Interim Report for January-March 2000

Interim Report for January-March 2000 · Net sales totalled SEK 1 940 k ( 263 k). · An operating deficit of SEK - 20 180 k ( - 9 901 k) was recorded. · A deficit of SEK - 15 753 k ( - 10 048 k) after financial items was reported. · The company had 58 employees during the period, an increase of 18. · Effnet has signed a licensing agreement with a leading independent chip developer for Effnet's award-winning routing technology. · Effnet has signed a letter of intent for the acquisition of Wkit Online AB, a data security company. · In January 2000, Effnet opened a new office in Mountain View, California. With this, Effnet has offices in the two most attractive regions in the USA for IT and network technology - the Boston area and California. · In January 2000, Effnet received a notification of allowance from the Swedish Patent and Registration Office to the final version of a patent application for its first-generation firewall technology. This indicates that a national patent for Sweden will be granted shortly. · Effnet will be the main supplier of firewalls to Figuration AB, in its expansion of the broadband networks in Sweden. The agreement also covers collaboration in defining and evaluating new technical solutions and new products for the new broadband market. The founders and personnel of Figuration AB have been involved in the design, building, commissioning and maintenance of the new generation of broadband networks. This recently established company has leading-edge expertise in voice, telecommunication, data communications and network technologies. Figuration AB's customers include Framfab and Bred bandsbolaget. · Effnet develops, markets sells and distributes network products and network technologies designed to resolve bottlenecks in communications via the Internet, thereby creating maximum benefit to the customer. Effnet markets its technology in three ways: in the form of own-brand products, via OEM agreements and through licensing agreements to other operators in the network sector. During 1999, Effnet evolved from a specialist development company into a commercial operator in the network market. The Company is now entering a phase where marketing and sales are at the centre of focus. Effnet's long-term goal is to become one of the leading world players in solving current and future bottlenecks in Internet communications. Today, Effnet operates in four locations: Stockholm, Luleå, Boston and Mountain View, California. Shares in Effnet Group AB are quoted on the "New Market" List of the Stockholm Stock Exchange. To find out more about Effnet, please visit our Web site at: http://www.effnet.com/ The network market In 2001, sales in the global network market are expected to be at least SEK 500 billion, according to the firm of analysts Forrester Research. Over the next few years, electronic commerce, mobile Internet and expansion in broadband will drive up the rate of increase in the number of users and the volume of information on the Internet. As this expansion progresses, new bottlenecks will be discovered, ones that will be very difficult to resolve using traditional technology. These bottlenecks identify Effnet's opportunities for business. Furthermore, security aspects will become ever more important, along with maintaining and improving performance levels. There are no existing solutions on the market today, apart from Effnet's, which are capable of introducing security without sacrificing performance. At a pace with the rapid expansion of broadband and mobile Internet taking place, the Company's technology will become even more competitive. Effnet has chosen to look on other operators in the network and security market as potential partners, and not competitors. Effnet markets its technology in three ways: as own-brand products, under OEM agreements and via licensing. During the first quarter of this year, the Company signed its first licensing agreement with a leading independent developer of chips. As a result, Effnet's award-winning technology will be found as part of chips being developed for the network industry. The Company is currently negotiating with several potential licensees with the aim of signing at least another three agreements during the course of this year. Two steps are normally involved in a licensing agreement. The first involves adapting Effnet's technology to the customer's specific product before it is launched on the market. The second step, which takes place after the adaptations have been tested and accepted, involves the implementation in the finished product. Effnet normally charges for this integration work and then receives payment in the form of licensing fees, one fixed part and one fixed fee per unit sold to customers or a percentage of each unit sold to customers. As part of the process of strengthening Effnet's focus on security, the Company has acquired the data security company Wkit Online AB. This acquisition will strengthen Effnet on three fronts: by providing an increased customer base, a broader product portfolio, and access to some of the world's most demanding clients for the development of their own technology and their own products. First quarter 2000 Effnet's net sales during the period totalled SEK 1 940 k, which is an increase of 78 % compared with the fourth quarter of 1999. Within the European market, there has been a strengthening of the direct sales organisation, with a particular focus on OEM (Original Equipment Manufacturers) agreements and licensing. During the period, Effnet was chosen as the main supplier of firewalls to Figuration AB for that company's development of broadband networks in Sweden. The agreement also covers collaboration in defining and evaluating new technical solutions and new products for the new broadband market. In the North American market, the Company during the first quarter accelerated commercial discussions with potential licensees for its technology. These discussions have resulted in Effnet's first licensing agreement within the Technology Partner Program (TPP). The customer is a leading independent developer of chips. Financial result The Group reports an operating deficit of SEK - 20 180 k ( - 9 901 k ). The Group's result after financial items was a deficit of SEK - 15 753 k ( - 10 048 k). The strengthening of the sales and marketing organisation in Europe and North America continued according to plan during the first quarter. Selling and marketing expenses amounted to SEK 8 264 k ( 2 504 k). The costs of product and technology development, reported on a current basis, amounted to SEK 6 031 k ( 6 819 k ). The further development of Effnet's technology platform is advancing, but with an increased focus on data security. Administrative expenses have risen steeply compared with the same period last year. The change very much reflects the build-up of the finance organisation. Financial position Effnet's equity-to-assets ratio at 31 March 2000 was 97.6 % (77.1 %). Liquid assets, including current investments, totalled SEK 369 629 k ( 75 477 k ). Capital expenditure Capital expenditure during the period totalled SEK 1 164 k ( 227 k ) and consisted mainly of expenditure on computer equipment. Personnel The number of employees at the close of the period totalled 58 (40). The average number of full time employees at the close of the period totalled 48 (33), including 5 (1) in the USA. Events after the close of the period · Effnet has announced an increased focusing on IP version 6 and mobile security. Effnet's technical platform with its patented algorithms for effective and secure Internet communication will be expanded with specific solutions for mobile and wireless communications. · The acquisition of Wkit Online AB has been finalised. The final purchase price is 330,000 new shares in Effnet. Wkit's business is based on data security-related services and products. The company has 17 employees in two divisions, one for service and one for programs. Wkit had total sales of SEK 1.7 million in the financial period 1998/99 (17 months), with a deficit of SEK - 2.1 million after financial items. Wkit anticipates total sales of SEK 30 million for the 2000/2001 financial year. · Effnet/Wkit has signed an agency agreement with Schindler, Parent & Compagnie GmbH. SPCIE is a "full-service" PR and communications company specialising in Corporate Image, Corporate Design and Brand Management with a strong IT focus. SPCIE's customers include Bahlsen, Daimler-Chrysler, SEAT and Diehl. SPCIE has 70 employees. The agency agreement will strengthen Effnet's strategic position on the European market and above all Germany by adding further sales channels for firewalls and security solutions. · At Effnet's Annual General Meeting on 13 April it was resolved inter alia to amend Effnet's Articles of Association, to increase the Company's share capital by means of a bonus issue, to carry out a share split with five new shares for each one old share, and to introduce a programme of share options for the employees and other key persons within the Group. The options programme will involve the right to subscribe for a maximum of 1 500 000 shares (after the split), which is equivalent to a dilution effect of 2.8 %. Financial calendar Interim Report, January - June 17 August 2000 Interim Report, January - September 2 November 2000 This Interim Report has not been audited by the Company's auditor. Stockholm, 4 May 2000 Effnet Group AB (publ) Tomas Althén CEO For further information, please contact: Tomas AlthénTel.: +46-(0)708-15 16 15 CEO Lars LundeborgTel.: +46-(0)708-99 86 03 CFO Consolidated Profit and 2000 1999 1999 Loss Account (Summary) (SEK '000) January - January - January - March March December Net sales 1 940 263 2 272 Cost of goods sold - 496 - 53 - 714 Gross profit 1 444 210 1 558 Selling expenses - 8 264 - 2 504 - 23 395 Administrative expenses - 7 386 - 789 - 8 944 Research and development - 6 031 - 6 819 - 21 309 costs Other operating 57 0 2 285 income/expenses Operating result - 20 180 - 9 901 - 49 805 Financial items, net 4 427 - 147 1 312 Result after financial - 15 753 - 10 048 - 48 493 items Tax 0 0 93 Minority interest in result 0 0 11 for the period Result for the period - 15 753 - 10 048 - 48 389 Consolidated 2000 1999 1999 Balance Sheet (Summary) (SEK '000) 31 March 31 March 31 December Assets Fixed assets 2 737 919 1 798 Current assets 378 690 78 564 392 393 Total assets 381 427 79 483 394 191 Shareholders' equity & liabilities Shareholders' equity 372 178 61 304 385 922 Minority interest 0 0 58 Provisions 95 95 95 Current liabilities 9 154 18 084 8 116 Total shareholders' equity & 381 427 79 483 394 191 liabilities Consolidated Cash Flow Statement 2000 1999 1999 (SEK '000) January - January - January - March March December Cash flow from day-to-day - 15 544 - 9 932 - 48 191 operations Changes in working capital - 2 446 14 894 2 645 Investments - 1 164 - 227 - 1 170 Financing 1 804 65 054 428 037 Change in liquid assets - 17 350 69 789 381 321 Per-share data (adjusted to reflect new share 2000 1999 issues) Amounts in SEK 31 March 31 December Number of shares at close of period 10 410 905 10 410 905 Average number of shares 10 410 905 8 419 274 Earnings per share - 1.51 - 5.75 Earnings per share after full dilution - 1.43 - 5.38 Shareholders' equity per share 35.75 45.84 Shareholders' equity per share after full 33.88 42.91 dilution ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2000/05/04/20010815BIT00210/bit0001.doc http://www.waymaker.net/bitonline/2000/05/04/20010815BIT00210/bit0001.pdf