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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

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

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000

                                       OR

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

                 For the transition period ________ to _________

                           COMMISSION FILE NO. 0-25677

                 CYBERNET INTERNET SERVICES INTERNATIONAL, INC.

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                   DELAWARE                             51-0384117
        (STATE OR OTHER JURISDICTION OF              (I.R.S. EMPLOYER
         INCORPORATION OR ORGANIZATION)              IDENTIFICATION NO.)

                          STEFAN - GEORGE - RING 19-23
                              81929 MUNICH, GERMANY
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                  49-89-993-150
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                 (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. Yes [X] No [ ]

Number of shares  outstanding of the issuer's class of Common Stock as of
 August 8, 2000: 23,355,663

<PAGE>

                                TABLE OF CONTENTS

                                                                            PAGE

PART I  FINANCIAL INFORMATION .............................................   3
    ITEM 1.  Financial Statements .........................................   3
    ITEM 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations .....................  10
    ITEM 3.  Quantitative and Qualitative Disclosures about Market Risk ...  18

PART II  OTHER INFORMATION ................................................  18
     ITEM 1.  Legal Proceedings ...........................................  18
     ITEM 2.  Changes in Securities and Use of Proceeds ...................  18
     ITEM 3.  Defaults upon Senior Securities .............................  18
     ITEM 4.  Submission of Matters to a Vote of Security Holders .........  18
     ITEM 5.  Other Information ...........................................  18
     ITEM 6.  Exhibits and Reports on Form 8-K ............................  18


                                                                    Page 2 of 19

<PAGE>


PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                 CYBERNET INTERNET SERVICES INTERNATIONAL, INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                December 31,        June 30,
                                                                                     1999              2000
                                                                                ------------        --------
                                                                                         (in thousands)

<S>                                                                               <C>               <C>
 ASSETS
   Cash and cash equivalents....................................................  $ 73,213          $ 53,506
   Short-term investments.......................................................    41,237            15,833
   Accounts receivable-- trade, net of allowance for doubtful accounts of
   $1,192,000 and $1,090,000 at December 31, 1999 and June 30, 2000 respectively
                                                                                     9,162             8,689
   Other receivables............................................................     5,052             7,152
   Restricted investments.......................................................    10,091            20,182
   Prepaid expenses and other assets............................................     2,201             1,297
                                                                                  --------          --------
   Total current assets.........................................................   140,956           106,659

   Property and equipment, net..................................................    28,479            40,150
   Product development costs, net...............................................     3,096             2,485
   Goodwill, net................................................................    26,240            27,369
   Deferred income taxes .......................................................    20,771            26,009
   Restricted investments.......................................................    48,158            27,638
   Other assets.................................................................    20,100            20,343
                                                                                  --------          --------

TOTAL ASSETS....................................................................  $287,800          $250,654
                                                                                  ========          ========

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
     Overdrafts and short-term borrowings.......................................  $    437                35
     Trade accounts payable.....................................................    18,229            10,079
     Other accrued liabilities..................................................    15,144            15,019
     Current portion long term debt and capital lease obligations...............     1,728             1,541
     Accrued personnel costs....................................................     2,694             1,711
                                                                                  --------          --------
          Total current liabilities.............................................    38,232            28,385

     Long-term debt ............................................................   178,372           184,544
     Capital lease obligations..................................................     2,437             3,581
SHAREHOLDERS' EQUITY
   Common stock $.001 par value,  50,000,000 shares  authorized,  20,970,000 and
   23,212,000 shares issued and outstanding at December 31, 1999 and June 30,
   2000 respectively............................................................        21                23
   Preferred stock $.001 par value, 50,000,000 shares authorized, 4,793,000 and
   3,203,000 issued and outstanding December 31, 1999 and June 30, 2000
   respectively.................................................................         4                 3
     Additional paid in capital.................................................   134,951           140,540
     Accumulated deficit........................................................   (57,971)          (97,425)
     Other comprehensive income (loss)..........................................    (8,246)           (8,997)
                                                                                  --------          --------
     Total shareholders' equity.................................................    68,759            34,144
                                                                                  --------          --------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY......................................  $287,800          $250,654
                                                                                  ========          ========
</TABLE>

           See accompanying notes to consolidated financial statements


                                                                    Page 3 of 19

<PAGE>


                 CYBERNET INTERNET SERVICES INTERNATIONAL, INC.

             CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                        Three months ended June 30,   Six months ended June 30,
                                                           1999           2000           1999         2000
                                                           ----           ----           ----         ----
                                                                 (in thousands, except per share data)
<S>                                                      <C>           <C>            <C>            <C>
Revenue
     Internet Projects.................................  $ 1,067       $  1,292       $  2,459       $  1,928
     Network Services..................................    3,532          7,461          5,994         13,883
                                                         -------       --------       --------       --------
Total revenues.........................................    4,599          8,753          8,453         15,811

Cost of revenues:
     Internet Projects.................................      977          1,272          2,056          1,966
     Network Services..................................    3,564          5,228          6,534         11,602
     Depreciation and amortization.....................    1,131            909          1,545          1,976
                                                         -------       --------       --------       --------
Total cost of revenues.................................    5,672          7,409         10,135         15,544

Gross margin (loss)....................................   (1,073)         1,344         (1,682)           267

    General and administrative expenses................    2,314          5,068          3,770         11,785
    Sales and marketing expenses.......................    3,340          3,528          5,147          6,434
    Research and development...........................      883            626          2,146            803
    Depreciation and amortization......................      387          3,619          1,228          6,781
                                                         -------       --------       --------       --------
Total operating expenses                                   6,924         12,841         12,291         25,803
Operating loss.........................................   (7,997)       (11,497)       (13,973)       (25,536)
Interest expense.......................................       53          9,328             64         18,187
Interest income........................................      123          1,870            383          3,194
Foreign currency gains (losses)........................       --           (155)            --         (5,065)
                                                         -------       --------       --------       --------
Loss before taxes and minority interest................   (7,927)       (19,110)       (13,654)       (45,594)
Income tax benefit.....................................    3,143          3,212          5,302          6,139
                                                         -------       --------       --------       --------
Net loss before minority interest......................   (4,784)       (15,898)        (8,352)       (39,455)
Minority interest......................................      103             --            103             --
                                                         -------       --------       --------       --------
Net loss..............................................   $(4,681)      $(15,898)      $ (8,249)      $(39,455)
                                                         =======       ========       ========       ========
Basic and diluted loss per share.......................    (0.25)         (0.68)         (0.44)         (1.69)
                                                         =======       ========       ========       ========
Number of shares used to compute earnings per share ...   18,762         23,472         18,918         23,287
                                                         =======       ========       ========       ========
</TABLE>

           See accompanying notes to consolidated financial statements


                                                                    Page 4 of 19

<PAGE>


                 CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                           For six months ended June 30,
                                                                               1999            2000
                                                                               ----            ----
                                                                                (in thousands)
<S>                                                                           <C>            <C>
 Cash Flows from Operating Activities:
 Net loss...............................................................      $ (8,249)      $(39,454)

 Adjustments to reconcile net loss to net cash used by operations:
     Deferred tax credit................................................        (5,309)        (6,282)
     Depreciation and amortization......................................         2,772          8,757
     Provision for losses on accounts receivable........................           651           (102)
     Amortization of Bond discount......................................            --          2,656
     Accreted interest expense on long term debt........................            --          4,815
     FX loss............................................................            --          5,065
 Changes in operating assets and liabilities:
     Trade accounts receivable..........................................        (1,759)            70
     Other receivables..................................................           139         (2,346)
     Other assets.......................................................        (1,250)           (92)
     Prepaid expenses and other current assets..........................          (693)           797
     Trade accounts payable.............................................         1,757         (7,262)
     Other accrued expenses and liabilities.............................           517            613
     Accrued personnel costs............................................            80           (852)
                                                                              --------       --------
          Total changes in operating assets and liabilities                     (1,209)        (9,072)
                                                                              --------       --------
      Net cash used in operating activities.............................       (11,344)       (33,617)
 Cash Flows from Investing Activities:
 Purchase of short term investments.....................................          (403)       (34,153)
 Proceeds from sale of short term investments...........................            --         67,669
 Purchase of property and equipment.....................................        (6,587)       (16,426)
 Product development costs..............................................          (686)          (133)
 Acquisition of businesses, net of cash acquired........................       (24,192)        (1,990)
 Payment of deferred purchase obligations...............................        (4,172)            --
                                                                              --------       --------
      Net cash provided by investing activities.........................       (36,040)        14,967
 Cash Flows from Financing Activities:
 Proceeds from issuance of bonds and other borrowings...................        23,805            780
 Repayment of borrowings................................................            --             --
                                                                              --------       --------
      Net cash provided by financing activities.........................        23,805            780
                                                                              --------       --------
 Translation adjustments................................................        (4,323)        (1,837)
                                                                              --------       --------
 Net (decrease) increase in cash and cash equivalents...................       (27,902)       (19,707)
 Cash and cash equivalents at beginning of period.......................        42,876         73,213
                                                                              --------       --------
 Cash and cash equivalents at end of period.............................      $ 14,974         53,506
                                                                              ========       ========
 Supplemental disclosure of non-cash investing and financing activities:
 Acquisitions (Note 4):
     Fair value of assets acquired .....................................      $ 34,344       $ 11,820
     Less:
          Cash acquired.................................................            73            195
          Cash paid ....................................................        22,850          2,186
          Stock issued..................................................         4,626          5,590
                                                                              --------       --------
     Liabilities assumed ...............................................         6,795          3,847
                                                                              ========       ========
 Stock dividend.........................................................
 Other supplemental cash flow disclosures:
      Cash paid for interest............................................            --         10,091
      Cash paid for taxes...............................................            --             --
      Depreciation......................................................         2,258          4,978
      Amortization......................................................           514          4,779
</TABLE>

           See accompanying notes to consolidated financial statements


                                                                    Page 5 of 19

<PAGE>



                 CYBERNET INTERNET SERVICES INTERNATIONAL, INC.

            NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS


1.  Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance
with generally  accepted  accounting  principles  ("GAAP") for interim financial
information.  Accordingly,  they  do not  include  all of  the  information  and
footnotes required by GAAP for complete financial statements.  In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary  for  a  fair  presentation  of  financial  position  and  results  of
operations have been included.  Operating results for the six months ending June
30, 2000 are not  necessarily  indicative of results to be expected for the year
ended  December 31, 2000.  For further  information,  refer to the  Consolidated
Financial  Statements  and Footnotes  thereto  included in the Company's  annual
report of Form 10-K for the year ended  December  31, 1999.  Certain  prior year
amounts in the  consolidated  financial  statements  have been  reclassified  to
conform to the current year presentation.

2.  Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per
share:

                                                                   June 30,
                                                               1999       2000
                                                               ----       ----
                                                           (in thousands, except
                                                                 per share data)
Numerator:
  Net loss-numerator for basic and diluted loss per share.. $ (8,249)  $(39,455)
Denominator:
  Denominator for basic and diluted loss
    per share -- weighted average shares outstanding.......   18,918     23,287
Basic and diluted loss per share........................... $   (.44)  $  (1.69)


The  denominator  for  diluted  earnings  per  share  excludes  the  convertible
preferred  stock and stock  options  because the  inclusion of these items would
have an anti-dilutive effect.

3.  Segment information

The Company evaluates performance and allocates resources based on the operating
profit of its subsidiaries.  The Company operates in one line of business, which
is providing  international  Internet  backbone and access  services and network
business solutions for corporate  customers.  The Company's  reportable segments
are divided by country since each country's operations are managed and evaluated
separately.   Information  concerning  the  Company's  geographic  locations  is
summarized as follows:

                                                   Six months ended June 30,
                                                      1999          2000
                                                      ----          ----
                                                         (in thousands)
Revenues:
   Germany.................................        $  5,455       $  8,223
   U.S.....................................              --             --
   Italy...................................             976          4,329
   Other...................................           2,022          3,259
                                                   --------       --------
   Total...................................        $  8,453       $ 15,811
                                                   ========       ========
Depreciation and Amortization:
   Germany.................................        $  2,381       $  2,946
   U.S.....................................             127          4,506
   Italy...................................             145            639
   Other...................................             120            667
                                                   --------       --------
   Total...................................        $  2,773       $  8,758
                                                   ========       ========


                                                                    Page 6 of 19

<PAGE>


                                                   Six months ended June 30,
                                                      1999          2000
                                                      ----          ----
                                                         (in thousands)
Interest Expense:
     Germany...............................        $     16       $     81
     U.S...................................               9         17,952
     Italy.................................               7            151
     Other.................................              32              3
                                                   --------       --------
     Total.................................        $     64       $ 18,187
                                                   ========       ========
Interest Income:
     Germany...............................        $     10       $     53
     U.S...................................             373          3,126
     Italy.................................              --              9
     Other.................................              --              6
                                                   --------       --------
     Total.................................        $    383       $  3,194
                                                   ========       ========
Loss before Taxes:
     Germany...............................        $(11,723)      $ (7,581)
     U.S...................................            (597)       (30,986)
     Italy.................................            (765)        (3,458)
     Other.................................            (569)        (3,569)
                                                   --------       --------
     Total.................................        $(13,654)      $(45,594)
                                                   ========       ========
Income tax benefit:
     Germany...............................        $  5,305       $  6,139
     U.S...................................              --             --
     Italy.................................              --             --
     Other.................................               3             --
                                                   --------       --------
     Total.................................        $  5,305       $  6,139
                                                   ========       ========

Total Assets:
     Germany...............................        $ 36,681       $ 75,427
     U.S...................................          50,101        154,509
     Italy.................................           7,537         14,378
     Other.................................           2,467          6,340
                                                   --------       --------
     Total.................................        $ 96,786       $250,654
                                                   ========       ========


4.  Business Acquisitions

Effective April 13, 1999, the Company acquired 51% of the outstanding  shares of
Sunweb  Internet  Services SIS AG  ("Sunweb")  for a total  consideration  of DM
3,103,000  ($1,639,000).  DM 1,807,000 ($954,000) of the purchase price was paid
in cash (in  Swiss  Francs)  with the  remainder  settled  in  exchange  for the
issuance of 25,680 shares of the common stock of the Company. The Stock Purchase
Agreement also contains  provisions for put and call options for the sellers and
buyers, respectively,  for the remaining 49% of the outstanding stock of Sunweb.
The purchase  price per the  agreement  for the  remaining  49% of the shares is
based on a multiple of Sunweb's  net profit or loss  before  taxes.  The put and
call options expire on December 31, 2001. The acquisition has been accounted for
using the purchase method of accounting and as such the  accompanying  financial
statements reflect Sunweb's results of operations from April 13, 1999.  Goodwill
recorded in connection with the acquisition of Sunweb, amounting to DM 2,678,000
($1,414000), is being amortized over 10 years.

Effective June 30, 1999, the Company acquired 100% of the outstanding  shares of
Cybernet Italia S.p.A.(formerly Flashnet S.p.A.) for a total consideration of DM
52,816,000 ($27,890,000).  DM 41,464,000 ($21,896,000) of the purchase price was
paid in cash (in Italian  Lire) with the  remainder  settled in exchange for the
issuance of 301,290 shares of the common stock of the Company.  The  acquisition
has been  accounted for using the purchase  method of accounting and as such the
accompanying  financial  statements  reflect Cybernet Italia's results from June
30, 1999.  Goodwill  recorded in  connection  with the  acquisition  of Cybernet
Italia,  amounting to DM 32,136,000  ($16,970,000),  is being  amortized over 10
years.

Effective October 28 1999, the Company acquired of 51% of the outstanding shares
of Novento  Telecom AG  ("Novento")  and 51% of  Multicall  Telefonmarketing  AG
("Multicall")  for a consideration  of DM 3,178,000  ($2,373,000).  DM 2,002,000
($1,092,000)  of the purchase price was paid in cash with the remainder  settled
in  exchange  for the  issuance  of  39,412  shares of the  common  stock of the
Company.  The  acquisition  has been accounted for using the purchase  method of
accounting and as such the accompanying financial statements


                                                                    Page 7 of 19

<PAGE>


reflect Novento and Multicall's results from October 28, 1999. Goodwill recorded
in  connection  with the  acquisition  of  Novento,  amounting  to DM  1,913,000
($1,043,000) is being amortized over 10 years.

Effective  October  29,  1999 the  Company  acquired  the  remaining  34% of the
outstanding  shares of Eclipse,  in which the Company  already  owned 66% of the
outstanding shares, for a total consideration of DM 4,320,000  ($2,356,000).  DM
707,000  ($386,000)  of the purchase  price was paid in cash with the  remainder
settled by way of the  depositing  of 136,402  shares of the common stock of the
Company  in a pooling  trust  from  which the  shares  will be  released  to the
sellers.  Goodwill  recorded in connection with the acquisition of the remaining
shares in Eclipse,  amounting to DM 3,718,000  ($2,359,000),  is being amortized
over the remaining life of the goodwill  associated  with the acquisition of the
majority  shareholding at the end of 1997.  Under the terms of the agreement the
price was  reviewed  in light of the  subsequent  movement in the share price of
Cybernet. As a consequence of this review an addition 108,390 shares were issued
to the vendors in May 2000.  Goodwill of DM 2,187,000  ($1,036,000) was recorded
in Q2 1999,  and is being  amortized  over the  remaining  life of the  goodwill
associated with the acquisition of the majority shareholding at the end of 1997.

Effective  January  1, 2000,  the  Company  acquired  the  remaining  49% of the
outstanding  shares of Novento  Telecom AG ("Novento")  and the remaining 49% of
Multicall Telefonmarketing AG ("Multicall") (together "Novento"),  businesses in
which  the  Company  already  owned  51%  of  the  outstanding   shares,  for  a
consideration of DM 10,860,000  ($5,582,000).  DM 2,000,000  ($1,028,000)of  the
purchase  price was paid in cash with the remainder  settled in exchange for the
issuance of 543,812 shares of the common stock of the Company. Goodwill recorded
in connection with the acquisition of the remaining shares in Novento, amounting
to DM5,798,000 000 ($2,981,000) is being amortized over 5 years.

Effective April 17, 2000, the Company acquired  Cybernet  S.a.g.l.,  an internet
service provider located in Lugano Switzerland,  for a maximum purchase price of
SFr  500,000  ($304,000)  and  12,000  shares of our  common  stock.  Of the SFr
500,000,  SFr 100,000 will only be paid upon the  achievement of certain revenue
targets  during the period  from  March 1, 2000 to August 31,  2000.  The 12,000
shares of common  stock  will be  released  to the former  owners  only upon the
achievement  of certain  revenue  targets  during the fiscal  year 2000.  Of the
purchase  price SFr  400,000  has been paid in cash.  The  acquisition  has been
accounted  for  using  the  purchase  method  of  accounting  and  as  such  the
accompanying financial statements reflect Cybernet S.a.g.l's results from April,
1999.  Goodwill recorded in connection with the acquisition of Cybernet S.a.g.l,
amounting to DM454,000 ($222,000), is being amortized over 10 years.

Effective June,  2000, the Company acquired the remaining 49% of the outstanding
shares of Sunweb AG, a business  in which the Company  already  owned 51% of the
outstanding  shares, for a consideration of DM 1,887,000  ($917,000).  The whole
purchase  price  was paid in cash.  Goodwill  recorded  in  connection  with the
acquisition  of  the  remaining   shares  in  Sunweb  amounting  to  DM1,887,000
($917,000) is being amortized over 10 years.

The following unaudited pro forma consolidated results of operations for the six
months ended June 30, 1999 and 2000 assume the acquisitions of Sunweb,  Cybernet
Italia, Novento and Multicall had occurred as of January 1, 1999.


                                                                    Page 8 of 19

<PAGE>

                                              Six months ended June 30,
                                                 1999          2000
                                                 ----          ----
                                        (in thousand except per share data)
  Revenue ................................    $ 15,483       $ 15,811
  Net loss ...............................     (11,279)       (39,455)
  Basic and diluted loss per share .......       (0.54)         (1.69)


5.  Subsequent events

The Company  has been  repurchasing  a portion of its 14% Senior  Notes due 2009
(the "Notes"). During July 2000, the Company repurchased $50.3 millions of Notes
at average  prices equal to 44% of the face value of the Notes  repurchased.  As
required  by the terms of the  Notes,  the  Company  has  established  an escrow
account  to provide  for  payment  in full of the first six  scheduled  interest
payments on the Notes.  The amounts  contained in the escrow account are carried
on the Company's balance sheet as "Restricted  investments".  As a result of the
repurchase of Notes in July,  approximately  $13.2 million will be released from
the escrow account and will be available to the Company.  The price of the Notes
repurchased  in July  net of  amounts  released  from  the  escrow  account  was
approximately  $9 million.  The face amount of the Notes  outstanding  after the
July repurchases is approximately $100 million.


                                                                    Page 9 of 19

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

Overview

The  following  table  sets  forth,  for the  periods  indicated,  the  items of
Consolidated  Statements of Loss for the three month and six month periods ended
June  30,  1999 and  2000,  respectively,  expressed  as a  percentage  of total
revenues:

<TABLE>
<CAPTION>
                                               For three months ended    For six months ended
                                                     June 30,                   June 30,
                                                 1999         2000          1999         2000
                                                 ----         ----          ----         ----
<S>                                             <C>          <C>           <C>          <C>
Revenue
     Internet Projects.......................    23.2%        14.8%         29.1%        12.2%
     Network Services........................    76.8%        85.2%         70.9%        87.8%
Total revenues...............................   100.0%       100.0%        100.0%       100.0%

Cost of revenues:
     Internet Projects.......................    21.2%        14.5%         24.3%        12.4%
     Network Services........................    77.5%        59.7%         77.3%        73.4%
     Depreciation and amortization...........    24.6%        10.4%         18.3%        12.5%
Total cost of revenues.......................   123.3%        84.6%        120.0%        98.3%
Gross margin (loss)..........................   (23.3)%       15.4%        (20.0)%        1.7%

     General and administrative expenses.....    50.3%        57.9%         44.6%        74.5%
     Sales and Marketing expenses............    72.6%        40.3%         60.9%        40.7%
     Research and development................    19.2%         7.2%         25.4%         5.1%
     Depreciation and amortization...........     8.4%        41.3%         14.5%        42.9%
Total operating expenses.....................   150.6%       146.7%        145.4%       163.2%
Operating loss...............................  (173.9)%     (131.3)%      (165.3)%     (161.5)%
Interest expense.............................     1.2%       106.6%          0.8%       115.0%
Interest income..............................     2.7%        21.4%          4.5%        20.2%
Realized foreign currency translation losses.     0.0%        (1.8)%         0.0%       (32.0)%
Loss before taxes and minority interest......  (172.4)%     (218.3)%      (161.5)%     (288.4)%
Income tax benefit...........................    68.3%        36.7%         62.7%        38.8%
Net loss before minority interest............  (104.0)%     (181.6)%       (98.8)%     (249.5)%
Minority interest............................     2.2%         0.0%          1.2%         0.0%
Net loss.....................................  (101.8)%     (181.6)%       (97.6)%     (249.5)%
</TABLE>

Results of  operations -- Three Months Ended June 30, 2000 Compared to the Three
Months Ended June 30, 1999

Revenues

Total revenues  increased  90.3% from $4,599,000 in the three months to June 30,
1999 to  $8,753,000  in the  second  quarter of 2000,  primarily  as a result of
increased Network Services  revenues.  Internet Project revenues increased 21.1%
from  $1,067,000 in the second quarter of 1999 to $1,292,000 for the same period
in 2000,  while Network  Services  revenues  increased 111.2% from $3,532,000 to
$7,461,000.  The second quarter Network Services  revenues  represented 76.8% of
total revenues in 1999, as compared with 85.2% in 2000.

The increase in revenues  from Network  Services is mainly a result of expansion
of our customer  base,  which  provides us with a stream of recurring  revenues.
Although we have focused on building  recurring  revenues from Network Services,
building   relations  with  Internet  Project  customers  remains  a  continuing
strategy. In addition, revenues for the three months ended June 30, 1999 reflect
$2,227,000 of Cybernet Italia revenues,  and $1,138,000 of Novento's revenues in
the second  quarter of 2000.  Both of these  companies  were acquired after June
1999.  The  revenues of these  companies  are  derived  primarily  from  Network
Services.  Excluding  the


                                                                   Page 10 of 19

<PAGE>

revenues of these acquisitions, Network Services revenues increased 16.0% in the
second  quarter of 2000 compared with  revenues of the  corresponding  period in
1999, and Internet Projects revenues increased by 21.1%.

From  the  second  quarter  of 1999 to the  second  quarter  of  2000,  the Euro
depreciated  approximately  16.5%  against  the  US  dollar.  As  our  principal
operating  currency is the Euro, the depreciation of the Euro had an unfavorable
impact on our  revenues  which are  reported in US  dollars.  Reported US dollar
revenues increased approximately 90% in the second quarter of 2000 over the same
period in 1999. Had the exchange rate of the Euro remained stable against the US
dollar  during  this  period,  our  US  dollar  revenues  would  have  increased
approximately 115%.

Costs of Revenues

Total costs of revenues increased 30.6% from $5,672,000 in the second quarter of
1999 to  $7,409,000  in the  second  quarter  of  2000.  Cost of  revenues  as a
percentage of revenues  fell from 123.3% in the second  quarter of 1999 to 84.6%
in the  second  quarter  of  2000.  Cost  of  revenues  mainly  consists  of (i)
telecommunications expenses, (ii) technical and operations personnel and related
overhead costs,  (iii) the cost of hardware and software sold, (iv) amortization
of  product  development  costs,  (v)  depreciation  of network  facilities  and
equipment,  and (vi)  consulting  expenses in the area of network  and  software
development.   Telecommunications   expenses   mainly   represent  the  cost  of
transporting  Internet  traffic  from our  customer's  location  through a local
telecommunications  carrier to one of our  access  nodes and the cost of leasing
lines to interconnect  our backbone nodes.  Technical and operational  personnel
included in cost of revenues are those  individuals  involved in the managing of
our  network  and the  providing  services  over  this  network.  We had 64 such
technical and operations  personnel on June 30, 2000 and  approximately  90 such
personnel at June 30, 1999.

The cost of revenues from Internet Projects  increased by 30.2% from $977,000 in
the second quarter of 1999 to $1,272,000 in the second quarter of 2000.  Cost of
Internet  Projects as a percentage of related  revenues  increased from 91.6% in
the second quarter of 1999 to 98.5% in the second quarter of 2000.

The cost of revenues from Network  Services  increased  46.7% from $3,564,000 in
the second  quarter of 1999 to  $5,228,000 in the second  quarter of 2000.  This
increase  primarily resulted from the additional leased line expenses related to
the expansion of our network backbone, additional leased lines to our customer's
premises,  an increase in network  personnel  and  consolidation  of expenses of
companies  acquired in 1999. Cost of Network Services as a percentage of related
revenues  decreased  from  100.9% in the second  quarter of 1999 to 70.1% in the
second  quarter of 2000.  This  decrease is primarily  attributable  to improved
network  utilization  and  heightened  productivity  of personnel in our network
operations.

Depreciation  and amortization  included in the cost of revenues  decreased from
$1,131,000  in the second  quarter of 1999 to $909,000 in the second  quarter of
2000. This decrease reflects a  reclassification  of depreciation from operating
expenses to cost of revenue  which took place in the second  quarter of 1999 and
caused an unusually high charge for that quarter.

General and Administrative Expenses

General and  administrative  expenses  increased  119.0% from  $2,314,000 in the
second quarter of 1999 to $5,068,000 in the second quarter of 2000.  General and
administrative  expenses  consist  principally  of salaries and other  personnel
costs  for our  administrative  staff,  office  rent,  and  external  legal  and
accounting  advisory  costs.  The  increase in our  general  and  administrative
expenses  reflects the costs of building a corporate  infrastructure  to support
our  anticipated  growth and the  addition  of the  general  and  administrative
expenses of the  companies  acquired in the last six months of 1999. We incurred
significant legal,  accounting and other external advisory costs associated with
our financing activities, acquisitions and alliances in the second half of 1999.
As a percentage of revenues,  general and administrative expenses increased from
50.3% in the second quarter of 1999 to 57.9% in the second quarter of 2000.

Within general and administrative expenses are the personnel cost of general and
administrative  personnel and technical staff who are not involved in the day to
day  management of the network.  These  personnel  totaled 71 at the end of June
2000.  The non technical  general and  administrative  personnel  increased from
approximately  59 at the end of June 1999 to 86 at the end of June 2000. Most of
these additions were made to the financial,  human resources,  and IT management
of the operating companies and to the executive management in the


                                                                   Page 11 of 19

<PAGE>

corporate  headquarters.  We made  reductions  in support  functions and related
overhead in the fourth quarter of 1999. These reduced general and administrative
expenses  by 29% in the three  months  ended  March 31,  2000 as compared to the
three months ended December 31, 1999, and a further decrease of 25% in the three
months to June 30,  2000 (see  also the  section  on  comparatives  to  previous
quarters at the end of this MD&A section).

Excluding  the general and  administrative  expenses in the  companies  acquired
since the end of the second quarter of 1999, general and administrative expenses
increased 75% from $2,314,000 in the second quarter of 1999 to $4,090,000 in the
second quarter of 2000.

Sales and Marketing Expenses

Sales and  marketing  expenses  increased by 5.6% from  $3,340,000 in the second
quarter of 1999 to $3,528,000 in the second quarter of 2000. Sales and marketing
expenses  consist  principally  of  salaries  of our sales  force and  marketing
personnel and advertising and  communication  expenditures.  The number of sales
and marketing staff increased from  approximately  88 on June 30, 1999 to 127 on
June 30, 2000.  As a percentage of revenues,  our sales and  marketing  expenses
decreased  from  72.6% in the  second  quarter  of 1999 to  40.3% in the  second
quarter of 2000.

Excluding the sales and marketing  expenses in the companies  acquired since the
end of the second quarter of 1999,  sales and marketing  expenses  decreased 14%
from  $3,340,000  in the  second  quarter  of 1999 to  $2,860,000  in the second
quarter of 2000.

Research and Development

Research and  development  expenses  decreased 29.1% from $883,000 in the second
quarter  of 1999 to  $626,000  in the  second  quarter  of  2000.  Research  and
development expenses consist principally of personnel costs of employees working
on product  development,  consulting  costs and  certain  overhead  items.  As a
percentage of revenues,  research and  development  decreased  from 19.2% in the
second quarter of 1999 to 7.2% in the second quarter of 2000.

Depreciation and Amortization

Depreciation  and  amortization  expenses  increased from $387,000 in the second
quarter of 1999 to  $3,619,000  in the second  quarter  of 2000.  This  increase
reflects increased depreciation of property and equipment purchased to build the
corporate  infrastructure  necessary to support our anticipated  growth,  and in
particular  increased  amortization  of  goodwill  related to our  acquisitions.
Goodwill  represents  the excess of the purchase price of companies we purchased
over the fair  value of the  tangible  assets of those  companies.  Goodwill  is
amortized  over 5 - 10 years.  In addition,  in the second quarter of 1999 there
was a  reclassification  of  depreciation  from  operating  expenses  to cost of
revenue resulting in a lower charge for the quarter under operating expenses.

Interest Income and Expense

Interest  expense  increased  from  $53,000  in the  second  quarter  of 1999 to
$9,331,000  in the second  quarter of 2000 as a result of our  issuance  of debt
securities in the second half of 1999.  Interest income  increased from $123,000
in the second  quarter of 1999 to $1,869,000 in the second  quarter of 2000 as a
result of interest earned on the unutilized proceeds of these offerings.

In the  second  quarter  of 2000 we  incurred  net  foreign  exchange  losses of
$155,000  because our borrowings are denominated in US dollars but our principal
operating  currency  is the Euro.  Such  losses  will  continue if the US dollar
continues to strengthen against the Euro.

Income Taxes

We recorded  income tax benefits of $3,143,000 in the second quarter of 1999 and
$3,212,000 in the second  quarter of 2000,  arising  principally  from operating
losses.  Although we have additional operating losses, a valuation allowance has
been established to reflect the estimated amount of the tax benefit that may not
be realized.  The majority of the operating losses and the associated  valuation
allowance are associated  with  operations  subject to taxation under the German
tax code. Under the current German tax code, these net


                                                                   Page 12 of 19

<PAGE>

operating  losses may be  carried  forward  indefinitely  and used to offset our
future taxable earnings.

Results of operations -- Six Months Ended June 30, 2000
  Compared to the Six Months Ended June 30, 1999

Revenues

Total revenues  increased 87% from $8,453,000 in the six months to June 30, 1999
to  $15,81,000  in the  first  six  months  of 2000,  primarily  as a result  of
increased Network Services  revenues.  Internet Project revenues decreased 21.6%
from  $2,459,000  in the first six  months  of 1999 to  $1,928,000  for the same
period in 2000, while Network Services revenues increased 131.6% from $5,994,000
to $13,883,000. The first six months Network Services revenues represented 70.9%
of total revenues in 1999, as compared with 87.8% in 2000.

The increase in revenues  from Network  Services is mainly a result of expansion
of our customer  base,  which  provides us with a stream of recurring  revenues.
Although we have focused on building  recurring  revenues from Network Services,
building   relations  with  Internet  Project  customers  remains  a  continuing
strategy.  In addition,  revenues for the six months ended June 30, 2000 reflect
$3,361,000 of Cybernet Italia  revenues,  and $2,406,000 of Novento's  revenues.
These  companies were acquired after June 1999. The revenues of these  companies
are derived  primarily  from Network  Services.  Excluding the revenues of these
acquisitions,  Network Services revenues increased 35.5% in the first six months
of 2000 compared with revenues of the corresponding period in 1999, and Internet
Projects revenues decreased by 21.9%.

From the first six  months  of 1999 to the  first six  months of 2000,  the Euro
depreciated  approximately 13% versus the US dollar. As our principal  operating
currency is the Euro, the depreciation of the Euro had an unfavorable  impact on
our  revenues  which are  reported  in US dollars.  Reported US dollar  revenues
increased approximately 87% in the first six months of 2000 over the same period
in 1999. Had the exchange rate of the Euro remained stable against the US dollar
during this period,  our US dollar  revenues would have increased  approximately
112%.

Costs of Revenues

Total costs of revenues increased 53.4% from $10,135,000 in the first six months
of 1999 to  $15,544,000  in the first six months of 2000.  Cost of revenues as a
percentage of revenues fell from 120.0% in the first six months of 1999 to 98.3%
in the first  six  months  of 2000.  Cost of  revenues  mainly  consists  of (i)
telecommunications expenses, (ii) technical and operations personnel and related
overhead costs,  (iii) the cost of hardware and software sold, (iv) amortization
of  product  development  costs,  (v)  depreciation  of network  facilities  and
equipment,  and (vi)  consulting  expenses in the area of network  and  software
development.   Telecommunications   expenses   mainly   represent  the  cost  of
transporting  Internet  traffic  from our  customer's  location  through a local
telecommunications  carrier to one of our  access  nodes and the cost of leasing
lines to interconnect  our backbone nodes.  Technical and operational  personnel
included in cost of revenues  are those  individuals  involved in the  planning,
building  and  managing  of our  network and the  providing  services  over this
network.

The cost of revenues from Internet Projects decreased by 4.4% from $2,056,000 in
the first six months of 1999 to $1,966,000 in the first six months of 2000. Cost
of Internet Projects as a percentage of related revenues increased from 24.3% in
the first six months of 1999 to 102.0% in the first six months of 2000.

The cost of revenues from Network  Services  increased  77.6% from $6,534,000 in
the first six  months of 1999 to  $11,602,000  in the first six  months of 2000.
This  increase  primarily  resulted  from the  additional  leased line  expenses
related to the expansion of our network backbone, additional leased lines to our
customer's  premises, a large increase in network personnel and consolidation of
expenses of companies acquired in 1999. Cost of Network Services as a percentage
of related  revenues  decreased  from  109.0% in the first six months of 1999 to
83.6% in the first six months of 2000.  This decrease is primarily  attributable
to improved network utilization and heightened  productivity of personnel in our
network operations.

Depreciation and amortization included in the cost of revenues,  increased 27.9%
from  $1,545,000  in the first six months of 1999 to $1,976,000 in the first six
months of 2000 as a result of investments in our own network  infrastructure and
supporting systems.


                                                                   Page 13 of 19

<PAGE>

General and Administrative Expenses

General and  administrative  expenses  increased  212.6% from  $3,770,000 in the
first six months of 1999 to $11,785,000 in the first six months of 2000. General
and administrative  expenses consist principally of salaries and other personnel
costs  for our  administrative  staff,  office  rent,  and  external  legal  and
accounting  advisory  costs.  The  increase in our  general  and  administrative
expenses  reflects the costs of building a corporate  infrastructure  to support
our  anticipated  growth and the  addition  of the  general  and  administrative
expenses of the  companies  acquired in the last six months of 1999. We incurred
significant legal,  accounting and other external advisory costs associated with
its financing activities, acquisitions and alliances in the second half of 1999.
As a percentage of revenues,  general and administrative expenses increased from
44.6% in the first six months of 1999 to 74.5% in the first six months of 2000.

Within general and administrative expenses are the personnel cost of general and
administrative  personnel as well as technical staff who are not involved in the
day to day management of the network.  These personnel  totaled 71 at the end of
June 2000. The non technical general and administrative personnel increased from
approximately  59 at the end of June 1999 to 86 at the end of June 2000. Most of
these additions were made to the financial,  human resources,  and IT management
of the  operating  companies  and to the  executive  management in the corporate
headquarters.

Excluding  the general and  administrative  expenses in the  companies  acquired
since the end of the  first  six  months  of 1999,  general  and  administrative
expenses  increased  170% from  $3,770,000  in the  first six  months of 1999 to
$10,169,000 in the first six months of 2000.

Sales and Marketing Expenses

Sales and marketing  expenses  increased by 25% from $5,147,000 in the first six
months  of 1999 to  $6,434,000  in the  first  six  months  of 2000.  Sales  and
marketing  expenses  consist  principally  of  salaries  of our sales  force and
marketing personnel and advertising and communication  expenditures.  The growth
in these  expenses was  partially  due to  additions to the sales and  marketing
staff which increased from  approximately 88 on June 30, 1999 to 127 on June 30,
2000. As a percentage of revenues,  our sales and marketing  expenses  decreased
from  60.9% in the first six  months of 1999 to 40.7% in the first six months of
2000.

Excluding the sales and marketing  expenses in the companies  acquired since the
end of the first six months of 1999, sales and marketing  expenses  decreased 1%
from  $5,147,000  in the first six months of 1999 to $5,114,000 in the first six
months of 2000.

Research and Development

Research and development  expenses  decreased 62.6% from $2,146,000 in the first
six months of 1999 to  $803,000  in the first six months of 2000.  Research  and
development expenses consist principally of personnel costs of employees working
on product  development,  consulting  costs and  certain  overhead  items.  As a
percentage of revenues,  research and  development  decreased  from 25.4% in the
first six months of 1999 to 5.1% in the first six months of 2000.

Depreciation and Amortization

Depreciation  and amortization  expenses  increased from $1,228,000 in the first
six months of 1999 to $6,781,000 in the first six months of 2000.  This increase
reflects increased depreciation of property and equipment purchased to build the
corporate  infrastructure  necessary to support our anticipated  growth,  and in
particular  increased  amortization  of  goodwill  related to our  acquisitions.
Goodwill  represents  the excess of the purchase price of companies we purchased
over the fair  value of the  tangible  assets of those  companies.  Goodwill  is
amortized over 5 - 10 years.

Interest Income and Expense

Interest  expense  increased  from  $64,000  in the first six  months of 1999 to
$18,187,000  in the first six months of 2000 as a result of our issuance of debt
securities in the second half of 1999.  Interest income  increased from $383,000
in the first six months of 1999 to $3,194,000 in the first six months of 2000 as
a result of interest earned on the unutilized proceeds of these offerings.


                                                                   Page 14 of 19

<PAGE>

In the first six  months of 2000 we  incurred  net  foreign  exchange  losses of
$5,065,000  because  our  borrowings  are  denominated  in US  dollars  but  our
principal operating currency is the Euro. We will continue to record such losses
if the US dollar strengthens against the Euro.

Income Taxes

We recorded  income tax benefits of  $5,302,000  in the first six months of 1999
and  $6,139,000  in the  first  six  months of 2000,  arising  principally  from
operating  losses.  Although we have additional  operating  losses,  a valuation
allowance  has been  established  to  reflect  the  estimated  amount of the tax
benefit that may not be realized.  The majority of the operating  losses and the
associated  valuation  allowance  are  associated  with  operations  subject  to
taxation under the German tax code. Under the current German tax code, these net
operating  losses may be  carried  forward  indefinitely  and used to offset our
future taxable earnings.

Liquidity and Capital Resources

Cash Flow

Operating  activities  used cash of  $33,617,000 in the first six months of 2000
compared to $11,344,000  for the comparable  period in 1999. This is principally
the result of higher net losses as explained above.

For  the  first  six  months  of  2000  investing  activities  provided  cash of
$14,967,000  compared to cash used of $36,040,000  for the comparable  period in
1999. This increase in cash generated from investing  activities  represents the
net proceeds  from the purchase and sale of  short-term  investments,  partially
offset  by the  cash  outflows  for the  purchases  of  property  and  equipment
($16,426,000).  Expenditures for property and equipment consisted principally of
the fit-out of Points of Presence and data facilities, the purchases of computer
hardware and software and other  expenditures  related to our Internet  backbone
and equipment.

For the first six months of 2000, net cash provided by financing  activities was
$780,000 compared to $23,805,000 in the same period in 1999.

Working Capital

On June 30,  2000,  our  working  capital,  defined as the excess of our current
assets over our current liabilities, was $78,274,000 as compared $102,724,000 at
December 31, 1999.

Our  accounts  receivable  as of June 30,  2000,  reflects  $8,689,0000  for net
accounts  receivable  compared to  $9,162,000  as at December 31, 1999.  We have
taken steps to improve the timely collection of receivables,  some of which have
started to show an impact.

Cash and cash  equivalents  amounted to  $53,505,000  at June 30, 2000  compared
$73,213,000 at December 31, 1999. Of this, approximately  $43,500,000 is held in
US dollars.  We also had various  short-term  investments  denominated in Euro's
totaling  $15,800,000  at June 30, 2000.  In  addition,  at June 30, 2000 we had
approximately  $47,820,000 of restricted  cash held in escrow,  to meet the next
five  semi-annual  interest  payments  on our 14% Senior  Notes.  This amount is
invested in US Government securities.

Credit Arrangements

As of June 30, 2000, we had  short-term  unsecured  overdraft  facilities  under
which we and our  subsidiaries  could borrow up to $1,195,000.  These facilities
are  denominated  in Italian  Lire (in the amount of  $1,125,000)  and  Austrian
Schilling (in the amount of $69,000).  The interest rates  fluctuate  based upon
current lending rates. The weighted  average  borrowing rate on these facilities
was 6.43% as June 30, 2000. In addition,  certain of our banks provide overdraft
protection  exceeding  the limits  specified in these  agreements As of June 30,
2000, we and our subsidiaries had used $35,000 of these facilities. In addition,
as June 30, 2000, we had long-term capitalized lease obligations of $5,122,000.


                                                                   Page 15 of 19

<PAGE>

Capital Expenditures

For  the  six  months  ended  June  30,  2000,  capital   expenditures   totaled
approximately  $16,572,000.  We funded these capital expenditures primarily from
net cash  provided by financing  activities.  Our  investments  in the first six
months of 2000  included:  (i)  investments in our backbone  infrastructure  and
equipment approximately totaling DM 4,694,000 ($2,304,000),  (ii) investments in
data facilities and data center premises  totaling  approximately  DM 17,600,000
($8,642,000), and (iii) investments in other equipment totaling approximately DM
11,322,000 ($5,480,000).

Comparison of last three quarters in Euro's

We set out below a summary of the development of our results over the last three
quarters in Euro (which is equivalent to 1.95583 DM). We are showing the amounts
in Euro's as this is the main  currency in which we  operate;  and the impact of
exchange  rate  movements  is  eliminated  - the dollar  amounts are included in
parentheses for reference

<TABLE>
<CAPTION>
                                     Three months ended        Three months ended        Three months ended
                                      December 31, 1999          March 31, 2000             June 30, 2000
                                     ------------------        ------------------        ------------------
                                                    (in thousands - Euro unless stated)
                                                (in thousands, except Revenue per employee)
                                     Euro        (US $)         Euro        (US $)        Euro        (US $)
                                     ----        ------         ----        ------        ----        ------
<S>                                  <C>        <C>             <C>        <C>            <C>        <C>
Revenue ..........................   7,212      ($7,554)        7,163      ($7,058)       9,303      ($8,753)
Cost of revenue - excluding
  depreciation and amortization ..   7,923      ($8,318)        7,173      ($7,068)       6,957      ($6,500)
                                   -------      -------        ------     --------      -------      -------
Gross margin - before
  depreciation and amortization ..    (711)       ($764)          (10)        ($10)       2,346      ($2,253)
Operating expenses - excluding
  depreciation and amortization ..  14,222     ($14,973)        9,946      ($9,800)       9,864      ($9,222)
                                   -------     --------        ------     --------      -------      -------
EBIDTA (Operating result before
  depreciation and amortization) . (14,933)    ($15,737)       (9,956)     ($9,810)      (7,518)     ($6,969)
 ................................. -------     --------        ------     --------      -------    ---------
Revenue per employee .............  67,718     ($70,930)       79,149     ($77,989)     107,085    ($100,754)
</TABLE>

Revenue

Revenue  denominated  in Euro's fell slightly from the fourth quarter of 1999 to
the first quarter of 2000, due to a slow down in project revenue. This slow down
resulted  from certain  projects not being fully  completed  and  therefore  not
billed  during the first  quarter  of 2000.  Revenue  increased  by 29.9% in the
second  quarter of 2000 compared with the first quarter of 2000  reflecting  the
completion of projects,  and the continued  development of the recurring revenue
streams. Italy in particular reported increased revenue in the second quarter of
2000  resulting  from a higher  number of business  customers  for  connectivity
services, including dedicated lines and dial-up products.

Cost of revenues

Total cost of revenues, excluding depreciation and amortization,  denominated in
Euro's  decreased by 3% in the second  quarter of 2000  compared  with the first
quarter of 2000. Cost of revenue, excluding depreciation and amortization,  as a
percentage of sales decreased from 110% in the fourth quarter of 1999 to 100% in
the  first  quarter  of 2000 and to 75% in the  second  quarter  of  2000.  This
reflects the greater cost efficiencies  being obtained by higher  utilization of
our  infrastructure  and the lower level of technical and operational  staff now
deployed.


                                                                   Page 16 of 19

<PAGE>

Gross margin

The higher  revenue  and lower level of costs of sales has  increased  our gross
margin,  before  depreciation  and  amortization as denominated in Euro over the
last three  quarters.  This has increased  from a negative  margin of 10% in the
fourth  quarter of 1999 to 0% in the first quarter of 2000 and 25% in the second
quarter of 2000. The gross margin,  before  depreciation and amortization of the
network  services has increased from a negative  margin of 20% in fourth quarter
of 1999,  to 1% in the first  quarter of 2000 and 29% in the  second  quarter of
2000.

General and Administrative expenses

General and administrative expenses denominated in Euro have decreased from Euro
8,967,000  ($9,471,000)  in  the  fourth  quarter  of  1999  to  Euro  6,816,000
($6,716,000)  in the  first  quarter  of 2000  and  further  to  Euro  5,457,000
($7,461,000)  in the second  quarter of 2000.  This  represents a reduction as a
percentage of sales from 124% in the fourth  quarter of 1999 to 95% in the first
quarter  of 2000 and 59% in the  second  quarter  of  2000.  This  reflects  the
reduction  in the level of staff and related  overheads  which we started in the
fourth  quarter of 1999.  The lower  general and  administrative  expenses  also
reflects  additional  cost controls  which have been  implemented  by management
towards the end of 1999 and in 2000.

Sales and marketing expenses

Sales and marketing  expenses  denominated in Euro decreased from Euro 4,747,000
($4,994,000)  the fourth quarter of 1999 to Euro 2,949,000  ($2,906,000)  in the
first quarter of 2000 reflecting a reduction in staff,  and a general  reduction
in marketing  expenses and the  implementation of tight cost control.  Sales and
marketing  expenses  denominated  in Euro  subsequently  increased in the second
quarter  of  2000  to Euro  3,751,000  ($3,528,000)  as a  result  of  increased
advertising  expense,  and the  replacement  of some of the sales and  marketing
staff who departed the company at the end of 1999 and the start of 2000.

Research and development

Research  and  development  expenses  denominated  in Euro  decreased  from Euro
509,000  ($509,000) the fourth quarter of 1999 to Euro 180,000 ($177,000) in the
first quarter of 2000.  Research and  development  expenses  denominated in Euro
increased in the second quarter of 2000 to Euro 657,000 ($626,000).

EBIDTA

EBIDTA,  operating results before depreciation and amortization,  as denominated
in Euro have improved from a loss of Euro 14,933,000 ($15,373,000) in the fourth
quarter of 1999 to losses of Euro 9,956,000 ($9,800,000) in the first quarter of
2000 and Euro 7,518,000 in the second quarter of 2000.  This improved  result is
due to the increased revenue and cost saving exercise implemented by management.

Other matters

The Company  has been  repurchasing  a portion of its 14% Senior  Notes due 2009
(the "Notes"). During July 2000, the Company repurchased $50.3 millions of Notes
at average  prices equal to 44% of the face value of the Notes  repurchased.  As
required  by the terms of the  Notes,  the  Company  has  established  an escrow
account  to provide  for  payment  in full of the first six  scheduled  interest
payments on the Notes.  The amounts  contained in the escrow account are carried
on the Company's balance sheet as "Restricted  investments".  As a result of the
repurchase of Notes in July,  approximately  $13.2 million will be released from
the escrow account and will be available to the Company.  The price of the Notes
repurchased  in July  net of  amounts  released  from  the  escrow  account  was
approximately  $9 million.  The face amount of the Notes  outstanding  after the
July repurchases is approximately $100 million.

As noted in our 10K for December 1999, we offer voice services to our customers.
We have been pursuing a strategy  pursuant to which we would own voice  switches
and have  interconnection  agreements with other operators as necessary.  We are
now  reconsidering  whether  it is best  for us to use  such  traditional  voice
telephony  technology,  or whether it would be more appropriate to use different
technologies  which  would be more  closely  aligned  to our  internet  protocol
services   and   technology,   or  whether  to   continue   using   third  party
telecommunications operators, or use a combination of these possibilities.


                                                                   Page 17 of 19

<PAGE>

At the end of the first half of the year we completed a data center in Frankfurt
of  approximately  3,350 net square meters,  and a second data centre of similar
size was completed in Munich in July 2000. We continue to believe that such data
centres  will be a  profitable  product  line,  and are  pushing  ahead with the
completion of a third data centre in Hamburg.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We  do  not  utilize  market-risk-sensitive   instruments,  such  as  derivative
financial  instruments.  Our primary market risk is in the area of interest rate
and foreign currency exchange rate fluctuations.

We maintain our cash  balances in deposits at banks and in highly  liquid short-
term investments,  such as money market funds and U.S. Treasury Bonds, therefore
lowering our exposure to interest income risks. As a result of our sale of Units
consisting  of 14% Senior  Notes due 2009 and  warrants  in July 1999 (the "Unit
Offering"),  as well as our sale of Convertible Notes in August,  1999 we have a
substantial amount of debt in U.S. dollars.

While our reporting  currency is U.S.  dollars,  our functional  currency is the
Deutsche  Mark  and as such  significant  fluctuations  in the  U.S.  dollar  to
Deutsche  Mark  exchange  rate  could  have an  adverse  impact on the amount of
Deutsche Marks required to satisfy this debt. We estimate that a 10% increase in
the exchange rate between the Deutsche Mark and the U.S.  dollar would  increase
the Deutsche Mark amount required to settle the debt  outstanding  from the Unit
offering and our sale of Convertible Notes by approximately $20,000,000.

All of our revenues and a significant portion of our expenses are denominated in
currencies other than our reporting currency, the U.S. dollar. Approximately 52%
of our  revenues  in the first six months of 2000 were  denominated  in Deutsche
Marks and another 38% of revenues were  denominated in other  European  Monetary
Union member  currencies.  The majority of our foreign  exchange  rate  exposure
relates to the  translation of our Deutsche Mark financial  statements into U.S.
dollars which is impacted by changes in the exchange  rates between the Euro and
the U.S. dollar.

PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

          None.

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

          Not applicable.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

          Not applicable.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          Not applicable.

ITEM 5.   OTHER INFORMATION

          None.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          None.


                                                                   Page 18 of 19

<PAGE>

                                   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.


                           CYBERNET INTERNET SERVICES INTERNATIONAL, INC.


                           BY: /s/ Andreas Eder
                               ------------------------------
                               Andreas Eder
                               Chairman of the Board, President, and
                               Chief Executive Officer

                           BY: /s/ Paolo Di Fraia
                               ------------------------------
                               Paolo Di Fraia
                               Chief Financial Officer and Treasurer

Dated:  August 15, 2000


                                                                   Page 19 of 19