Interim Report for the Period January 1, 2000 - March, 31 2000

Interim Report for the Period January 1, 2000 - March, 31 2000 Highlights in the First Quarter * Revenues increase with 214% to MSEK 20.9 * Customer base expanded 71,000, 545% in a year * Franco Fedeli appointed to the Board * Launch of new profile * Biggest marketing campaign in company history initiated * The Expert chain becomes new distributor of Glocalnet's services * Two new issues totaling MSEK 160 completed * Glocalnet's share was listed on Nya Marknaden After the end of the period * Customer inflow accelerates and customer base passes 80,000 * Glocalnet announces intention to apply for UMTS license In January, the influx of customers continued as a result of Glocalnet's independent campaigns during the fourth quarter of 1999. A new issue of 500,000 class B shares at a subscription price of SEK 160 was also completed, raising a total of MSEK 80.0. The Board resolved to seek quotation of the company's shares on OM Stockholm Exchange's O-list in the second or third quarter of 2000. In February, the price on calls within Sweden was reduced to SEK 0.09/minute at weekends and evenings and SEK 0.19/minute during daytime. The Extraordinary General Meeting appointed Franco Fedeli to the Board. Another new issue totaling MSEK 80.6 was completed within the framework of the authorization provided by the Annual General Meeting on April 20, 1999. 212,000 class B shares were issued at SEK 380 per share. In March, Glocalnet's share was listed on the market place Nya Marknaden as a step in the process towards a market listing. Nya Marknaden is included in the stock exchange's trading system and allows the market to trade and monitor the share more easily. A new profile was launched in the biggest marketing campaign in the company's history. The campaign, encompassing TV, the evening papers, direct marketing and telemarketing elements, is intended to raise brand awareness and establish Glocalnet's price advantage, thereby attracting new customers. A new collaboration agreement was signed with the Expert chain, implying that Glocalnet's services are now sold in all of Expert's 225 stores around Sweden. After the end of the period, Glocalnet announced that the company intends to apply for a UMTS license. This will occur independently or in collaboration with one or several other players. The customer inflow accelerated during April and the customer base reached 80,000 as a result of the ongoing campaigns. The Annual General Meeting on April 18 resolved to effect a 10:1 share split in accordance with the Board's proposal and authorized the Board to complete new issues in connection with listing on OM Stockholm Exchange's O-list and acquisitions. A decision was also reached to undertake an options plan encompassing subordinated debentures with 400,000 immediately detachable warrants. Sales and revenue (Figures in brackets relate to Q1 1999) Glocalnet's consolidated sales including other operating revenue amounted to KSEK 20,9360 (6,676) for the first three months of the year, which is an increase of 214% compared to the same period last year. Consolidated traffic revenue amounted to KSEK 20,573 (6,572). The pronounced customer base growth following Sweden's pre-selection reform last year has now resulted in increased revenue. However, the recently launched marketing campaign has not affected first-quarter revenue to any significant extent as the related new customers were registered at the end of March. Accordingly, the increased customer base and ensuing growth in traffic volume will continue to have a positive impact on revenue and earnings in forthcoming periods. Network expenses and margins Network expenses were KSEK 15,449 (6,678) for the three-month period, largely comprising variable costs. Gross margin for the period amounted to 26%, which is a clear improvement from the zero margin for the first quarter last year and also compared to the 20% for 1999. Rising volumes and sustained continuous tendering for terminating traffic with the company's suppliers is expected to allow the continued reduction of expenses with retained good margins. Operating expenses and earnings Total operating expenses including depreciation amounted to KSEK 28,682 (10,582) for the period. External expenses for marketing campaigns, customer care, consultants and other administrative expenses amounted to KSEK 16,917 (3,600), of which the majority are costs for marketing. The total external expenses corresponds to 59% of the total operating expenses. Personnel expenses were KSEK 8,351 (5,523) and have increased in line with the recruitment currently underway. Depreciation amounted to KSEK 2,344 (1,311). Operating expenses increased by 11% on the preceding quarter. Operating earnings amounted to KSEK -23,195 (-10,584) for the period. Earnings declined by 7% compared to the preceding quarter. Earnings after financial items were KSEK -23,109 (-10,311) as a result of positive net interest income of KSEK 86. Assets and liabilities Total assets at the end of period were KSEK 206,161 (33,279), comprising fixed assets of KSEK 22,591 (11,653), current receivables of KSEK 23,611 (10,911,000) and cash balances of KSEK 159,959 (10,714). Shareholders' equity was KSEK 157,220 (17,778), long-term liabilities KSEK 9,984 (1,042) and current liabilities KSEK 38,957 (14,459). Investments in fixed assets Investments in fixed assets amounted to KSEK 4,094 (2,105) for the period, of which leasing totaled KSEK 491 comprising equipment and software relating to an internal reporting tool plus an initial partial project relating to the development of Web-based support for customer care via the Internet. Cash flow Cash flow before financing amounted to KSEK -19,100 (-12,947) for the period and was primarily derived from operating earnings and investments in fixed assets. Two new issues were completed during the period, raising KSEK 160,560. Furthermore, a limited number of outstanding warrants were exercised, raising KSEK 900. Financial position Bank assets were KSEK 159,959 at the end of the period. These include the proceeds from the new issues completed in the period. Forthcoming reports The company intends to publish its interim report for the second quarter on August 14, 2000. The interim report for the third quarter is scheduled for November 6, 2000. Market position and outlook Glocalnet is maintaining its robust expansion; customer inflows have now resulted in a customer base of 80,000 and this number is accelerating. Traffic volumes are continuing to rise in line with growing customer numbers and now amount to approximately 17 million minutes monthly. In future, the key objective will remain increasing the customer base and further marketing initiatives are being planned. In order to achieve this objective, Glocalnet has signed an agreement with the Expert chain relating to sales of Glocalnet's services in its stores nationwide. No larger customer acquisition activities have been carried out with Birka Energi within the framework of the two-year co-operation agreement that runs up until and including September 2000. In order to increase brand awareness and raise Glocalnet's profile as an operator that is on the consumer's side, the company has developed a new graphical profile, which was launched in March and is set to enhance the current and future campaigns targeted on selected market segments. The new profile, our knowledge of the market and the Expert chain as a new distributor means that Glocalnet is in a stronger position than ever ahead of future campaigns. The pilot study in collaboration with Bredbandsbolaget is now ongoing. Further steps will be decided based on this study. Glocalnet's services development initiatives are continuing; new services are set to boost revenue, improve margins and enable further price reductions that will generate value for our customers. Several pre-studies are underway in order to ascertain the need and potential for new service launches. The concepts for the new services are developed in cooperation with our strategic partners Cisco Systems and Portal Software. Glocalnet's strategic partners provide key competencies and extensive resources in upcoming strategic projects. A key part of services development is the ability to offer mobile services. Glocalnet intends to apply for a UMTS license in order to speed up progress towards a more open and competitive market. This will occur independently or in collaboration with strong partners and is intended to create the right market prospects for purchasing capacity from network operators that Glocalnet owns, wholly or partly. The work relating to planning and implementing an international launch of Glocalnet's services is in full swing. Studies have provided information regarding markets while discussions with potential distributors and partners are underway ahead of a decision to effect an establishment. The ambition is to be able to present an offering in one new country during 2000. This will imply investments in marketing and increasing the capacity of services while it will also mean that the infrastructure that is established in the form of organizational resources, processes and technical equipment can be scaled up and utilized to an increased extent on more markets. Glocalnet's current growth demonstrates that the company's business concept works. With strong strategic partners, a new graphic profile and an additional distributor, Glocalnet will now be able to pursue new marketing campaigns, further service development projects, as well as establishing the concept on new markets. This means that growth continues. Management is also reviewing acquisition opportunities in order to increase growth further. All intended to take us further in our vision of becoming a leading provider of IP-based communication services in Northern Europe. Stockholm, Sweden, May 8, 2000 Stefan Krook Chief Executive Officer Glocalnet develops and produces communication services sold direct to end- customers or alongside marketing partners. Glocalnet intends to become Sweden's third largest fixed private telephony player this year. The company's vision is to become a leading northern European operator within Internet-based services. Glocalnet has strategic collaborations with players such as Cisco Systems and Portal Software. Glocalnet is headquartered in Stockholm, Sweden; the Glocalnet share is quoted on Nya Marknaden. For more information, please contact: Mikael Hedlöf Stefan Krook Executive Vice President and CFO CEO Glocalnet AB Box 6896 Västmannagatan 44 A 113 86 Stockholm Sweden Tel: +46 (0)8 566 34 100 Fax: +46 (0)8 566 34 141 E-mail: info@glocalnet.com Website: www.glocalnet.com - ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/05/08/20000508BIT01290/bit0001.doc Full report http://www.bit.se/bitonline/2000/05/08/20000508BIT01290/bit0002.pdf Full report