Interim Report 2001 Jan-Sept

Interim Report for January-September 2001 Effnet focuses according to plan · Net sales during the nine-month period increased to KSEK 8 018 (4 029). · The operating result improved to KSEK -85 830 (-98 961) and the company posted a result after financial items of KSEK -78 606 (-83 026). · The average negative cash flow per month declined significantly in the third quarter compared to the first quarter 2001, decreasing by 28% from KSEK -9 174 to KSEK -6 627. · Liquid assets amounted to KSEK 201 259 at close of the period, equivalent to SEK 3.66 per share. · The number of employees totaled 63 (87) at the close of the period, a decrease of 24 compared to one year earlier. · Effnet increased its focus on completing products for Header Compression (HC) for the wireless network, mobile Internet and IP telephony markets. · The program for increased organizational efficiency introduced in the second quarter proceeded. The effects of the actions taken are despite some lump-sum costs a significantly decreasing burn-rate and a lower general cost level during the third quarter. Events after the end of the period · Norman Rasmussen stepped down as Chairman of the Board of Directors. Magnus Ryde, an Effnet board member since November 2000, was elected interim Chairman until the next shareholders' meeting. · Wkit Security AB announced that the new version of their copy protection software, Don't Bother Burn, DBB 3.0 for CD-ROM, is ready for commercial use. The company will now focus on selling the software to computer game and CD manufacturers. · Effnet decided to phase-out the IT securities services function currently offered from Wkit Security AB in Håverud, Dalsland. This measure is estimated to reduce Effnet's costs by SEK 8.4 million on an annual basis. Effnet innovates and licenses award-winning key technologies that resolve data speed, efficiency and security challenges in Internet Protocol (IP) networking and IT security. Effnet focuses on software development in Robust Header Compression (ROHC), a technology viewed as becoming essential for providers of IP-based wireless networks. Effnet's wholly owned subsidiary, Wkit Security, develops copy protection software. The Effnet group employs approx. 60 persons. Effnet Group AB shares are traded on Sweden's Nya Marknaden (symbol: EFFN). Read more about Effnet at www.effnet.com. Read about Wkit at www.wkit.com. THIRD QUARTER 2001 The Market The market slowdown encountered by the telecom sector and many network market participants continued through the third quarter. Customers postpone decisions around larger license deals even if the interest in the technology is great. However, the demand for improved accessibility is still expected to spark a growing need for wireless, mobile Internet Operations The hesitant and expectant atmosphere in the marketplace has affected Effnet`s ability to close deals. In spite of the sluggish market, Effnet has not pulled back on its product development and completion efforts, and it continues to approach prospective buyers. This tenacity will provide Effnet a strong position when the market turns. Focus on Header Compression (HC) In accordance with the program introduced at the end of the second quarter, Effnet has continued focusing resources on the development of its Header Compression solutions. Effnet believes Robust Header Compression (RoHC) will be essential for vendors producing an all-IP wireless community. Interoperability testing that ended at the beginning of the third quarter resulted in the successful verification of functionality between different vendors with completed RoHC implementations. Siemens, Nokia, Ericsson and Effnet participated in the testing. Effnet was the only independent vendor that participated in the test that today is selling its RoHC solution to other manufactures. During the next few months, Effnet will launch a number of new HC (Header Compression) products for wireless as well as wired IP telephony in the frontline of HC- technology. These products will be highly competitive alternatives to in-house development for any company in the network and communications infrastructure industries. Cost-cutting program The cost-cutting and efficiency program launched at the end of the second quarter has resulted in a significantly reduced burn-rate as well as increased focus and more effective utilization of the company resources. The negative cash flow per month in the third quarter was 28% lower than in the first quarter 2001. Cash flow per month each quarter 2001(KSEK) 1st quarter 2001 - 9 174 2nd quarter 2001 - 8 775 3rd quarter 2001 - 6 627 The lower cost base and improved cash flow combined with an increased efficiency and productivity in the organization will put the company in a strong position when the market turns. The Effnet organization Effnet has significantly reduced the number of employees compared to the same period last year. Over a period of one year the number of employees has decreased from 87 to 63. Norman Rasmussen, Chairman of the Board of Directors, stepped down shortly after the end of the quarter. Mr. Rasmussen will remain as a member of the board, where he has served since November 1998. Magnus Ryde, an Effnet board member since November 2000, was elected interim Chairman until the next shareholders' meeting Wkit Security AB A new version of the CD copy protection software Don't Bother Burn, DBB version 3.0, was finalized during the third quarter and launched on November 7. A number of manufacturers have evaluated and shown considerable interest in DBB 3.0 and Wkit will begin marketing and selling the product immediately. Effnet intends to phase-out the IT securities services function currently offered from Wkit Security AB in Håverud, Dalsland and focus on marketing and sales of DBB from Effnet´s Stockholm office. The measure is estimated to reduce costs by SEK 8.4 million per year and have a very limited impact on revenues. The closure of operations in Håverud may cause a need for write-offs during fourth quarter 2001. The write-off amount is estimated to approx. SEK 3 million. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/11/12/20011112BIT00760/bit0001.doc The full report http://www.waymaker.net/bitonline/2001/11/12/20011112BIT00760/bit0001.pdf The full report

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