Product Line or Service

Hyperon is a full-service security solutions firm with special emphasis on E-commerce and E-banking security. Today, we are expanding our business by developing a proprietary intrusion detection technology called HUNTR, for use in a managed intrusion detection service offering. Intrusion detection is rapidly becoming a necessary component of every company’s Internet infrastructure. This offering takes the ASP model of service delivery to another level by integrating specific on-site Internet infrastructure components for our customers with a high-performance response center. HUNTR is the Internet equivalent of a burglar alarm and alarm monitoring service for corporate computer networks.

Using a special sensor at the customer site, connected to a server at our central facility, Hyperon provides reliable security monitoring and rapid response to incidents. This technology replaces the costly and rapidly obsolete products used for intrusion detection today with a constantly updated service that requires no security expertise in the customer organization. By eliminating the need to hire and train specialists, we can simplify administration and improve overall security. We anticipate that many of our clients will want to expand the relationship to include managed firewalls and related security services.

As we meet demand in the undeveloped market for intrusion detection products, Hyperon can establish service agreements with a wide variety of clients and create relationships that could ultimately lead to our role as the trusted supplier of all security components in the organization. Our goal is to become the trusted human portal for all security products and services that enter the client domain. We have designed our service to yield a significant net return at less risk than traditional product development efforts.

Technology and Proprietary Rights

Hyperon bases this service offering on over 10 years experience in the field of intrusion detection. Two members of the Hyperon team have previously developed intrusion detection systems and Hyperon has actively managed intrusion detection for clients for more than one year. Hyperon’s client-side sensor technology is currently in beta testing and the server will go into beta by July 10th. Hyperon anticipates a September rollout date for the service.

Hyperon is processing trademark applications for the HUNTR name and patent applications for the underlying technology. Although Hyperon has shortened development time by using open source components, we have carefully separated our proprietary technology to protect intellectual advantage in this competitive market. Since Hyperon delivers and services components directly, there is no need for user access to our sensor or server technology. Subsequently, we are including stringent controls to prevent reverse engineering of our code and algorithms.

Market Opportunities

Nearly every public company in the world requires some type of Internet connection. Most of those companies will require intrusion detection systems during the next 4 years. IDC projects a market demand for intrusion detection of more than $1 billion by 2003. Since no company currently has more than 5% market share in the managed IDS space, we anticipate a wide-open opportunity for our service.

We understand the Fortune 200 will probably not be interested in using a managed service. They are more likely to use a product and hire staff to support it. But we intend to market to the broad segment of mid and small cap companies who are unwilling or unable to hire special expertise to support intrusion detection. Since our service requires no installation or maintenance expertise at the customer site, we can offer this service to any company with an in-house Internet connection.

In order to reach the broad market, we are partnering with a major security firm to brand the service and provide infrastructure support. This partnership should establish instant credibility with clients and allow us to focus on the technology aspects of our service. It will also allow us to scale beyond the competition for a lower overall cost per customer.

Marketing Sales Distribution

We have directed our marketing and sales efforts at generating recurring fee income from a loyal customer base. Our partnership arrangement is expected to provide significant brand recognition in the market and we anticipate that customer service will become a key factor in retention. We intend to augment traditional marketing efforts with specific initiatives in the financial services vertical, where we have existing relationships. We intend to rely on direct sales initially, leveraging our existing consulting and professional relationships. Two current clients have agreed to install the service and act as reference accounts. We are also evaluating a channel marketing alternative for the service. We anticipate that more than 100 companies could qualify for our channel partnership program.

Once the service is established in the US we will evaluate opportunities for expansion in Latin America through our Mexican subsidiary, Hyperon Latinoamericana. We recognize the potential for cross-selling this service through our existing consulting operation and vice-versa.Manufacturing and Support

The service offering works with off-the-shelf components. We have identified two suppliers for these components and are negotiating volume discounts. Using this hardware, we can create a sensor in approximately 2 hours. Our service is priced to include a 2-day installation at a customer site, using trained technicians from Hyperon. We will be integrating other components at our service facility during July 2000.

The highest cost element of any managed service is the response center. We are partnering with an established security firm to leverage that aspect of their business in this space. We believe that this relationship will significantly reduce the up-front investment required to make our service viable.

Competition

Companies have been marketing intrusion detection products for several years. Currently, the cost to implement intrusion detection is prohibitive for most organizations. In response to the need for simple and low-cost intrusion detection, a variety of companies are beginning to offer managed services. Players like Counterpane and Pilot Network Services and ISS have announced service offerings this year and most of the major players in this space are expected to begin offering services by the end of 2000.

Hyperon is uniquely positioned to compete in this space because of our extensive experience with intrusion detection and our knowledge of the traditional burglar alarm monitoring industry. One of Hyperon’s employees led a project to build the first intrusion detection system used at NASA. Our understanding of the technology has allowed us to avoid the early pitfalls experienced by other providers. Our partnership agreement should reduce our cost structure and increase our recognition in the marketplace. Our evaluation of the competition indicates that we can compete effectively on price while exceeding the scaling capacity of any competitor in the market.