the fair value of assets and liabilities under FASB ASC 820 in the current
      economic environment and reemphasizes that the objective of a fair value
      measurement remains the price that would be received to sell an asset or
      paid to transfer a liability at the measurement
  date.





·
            FASB
      ASC 320 modifies the requirements for recognizing other-than-temporarily
      impaired debt securities and significantly changes the existing impairment
      model for such securities. It also modifies the presentation of
      other-than-temporary impairment losses and increases the frequency of and
      expands already required disclosures about other-than-temporary impairment
      for debt and equity securities.





·
            FASB
      ASC 820-10-50 requires disclosures of the fair value of financial
      instruments within the scope of FASB ASC 820 in interim financial
      statements, adding to the current requirement to make those disclosures in
      annual financial statements. The staff position also requires that
      companies disclose the method or methods and significant assumptions used
      to estimate the fair value of financial instruments and a discussion of
      changes, if any, in the method or methods and significant assumptions
      during the period.





·
            FASB
      ASC 820-10-50 requires disclosures of the fair value of financial
      instruments within the scope of FASB ASC 820 in interim financial
      statements, adding to the current requirement to make those disclosures in
      annual financial statements. The staff position also requires that
      companies disclose the method or methods and significant assumptions used
      to estimate the fair value of financial instruments and a discussion of
      changes, if any, in the method or methods and significant assumptions
      during the period.





We do not
believe that the adoption of these new staff positions will have a material
impact on our financial position and results of operations.





FASB ASC 860.  In
June 2009, the FASB issued ASC 860, which eliminates the concept of a
qualifying special-purpose entity, creates more stringent conditions for
reporting a transfer of a portion of a financial asset as a sale, clarifies
other sale-accounting criteria, and changes the initial measurement of a
transferor’s interest in transferred financial assets. FASB ASC 860 will be
effective for transfers of financial assets in fiscal years beginning after
November 15, 2009 and in interim periods within those fiscal years with
earlier adoption prohibited. We will adopt FASB ASC 860 on October 1,
2010.





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 September 30, 2009 and December 31, 2008 were
$2,490,000 and $2,402,791, respectively. The amortization of deferred finance
costs was $113,010 and $210,542 for the nine months ended September 30, 2009 and
2008, respectively. The deferred finance cost balances at September 30, 2009 and
December 31, 2008 were $-0- 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 total
interest paid to two Debenture holders was $16,982.  No other payments
have been made, however.  The Debentures matured on April 10, 2009
(see Notes 1 and 13).





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 September 30, 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 $8,833 of related interest have been accrued through September 30,
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 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 a company’s 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 nine months ended September 30, 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. No shares
were issued in the three months ended September 30, 2009.





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.





For
awards with service conditions and graded vesting that were granted prior to the
adoption of accounting standards, the Company estimates the requisite service
period and the number of shares expected to vest and recognize compensation
expense for each tranche on a straight-line basis over the estimated requisite
service period of the award or over a period ending with an employee's eligible
retirement date, if earlier. Adjustments to compensation expense as a result of
revising the estimated requisite service period are recognized
prospectively.





Total
stock options outstanding at September 30, 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
            
            
            -Exercised
            
            
            -Outstanding
      at December 31, 2008
            
            
            100,000Options
      exercisable at December 31, 2008
            
            
            100,000Options
      outstanding at January 1, 2009
            
            
            100,000Granted
            
            
            -Exercised
            
            
            -Outstanding
      at September 30, 2009
            
            
            100,000Options
      exercisable at September 30, 2009
            
            
            100,000





The
100,000 options outstanding at September 30, 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
            
            
            
            3.00Total
      Outstanding Warrants – December 31, 2008
            
            
            10,571,003
            
            
            
            3,523,669
            
            
            
            7,047,334
            
            
            
            1.42
            
            
            
            3.00Exercisable
      at December 31, 2008
            
            
            10,571,003
            
            
            
            3,523,669
            
            
            
            7,047,334
            
            
            
            1.42
            
            
            
            3.00Granted
            
            
            -
            
            
            
            -
            
            
            
            -Exercised
            
            
            -
            
            
            
            -
            
            
            
            -Forfeited
            
            
            -
            
            
            
            -
            
            
            
            -Outstanding
      at September 30, 2009
            
            
            10,571,003
            
            
            
            3,523,669
            
            
            
            7,047,334
            
            
            
            1.42
            
            
            
            2.75Total
      Outstanding Warrants – September 30, 2009
            
            
            10,571,003
            
            
            
            3,523,669
            
            
            
            7,047,334
            
            
            
            1.42
            
            
            
            2.75Exercisable
      at September 30, 2009
            
            
            10,571,003
            
            
            
            3,523,669
            
            
            
            7,047,334
            
            
            
            1.42
            
            
            
            2.75







11




5. PROPERTY AND EQUIPMENT
AND SOFTWARE DEVELOPMENT





At
September 30, 2009 and 2008, property and equipment consisted of the
following:




September
      30,
            
            
            December
      31,
            
            
            Estimated
      Useful Life in2009
            
            
            2008
            
            
            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
            
            
            256,876
            
            
            
            237,186$
            60,531
            
            
            $
            78,831





Depreciation
and amortization of property and equipment amounted to $19,687 and $46,341 for
the nine months ended September 30, 2009 and 2008, respectively.




September
      30,
            
            December
      31,
            
            Estimated
      Useful2009
            
            2008
            
            Life
      in YearsSoftware
      Development Costs
            
            $
            677,200
            
            
            $
            677,200
            
            
            
            3Less:
      Accumulated Amortization
            
            
            293,428
            
            
            
            124,129$
            383,772
            
            
            $
            553,071





The
Company’s policy is to capitalize software development costs in accordance with
accounting standards (See Note 2). Amortization of Software Development Costs
amounted to $169,299 and $-0- for the nine months ended September 30, 2009 and
2008, respectively, and is included within Selling, General and Administrative
Expenses.





6. INCOME
TAXES





The
Company had the following deferred tax assets and liabilities at September 30,
2009 and December 31, 2008:




September
      30, 2009
              
              
              December
      31, 2008Current
      assets and liabilities:Accounts
      receivable
              
              $
              (62,000
              )
              
              $
              (135,000
              )Accounts
      payable and accrued expenses
              
              
              176,000
              
              
              
              57,000Deferred
      revenues
              
              
              303,000
              
              
              
              141,000417,000
              
              
              
              63,000Valuation
      allowance
              
              
              (417,000
              )
              
              
              (63,000
              )Net
      current deferred tax asset
              
              $
              -
              
              
              $
              -Noncurrent
      assets and liabilities:Net
      operating loss carryforwards
              
              $
              2,301,000
              
              
              $
              2,117,000Depreciation
              
              
              (44,000
              )
              
              
              (94,000
              )2,257,000
              
              
              
              2,023,000Valuation
      allowance
              
              
              (2,257,000
              )
              
              
              (2,023,000
              )Net
      non-current deferred tax asset
              
              $
              -
              
              
              $
              -









12





The
valuation allowance for the current and non-current deferred tax asset increased
by $588,000 for the nine months ended September 30, 2009.





The
Company has net operating losses amounting to approximately $5,700,000 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.





The
Company has no uncertain income tax positions.





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. It also rents space in West Seneca, New York, near
Buffalo. This lease agreement expires on May 31, 2010.





The
minimum rental commitment is as follows:





2009
            
            $
            22,0382010
            
            
            10,978$
            33,016





Rent
expense amounted to $70,156 and $69,550 for the nine months ended September 30,
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


In
December, 2006, Raz-Lee Security Ltd. (“Raz-Lee”), a former distributor of the
Company's products, filed a lawsuit in Herzliya, Israel (Case No. 8443/06)
against the Company and its CEO for moneys allegedly owed in connection with the
distribution of the Company's products in Israel. The action sought $50,000 in
damages, plus interest, court costs and attorneys' fees. The Company filed a
counterclaim against Raz-Lee for failure to report sales and royalties, and for
a full accounting. The suit against the Company's CEO was dismissed, and appeal
of such dismissal was filed. In July, 2009, the Herzliya court awarded Raz-Lee
approximately (the approximations are a result of currency fluctuations) $15,750
plus approximately $7,500 of costs. The balance of Raz-Lee's claim was
dismissed. Since the amount awarded relates to past periods, the court also
awarded interest charges, bringing the total award including costs to
approximately $34,500. Raz-Lee collected the amount of approximately $6,500
which had been posted by the Company with the Herzliya court. The balance has
not been paid. The Company's counterclaim against Raz-Lee was dismissed. The
Company believes that Raz-Lee will file an appeal of the dismissal of parts of
its claim. The Company is currently consulting with counsel concerning the
filing of an appeal of the dismissal of the counterclaim or a part thereof. The
Company has a reserve of $28,000 to provide for payment of this
claim.






13







On July
20, 2009, Fagey Steinberg, a holder of a Debenture in the principal amount of
$100,000, filed a Motion for Summary Judgment in Lieu of Complaint (the
“Motion”) against the Company for payment of the full principal amount of such
Debenture together with accrued and unpaid interest and such other and further
relief as is just and proper.  The Company did not appear in this
action, and on September 17, 2009, the judge signed an order granting summary
judgment in favor of the plaintiff.  However, the Company is
continuing to engage in settlement negotiations with this Debenture
holder.





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 is 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.





e.
Joint
Venture


On July
27, 2009, the Company entered into an agreement that outlines the intent to form
a joint venture in the People’s Republic of China with two other companies. The
purpose of this joint venture is to develop and sell leading edge products and
services that add intelligence to shipping products to track and monitor goods
throughout the supply chain.





The
agreement provides for a capital contribution by the Company to the joint
venture of $2,500,000 payable in four installments over eighteen months. The
Company is under no obligation to make these capital contributions unless and
until the parties enter into a binding, definitive joint venture agreement. The
Company will require additional financing in the form of debt and/or equity to
participate in the joint venture and make the required contributions. Both the
agreement and the subsequent binding, definitive joint venture agreement will be
governed by the law of the People’s Republic of China.





On June
1, 2009, the Company entered into a one-year agreement with an investment banker
to raise the capital necessary to fund the joint venture. The investment banker
will receive a fee of 5% of the transaction proceeds.





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 nine
months ended September 30, 2009 or 2008.





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 nine months ended September 30, 2009 and 2008, the Company incurred
approximately $22,500 and $26,500, respectively, in sales commissions to Profit
Horizon, Inc.





11. FAIR VALUE OF FINANCIAL
INSTRUMENTS





The
Company’s financial instruments consisted of the following:





September
      30, 2009
            
            
            December
      31, 20088%
      Convertible Debentures
            
            
            2,490,000
            
            
            
            2,402,791





12. LOSS PER
SHARE





Loss per
share for the nine months ended September 30, 2009 and 2008 does not include the
effects of the 10,571,003 Warrants or the 4,980,000 shares into which the 8%
Convertible Debentures are convertible because the effects would be
anti-dilutive.






14





13. CURRENT STATUS OF
CONVERTIBLE DEBENTURES





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.





In the
event the Company is not successful in entering into favorable settlement
agreements with the Debenture holders, management has determined, based on the
provisions set forth in the Debenture instrument, which, as of April 10, 2009,
the aggregate Mandatory Prepayment Amount (“MPA”) for all of the debenture
holders could be up to an estimated maximum amount of approximately $3,800,000.
Except for two debenture holders who have demanded repayment with a total
maximum MPA estimated to be up to approximately $315,000, of which $62,096
represents accrued interest over the term of the $200,000 of related debt,
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. For the two debenture holders
who have demanded repayment, the statement of operations includes a loss of
$58,493 relating to the difference between the MPA as estimated and the book
carrying amount of that debt without consideration of the MPA and that amount is
also included within the 8% Convertible Debentures of $2,601,275 as shown on the
balance sheet at September 30, 2009.





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. Accrued interest payable at September 30, 2009 includes
interest expense of $105,477 incurred and charged to operations during the
period since the maturity/default date of April 10, 2009 to the balance sheet
date, of which $14,096 relates to the $200,000 of convertible debt upon which a
demand for payment by the Company has been made. 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.





On July
27, 2009, the Company entered into an agreement that outlines the intent to form
a joint venture in the People’s Republic of China with two other companies. The
purpose of this joint venture is to develop and sell leading edge products and
services that add intelligence to shipping products to track and monitor goods
throughout the supply chain.





The
agreement provides for a capital contribution by the Company to the joint
venture of $2,500,000 payable in four installments over eighteen months. The
Company is under no obligation to make these capital contributions unless and
until the parties enter into a binding, definitive joint venture agreement. The
Company will require additional financing in the form of debt and/or equity to
participate in the joint venture and make the required contributions. Both the
agreement and the subsequent binding, definitive joint venture agreement will be
governed by the law of the People’s Republic of China.





On June
1, 2009, the Company entered into a one-year agreement with an investment banker
to raise the capital necessary to fund the joint venture. The investment banker
will receive a fee of 5% of the transaction proceeds.






15








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. We assume no obligation and do 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.





We are a
software developer, publisher, and systems integrator in the IBM midrange
market. Our flagship product, MarkMagicTM, 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.





Our
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.







16






Comparison
of the three and nine months ended September 30, 2009 to the three and nine
months ended September 30, 2008.





The
following table summarizes certain aspects of our results of operations for the
three and nine months ended September 30, 2009 to the three and nine months
ended September 30, 2008.




Three
      months ended September 30,
            
            
            
            
            
            
            
            
            Nine
      months ended September 30,2009
            
            
            2008
            
            
            Change $
            
            
            Change %
            
            
            2009
            
            
            2008
            
            
            Change $
            
            
            Change %RevenuesProducts
            
            $
            105,065
            
            
            $
            179,639
            
            
            $
            (74,574
            )
            
            
            -42
            %
            
            $
            491,207
            
            
            $
            524,923
            
            
            $
            (33,716
            )
            
            
            -6
            %Services
            
            
            175,333
            
            
            
            148,934
            
            
            
            26,399
            
            
            
            18
            %
            
            
            514,044
            
            
            
            434,594
            
            
            
            79,450
            
            
            
            18
            %Total
      Revenues
            
            
            280,398
            
            
            
            328,573
            
            
            
            (48,175
            )
            
            
            -15
            %
            
            
            1,005,251
            
            
            
            959,517
            
            
            
            45,734
            
            
            
            5
            %Direct
      CostsEquipment
      Purchases
            
            $
            19,486
            
            
            $
            22,693
            
            
            $
            (3,207
            )
            
            
            -14
            %
            
            $
            163,985
            
            
            $
            120,110
            
            
            $
            43,875
            
            
            
            37
            %Royalties
      & Consulting
            
            
            9,374
            
            
            
            29,049
            
            
            
            (19,675
            )
            
            
            -68
            %
            
            
            39,576
            
            
            
            50,586
            
            
            
            (11,010
            )
            
            
            -22
            %Total
      Direct Costs
            
            $
            28,860
            
            
            $
            51,742
            
            
            $
            (22,882
            )
            
            
            -44
            %
            
            $
            203,561
            
            
            $
            170,696
            
            
            $
            32,865
            
            
            
            19
            %%
      of total revenues
            
            
            10
            %
            
            
            16
            %
            
            
            
            
            
            
            
            
            
            
            20
            %
            
            
            18
            %Gross
      margin
            
            $
            251,538
            
            
            $
            276,831
            
            
            $
            (25,293
            )
            
            
            -9
            %
            
            $
            801,690
            
            
            $
            788,821
            
            
            $
            12,869
            
            
            
            2
            %%
      of total revenues
            
            
            90
            %
            
            
            84
            %
            
            
            
            
            
            
            
            
            
            
            80
            %
            
            
            82
            %Research
      and development costs
            
            $
            49,308
            
            
            $
            123,594
            
            
            $
            (74,286
            )
            
            
            -60
            %
            
            $
            150,441
            
            
            $
            505,513
            
            
            $
            (355,072
            )
            
            
            -70
            %%
      of total revenues
            
            
            18
            %
            
            
            38
            %
            
            
            
            
            
            
            
            
            
            
            15
            %
            
            
            53
            %Sales
      and marketing expenses
            
            $
            26,271
            
            
            $
            60,123
            
            
            $
            (33,852
            )
            
            
            -56
            %
            
            $
            101,340
            
            
            $
            204,399
            
            
            $
            (103,059
            )
            
            
            -50
            %%
      of total revenues
            
            
            9
            %
            
            
            18
            %
            
            
            
            
            
            
            
            
            
            
            10
            %
            
            
            21
            %General
      and administrative expenses
            
            $
            316,020
            
            
            $
            362,530
            
            
            $
            (46,510
            )
            
            
            -13
            %
            
            $
            1,008,094
            
            
            $
            1,111,849
            
            
            $
            (103,755
            )
            
            
            -9
            %%
      of total revenues
            
            
            113
            %
            
            
            110
            %
            
            
            
            
            
            
            
            
            
            
            100
            %
            
            
            116
            %Interest  expense
            
            $
            53,754
            
            
            $
            198,112
            
            
            $
            (144,358
            )
            
            
            -73
            %
            
            $
            353,944
            
            
            $
            538,485
            
            
            $
            (184,541
            )
            
            
            -34
            %%
      of total revenues
            
            
            19
            %
            
            
            60
            %
            
            
            
            
            
            
            
            
            
            
            35
            %
            
            
            56
            %Other
      Income (Expenses)
            
            $
            (5,033
            )
            
            $
            224
            
            
            $
            (5,257
            )
            
            
            -2347
            %
            
            $
            (58,450
            )
            
            $
            4,215
            
            
            $
            (62,665
            )
            
            
            -1487
            %%
      of total revenues
            
            
            -2
            %
            
            
            0
            %
            
            
            
            
            
            
            
            
            
            
            -6
            %
            
            
            0
            %Loss
      Before Taxes
            
            $
            (198,848
            )
            
            $
            (467,304
            )
            
            $
            268,456
            
            
            
            -57
            %
            
            $
            (870,579
            )
            
            $
            (1,567,210
            )
            
            $
            696,631
            
            
            
            -44
            %Income
      Taxes (Benefit)
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            
            0
            %
            
            $
            -
            
            
            $
            (356,193
            )
            
            $
            356,193
            
            
            
            -100
            %Effective
      tax rate
            
            
            0
            %
            
            
            0
            %
            
            
            
            
            
            
            
            
            
            
            0
            %
            
            
            23
            %Net
      loss
            
            $
            (198,848
            )
            
            $
            (467,304
            )
            
            $
            268,456
            
            
            
            -57
            %
            
            $
            (870,579
            )
            
            $
            (1,211,017
            )
            
            $
            340,438
            
            
            
            -28
            %%
      of total revenues
            
            
            -71
            %
            
            
            -142
            %
            
            
            
            
            
            
            
            
            
            
            -87
            %
            
            
            -126
            %






17







Revenues





The
decrease in total revenues in absolute dollars for the three months ended
September 30, 2009, as compared to the same three months in 2008, is primarily
due to less demand for hardware. Demand for services has increased for the
period.  The increase in total revenues for the nine months ended
September 30, 2009 compared to the same period in 2008 is due to an increase in
sales of hardware during the first quarter and an increase in services during
the second quarter as well as an increase in prices for software.  We
also started selling a new product called WOW in the second quarter, which
increased our revenues.  We expect that our revenues for the fourth
quarter of 2009 will be about the same as 2008 fourth quarter
revenues.  New MarkMagic features that we released in the third
quarter met with positive reception from new and existing customers, which we
believe will allow revenues to remain stable despite the general economic
downturn.





Direct
Costs





The costs
for hardware and supplies for the three months ended September 30, 2009, were
lower, as compared to the same three months in 2008, due to a decrease in
hardware sales for this period.  The costs for hardware and supplies
for the nine months ended September 30, 2009, were higher, as compared to the
same nine months in 2008, due to increased hardware sales.




Gross
Margin





Gross
Margin as a percentage of sales increased in the three months ended September
30, 2009 as compared to the same three months in 2008.  Gross Margin
as a percentage of sales decreased slightly in the nine months ended September
30, 2009 as compared to the same nine months in 2008. This was due to increased
costs of hardware sold to our costumers during the period. We expect that our
margins will remain at their current levels throughout the year due to the
challenging economic environment that we, and the software industry at large,
are experiencing.





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 Accounting Standards Codification 985-20-25, 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. Our EdgeMagic software product was available for general
release on September 1, 2008, and all costs after that date have been expensed
in accordance with Accounting Standards Codification
985-20-25.  During the nine-month periods ended September 30, 2009 and
2008, the software development costs that were expensed were $150,441 and
$505,513, respectively. Software development costs decreased in the nine-month
period due to reduced spending on consultants and a reduction in personnel as a
result of the substantial completion of our EdgeMagic product.





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 and
nine months ended September 30, 2009 as compared to the same three and nine
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 in absolute dollars for the three
and nine months ended September 30, 2009 as compared to the same three and nine
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.  Amortization of these
deferred finance costs ceased in April 2009 and was partially offset by amounts
incurred after the Debenture default on April 10, 2009.






18








Other
Income, Net





Other
Income (Expenses) decreased for the three and nine months ended September 30,
2009 as compared to the same three and nine months in 2008 due to the
approximate $58,000 loss recorded from the Mandatory Prepayment Amount for
Debenture Holders demanding repayment.





Interest
and other income, decreased for the three and nine months ended September 30,
2009 as compared to the same three and nine 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 no income tax benefit for the three months ended September 30, 2009 and
2008. There were no effective income tax rates for the three months ended
September 30, 2009 and 2008. We recorded income tax benefit of $-0- and
($356,193) for the nine months ended September 30, 2009 and 2008. The effective
income tax rates were 0% and 23% for the nine months ended September 30, 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.





Liquidity
and Capital Resources





As of
September 30, 2009, the Company’s principal source of liquidity was cash of
$29,421. Our operations used $39,780 in cash during the nine months ended
September 30, 2009 as compared to funds used for operations of $942,991 for the
nine months ended September 30, 2008.





To
sustain operations under our current structure, we need cash of approximately
$50,000 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 $3,950,000 at September 30, 2009.
The deficiency in working capital included approximately $2,601,000 in amounts
due on 8% convertible debentures, at least $2,290,000 of which is expected to be
renegotiated and not require cash settlement as well as $346,000 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
fourth quarter of 2009, we are operating slightly below break-even on a cash
flow basis. This is due to reduced revenue from our OEM channels that have been
adversely impacted by general global economic weakness.  This trend is
not expected to reverse itself before the end of the year. We believe we can
sustain our cash flow at slightly below break-even and will seek additional
sources of financing for the short term.  A number of current
investors have indicated to management their willingness to increase their
current investment positions to be used for short-term operating
capital.  As we remain slightly below break-even, we believe that such
short-term capital infusion will be adequate to permit us to maintain our
operations.





ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Not
applicable to smaller reporting companies.







19




ITEM 4T. CONTROLS AND
PROCEDURES





Evaluation of Disclosure Controls
and Procedures.





Our
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 our “disclosure controls and
procedures” (as defined in rules promulgated under the Securities Exchange Act
of 1934, as amended).  Based on their evaluation of the Company’s
disclosure controls and procedures as of September 30, 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 our
management, including our principal executive and principal financial officers,
to allow timely decisions regarding required disclosure.





Changes
in Internal Control over Financial Reporting.





During
the third quarter of the Company’s 2009 fiscal year, there were no changes
in our internal control over financial reporting during the period covered by
this report that have materially affected, or are reasonably likely to
materially affect, our 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.





Our
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.







20







PART
II. OTHER INFORMATION





ITEM 1.  LEGAL PROCEEDINGS.





In
December, 2006, Raz-Lee Security Ltd. (“Raz-Lee”), a former distributor of the
Company’s products, filed a lawsuit in Herzliya, Israel (Case No. 8443/06)
against the Company and its CEO for moneys allegedly owed in connection with the
distribution of the Company's products in Israel. The action sought $50,000 in
damages, plus interest, court costs and attorneys' fees. The Company filed a
counterclaim against Raz-Lee for failure to report sales and royalties, and for
a full accounting. The suit against the Company's CEO was dismissed, and appeal
of such dismissal was filed. In July, 2009, the Herzliya court awarded Raz-Lee
approximately (the approximations are a result of currency fluctuations) $15,750
plus approximately $7,500 of costs. The balance of Raz-Lee's claim was
dismissed. Since the amount awarded relates to past periods, the court also
awarded interest charges, bringing the total award including costs to
approximately $34,500. Raz-Lee collected the amount of approximately $6,500
which had been posted by the Company with the Herzliya court. The balance has
not been paid. The Company's counterclaim against Raz-Lee was dismissed. The
Company believes that Raz-Lee will file an appeal of the dismissal of parts of
its claim. The Company is currently consulting with counsel concerning the
filing of an appeal of the dismissal of the counterclaim or a part thereof. The
Company has a reserve of $28,000 to provide for payment of this
claim.





On July
20, 2009, Fagey Steinberg, a holder of a Debenture in the principal amount of
$100,000, filed a Motion for Summary Judgment in Lieu of Complaint (the
“Motion”) against the Company for payment of the full principal amount of such
Debenture together with accrued and unpaid interest and such other and further
relief as is just and proper.  The Company did not appear in this
action, and on September 17, 2009, the judge signed an order granting summary
judgment in favor of the plaintiff.  However, the Company is
continuing to engage in settlement negotiations with this Debenture
holder.





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.






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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:
      November 16, 2009
            
            CYBRA
      CorporationBy:
            /s/
      Harold BrandHarold
      BrandChief
      Executive Officer andInterim
      Chief Financial Officer











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