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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2011

or

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

For the transition period from _________________
to_________________

Commission File Number: 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. [X] 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
[X]                          

Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes [  
]    No [X]

As of August 15, 2011, the registrant had 15,519,667shares of Common Stock outstanding.

---

CYBRA Corporation

Table of Contents

|           |                                                                                             | Page
|---------- | ------------------------------------------------------------------------------------------- | ----
|           |                                                                                             |     
|Part I.    | Financial Information                                                                       | 1   
|           |                                                                                             |     
|Item 1.    | Financial Statements                                                                        | 1   
|           |                                                                                             |     
|           | Balance Sheets as of June 30, 2011 and December 31, 2010                                    | 1   
|           |                                                                                             |     
|           | Statements of Operations for the three and six months ended
      June 30, 2011 and 2010    | 2   
|           |                                                                                             |     
|           | Statements of Cash Flows for the six months ended June 30,
      2011 and 2010              | 3   
|           |                                                                                             |     
|           | Notes to Financial Statements                                                               | 4   
|           |                                                                                             |     
|Item 2.    | Managements Discussion and Analysis of Financial Condition
      and Results of Operations | 15  
|           |                                                                                             |     
|Item 3.    | Quantitative and Qualitative Disclosures About Market Risk                                  | 22  
|           |                                                                                             |     
|Item 4.    | Controls and Procedures                                                                     | 22  
|           |                                                                                             |     
|Part II.   | Other Information                                                                           | 23  
|           |                                                                                             |     
|Item 1.    | Legal Proceedings                                                                           | 23  
|           |                                                                                             |     
|Item 3.    | Defaults Upon Senior Securities                                                             | 23  
|           |                                                                                             |     
|Item 6.    | Exhibits                                                                                    | 23  
|           |                                                                                             |     
|Signatures |                                                                                             | 24  

i

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PART I. FINANCIAL INFORMATION

ITEM
1.           FINANCIAL
STATEMENTS

CYBRA CORPORATION

BALANCE SHEETS

|                                                                                                                                                                                                                      |   | June 30,   |   |   | December 31, |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ---------- | - | - | ------------ | -
|                                                                                                                                                                                                                      |   | 2011       |   |   | 2010         |  
|                                                                                                                                                                                                                      |   | unaudited  |   |   |              |  
|ASSETS                                                                                                                                                                                                                |   |            |   |   |              |  
|                                                                                                                                                                                                                      |   |            |   |   |              |  
|CURRENT ASSETS                                                                                                                                                                                                        |   |            |   |   |              |  
|Cash                                                                                                                                                                                                                  | $ | 37,591     |   | $ | 24,335       |  
|Accounts receivable, less
      allowance for doubtful accounts of $6,000                                                                                                                                             |   | 295,438    |   |   | 221,590      |  
|                                                                                                                                                                                                                      |   |            |   |   |              |  
|Total Current Assets                                                                                                                                                                                                  |   | 333,029    |   |   | 245,925      |  
|                                                                                                                                                                                                                      |   |            |   |   |              |  
|PROPERTY AND EQUIPMENT, at cost, less
      accumulated depreciation and amortization of $ 286,238 and $281,017                                                                                                       |   | 59,324     |   |   | 51,246       |  
|SOFTWARE DEVELOPMENT, at cost, less accumulated
      amortization of $674,901 and $576,032                                                                                                                           |   | 3,799      |   |   | 102,668      |  
|SECURITY DEPOSITS AND OTHER ASSETS                                                                                                                                                                                    |   | 11,654     |   |   | 11,654       |  
|                                                                                                                                                                                                                      |   |            |   |   |              |  
|TOTAL ASSETS                                                                                                                                                                                                          | $ | 407,806    |   | $ | 411,493      |  
|                                                                                                                                                                                                                      |   |            |   |   |              |  
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                                                                                                 |   |            |   |   |              |  
|                                                                                                                                                                                                                      |   |            |   |   |              |  
|CURRENT LIABILITIES                                                                                                                                                                                                   |   |            |   |   |              |  
|8% Convertible Debentures                                                                                                                                                                                             | $ | 1,420,000  |   | $ | 1,420,000    |  
|Accrued interest                                                                                                                                                                                                      |   | 369,579    |   |   | 313,246      |  
|Accounts payable and accrued expenses                                                                                                                                                                                 |   | 374,965    |   |   | 329,283      |  
|Deferred officer/director
      compensation                                                                                                                                                                          |   | 116,827    |   |   | 131,827      |  
|Loans from shareholders in contemplation of
      private placement of common stock                                                                                                                                   |   | 47,500     |   |   | 47,500       |  
|Note payable under financial
      institution line of credit                                                                                                                                                         |   | 40,000     |   |   | -            |  
|Deferred revenue                                                                                                                                                                                                      |   | 424,545    |   |   | 414,737      |  
|TOTAL CURRENT LIABILITIES                                                                                                                                                                                             |   | 2,793,416  |   |   | 2,656,593    |  
|                                                                                                                                                                                                                      |   |            |   |   |              |  
|STOCKHOLDERS' DEFICIT                                                                                                                                                                                                 |   |            |   |   |              |  
|Preferred Stock, Series A 10% Convertible
      Preferred Stock, par value $0.001 per
      share,    10,000,000 shares authorized; 2,090,000
      shares issued and outstanding (liquidation preference $1,045,000) |   | 2,090      |   |   | 2,090        |  
|Common stock, par value
      $0.001 per share, 100,000,000 shares
      authorized;    15,519,667 shares issued and
      outstanding                                                                                |   | 15,519     |   |   | 15,519       |  
|                                                                                                                                                                                                                      |   |            |   |   |              |  
|Additional Paid - in capital                                                                                                                                                                                          |   | 6,754,024  |   |   | 6,754,024    |  
|                                                                                                                                                                                                                      |   |            |   |   |              |  
|Accumulated deficit                                                                                                                                                                                                   |   | (9,157,243 | ) |   | (9,016,733   | )
|                                                                                                                                                                                                                      |   |            |   |   |              |  
|Total Stockholders' Deficit                                                                                                                                                                                           |   | (2,385,610 | ) |   | (2,245,100   | )
|                                                                                                                                                                                                                      |   |            |   |   |              |  
|TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                                                                                     | $ | 407,806    |   | $ | 411,493      |  

The accompanying notes are an integral part of these financial
statements

1

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CYBRA CORPORATION

STATEMENTS OF OPERATIONS

|                                                                                                                  |   | Three Months Ended |   |   | Six Months Ended |  
|----------------------------------------------------------------------------------------------------------------- | - | ------------------ | - | - | ---------------- | -
|                                                                                                                  |   | June
      30,     |   |   | June
      30,   |  
|                                                                                                                  |   | 2011               |   |   | 2010             |  
|                                                                                                                  |   |                    |   |   |                  |  
|REVENUES                                                                                                          |   |                    |   |   |                  |  
|Products                                                                                                          | $ | 222,525            |   | $ | 246,675          |  
|Services                                                                                                          |   | 257,195            |   |   | 240,903          |  
|TOTAL REVENUES                                                                                                    |   | 479,720            |   |   | 487,578          |  
|                                                                                                                  |   |                    |   |   |                  |  
|                                                                                                                  |   |                    |   |   |                  |  
|Cost of Goods Sold                                                                                                |   | 95,947             |   |   | 12,517           |  
|Consulting                                                                                                        |   | 19,234             |   |   | 7,500            |  
|                                                                                                                  |   | 115,181            |   |   | 20,017           |  
|                                                                                                                  |   |                    |   |   |                  |  
|GROSS PROFIT                                                                                                      |   | 364,539            |   |   | 467,561          |  
|                                                                                                                  |   |                    |   |   |                  |  
|Research and Development                                                                                          |   | 55,543             |   |   | 59,295           |  
|Selling, General and Administrative                                                                               |   | 350,358            |   |   | 380,414          |  
|TOTAL OPERATING EXPENSES                                                                                          |   | 405,901            |   |   | 439,709          |  
|                                                                                                                  |   |                    |   |   |                  |  
|(LOSS) INCOME FROM OPERATIONS                                                                                     |   | (41,362            | ) |   | 27,852           |  
|                                                                                                                  |   |                    |   |   |                  |  
|OTHER INCOME (EXPENSE)                                                                                            |   |                    |   |   |                  |  
|Reversal (Loss) on debenture valuation
      adjustment                                                           |   | -                  |   |   | 66,247           |  
|Reversal on liquidated
      damages                                                                              |   | -                  |   |   | 63,835           |  
|Loss on debt restructuring                                                                                        |   | -                  |   |   | (695,094         | )
|Beneficial
      conversion cost in connection with issuanceofcommon stock
      in exchange for interest payable |   | -                  |   |   | (44,190          | )
|Interest expense, includes amortization                                                                           |   | (28,481            | ) |   | (52,792          | )
|Interest income                                                                                                   |   | 4                  |   |   | 14               |  
|                                                                                                                  |   | (28,477            | ) |   | (661,980         | )
|                                                                                                                  |   |                    |   |   |                  |  
|NET LOSS                                                                                                          | $ | (69,839            | ) | $ | (634,128         | )
|                                                                                                                  |   |                    |   |   |                  |  
|PER SHARE DATA                                                                                                    |   |                    |   |   |                  |  
|Basic and diluted net loss
      per share                                                                        | $ | (0.00              | ) | $ | (0.05            | )
|                                                                                                                  |   |                    |   |   |                  |  
|Basic and diluted weighted-average
      shares outstanding                                                       |   | 15,519,668         |   |   | 13,847,596       |  

The accompanying notes are an integral part of these financial
statements

2

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CYBRA CORPORATION

STATEMENTS OF CASH FLOWS

|                                                                                                                                                    |   | Six Months Ended |  
|--------------------------------------------------------------------------------------------------------------------------------------------------- | - | ---------------- | -
|                                                                                                                                                    |   | June
      30,   |  
|                                                                                                                                                    |   | 2011             |  
|                                                                                                                                                    |   |                  |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                                                                |   |                  |  
|Net loss                                                                                                                                            | $ | (140,510         | )
|                                                                                                                                                    |   |                  |  
|Adjustments to reconcile net loss to net cash provided
      by (used in) operating activities                                                      |   |                  |  
|Depreciation
      and Amortization                                                                                                                 |   | 104,088          |  
|                                                                                                                                                    |   |                  |  
|Loss on debt
      restructuring                                                                                                                    |   | -                |  
|Beneficial conversion cost in
      connection with issuance of common stock in 
                exchange for
      interest payable.               |   | -                |  
|Debenture
      valuation adjustment                                                                                                                |   | -                |  
|Changes in operating assets and liabilities                                                                                                         |   |                  |  
|Decrease
      in accrued liquidated damages                                                                                                        |   | -                |  
|(Increase) in accounts receivable                                                                                                                   |   | (73,848          | )
|Increase
      (Decrease) in accounts payable and accrued expenses                                                                                  |   | 30,682           |  
|Increase in accrued interest                                                                                                                        |   | 56,333           |  
|Increase
      in note payable under financial institution line of credit                                                                           |   | 40,000           |  
|Increase in Deferred revenue                                                                                                                        |   | 9,808            |  
|Net Cash Provided by (Used in) Operating Activities                                                                                                 |   | 26,553           |  
|                                                                                                                                                    |   |                  |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                                                                                                |   |                  |  
|Acquisition of property and equipment                                                                                                               |   | (13,297          | )
|Net Cash Used in Investing Activities                                                                                                               |   | (13,297          | )
|                                                                                                                                                    |   |                  |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                                                                |   |                  |  
|Loans from shareholders in contemplation of private
      placement of common stock                                                                 |   | -                |  
|Net Cash Provided by Financing Activities                                                                                                           |   | -                |  
|                                                                                                                                                    |   |                  |  
|INCREASE IN CASH AND CASH EQUIVALENTS                                                                                                               |   | 13,256           |  
|                                                                                                                                                    |   |                  |  
|CASH AND CASH EQUIVALENTS                                                                                                                           |   |                  |  
|Beginning of period                                                                                                                                 |   | 24,335           |  
|End of period                                                                                                                                       | $ | 37,591           |  
|                                                                                                                                                    |   |                  |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                                                                                  |   |                  |  
|Cash paid during the period for:                                                                                                                    |   |                  |  
|Income
      Taxes                                                                                                                                  | $ | 797              |  
|Interest                                                                                                                                            | $ | -                |  
|                                                                                                                                                    |   |                  |  
|NON-CASH FINANCING ACTIVITIES                                                                                                                       |   |                  |  
|Issuance of 490,999
      shares of common stock in settlement of accrued interest            payable
      to holders of 8% convertible debentures |   | -                |  

The accompanying notes are an integral part of these financial
statements

3

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CYBRA CORPORATION

NOTES TO FINANCIAL STATEMENTS June 30, 2011

1. ORGANIZATION, DESCRIPTION OF OPERATIONS, FINANCIAL STATUS
OF THE COMPANY AND BASIS OFPRESENTATION

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 specializing in Automatic
Identification technology solutions. The Companys flagship product,
MarkMagicTM, is a barcode, radio frequency identification (RFID) and forms
middleware solution relied upon daily by thousands of customers worldwide. It
helps customers easily integrate bar code labels, RFID technology and electronic
forms into their business systems. EdgeMagic®, first released in February 2008,
is an integrated RFID control solution that 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. CYBRA software
solutions run on all major computing platforms including IBM Power Systems
(System i, iSeries, AS/400, AIX) as well as Linux, Unix, and Microsoft Windows.

Financial Status of the Company/Going Concern

At June 30, 2011, the Company had cash of $37,591 and a working
capital deficit of $2,460,387. Additionally, the Company incurred a net loss of
$140,510 for the six months ended June 30, 2011, which includes non-cash charges of $160,747, and had a stockholders deficit
of $2,385,610 at June 30, 2011. Management has taken several steps to improve
sales and reduce costs in order to ensure that its cash flows will meet its
operating cash requirements for the next quarter. 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 amended 8% Convertible Debentures with a principal balance
of $1,420,000 became due on April 11, 2011 and the Company is in default on this
obligation. Management has continued negotiations with the holders of these
debentures. The effects of unsuccessful negotiations or the impact on the
Companys financial position and results of operations have not been determined.

These factors raise substantial  doubt about the Companys ability
to continue as a going concern. Management is hopeful that they will succeed in
settling with the debenture holders in a manner that will provide the Company
with sufficient time to repay the debt and not have the risk of further default.
No assurances can be given that management will be successful in its
negotiations with the debenture holders or that the efforts to improve the sales
of EdgeMagic will result in improvements significant enough to provide
sufficient cash flows and operating capital. No adjustments have been made to
the accompanying financial statements to reflect the recoverability or
classification of recorded asset amounts or the amounts or classification of
liabilities should the Company be unable to continue in existence.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Software Costs

The Company accounts for software development costs in
accordance with ASC 985-730, Software Research and Development,and ASC 985-20, Costs of Software to be Sold, Leased or Marketed. ASC
985-20 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. ASC 985-20
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, ASC 985-20 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.

4

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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 six months ended June 30, 2011 and 2010 was $117,086
and $105,730, respectively.

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

Warrants issued in conjunction with equity financings were
accounted for under ASC 815-40, Contracts in Entitys Own Stock. ASC
825-20, Accounting for Registration Payment Arrangements, 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 how these standards affected these 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). In
connection with the Debenture Amendment and Exchange Agreements (as discussed in
Note 3, 8% Convertible Debentures and Derivative Financial Instruments), the
registration rights and penalties under the original Securities Purchase
Agreements were waived.

Derivative Financial Instruments

The Company accounts for its Warrants, which were Class B
Warrants issued in a private placement of the 8% Convertible Debentures
(the Debentures) with detachable Class A Warrants and Class B Warrants on
April 10, 2006, and amended on June 8, 2010 to extend their maturity to April
10, 2013, and reduce the exercise prices to amounts between $1.00 and $1.30 from
$1.75 (see Note 3, 8% Convertible Debentures and Derivative Financial
Instruments), as derivatives under the guidance of ASC 815-10,Accounting for
Derivative Instruments and Hedging Activities, and ASC 815-40, Contracts
in an Entity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 Instrumentin 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 ASC 470-20, 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,
Property and Equipment.

Income Taxes

Income taxes are accounted for under the asset and liability
method in accordance with 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 ASC 740 rules governing uncertain tax
positions, which provides guidance for recognition and measurement. 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 derecognization,
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 six months ended
June 30, 2011 and 2010, 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.

5

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Advertising Costs

Advertising costs are charged to expense as incurred. Total
advertising amounted to $3,098 and $5,034 for the six months ended June 30, 2011
and 2010, 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
warrants, 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. The Company bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results could differ from those
estimates.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to
concentrations of credit risk consist of commercial accounts receivable and
temporary cash investments, which could, from time-to-time, exceed the federal
deposit insurance coverage. The Company has cash investment policies that
restrict placement of these investments to financial institutions evaluated as
highly creditworthy. As of June 30, 2011, the Company does not hold cash and
cash equivalents with individual banks in excess of federally insured limits.

Concentrations of credit risk that arise from financial
instruments exist for groups of customers when they have similar economic
characteristics that would cause their ability to meet contractual obligations
to be similarly affected by changes in economic conditions. The Company operates
in one segment, software development and systems integration of bar code and
RFID to manufacturers and wholesale distributors in the United States of
America. Management believes that the customer base is sufficiently diverse and
therefore does not consider the aggregate of customer accounts receivable to be
a concentration of credit risk.

Cash and Cash Equivalents

The Company classifies marketable securities that are highly
liquid and have maturities of six months or less at the date of purchase as cash
equivalents. The Company manages its exposure to counterparty credit risk
through specific minimum credit standards, diversification of counterparties and
procedures to monitor its credit risk concentrations.

Revenue Recognition

The Company recognizes revenues in accordance with AICPA
Statement of Position ASC 985-605, Software Revenue Recognition.

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 collectability 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

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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.

Accounts Receivable

The Company records 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. The Company
calculates this allowance based on its history of write-offs, level of past-due
accounts based on the contractual terms of the receivables, and its
relationships with and the economic status of its customers. Uncollectible
receivables are charged off against the allowance for doubtful accounts as
management determines that they are clearly uncollectible after taking all
reasonable steps to collect the balances.

Trade receivables are presented net of an allowance for
doubtful accounts of $6,000 as of June 30, 2011 and December 31, 2010.

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

Stock-Based Compensation

In addition to requiring supplemental disclosures, ASC 718,
Compensation  Stock Compensation, and ASC 505-50, Equity-Based
Payments to Non-Employees, address 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. 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, as amended
(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
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 fair value of the Companys assets and liabilities, which
qualify as financial instruments under ASC 820, Fair Value Measurements and
Disclosures, approximates the carrying amounts represented in the balance
sheet.

ASC 825-20, Accounting for Registration Payment
Arrangements, 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 ASC 450, Contingencies. In connection
with the Debenture Amendment and Exchange Agreements (as discussed in Note 3, 8%
Convertible Debentures and Derivative Financial Instruments), the registration
rights and penalties under the original Securities Purchase Agreements were
waived.

Basic and Diluted Loss per Share

In accordance with 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 June 30, 2011 and 2010, the Companys stock
equivalents were anti-dilutive and excluded in the diluted loss per share
computation.

7

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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.

Recently issued accounting standards

The Company does not believe that the adoption of any recently
issued, but not yet effective, accounting standards will have a material effect
on its financial position and results of operations.

Reclassifications

No reclassifications have been made to the financial
statements.

3. 8% CONVERTIBLE DEBENTURES AND DERIVATIVE FINANCIAL
INSTRUMENTS

Original financing:

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. Interest on the Debentures was due semiannually at 8% per annum beginning
December 31, 2006. Interest was also due upon conversion, redemption and
maturity. The total interest paid in cash to two Debenture holders prior to
April 10, 2009 was $16,982. Another Debenture holder converted its accrued
interest to shares of common stock in 2009. The original Debentures matured on
April 10, 2009, but were not paid on that date. As a result, the Debentures were
in default; however, the Company has renegotiated the terms of the Debentures,
as described below.

The investors also received 7,500,000 Warrants, 2,500,000 of Class A Warrants and 5,000,000 of Class B Warrants as part of the original sale of the Debentures. Each Class A Warrant gave the holder the right to buy one share of the Company’s common stock, par value $0.001 per share (the “Common Stock”), for $0.75. Class A Warrants to purchase 2,123,800 shares of Common Stock remained outstanding and were exercisable at any time through April 10, 2011. The Class A Warrants are no longer exercisable. The Class B Warrants were replaced with new Class B Warrants as described below.

Renegotiation and exchange of Debentures:

The Company had renegotiated 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.

On June 8, 2010, the Company entered into Debenture Amendment
and Exchange Agreements with two holders of its Debentures having an aggregate
principal amount of $640,000 (the Option A Holders), and ten holders of its
Debentures having an aggregate principal amount of $805,000 (the Option B
Holders). Pursuant to the Debenture Amendment and Exchange Agreements, the
Option A Holders and the Option B Holders exchanged their Debentures for an
amended and restated Debenture due April 10, 2011.

In addition, the Option A Holders and the Option B Holders
received an aggregate of 499,099 shares of common stock in lieu of approximately
$246,000 of accrued interest through April 10, 2009. The Company also issued (a)
new Class B Warrants to the Option A Holders to purchase an aggregate of
1,560,000 shares of the Companys Common Stock at an exercise price of $1.15 per
share, in exchange for their outstanding Class B Warrants, and (b) new Class B
Warrants to the Option B Holders to purchase an aggregate of 1,803,200 shares of
the Companys Common Stock at an exercise price of $1.30 per share, in exchange
for their outstanding Class B Warrants.

On the same date, the Company entered into Securities Exchange
Agreements with 16 holders of its Debentures having an aggregate principal
amount of $1,045,000 (the Option C Holders) to exchange their Debentures for
2,090,000 shares of Series A 10% Convertible Preferred Stock (the Series A
Preferred Stock). The Securities Exchange Agreements were signed on June 8,
2010, but the transactions contemplated by those agreements were subject
to (i) approval by the Companys shareholders of an amendment to the Companys
Certificate of Incorporation to authorize it to issue up to 10 million shares of
preferred stock in one or more series or classes having such designations,
relative rights, preferences, and limitations as may be designated by the
Companys Board of Directors (the Amendment), and (ii) subsequent
authorization of the Series A Preferred Stock by the Companys Board of
Directors.

8

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On August 3, 2010 the Company held a special meeting of
shareholders in which its shareholders approved the Amendment. On the same day,
the Company filed a Certificate of Designation setting forth the terms of the
Series A Preferred Stock with the New York Secretary of State. The Company
subsequently issued to the Option C Holders (a) 2,090,000 shares of Series A
Preferred Stock in exchange for the Debentures, and (b) 487,704 shares of its
Common Stock in payment of accrued and unpaid interest due under the Debentures
through April 10, 2009. The Common Stock was issued at $0.50 per share compared
to the fair market value on June 8, 2010 of $0.59 per share. As a result, the
conversion generated a beneficial conversion cost. The Option C Holders also
received new Class B Warrants to purchase an aggregate of 2,466,200 shares of
the Companys Common Stock at an exercise price of $1.00 per share, in exchange
for their outstanding Class B Warrants. The new Class B Warrants vest
immediately and expire on April 10, 2013.

The Debenture balances were $1,420,000 at June 30, 2011 and
December 31, 2010.

Other transactions related to the amendments:

In July 2010, two holders of the Companys 8% Convertible
Debentures due April 10, 2011 (the Amended Debentures) converted an aggregate
of $15,000 of the principal amount of Amended Debentures into 30,000 shares of
Common Stock. Outstanding interest on the converted principal was paid in cash.
The Company subsequently provided notice (the Notice) to all holders of the
Amended Debentures specifying that, unless notified otherwise by the Company,
the Company will pay interest due upon the conversion, redemption and maturity
of the Amended Debentures with shares of its Common Stock. The Notice also
clarified that the aforesaid election includes the accrued and unpaid interest
due under the Amended Debentures on June 30, 2009, December 31, 2009, and June
30, 2010.

In October 2010, one holder converted $10,000 of the principal
amount of Amended Debentures into 20,000 shares of Common Stock. Outstanding
interest on the converted principal was paid in 2,442 shares of common stock.

At June 30, 2011, there were Warrants to purchase 5,453,200
shares of Common Stock outstanding in connection with the sale and amendments of
the Debentures.

The new Class B Warrants issued to the Option A Holders and the
Option B Holders were determined to have a value of $1,956,000, as compared to
the outstanding Class B Warrants, which were valued at $1,261,000. The new Class
B Warrants issued to the Option C Holders were determined to have a value of
$1,436,000, as compared to the outstanding Class B Warrants, which were valued
at $906,000. As a result, the Company incurred a debt extinguishment charge in
accordance with ASC 470-50, Debt Modification and Extinguishments, and
recorded a loss of $1,225,748.

As part of the original sale of the Debentures, $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 as 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 original Debentures and those that underlie the Warrants were subject to
a registration rights agreement. The registration rights agreement provided for
liquidated damages if certain requirements were met, which they were not. In
connection with the Debenture Exchange and Amendment Agreements, the Debenture
holders waived their right to receive liquidated damages and interest thereon
due under the registration rights agreement.

The Warrants were 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. In accordance with the
Companys adoption of ASC 815-40, Contracts in Entitys Own Stock, and ASC 825-20,
Accounting for Registration Payment Arrangements, the classification of
the warrant liability was changed to stockholders equity (additional paid in
capital) as of January 1, 2007. The amended warrants do not carry a registration
rights agreement.

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 increases, all of which should tend to reduce the
volatility of the value of the Companys common shares.

9

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Effects of the default prior to the amendment:

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 becomes, 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, as more
fully explained in the Companys Annual Report on Form 10-K for the year ended
December 31, 2009 filed with the Securities and Exchange Commission on April 15,
2010.

During the six months ended June 30, 2010, the Company recorded
charges related to the Mandatory Prepayment Amount. These charges were reversed
during the quarter ended June 30, 2010 and September 30, 2010 as the relevant
Debentures were modified or exchanged for Series A Preferred Stock.

Payment Default on Amended and Restated 8% Convertible
Debentures: 
On April 10, 2011, the Company did not pay outstanding Amended
and Restated 8% Convertible Debentures (the Debentures), in the aggregate
principal amount of $1,420,000, which became due on that date. These Debentures
were issued on June 8, 2010, pursuant to a Debenture Amendment and Exchange
Agreement, also dated June 8, 2010 (the Exchange 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 as
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 the Companys 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.

The Company has commenced settlement negotiations with several
of the debenture holders. There can be no assurances that an agreement
acceptable to the Company will be reached.

4. STOCK BASED COMPENSATION

During the six months ended June 30, 2011 and 2010, the Company
issued no shares of common stock in lieu of cash compensation.

The Company has adopted the CYBRA Corporation 2006 Incentive
Stock Plan, a stock-based compensation plan to reward services rendered by
officers, directors, employees and consultants. The Company has reserved
5,000,000 shares of Common Stock for issuance under the plan.

10

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The Company recognizes share-based compensation expense for all
service-based awards with graded vesting schedules on a straight-line basis over
the requisite service period for the entire award. Initial accruals of
compensation expense are based on the estimated number of shares for which
requisite service is expected to be rendered. Estimates are revised if
subsequent information indicates that forfeitures will differ from previous
estimates, and the cumulative effect on compensation cost of a change in the
estimated forfeitures is recognized in the period of the change.

Total stock options outstanding at June 30, 2011 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, 2010
    
    100,000Granted
    
    0Exercised
    
    0Outstanding at December 31, 2010
    
    100,000Options exercisable at December 31, 2010
    
    100,000Options outstanding at January 1, 2011
    
    100,000Granted
    
    0Exercised
    
    0Outstanding at June 30, 2011
    
    100,000Options exercisable at June 30, 2011
    
    100,000


The 100,000 options outstanding at June 30, 2011 were issued in
December 2007, have a remaining outstanding life of six months and have an
exercise price of $0.75 per share.

5. PROPERTY AND EQUIPMENT

At June 30, 2011 and December 31, 2010, property and equipment
consisted of the following:

EstimateJune 30, 2011
      
      
      December 31, 2010
      
      
      Useful LifeIn YearsFurniture and office equipment
    $
      212,086
    
    $
      198,787
    
    
      5Computer software
    
      112,182
    
    
      112,182
    
    
      3Leasehold Improvements
    
      21,294
    
    
      21,294
    
    
      Life of Lease$
      345,562
    
    $
      332,263Less: Accumulated Depreciation
    $
      286,238
    
    $
      281,017Net Property and Equipment
    $
      59,324
    
    $
      51,246


Depreciation and amortization of property and equipment
amounted to $5,221 and $10,507 for the six months ended June 30, 2011 and 2010, respectively.

11

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Software Development Costs
    $
    678,700
    
    $
    678,700
    
    
    3Less: Accumulated Amortization
    
    674,901
    
    
    576,032Net Software Development Costs
    $
    3,799
    
    $
    102,668


The Companys policy is to capitalize software development
costs in accordance with ASC 985-730 (See Note 2, Summary of Significant
Accounting Policies). Amortization of Software Development Costs amounted to
$98,867 and $113,054 for the six months ended June 30, 2011 and 2010,
respectively, and is included within Selling, General and Administrative
Expenses.

6. INCOME TAXES

The Company has the following deferred tax assets and
liabilities at June 30, 2011 and 2010:

June
      30, 2011
    
    
    December 31, 2010Current assets and liabilities:Accounts
      receivable
    $
    (120,000
    )
    $
    (92,000
    )Accounts payable and accrued
      expenses
    
    48,000
    
    
    57,000Deferred
      Revenues
    
    172,000
    
    
    168,000100,000
    
    
    133,000Valuation Allowance
    
    (100,000
    )
    
    (133,000
    )Net current deferred tax asset
    
    -
    
    
    -Noncurrent assets and liabilitiesNet operating loss
      carryforwards
    $
    2,516,000
    
    $
    2,487,000Depreciation
    
    -
    
    
    (18,000
    )2,516,000
    
    
    2,469,000Valuation allowance
    
    (2,516,000
    )
    
    (2,469,000
    )Net deferred tax asset
    
    -
    
    
    -


The valuation allowance for the deferred tax asset increased by
$14,000 for the six months ended June 30, 2011.

The Company has net operating losses amounting to approximately
$6,140,000 that expire in various periods from 2024 through 2030. 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 the Companys
control. Accordingly, management has determined that a full valuation allowance
of the deferred tax asset is appropriate at this time.

12

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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.

The tax years ended December 31, 2007 through 2010 are open for
examination by federal and state taxing authorities.

7. PREFERRED STOCK

The Company is authorized to issue up to 10,000,000 shares of
preferred stock in one or more series or classes having such designations,
relative rights, preferences, and limitations as may be designated by the Board
of Directors. There are 2,090,000 shares of Series A 10% Convertible Preferred
shares currently outstanding which are convertible into 2,090,000 shares of
common stock, all issued in connection with the renegotiation and exchange of
Debentures as described in Note 3.

8. COMMITMENTS, CONTINGENCIES AND OTHER COMMENTS

a. Operating lease 
  The Company occupies office space in Yonkers, New York under a
lease agreement that was amended effective December 30, 2009 and expires on
January 31, 2014.

The Company also rents space in West Seneca, New York, near
Buffalo. This lease expires on May 31, 2012 as extended on April 5, 2010.

The minimum rental commitment for both properties is as
follows:

2011
    $
    81,6282012
    
    77,6402013
    
    44,187$
    203,455


Rent expense amounted to $49,710 and $30,172 for the six months
ended June 30, 2011 and 2010, respectively. This includes additional expense for
storage.

b. Note Payable under Financial Institution Line of
Credit 
The Company has a $115,000 credit line available through its
bank. The Company borrowed $128,000 and repaid $88,000 in the six months ended
June 30, 2011. There is a balance due of $40,000 at June 30, 2011. The repayment
period is 36 months. The interest rate varies at the banks prime rate and was
3.25% at June 30, 2011. There is an annual fee of $1,150. Borrowings under the
line of credit are personally guaranteed by Harold Brand, Chairman and Chief
Executive Officer and majority shareholder of the Company.

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 Chief Executive Officer 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.

On February 15, 2011, Raz-Lee instituted proceedings in the
Supreme Court of the State of New York, County of Westchester, Index No.
4763/11, for enforcement of the foreign judgment. In May 2011, the Company
entered into a settlement agreement with Raz-Lee. The unpaid balance is included in Accrued Expenses as of June
30, 2011 and payment of the remaining balance was made in July 2011.

13

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d. 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.

e. Loans from shareholders 
  During the six months ended June 30, 2010, the Company received
$35,000 from its Chief Executive Officer and $12,500 from another stockholder
(totaling $47,500) as advance payment toward the planned issuance of common
stock and other securities in a planned private placement. The Company is
currently legally obligated to return the funds received on demand of the
investors if the contemplated private placement is not completed. The balances
due bear no interest.

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 three-month or six-month period ended June 30, 2011 or 2010.

10. RELATED PARTY TRANSACTIONS

a. Executive
  Employment Contract 
  Effective April 30, 2006, the Company entered into a five-year
Employment Agreement with Mr. Brand, with a base salary set at $180,000 per
annum. In addition to this salary, Mr. Brand is entitled to incentive
compensation in 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). Mr. Brand is
also 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. Unpaid incentive compensation is included in accrued expenses on
the balance sheet.

Starting in 2008, the executive officers of the Company
deferred part of their salaries and commissions. The balance of deferred
compensation was $116,827 as of June 30, 2011 and $131,827 as of December 31,
2010.

b. Profit Horizon, Inc. 
  Profit Horizon, Inc., a company controlled by Robert J. Roskow,
Executive Vice President and a Director of the Company, provides sales
consulting services. During the six months ended June 30, 2011 and 2010, the
Company incurred $7,500 in both periods in commissions to Profit Horizon, Inc.

11. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Companys financial instruments consisted of the following:

|                          |   |           |  |   | December  | 
|------------------------- | - | --------- |  | - | --------- | 
|                          |   | June 30,  |  |   | 31,       | 
|                          |   | 2011      |  |   | 2010      | 
|8% Convertible Debentures | $ | 1,420,000 |  | $ | 1,420,000 | 

14

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12. LOSS PER SHARE

Loss per share for the six months ended June 30, 2011 and 2010
does not include the effects of 8,900,404 Warrants, 2,090,000 shares of Series A
10% Convertible Preferred Stock, options to acquire 100,000 shares of common
stock held by employees, directors and consultants, or the 2,860,000 shares into
which the 8% Convertible Debentures are convertible because the effects would be
anti-dilutive.

13. SUBSEQUENT EVENTS

The Company evaluated events occurring between the end of the
first quarter June 30, 2011, and August 15, 2011 when the financial statements
were issued. There are no subsequent events to report.

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 our 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 Securities and Exchange Commission. We assume no
obligation and do not intend to update these forward-looking statements, except
as required by law.

OVERVIEW

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
specializing in Auto Identification technology solutions. Our flagship product,
MarkMagicTM, is a bar code, radio frequency identification (RFID)
and forms middleware solution relied upon daily by thousands of customers
worldwide. It helps customers easily integrate bar code labels, RFID technology
and electronic forms into their business systems.

EdgeMagic®, first released in February 2008, is an
integrated RFID control solution that 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.

Our software solutions run on all major computing platforms
including IBM Power Systems (System i, iSeries, AS/400, AIX) as well as Linux,
Unix, and Microsoft Windows.

15

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Comparison of the three months ended June 30, 2011 and
2010

The following table summarizes certain aspects of our results
of operations years ended June 30, 2011 and 2010

|                                    |   | Three months ended |   |   |          |   |   |          |   |  | Six months ended |  |   |           |   |   |          |  
|----------------------------------- | - | ------------------ | - | - | -------- | - | - | -------- | - |  | ---------------- |  | - | --------- | - | - | -------- | -
|                                    |   | June 30,           |   |   |          |   |   |          |   |  | June 30,         |  |   |           |   |   |          |  
|                                    |   | 2011               |   |   | 2010     |   |   | Change $ |   |  | Change %         |  |   | 2011      |   |   | 2010     |  
|Revenues                            |   |                    |   |   |          |   |   |          |   |  |                  |  |   |           |   |   |          |  
|Products                            | $ | 222,525            |   | $ | 246,675  |   | $ | (24,150  | ) |  | -10%             |  | $ | 553,148   |   | $ | 450,244  |  
|Services                            |   | 257,195            |   |   | 240,903  |   |   | 16,292   |   |  | 7%               |  |   | 465,415   |   |   | 410,134  |  
|Total Revenues                      |   | 479,720            |   |   | 487,578  |   |   | (7,858   | ) |  | -2%              |  |   | 1,018,563 |   |   | 860,378  |  
|                                    |   |                    |   |   |          |   |   |          |   |  |                  |  |   |           |   |   |          |  
|Direct Costs                        |   |                    |   |   |          |   |   |          |   |  |                  |  |   |           |   |   |          |  
|Equipment Purchases                 | $ | 95,947             |   | $ | 12,517   |   | $ | 83,430   |   |  | 667%             |  | $ | 225,778   |   | $ | 64,313   |  
|Royalties & Consulting              |   | 19,234             |   |   | 7,500    |   |   | 11,734   |   |  | 156%             |  |   | 46,858    |   |   | 21,119   |  
|                                    |   |                    |   |   |          |   |   |          |   |  |                  |  |   |           |   |   |          |  
|Total Direct Costs                  | $ | 115,181            |   | $ | 20,017   |   | $ | 95,164   |   |  | 475%             |  | $ | 272,636   |   | $ | 85,432   |  
|% of total revenues                 |   | 24%                |   |   | 4%       |   |   |          |   |  |                  |  |   | 27%       |   |   | 10%      |  
|                                    |   |                    |   |   |          |   |   |          |   |  |                  |  |   |           |   |   |          |  
|Gross margin                        | $ | 364,539            |   | $ | 467,561  |   | $ | (103,022 | ) |  | -22%             |  | $ | 745,927   |   | $ | 774,946  |  
|% of total revenues                 |   | 76%                |   |   | 96%      |   |   |          |   |  |                  |  |   | 73%       |   |   | 90%      |  
|                                    |   |                    |   |   |          |   |   |          |   |  |                  |  |   |           |   |   |          |  
|Research and development costs      | $ | 55,543             |   | $ | 59,295   |   | $ | (3,752   | ) |  | -6%              |  | $ | 117,086   |   | $ | 105,730  |  
|% of total revenues                 |   | 12%                |   |   | 12%      |   |   |          |   |  |                  |  |   | 11%       |   |   | 12%      |  
|                                    |   |                    |   |   |          |   |   |          |   |  |                  |  |   |           |   |   |          |  
|Sales and marketing expenses        | $ | 55,828             |   | $ | 66,964   |   | $ | (11,136  | ) |  | -17%             |  | $ | 95,247    |   | $ | 90,107   |  
|% of total revenues                 |   | 12%                |   |   | 14%      |   |   |          |   |  |                  |  |   | 9%        |   |   | 10%      |  
|                                    |   |                    |   |   |          |   |   |          |   |  |                  |  |   |           |   |   |          |  
|General and administrative expenses | $ | 294,530            |   | $ | 313,450  |   | $ | (18,920  | ) |  | -6%              |  | $ | 617,454   |   | $ | 631,672  |  
|% of total revenues                 |   | 61%                |   |   | 64%      |   |   |          |   |  |                  |  |   | 61%       |   |   | 73%      |  
|                                    |   |                    |   |   |          |   |   |          |   |  |                  |  |   |           |   |   |          |  
|Interest expense                    | $ | 28,481             |   | $ | 52,792   |   | $ | (24,311  | ) |  | -46%             |  | $ | 56,659    |   | $ | 105,378  |  
|% of total revenues                 |   | 6%                 |   |   | 11%      |   |   |          |   |  |                  |  |   | 6%        |   |   | 12%      |  
|                                    |   |                    |   |   |          |   |   |          |   |  |                  |  |   |           |   |   |          |  
|Other Income (Expenses)             | $ | 4                  |   | $ | (609,188 | ) | $ | 609,192  |   |  | -100%            |  | $ | 9         |   | $ | (614,113 | )
|% of total revenues                 |   | 0%                 |   |   | -125%    |   |   |          |   |  |                  |  |   | 0%        |   |   | -71%     |  
|                                    |   |                    |   |   |          |   |   |          |   |  |                  |  |   |           |   |   |          |  
|Loss Before Taxes                   | $ | (69,839            | ) | $ | (634,128 | ) | $ | 564,289  |   |  | -89%             |  | $ | (140,510  | ) | $ | (772,054 | )
|% of total revenues                 |   | -15%               |   |   | -130%    |   |   |          |   |  |                  |  |   | -14%      |   |   | -90%     |  

16

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Revenues

Revenues were $479,720 and $487,578 for the three months ended
June 30, 2011 and 2010, and $1,018,563 and $860,378 for the six months ended
June 30, 2011 and 2010. This is a decrease of approximately 2% for the three-month period and an increase of 18% for the six-month period ended June 30, 2011
compared to the prior periods. Lower sales for our MarkMagic product during the
three-month period were mostly offset by an increase in EdgeMagic and associated
sales. MarkMagic sales decreased due to a slowdown in revenue contribution from
our channel partners as they prepare to introduce new MarkMagic versions in the
second half of the year. Sales for our most recent RFID product, EdgeMagic,
increased during the 2011 six-month period as compared with the same 2010
period, mirroring the general trend of increased market acceptance of RFID
technology, particularly in the apparel sector. Demand for services showed an
increase as well. We expect these trends to continue contributing to positive
growth in revenues over the course of the year.

Direct Costs

The costs for equipment that was resold to customers increased
by 667% for the three months ended June 30, 2011 as compared to the June 30,
2010 three-month period. There was an increase of 251% for the six-months ended
June 30, 2011 compared to the 2010 six-month period. As EdgeMagic sales tend to
be more of an end-to- end solution than MarkMagic sales, the increase in
EdgeMagic sales resulted in an increase in sales of hardware and supplies.

Gross Margin

Gross Margin as a percentage of sales for the three months
ended June 30, 2011 as compared to the same period in 2010 decreased 22%. Gross
Margin as a percentage of sales for the six months ended June 30, 2011 as
compared to the same period in 2010 decreased 4%. This was due to an increase in
relatively lower margin hardware sales, which reflect EdgeMagic projects that
are more end-to-end in nature than MarkMagic sales.

Research and Development Costs

Research and development costs decreased 6% for the three
months ended June 30, 2011 as compared to the same period in 2010. The costs
increased 11% for the six months ended June 30, 2011 as compared to the same
period in 2010. These 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 ACS
985-20-25, Research and Development Costs of Computer Software, 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, 2010, and all costs after that
date have been expensed in accordance with ACS 985-20-25. During the three
months ended June 30, 2011 and 2010, the software development costs that were
expensed were $55,543 and $59,295, respectively. For the six months ended June
30, 2011 and June 30, 2010 the software development costs that were expensed
were $117,086 and $105,730, respectively. Software development costs increased
slightly in 2011 due to enhancements to our MarkMagic and EdgeMagic products.

Sales and Marketing Expenses

Sales and marketing expenses consisted primarily of
commissions, trade shows, advertising and promotional expenses. There was a 17%
decrease in absolute dollars for the three months ended June 30, 2011 as
compared to the same period in 2010. This is due to lower sales commissions.
There was a 6% increase for the six months ended June 30, 2011 compared to the
same period in 2010. This is due to higher trade show participation.

General and Administrative Expense

General and administrative expenses consisted primarily of
costs associated with our executive, financial, human resources and information
services functions. General and administrative expenses decreased slightly for
the three months and six months ended June 30, 2011 as compared to the same
period in 2010.

17

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Interest Expense

Interest expense for the three months ended June 30, 2011 as
compared to the same period in 2010 decreased by 46% from $52,792 for the three
months ended June 30, 2010 to $28,481 for the three months ended June 30,
2011. Interest expense for the six months ended June 30, 2011 as compared to
the same period in 2010 decreased by 46% also from $105,378 for the six months
ended June 30, 2010 to $56,659 for the six months ended June 30, 2011. Interest
expense in 2010 represented interest accrued on, and amortization of deferred
financing cost related to, the 8% Convertible Debentures originally due April
10, 2009 (the Debentures). Amortization of these deferred finance costs ceased
in April 2009 and standard interest continued to accrue on them. On June 8,
2010, holders of our Debentures having an aggregate principal amount of
$1,445,000 converted outstanding interest due through April 2010 into shares of
common stock. On the same date, 16 holders of Debentures having an aggregate
principal amount of $1,045,000 agreed to exchange their Debentures for a new
class of preferred stock of the Company having terms similar to those in the
Debentures. This reduction in principal on which interest was calculated
resulted in decreased interest expense for the three and six months ended June
30, 2011.

Other Income (Expenses)

Other income and expenses decreased for the three and six
months ended June 30, 2011 due to a loss from debt restructuring recorded on the
8% debenture default recorded in the three and six months ended June 30,
2010.

Provision for Income Taxes

The provision for income taxes consists of provisions for state
franchise taxes.

We recorded no income tax expense or benefit for the three and
six months ended June 30, 2011 and 2010. The effective tax rate of 0% differs
from the statutory U.S. federal income tax rate of 35% primarily due to
increases in valuation allowance for deferred tax asset that we believe we are
unlikely to be able to realize.

Liquidity and Capital Resources

The following table summarizes our cash and cash equivalents,
  working capital, long-term debt and cash flows for the six months ended June
  30, 2011 and 2010.

|                                          |  | Six months ended |   |  |            |   |  |           |  
|----------------------------------------- |  | ---------------- | - |  | ---------- | - |  | --------- | -
|                                          |  | June 30,         |   |  |            |   |  |           |  
|                                          |  | 2011             |   |  | 2010       |   |  | Change $  |  
|                                          |  |                  |   |  |            |   |  |           |  
|Cash and cash equivalents                 |  | 37,591           |   |  | 146,005    |   |  | (108,414  | )
|Working capital deficit                   |  | (2,465,535       | ) |  | (3,692,102 | ) |  | 1,226,567 |  
|Net cash used in operating activities     |  | 21,325           |   |  | 56,823     |   |  | (35,498   | )
|Net cash used in investing activities     |  | (8,069           | ) |  | (16,357    | ) |  | 8,288     |  
|Net cash provided by financing activities |  | -                |   |  | 47,500     |   |  | (47,500   | )

As of June 30, 2011, our principal source of liquidity was cash
of approximately $37,000. Our operations provided $21,325 in cash during the six
months ended June 30, 2011 as compared to $56,823 for the same period in 2010.

To sustain operations under our current structure, we need cash
of approximately $120,000 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.

Our working capital deficit was approximately $2,464,000 at
June 30, 2011. The deficit in working capital included approximately $1,420,000
in liabilities related to the Debentures. It also included $424,000 in deferred
revenues that require settlement in future services rather than cash.

During the six months ended June 30, 2011 and 2010, the Company
issued no shares of common stock.

18

---

As of the second quarter of 2011, we generated positive cash
flow of approximately $20,000. This is due to an upturn in business that we
believe may be a result of the overall improvement in the general business
environment, positive market acceptance of new product features, as well as our
success in maintaining tight control on expenses. We see a recent positive trend
in customer interest in RFID in general and in our EdgeMagic product in
particular. Wal-Marts implementation of RFID tracking throughout its stores for
selected apparel goods is a positive sign. Apparel suppliers represent a large
segment of our customer base. Wal-Mart is often a pioneer in new technology,
with other retailers following suit. JC Penney and Dillards have already joined
Wal-Mart in encouraging their suppliers - among them a number of CYBRA customers
- to tag their apparel goods at the item level. We therefore expect increased
interest in EdgeMagic to meet anticipated retailer compliance requirements over
the course of 2011. Furthermore, the recent hiring of a Vice President Sales and
Marketing with extensive industry experience and success, particularly in RFID,
we believe will contribute significantly to revenue improvement in the second
half of 2011.

The amended 8% Convertible Debentures with a principal balance
of $1,420,000 became due on April 11, 2011 and the Company is in default on this
obligation. Management has continued negotiations with the holders of these
debentures. The effects of unsuccessful negotiations or the impact on the
Companys financial position and results of operations have not been determined.
No assurance can be given that management will be successful in its negotiations
with the debenture holders.

Critical Accounting Policies

Use of estimates

The preparation of financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes, and
disclosure of contingent liabilities at the date of the financial statements.
Estimates are used for, but not limited to, the selection of the useful lives of
property and equipment, provisions necessary for contingent liabilities, fair
values, revenue recognition, taxes, budgeted costs and other similar charges.
Management believes that the estimates utilized in preparing its financial
statements are reasonable and prudent. Actual results could differ from these
estimates.

Impact of Derivative Accounting

Warrants issued in conjunction with equity financings  were accounted for under ASC 815-40, Contracts in Entity’s Own Stock.  ASC  825-20, Accounting for Registration Payment Arrangements, 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 how these standards affected these accompanying  financial statements.

Property and equipment

Property and equipment are recorded at cost less accumulated
depreciation and any impairment losses. The cost of an asset is comprised of its
purchase price and any directly attributable costs of bringing the asset to its
working condition and location for its intended use. Expenditures incurred after
the fixed assets have been put into operation, such as repairs and maintenance
and overhaul costs, are normally charged to the profit and loss account in the
year in which they are incurred.

In situations where it can be clearly demonstrated that the
expenditure has resulted in an increase in the future economic benefits expected
to be obtained from the use of the asset beyond its originally assessed standard
of performances, the expenditure is capitalized as an additional cost of the
asset.

Depreciation is computed using the straight-line method over
the estimated useful lives of the assets, less any estimated residual value.
Estimated useful lives of our assets are as follows:

Office Equipment  5 years

Software  3 years

19

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Any gain or loss on disposal or retirement of a fixed asset is
recognized in the profit and loss account and is the difference between the net
sales proceeds and the carrying amount of the relevant asset. When property and
equipment are retired or otherwise disposed of, the assets and accumulated
depreciation are removed from the accounts and the resulting profit or loss is
reflected in income.

Expenditures for maintenance and repairs are charged to expense
as incurred. Additions, renewals and betterments are capitalized.

Long-lived assets

We apply the provisions of Financial Accounting Standard Board
(FASB) Accounting Standards Codification (ASC) No. 360, Property, Plant and
Equipment. ASC 360 requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable through the estimated undiscounted cash flows
expected to result from the use and eventual disposition of the assets. Whenever
any such impairment exists, an impairment loss will be recognized for the amount
by which the carrying value exceeds the fair value.

The Company tests long-lived assets, including property, plant
and equipment and other assets, for recoverability at least annually or more
frequently upon the occurrence of an event or when circumstances indicate that
the net carrying amount is greater than its fair value. Assets are grouped and
evaluated at the lowest level for their identifiable cash flows that are largely
independent of the cash flows of other groups of assets. The Company considers
historical performance and future estimated results in its evaluation of
potential impairment and then compares the carrying amount of the asset to the
future estimated cash flows expected to result from the use of the asset. If the
carrying amount of the asset exceeds estimated expected undiscounted future cash
flows, the Company measures the amount of impairment by comparing the carrying
amount of the asset to its fair value. The estimation of fair value is generally
measured by discounting expected future cash flows as the rate the Company
utilizes to evaluate potential investments. The Company estimates fair value
based on the information available in making the necessary estimates, judgments
and projections. There was no impairment of long-lived assets since our
acquisition of the assets from Peak.

Income taxes

The Company accounts for income taxes using an asset and
liability approach which allows for the recognition and measurement of deferred
tax assets based upon the likelihood of realization of tax benefits in future
years. Under the asset and liability approach, deferred taxes are provided for
the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes. A valuation allowance is provided for deferred tax assets
if it is more likely than not these items will either expire before the Company
is able to realize their benefits, or that future deductibility is
uncertain.

The Company records a valuation allowance for deferred tax
assets, if any, based on its estimates of its future taxable income as well as
its tax planning strategies when it is more likely than not that a portion or
all of its deferred tax assets will not be realized. If the Company is able to
utilize more of its deferred tax assets than the net amount previously recorded
when unanticipated events occur, an adjustment to deferred tax assets would
increase the Companys net income when those events occur.

20

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Non-Cash Expense Items

During the three months ended June 30, 2011, there were
transactions and events resulting in non-cash expenses that affected our net
income.

The following tables summarize the non-cash expense items,
total amount and percentage of our net loss for the six months ended June 30,
2011 and 2010:

Six Months EndedMarch
        31,2011
      
      
      2010Cash and non cash items in net lossCash
      $
      20,237
      
      $
      70,831Non cash
      
      (160,747
      )
      
      (842,885
      )Net loss
      
      (140,510
      )
      
      (772,054
      )Summary of non cash itemsDebenture valuation
        adjustment
      
      -
      
      
      61,316Reversal on debenture valuation
        adjustment
      
      -
      
      
      63,835Reversal on liquidated
        damages
      
      -
      
      
      (695,094
      )Beneficial conversion costs
      
      -
      
      
      (44,190
      )Interest Expense
      
      (56,659
      )
      
      (105,378
      )Depreciation
      
      (104,088
      )
      
      (123,374
      )Total Non-Cash Items
      $
      (160,747
      )
      $
      (842,885
      )Percentage of Net Loss
      
      114%
      
      
      109%


21

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ITEM
3.           QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to smaller reporting companies.

ITEM
4.           CONTROLS AND
PROCEDURES

Disclosure Controls and Procedures.

As required by Rule 13a-15 under the Securities Exchange Act of
1934 (the Exchange Act), we carried out an evaluation of the effectiveness of
the design and operation of our disclosure controls and procedures, as of the
end of the period covered by this report on Form 10-Q. This evaluation was
carried out under the supervision and with the participation of our management,
including our President and Chief Executive Officer and our interim Chief
Financial Officer. Based upon that evaluation, management concluded that our
disclosure controls and procedures are effective to ensure that information
required to be disclosed in the reports that we file or submit under the
Exchange Act is accumulated and communicated to management (including the chief
executive officer and chief financial officer) to allow timely decisions
regarding required disclosure and that our disclosure controls and procedures
are effective to give reasonable assurance that the information required to be
disclosed by us in reports that we file under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the Securities and Exchange Commission.

Changes in Internal Control Over Financial Reporting

During the last fiscal quarter, there were no changes in our
internal control over financial reporting identified in connection with the
evaluation performed that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

22

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PART II. OTHER INFORMATION

ITEM
1.           LEGAL
PROCEEDINGS.

The information relating to legal proceedings contained in Note
8(c) to the Financial Statements included in Part I, Item 1 of this Quarterly
Report on Form 10-Q is incorporated herein by reference.

ITEM
3.           DEFAULTS
UPON SENIOR SECURITIES.

The amended 8% Convertible Debentures with a principal balance
of $1,420,000 became due on April 11, 2011 and, as of the date of this report,
the Company is in payment default on this obligation. Management has commenced
negotiations with the holders of these debentures. The effects of unsuccessful
negotiations or the impact on the Companys financial position and results of
operations have not been determined.

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.

23

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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:     August 15, 2011

CYBRA CORPORATION

| | By: | /s/ Harold Brand                            
| | --- | --------------------------------------------
| |     | Name:   Harold Brand                        
| |     | Title:    
      Chief Executive Officer and
| |     | Interim Chief Financial Officer             

24

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