2005 年 11 月 9 日
株式会社インターネットイニシアティブ
Tel: 03-5259-6500
E-mail: ir@iij.ad.jp
本資料は日本の方々の便宜性のために作成した簡易版です。8 ページより正式決算発表資料（英文）が続きますので、そちらもあわせてご参照いただけますよう、お願い申し上げます。

2005 年度第 2 四半期（7-9 月）及び中間期決算発表（抄訳）＜大幅増収増益、2005 年度通期の業績ターゲットに向け順調に推移＞

2005 年度第 2 四半期決算
・ 営業収益（売上高）は、前年同期比 13.5 %増、前四半期比 20.7 %増の 11,929 百万円
・ 営業利益は、前年同期比 79.8 %増、前四半期比 105.7 %増の 507 百万円
・ 当期利益は、前年同期比 336.6 %増、前四半期比 60.7 %増の 1,001 百万円

2005 年度 中間期決算
・ 営業収益（売上高）は、前年同期比 13.7 %増 の 21,809 百万円
・ 営業利益は、前年同期比 315.0 %増 の 754 百万円
・ 当期利益は、1,623 百万円と、前年同期の当期損失 9 百万円から大幅に改善し黒字転換
・ 季節変動要因により中間期は下期に比べ弱含みしますが、当中間期はシステムインテグレーション及びアウトソーシング売上が順調に推移、前年同期比増収増益
・ 2005 年度中間期において、期初の業績ターゲットを達成

2005 年度通期の見通し
・ 通期業績ターゲットの変更はございません

経営の概況
IIJ の主要マーケットである大企業や官公庁では、社内ネットワークや業務システムといったミッションクリティカルなシ
ステムにおけるインターネット技術の利用が引続き進展しています。これらの企業においては、業務トラフィックの増加
や、ネットワークの複雑化、または様々なセキュリティ課題の増加により、一層のアウトソーシングニーズが顕在化してきております。このような顧客のニーズに応えるために、IIJ では、インターネット接続で培った高い技術力をベースに、ネットワーク設計・構築、セキュリティ・コンサルティングといったインテグレーションやネットワーク運用等のアウトソーシ
ングサービスをトータルに提供する「ネットワークソリューション事業」を戦略的に推進しております。
当四半期は、システムインテグレーションの構築案件について受注が好調に推移し大幅増収となったほか、収益性の高い恒常売上であるアウトソーシングサービスについて①構築案件の受注に伴うシステム運用アウトソーシング案件の恒常的増加、②セキュリティー及びメールアウトソーシング等の付加価値サービスが順調に推移したことより、前年同期比にて営業利益、当期利益ともに大幅増益となりました。
IIJ のネットワークソリューション事業展開における重要な顧客基盤となるインターネット接続サービスにおいては、顧客企業の業務トラフィックの増加や、インターネット VPN を用いた多拠点ネットワーク接続案件の獲得に伴う新規契約の獲得により、契約総帯域、契約数ともに引続き順調に推移しました。
これらの結果、2005 年度中間期においても大幅な増収増益となり、期初の業績ターゲットを達成いたしました。

IIJ 2Q05

業績サマリー

（百万円）
2005
中間期

営業収益（売上高）
売上原価
販売管理費等
営業利益
当期利益（損失）

2004
中間期

前年同期比

2Q05

2Q04

前年同期比

1Q05

前四半期比

21,80919,187

13.7%

11,92910,512

13.5%

9,880

20.7%

17,991

16,297

10.4%

9,873

8,854

11.5%

8,118

21.6%

3,064

2,708

13.1%

1,549

1,376

12.5%

1,516

2.2%

754

182

315.0%

507

282

79.8%

247

105.7%(9) (18374.4%)

1,001

229

336.6%

623

60.7%

1,623

サービス別概況及び財務関連データ

インターネット接続サービスの契約数及び総帯域
専用線接続サービス合計
IP サービス（低帯域：64kbps-768kbps）*1
IP サービス（中帯域：1Mbps-100Mbps 未満）*1
IP サービス（高帯域：100Mbps 以上〜）
IIJ T1 スタンダード及び IIJ エコノミー
インターネットデータセンター接続サービス
IIJ FiberAccess/F 及び IIJ DSL/F（ブロードバンド対応型）
ダイアルアップ接続サービス合計
自社提供
OEM 提供*2
契約総帯域

2Q05
12,702
61
637
143
182
234

2Q04
8,880
71
597
93
358
225

1Q05
12,274
65
637
131
208
234

11,445

7,536

10,999663,527
711,637
677,20764,81070,62966,125598,717
641,008
611,082
151.0Gbps 104.9Gbps 140.9Gbps*1 IPv6 サービスを含む*2 他サービス事業者向け OEM サービス

IP サービスにおいては、顧客がより広帯域のサービスにシフトしていることから、100Mbps 以上のサービス
契約数が増加しております。特に 1Gbps 以上の IP サービスの契約数は前四半期比 10 回線増の 43 回線となりました。
契約数は、多拠点接続案件の増加に伴う新規契約獲得もあり、順調に増加しました。また、契約総帯域は、前四半期比 10.1Gbps 増の 151.0Gbps となりました。

IIJ 2Q05

インターネット接続及び付加価値サービスの営業収益、売上原価及び売上総利益率
インターネット接続サービス
専用線接続サービス
IP サービス*3
IIJ T1 スタンダード及び IIJ エコノミー
IIJ FiberAccess/F 及び IIJ DSL/F（ブロードバンド対応型）
ダイアルアップ接続サービス
自社提供*4OEM 提供*5
付加価値サービス
その他
インターネット接続及び付加価値サービス
営業収益合計インターネット接続及び付加価値サービス原価
うちバックボーンコスト
売上総利益率

2Q05
3,378
2,695
2,121
113

2Q04
3,572
2,832
2,222
228

前年同期比

461

（百万円）
前四半期比

(5.4%)(4.8%)(4.6%)(50.3%)

1Q05
3,446
2,747
2,166
134

382

20.7%

447

3.3%

683
457
226
1,459
930

740
501
239
1,220
716

(7.8%)(8.9%)(5.4%)
19.5%
30.0%

699
466
233
1,388
933

(2.3%)(2.0%)(3.0%)
5.1%(0.3%)

5,767

5,508

4.7%

5,767

0.0%

4,988
846
13.5%

4,780
877
13.2%

4.3%
(3.5%)

4,964
864
13.9%

0.5%
(2.0%)−(2.0%)(1.9%)(2.1%)(15.7%)−*3 インターネットデータセンター接続サービスを含む（回線専有型、64kbps-1.2Gbps）*4 各種法人向け及び個人向けサービス（IIJ4U、IIJmio）。B フレッツ、ADSL 対応オプションも含む*5 他サービス事業者向け OEM サービス

インターネット接続サービスにおいて、契約数及び契約総帯域が順調に増加し顧客基盤の拡充は図れておりま
すが、一方、IP サービスにおける一部価格見直しや、IIJ T1 スタンダード及び IIJ エコノミーサービスのブロードバンド対応型サービスへの移行等もあり、前年同期比、前四半期比ともに減収となりました。
付加価値サービスの売上は、セキュリティ系サービス、電子メール等のサーバアウトソーシングサービス、ネットワ
ークアウトソーシングサービス等が好調に推移したことから増収となりました。
その他の売上は、多拠点接続案件に伴う広域イーサネットサービスの売上増により前年同期比 30.0%増となりました。前四半期比では、前四半期にあった初期費用等の一時的売上の減少から、微減収となりました。
インターネット接続及び付加価値サービスの売上原価につきましては、人件費、保守費の増加があるもののバッ
クボーンコストの低減等もあり、安定的に推移しています。

IIJ 2Q05

システムインテグレーションの営業収益、売上原価及び売上総利益率
システムインテグレーション営業収益合計
システムインテグレーション
システム運用アウトソーシングサービス
システムインテグレーション原価
売上総利益率

2Q05
5,162
2,405
2,757
3,919
24.1%

2Q04
3,838
2,101
1,737
2,983
22.3%

前年同期比

34.5%
14.5%
58.7%
31.4%
−

（百万円）

1Q05
3,840
1,193
2,647
2,910
24.2%

前四半期比

34.4%
101.5%
4.2%
34.7%
−

システムインテグレーションの売上は、構築案件の増加及びそれに伴う運用アウトソーシングサービスが順調に推移した結果、前年同期比 34.5%増、前四半期比 34.4%増と大幅増収となりました。

機器販売の営業収益、売上原価及び売上総利益率
機器販売営業収益
機器販売原価
売上総利益率

2Q05
1,000
966
3.5%

（百万円）

2Q04
1,166
1,091
6.5%

前年同期比

(14.2%)(11.4%)
−

1Q05
273
244
10.9%

その他
Adjusted EBITDA（償却前営業利益）
設備投資 （キャピタルリースを含む）
減価償却費

前四半期比

266.0%
296.4%
−
（百万円）

2Q05
1,517
795
1,010

2Q04
1,275
1,345
1,012

前年同期比

19.0%
(40.9%)(0.1%)

1Q05
1,261
533
1,014

前四半期比

20.4%
49.1%
(0.4%)

注意事項： この資料には、1995 年米国民事証券訴訟改革法（Private Securities Litigation Reform Act of 1995）の「セーフハーバー」規定に定義する「将来性の見通しに関する記述（forward-looking statements）」に該当する情報が記載されています。この資料の記載のうち、過去または現在の事実に関するもの以外は、将来の見通しに関する記述に該当します。将来の見通しに関する記述は、現在入手可能な情報に基づく
IIJ 経営陣の仮定及び判断に基づくものであり、これには既知または未知のリスク及び不確定性が内在しています。IIJ の実際の活動または業績
は、今後、将来の見通しに関する記述に示されたところと大きく異なる可能性があります。投資家の皆様におかれましては、1934 年米国証券取引法（Securities Exchange Act of 1934）に基づく今後の報告書等において IIJ が行う開示をご参照ください。

IIJ 2Q05

株式会社 インターネットイニシアティブ
四半期連結損益計算書（米国会計基準未監査）

Appendix 1

2005年9月期、2004年9月期、2005年6月期
JPY/千円単位、 USD/千米ドル単位 (1)
前年同四半期比較
2005年9月期
2004年9月期
対営業収益

USD (1)
営業収益：
インターネット接続及び付加価値サービス収入：
専用線接続サービス
ダイヤルアップ接続サービス
付加価値サービス
その他
インターネット接続及び付加価値サービス収入合計

JPY

%

JPY

前四半期比較
2005年6月期

対営業収益%

対前年同四半期

%

JPY

対営業収益
%

対前四半期

%

23,791
6,024
12,8758,211
50,901

2,695,325
682,439
1,458,557
930,205
5,766,526

22.6%
5.7
12.2
7.8
48.3

2,832,355
739,957
1,220,119
715,617
5,508,048

27.0%
7.0
11.6
6.8
52.4

(4.8%)
(7.8)
19.5
30.0
4.7

2,746,900
698,670
1,387,893
933,120
5,766,583

27.8%
7.1
14.1
9.4
58.4

(1.9%)
(2.3)
5.1
(0.3)
(0.0)

45,561
8,833
105,295

5,161,600
1,000,701
11,928,827

43.3
8.4
100.0

3,837,711
1,166,569
10,512,328

36.5
11.1
100.0

34.5
(14.2)
13.5

3,840,075
273,438
9,880,096

38.9
2.7
100.0

34.4
266.0
20.7

44,02934,591
8,527
87,147

4,987,986
3,918,774
966,095
9,872,855

41.8
32.9
8.1
82.8

4,780,268
2,982,577
1,090,870
8,853,715

45.5
28.3
10.4
84.2

4.3
31.4
(11.4)
11.5

4,963,835
2,910,262
243,699
8,117,796

50.2
29.5
2.5
82.2

0.5
34.7
296.4
21.6

7,058
6,171
441
100,817799,562
699,166
49,947
11,421,530

6.7
5.8
0.4
95.7

711,661
612,526
52,237
10,230,139

6.8
5.8
0.5
97.3

12.4
14.1
(4.4)
11.6

767,801
713,91733,904
9,633,418

7.8
7.2
0.3
97.5

4.1
(2.1)
47.3
18.6

営業利益

4,478

507,297

4.3

282,189

2.7

79.8

246,678

2.5

105.7

その他の収益 (費用)5,204

589,617

4.9(10,188)(0.1)(5,887.4)

435,2334.4

35.5

税引前当期利益

9,682

1,096,914

9.2

272,001

2.6

303.3

681,9116.9

60.9

法人税、住民税及び事業税
少数株主損益持分法による投資損益

387
(722)
260

43,900(81,777)
29,403

0.4
(0.7)
0.3

15,506(42,837)
15,548

0.1
(0.4)
0.1

183.1
90.9
89.1

38,111(23,855)
2,729

0.4
(0.2)
0.0

15.2
242.8
977.4

当期利益

8,833

1,000,640

8.4%

229,206

2.2%

336.6%

622,674

6.3%

60.7%

システムインテグレーション
機器販売
営業収益合計営業費用：
インターネット接続及び付加価値サービス原価システムインテグレーション原価
機器販売原価
売上原価合計
販売費
一般管理費
研究開発費
営業費用合計基本的1株あたり当期利益
希薄化後1株あたり当期利益
基本的米国預託証券１単位あたり当期利益
希薄化後米国預託証券1単位あたり当期利益
期中平均発行済株式総数
期中平均発行済株式総数(潜在株式含む)
期中平均発行済米国預託証券総数
期中平均発行済米国預託証券総数(潜在株式含む)

26,12826,08713.06
13.04
38,29838,35876,595,702
76,715,032

注記(1): 2005年9月期につきましては、米ドル換算レート113.29円=1米ドル(2005/9/30)にて参考表示しております。

5,983

16,2542.99

8.13

38,31238,30976,623,702

76,618,779

株式会社 インターネットイニシアティブ
四半期連結貸借対照表（米国会計基準未監査）
2005年9月期、2004年9月期、2005年6月期
JPY/千円単位、 USD/千米ドル単位 (1)2005年9月期

Appendix 2

2004年9月期

2005年6月期

USD (1)

JPY

%

JPY

%

JPY

%

61,37859,007
2,527
8,737
1,282

6,953,496
6,684,910
286,367
989,785
145,243

19.3%
18.5
0.8
2.7
0.4

11,802,165
6,739,000
262,180
652,061
106,364

27.4%
15.6
0.6
1.5
0.3

5,106,388
304,628
5,792,808
265,286
1,263,409
80,797

15.1%
0.9
17.2
0.8
3.8
0.2

132,931

15,059,801

41.7

19,561,770

45.4

12,813,316

38.0

関連会社投資等
その他投資
有形固定資産等
敷金保証金
その他資産

3,996
71,04480,704
18,537
11,621

452,702
8,048,512
9,142,951
2,100,008
1,316,561

1.3
22.3
25.3
5.8
3.6

783,933
10,657,082
9,045,349
2,080,345
963,895

1.8
24.7
21.0
4.8
2.3

677,035
7,882,229
9,155,981
2,091,237
1,124,441

2.0
23.4
27.1
6.2
3.3

資産合計

318,833

36,120,535

100.0%

43,092,374

100.0%

33,744,239

100.0%

43,447
13,40345,953
4,554
6,975
22,403
23,9744,922,177
1,518,400
5,205,982
515,976
790,1942,537,997

5,732,204
816,800
4,502,356
448,585
604,868
1,650,139
11,088,000
2,491,070

13.3%
1.9
10.5
1.0
1.4
3.8
25.7
5.8

4,723,387
1,530,400
3,665,233
523,478
918,829
3,187,023

2,716,030

13.6%
4.2
14.4
1.5
2.2
7.0
7.5

2,718,759

14.0%
4.5
10.9
1.6
2.7
9.4
8.1

160,70918,206,756

50.4

27,334,022

63.4

17,267,109

51.2

長期借入金
長期リース債務退職給付引当金
その他固定負債

9,361
34,3971,600
3,418

1,060,476
3,896,848
181,289
387,259

2.9
10.8
0.5
1.1

1,732,473
3,620,613
102,224
300,190

4.0
8.4
0.3
0.7

870,3423,950,359
169,460
246,818

2.6
11.7
0.5
0.7

負債合計

209,485

23,732,628

65.7

33,089,522

76.8

22,504,088

66.7

少数株主持分

8,896

1,007,787

2.8

945,572

2.2

1,053,212

3.1

121,506
208,647(289,617)
60,659(743)

13,765,372
23,637,628(32,810,738)
6,872,096(84,238)38.1
65.4(90.8)
19.0(0.2)

13,765,372
23,637,628(37,349,204)
9,047,484(44,000)

31.9
54.9(86.7)
21.0(0.1)

13,765,372
23,637,628(33,811,378)
6,679,555(84,238)40.8
70.0(100.2)
19.8
(0.2)

資本合計

100,452

11,380,120

31.5

9,057,280

21.0

10,186,939

30.2

負債、少数株主持分及び資本合計

318,833

36,120,535

100.0%

43,092,374

100.0%

33,744,239

100.0%

資産の部
流動資産：
現金及び預金
短期投資
売掛金
棚卸資産
前払費用
その他流動資産
流動資産合計負債及び資本の部
流動負債：
短期借入金
有価証券貸借取引に伴う債務買掛金及び未払金
未払費用
その他流動負債
1年以内に期限到来の長期借入金
転換社債
短期リース債務
流動負債合計

資本：
資本金
資本準備金
欠損金
その他有価証券評価差額金等
自己株式-

注記(1): 2005年9月期につきましては、米ドル換算レート113.29円=1米ドル(2005/9/30)にて参考表示しております。

-

株式会社 インターネットイニシアティブ

Appendix 3

四半期連結キャッシュフロー計算書（米国会計基準未監査）
2005年9月期、2004年9月期、2005年6月期
JPY/千円単位、USD/千米ドル単位 (1)2005年9月期
USD (1)

JPY

2004年9月期

2005年6月期

JPY

JPY

営業活動によるキャッシュフロー：
当期利益

8,832

1,000,640

229,206

622,674

減価償却費等

8,916

1,010,139

1,011,532

1,013,745

貸倒引当金繰入（戻入）(15)(1,673)

19,968(5,339)

持分法による投資損益(260)(29,403)(15,548)(2,729)少数株主損益722

81,777

42,83723,855(36)(4,131)(14,152)(6,278)(5,826)(660,039)(98,103)(488,758)

為替差益
その他投資に係る損益
売掛金の減少（増加）(7,033)(796,785)(1,396,506)

1,621,419

買掛金及び未払金の増加（減少）11,2281,272,038

566,837(1,132,992)

棚卸資産の減少（増加）(186)(21,081)

149,969(125,190)

法人税等調整額(94)(10,681)-

18,343

その他

1,136

128,646

542,953(511,252)

営業活動によるキャッシュフロー

17,384

1,969,447

1,038,993

1,027,498

有形固定資産等の取得(1,008)(114,208)(51,435)(213,485)

子会社株式の取得(1,696)(192,142)--

短期投資及びその他投資の売却による収入

8,663

981,420

125,281

514,460

新たに連結対象となった会社より受け入れた現金及び預金（取得現金控除後）投資活動によるキャッシュフロー：2,025

229,457--

短期投資及びその他投資の取得

(7)

(844)

(3,083)(299,311)

敷金保証金の支払−純額(64)(7,256)(19,193)(39,210)

その他

(68)

(7,655)904(5,450)7,845

888,772

52,474(42,996)

投資活動によるキャッシュフロー
財務活動によるキャッシュフロー：長期借入金による調達
長期借入金の返済

8,827

1,000,000

1,000,000-(12,878)(1,458,892)(1,436,943)(208,654)

有価証券貸借取引による担保金預り収入

15,313

1,734,800

816,800-

有価証券貸借取引による預かり担保金の返済(15,419)(1,746,800)-(199,120)(766,807)

リース債務の元本返済(6,609)(748,762)(688,418)

短期借入金の純増減

1,755

198,790369,203(1,246)

財務活動によるキャッシュフロー(9,011)(1,020,864)

60,642(1,175,827)

86

9,753

22,853

11,236

現金及び預金の増（減）額

16,304

1,847,108

1,174,962(180,089)

現金及び預金の期首残高

45,074

5,106,388

10,627,203

5,286,477

現金及び預金の期末残高

61,378

6,953,496

11,802,165

5,106,388

現金及び預金に係る換算差額

注記(1):2005年9月期につきましては、米ドル換算レート113.29円=1米ドル(2005/9/30)にて参考表示しております。

For Immediate Release
Internet Initiative Japan Inc.
E-mail: ir@iij.ad.jp Tel: +81-3-5259-6500
URL: http://www.iij.ad.jp/

IIJ Announces Second Quarter Results for the Year Ending March 31, 2006
- Revenues and profits increased significantly in favorable progress towards our initial annual target Tokyo and New York, November 9, 2005 - Internet Initiative Japan Inc. (Nasdaq: IIJI) (“IIJ”), one ofJapan’s leading Internet-access and comprehensive network solutions providers, today announced its
financial results for the second quarter of the fiscal year ending March 31, 2006 (“FY2005”).1

Highlights of Second Quarter FY2005 Results
・ Revenue totaled JPY 11,929 million ($105.3 million), an increase of 13.5% from 2Q04.
・ Operating income was JPY 507 million ($4.5 million), an increase of 79.8% from 2Q04.
・ Net income was JPY 1,001 million ($8.8 million), an increase of 336.6% from 2Q04.
・ Results for the first half of FY2005 were as follows, and exceeded our initial targets.
Revenues: JPY 21,809 million ($192.5 million), an increase of 13.7% compared to 1H04.
Operating income: JPY 754 million ($6.7 million), an increase of 315.0% compared to 1H04.
Net income: Turned positive to JPY 1,623 million ($14.3 million) from a loss of
JPY 9 million in 1H04.
Target for FY20052
・ We maintain the target for FY2005 that we announced on May 27, 2005.
Overview of 2nd Quarter of FY2005 Financial Results and Business Outlook2"The favorable trend of increasing revenues and profits continued in 2Q05," said Koichi Suzuki,
President and CEO of IIJ. "Total revenues jumped 13.5% compared to the same period last year and20.7% sequentially mainly due to continued increases in sales of higher-margin network outsourcing
and systems integration ("SI"). This was largely a reflection of the direction that we see the market andour business heading. Corporate customers are continuously requiring ever higher quality IP
engineering skills and resources due to the constantly increasing volume of Internet traffic, escalating
network and security threats, and expansion of internal network systems that are integrated with theInternet. In particular, SI in 2Q05 increased significantly because we succeeded in acquiring a numberof new systems integration projects, including the connection of customers' sites with broadband lines,
the construction and operation of a new mail server to assist customers with their continuously
increasing number of e-mails, and the construction and operation of security systems for several
customers to bolster their efforts at fighting spam and external attacks.""We are pleased that we successfully exceeded our initial targets for the first half of the fiscal year," said

1
Unless otherwise stated, all financial figures discussed in this announcement are prepared in accordance with U.S. GAAP. All
financial figures are unaudited and consolidated. For all 2Q05 and 1H05 results, translations of Japanese yen amounts into US
dollars are solely for the convenience of readers outside of Japan and have been made at the rate of JPY 113.29 = US$1.00,
the approximate exchange rate on September 30, 2005. 2Q04 and 1H04 figures have been restated to reflect the change inincome tax expense (benefit) previously announced by IIJ in its press release dated April 11, 2005.
2
This Overview and Business Outlook contains forward-looking statements and projections such as statements regarding
FY2005 revenues and operating and net income that are subject to known and unknown risks and uncertainties that could
cause actual results to differ materially from those expressed or implied by these statements. These risks and uncertainties
include, but are not limited to, the factors noted at the end of this release and to the risk factors and other information includedin IIJ’s annual report on Form 20-F, filed with the SEC on August 3, 2005, as well as other filings and documents furnished to the
Securities and Exchange Commission. IIJ plans to keep this press release publicly available on its Web site (www.iij.ad.jp), but
may discontinue this practice at any time. IIJ intends to publish its next Overview and Business Outlook in its 3Q05 earnings
release, presently scheduled for release in February 2006.

Page 1 of 7

IIJ 2Q05

Akihisa Watai, CFO of IIJ. "We maintain our initial targets at this moment since we generally receive thelargest portion of our SI revenues in the fourth quarter of our fiscal year."

2nd Quarter FY2005 Financial Results
Operating Result Summary

21,80917,991YoY %change19,187 13.7%
16,297 10.4%

3,064

2,708

1H05
Total Revenues
Total Costs
SG&A Expenses andR&D
Operating Income
Net Income

754
1,623

Revenues
Revenues in 2Q05 totaled JPY
11,929 million, an increase of
13.5% from JPY 10,512 million in
2Q04 and an increase of 20.7%
from JPY 9,880 million in 1Q05.

(JPY in millions)

11,9299,873

YoY %change10,512 13.5%
8,854
11.5%

13.1%

1,549

1,376

182 315.0%(9) (18374.4%)

507
1,001

1H04

2Q04

2Q05

12.5%

282 79.8%
229 336.6%

QoQ %Change9,880 20.7%
8,118 21.6%

1Q05

1,516

247 105.7%
623 60.7%

Revenues

Total Re ve nue s
Conne ctivity & V AS
SI
Equipm e nt Sale sConnectivity and Value-added Services("VAS") revenues were JPY 5,767 million in 2Q05,
an increase of 4.7 % from JPY 5,508 million in
2Q04 and almost flat compared to JPY 5,767
million in 1Q05.
Dedicated access service revenues were JPY
2,695 million in 2Q05, a decrease of 4.8%
compared to 2Q04 and a decrease of 1.9%
compared to 1Q05. The decrease was mainly due
to the failure of an increase in revenues frombroadband services to offset a decrease inrevenues from T1 Standard or IIJ Economy.

2Q05

2Q04

11,929
5,767
5,162
1,000

10,512
5,508
3,838
1,166

2.2%

(JPY in millions)YoY %change
13.5%
4.7%
34.5%
(14.2%)

1Q05
9,880
5,767
3,840
273

QoQ %
change
20.7%
0.0%
34.4%
266.0%

Quarterly Total Revenues
14,000(JPY in millions)

12,00010,000
8,000
6,000
4,000
2,000
0
1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05

Connectivity and VAS

SI

Dial-up access service revenues were JPY 683
Equipment Sales
million in 2Q05, a decrease of 7.8% compared to
2Q04 and a decrease of 2.3% compared to 1Q05. The decrease from 2Q04 and 1Q05 is mainly due tothe decrease in revenues from IIJ4U and OEM service revenues.
VAS revenues were JPY 1,459 million in 2Q05, an increase of 19.5% compared to 2Q04 and anincrease of 5.1% compared to 1Q05. The increase compared to 2Q04 and 1Q05 is mainly due to anincrease in revenues from various types of packaged outsource services, such as security, e-mail andweb hosting and network services such as managed router services.
Other revenues were JPY 930 million in 2Q05, an increase of 30.0% compared to 2Q04 and a decreaseof 0.3% compared to 1Q05. The increase from 2Q04 is mainly due to an increase in revenues from
Wide-area Ethernet Services.
SI revenues increased 34.5% to JPY 5,162 million in 2Q05 from JPY 3,838 million in 2Q04 andincreased 34.4% from JPY 3,840 million in 1Q05. The increase from 2Q04 is mainly due to additional
revenues from the purchase of the security system business operations of Yamatane Co. Ltd. in October
2004 and solid growth of revenues from outsourced operations. The increase from 1Q05 is mainly due
to the significant increase in revenues from systems development projects and solid increase ofrevenues from outsourced operations.

Page 2 of 7

IIJ 2Q05

Equipment sales revenues were JPY 1,000 million in 2Q05, a decrease of 14.2% compared to 2Q04
and an increase of 266.0% compared to 1Q05. The increase from 1Q05 is due to the increase of sales of
network equipment related to new system integration projects.
Cost and expense
Cost of revenues was JPY 9,873
million in 2Q05, an increase of
11.5% compared to 2Q04 and anincrease of 21.6% compared to
1Q05.

Cost of Revenues
2Q05

2Q04

9,873
4,988
3,919
966

8,854
4,780
2,983
1,091

Total Cos ts :Conne ctivity & V AS
SI
Equipm e nt Sale s

Cost of Connectivity and VAS
revenues was JPY 4,988 million, an increase of
4.3% compared to 2Q04 and almost flat comparedto 1Q05. The increase from 2Q04 is mainly due toan increase in personnel expenses and cost for
local access lines for Wide-area Ethernet Services.
The gross-margin ratio for Connectivity and VAS in
2Q05 was 13.5%, compared to 13.2% in 2Q04 and13.9% in 1Q05. The improvement from 2Q04 was
mainly due to an increase in revenues fromhigher-margin VAS, and a decrease in backbone
costs.

(JPY in millions)YoY %change
11.5%
4.3%
31.4%
(11.4%)

1Q05
8,118
4,964
2,910
244

QoQ %
change
21.6%
0.5%
34.7%
296.4%

Quarterly Cost and Gross Margin Ratio
30.0%

12,000(JPY in millions)

10,000

25.0%

8,000

20.0%

6,000

15.0%

4,000

10.0%

2,000

5.0%
0.0%

0
1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

3Q05

4Q05

Cost of SI revenues was JPY 3,919 million in
Cost of Connectivity and VAS (Gross Margin Ratio)
2Q05, an increase of 31.4% compared to 2Q04
Cost of SI Cost (Gross Margin Ratio)
and an increase of 34.7% compared to 1Q05. The
Cost of Equipment Sales
gross margin ratio for SI in 2Q05 was 24.1%,
compared to 22.3% in 2Q04 and 24.2% in 1Q05. The improvement in margin compared to 2Q04 was
mainly due to the increase in higher-margin systems integration contracts.
Sales and marketing expenses were JPY 800 million in 2Q05, an increase of 12.4% compared to
2Q04 and an increase of 4.1% compared to 1Q05. The increase from 2Q04 is mainly due to an increasein advertising and personnel expenses. The increase from 1Q05 is mainly due to an increase inadvertising expenses.
General and administrative expenses were JPY 699 million in 2Q05, an increase of 14.1% comparedto 2Q04 and a decrease of 2.1% compared to 1Q05. The increase from 2Q04 is mainly due to anincrease in personnel expenses.
Operating income
Operating income was JPY 507 million in 2Q05,
compared to JPY 282 million in 2Q04 and JPY 247
million in 1Q05. The increase from 2Q04 and 1Q05
was mainly due to increased gross-margins inConnectivity, VAS and SI.
Other income (expenses) in 2Q05 was otherincome of JPY 590 million, compared to otherexpenses of JPY 10 million in 2Q04 and otherincome of JPY 435 million in 1Q05. The increase
from 2Q04 and 1Q05 is mainly due to an increase ingain from sale of available-for-sale securities. The
differences from 2Q04 also include the absence ofinterest payments for the convertible notes due
March 31, 2005.

Quarterly Operating Income (Loss)
1,500(JPY in millions)

1,300
1,100
900
700
500
300
100
(100)
(300)
1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05

Income tax expense for 2Q05 was JPY 44 million, compared to JPY 16 million in 2Q04 and JPY 38

Page 3 of 7

IIJ 2Q05

Quarterly Net Income (Loss)million in 1Q05.
3,000(JPY in millions)

Equity in net income of equity method
investees amounted to JPY 30 million in 2Q05,
compared to JPY 16 million in 2Q04 and JPY 3
million in 1Q05.

2,000

1,000

Net income was JPY 1,001 million in 2Q05,
compared to JPY 229 million in 2Q04 and JPY 623
million in 1Q05. The increase from 2Q04 and 1Q05
is mainly due to the increase in operating income,and an increase in gain from sale of available-forsale securities.

0(1,000)
1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05

2nd Quarter FY2005 Business Review
Analysis by Service
Connectivity and Value-added Services
Number of Contracts for Connectivity Services
Dedicated Access Service Contracts
IP Service (Low Bandwidth: 64kbps-768kbps)3
IP Service (Medium Bandwidth: 1Mbps-99Mbps) 3
IP Service (High Bandwidth: 100Mbps-)
IIJ T1 Standard and IIJ Economy
IIJ Data Center Connectivity Service
IIJ FiberAccess/F and IIJ DSL/F(Broadband Services)
Dial-up Access Service Contracts
Dial-up Access Services, under IIJ Brand
Dial-up Access Services, OEM4
Total Contracted Bandwidth

2Q05
12,702
61
637
143
182
234

2Q04
8,880
71
597
93
358
225

1Q05
12,274
65
637
131
208
234

11,445

7,536

10,999663,527
64,810598,717151.0Gbps

711,637
70,629641,008
104.9Gbps

677,207
66,125611,082
140.9Gbps

For the total number of contracts for dedicated access services, we continued a growth trend in 2Q05. In
IP Services, which are mainly used for critical services for corporate customers, contracts for 100Mbps
and higher increased significantly, and we increased the number of contracts for 1Gbps to 43 in 1Q05,
from 33 in the previous quarter. The number of contracts for broadband services also continued toincrease along with the increased systems integration projects for site connectivity.
Connectivity and VAS Revenue Breakdown and Cost

3,378
2,695
2,121
113

3,572
2,832
2,222
228

YoY %
Change(5.4%)(4.8%)(4.6%)(50.3%)

461

382

683
457
226
1,459

740
501
239
1,220

2Q05
Connectivity Service Revenues
Dedicated Access Service Revenues
IP Service 5
IIJ T1 Standard and IIJ Economy
IIJ FiberAccess/F and IIJ DSL/F(Broadband Services)
Dial-up Access Service Revenues
Under IIJ Brand
OEM
VAS Revenues

2Q04(JPY in millions)

3,446
2,747
2,166
134

QoQ %
change(2.0%)(1.9%)(2.1%)(15.7%)

20.7%

447

3.3%

(7.8%)(8.9%)(5.4%)
19.5%

699
466
233
1,388

(2.3%)(2.0%)(3.0%)
5.1%

1Q05

3

Including IPv6 Services.
OEM indicates Original Equipment Manufacturer.
5
IP Service revenues includes revenues from Data Center Connectivity Service.
4

Page 4 of 7

IIJ 2Q05

Other Revenues
Total Connectivity and VAS Revenues
Cost of Connectivity and VAS
Backbone Cost (included in the costof Connectivity and VAS)
Connectivity and VAS Gross Margin Ratio

930
5,767
4,988

716
5,508
4,780

30.0%
4.7%
4.3%

933
5,767
4,964

(0.3%)
0.0%
0.5%

846

877

(3.5%)

864(2.0%)

13.5%

13.2%

13.9%

VAS revenues increased reflecting an increase in revenues from various types of packaged outsource
services.
Other revenues also increased steadily, mainly due to an increase in revenue from Wide-area Ethernet
services in year-over-year comparison.

Backbone costs declined in 2Q05 by 3.5% compared to 2Q04 and by 2.0% compared to 1Q05.
Systems Integration
Systems Integration
Revenue Breakdown and Cost
2Q05
Systems Integration Revenues
Systems Integration
Outsourced Operation
Cost of Systems Integration
Systems Integration Gross Margin Ratio

5,162
2,405
2,757
3,919
24.1%

(JPY in millions)

YoY %
QoQ %
1Q05
Changechange3,838
34.5% 3,840
34.4%
2,101
14.5% 1,193 101.5%
1,737
58.7% 2,647
4.2%
2,983
31.4% 2,910
34.7%
22.3%
24.2%

2Q04

Our SI projects are becoming bigger in scale as we include the whole stream of consulting, design,
project management, implementation and operation. In 2Q05, SI revenues increased significantly due toan increase in SI development, and revenues from outsourced operations continued to increase steadily.
In addition, the increase from 2Q04 reflected additional revenues from the purchase of the security
system business operations of Yamatane Co. Ltd. ("Yamatane").
Equipment Sales

Equipment Sales Revenue and Cost
2Q05

Equipment Sales Revenues
Cost of Equipment Sales
Equipment Sales Gross Margin Ratio

1,000
966
3.5%

(JPY in millions)

YoY %
QoQ %
1Q05
changechange1,166 (14.2%)
273 266.0%
1,091 (11.4%)
244 296.4%
6.5%
10.9%

2Q04

Other Financial Statistics
Other Financial Statistics
2Q05
Adjusted EBITDA6
CAPEX, including capital leases7
Depreciation and amortization8

1,517
795
1,010

(JPY in millions)

YoY %
QoQ %
1Q05
changeChange1,275
19.0% 1,261
20.4%
1,345 (40.9%)
533
49.1%
1,012
(0.1%) 1,014 (0.4%)

2Q04

Major Topics
ADS ratio change and stock split:
On October 11, 2005, IIJ conducted a change in the ratio of its American Depositary Shares ("ADSs") tothe shares of common stock of IIJ ("Shares") from 1 ADS = 1 / 2,000 of a Share to 1 ADS = 1 / 400 of a6

Please refer to the Reconciliation of Non-GAAP Financial Measures on the next page.
Please refer to the Reconciliation of Non-GAAP Financial Measures on the next page.
8
Depreciation and amortization includes amortization of issuance cost of convertible notes in 2Q04.
7

Page 5 of 7

IIJ 2Q05

Share. IIJ also conducted a stock split (1 to 5) of Shares on the same day as the payable date.
IIJ Group to complete corporate reorganization:
In August 2005, IIJ Group announced a corporate reorganization to streamline its delivery of total
network solutions. With the reorganization, IIJ Media Communications Inc. transferred its systems
integration business to IIJ Technology Inc. ("IIJ-Tech") and integrated its broadcasting business andapplication hosting business with IIJ through a merger. At the same time, Asia Internet Holding Co., Ltd.
merged with IIJ. In October 2005, IIJ Group announced that the reorganization had been completed.
Introduction of RFID Solution:
In September 2005, IIJ announced the October 2005 release of the IIJ EPC Network Service that isbased on the EPCglobal Network international standard. Radio Frequency Identification ("RFID") is an
information exchange technology that uses radio IC tags. It provides the system components necessary
to record, reference, and update RFID tag information over the Internet.
IIJ-Tech to make investment in IPMobile incorporated:
In September 2005, IIJ announced that the Board of Directors of IIJ-Tech decided to purchase stockfrom IPMobile Incorporated ("IPMobile") as part of a private placement to third-parties. IIJ-Tech's
participation was JPY 50 million, of the total value of the third-party stock allocation by IPMobile of JPY
875 million.
Reconciliation of Non-GAAP Financial Measures
The following table summarizes the reconciliation of adjusted EBITDA to net income according to theconsolidated statements of operations that are prepared in accordance with accounting principles
generally accepted in the U.S. and presented in Appendix 1:
Adjusted EBITDA(JPY in millions)

Adjusted EBITDA
Depreciation and Amortization9
Operating Income
Other Income (Expenses)
Income Tax Expense
Minority Interests in (Earnings) Losses of
Subsidiaries
Equity in Net Income (Loss) of Equity Method
Investees
Net Income (Loss)

2Q04
1Q05
2Q05
1,275
1,261
1,517
(993) (1,014)(1,010)
282
247
507
(10)
435
590
16
38
44
(82)

(43)

(24)

30

16

3

1,001

229

623

The following table summarizes the reconciliation of capital expenditures to the purchase of property
and equipment according to the consolidated statements of cash flows that are prepared and presented
in accordance with accounting principles generally accepted in the U.S. in Appendix 3:
CAPEX
Capital Expenditures
Acquisition of Assets by Entering into
Capital Leases
Purchase of Property and Equipment(JPY in millions)

2Q04
1Q05
2Q05
1,345
533
795
681

1,294

320

114

51

213

TargetOur initial target for the interim and annual fiscal year and the interim results were as follows:9
Depreciation and amortization excludes amortization of issuance cost of convertible notes that was included in otherexpenses in 2Q04.

Page 6 of 7

IIJ 2Q05

Total Revenues
Operating Income
Net Income

TargetAnnounced on
May 27, 2005
19,980
550
1,320

1H05
21,809754
1,623

AnnualTarget46,3302,320
3,700

Since we generally receive the largest portion of our SI revenues in the fourth quarter of our fiscal year,
we maintain the initial annual target we announced on May 27, 2005.

Presentation
On November 9, 2005, IIJ will put a presentation of its results on its website. For details, please accessthe following URL: http://www.iij.ad.jp/en/IR/

About Internet Initiative Japan Inc.
Founded in 1992, Internet Initiative Japan Inc. (IIJ, NASDAQ: IIJI) is one of Japan's leading Internetaccess and comprehensive network solutions providers. The company has built one of the largest
Internet backbone networks in Japan, and between Japan and the United States. IIJ and its group ofcompanies provide total network solutions that mainly cater to high-end corporate customers. The
company's services include high-quality systems integration and security services, Internet access,hosting/housing, and content design.

For inquiries, contact:
Taisuke ONO, Naoshi YONEYAMAIIJ Corporate Communications
Tel: +81-3-5259-6500 E-mail: ir@iij.ad.jp URL: http://www.iij.ad.jp/

Statements made in this press release regarding IIJ’s or management’s intentions, beliefs, expectations, orpredictions for the future are forward-looking statements that are based on IIJ’s and managements’ current
expectations, assumptions, estimates and projections about its business and the industry. These forwardlooking statements, such as statements regarding FY2005 revenues and operating and net profitability, aresubject to various risks, uncertainties and other factors that could cause IIJ’s actual results to differ materiallyfrom those contained in any forward-looking statement. These risks, uncertainties and other factors include:
IIJ’s ability to maintain and increase revenues from higher margin services such as system integration andvalue-added services; the possibility that revenues from connectivity services may decline substantially as aresult of competition and other factors; the ability to compete in a rapidly evolving and competitivemarketplace; the impact on IIJ's profits of fluctuations in costs such as backbone costs and subcontractor
costs; the impact on IIJ's profits of fluctuations in the price of available-for-sale securities; the impact oftechnological changes in its industry; IIJ’s ability to raise additional capital to cover its indebtedness; thepossibility that NTT, IIJ’s largest shareholder, may decide to exercise substantial influence over IIJ; and otherrisks referred to from time to time in IIJ’s filings on Form 20-F of its annual report and other filings with theUnited States Securities and Exchange Commission.

Tables to follow

Page 7 of 7

IIJ 2Q05

INTERNET INITIATIVE JAPAN INC.
CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)Appendix 1

For the Three Months Ended Sep 30, 2005, Sep 30, 2004 and Jun 30, 2005
(1)
(Expressed in Thousands of Japanese Yen (JPY) and U.S. Dollars (USD) Except for Per Share and ADS Data)
Year-over-year Comparison
Sequential Comparison
Sep 30, 2005
Sep 30, 2004
Jun 30, 2005
% of
% of
% of
Total
Total
YOY
Total
QOQ
JPY
Revenues
JPY
Revenues
Chg %JPY
Revenues
Chg %USD (1)
Revenues:
Connectivity and value-added services:
Dedicated access services
Dial-up access services
Value-added services
Other
Total connectivity and value-added services

23,791
6,024
12,8758,211
50,901

2,695,325
682,439
1,458,557
930,205
5,766,526

22.6%
5.7
12.2
7.8
48.3

2,832,355
739,957
1,220,119
715,617
5,508,048

27.0%
7.0
11.6
6.8
52.4

(4.8%)
(7.8)
19.5
30.0
4.7

2,746,900
698,670
1,387,893
933,120
5,766,583

27.8%
7.1
14.1
9.4
58.4

(1.9%)
(2.3)
5.1
(0.3)
(0.0)

45,561
8,833
105,295

5,161,600
1,000,701
11,928,827

43.3
8.4
100.0

3,837,711
1,166,569
10,512,328

36.5
11.1
100.0

34.5
(14.2)
13.5

3,840,075
273,438
9,880,096

38.9
2.7
100.0

34.4
266.0
20.7

Costs and expenses:
Cost of connectivity and value-added services
Cost of systems integration revenues
Cost of equipment sales
Total costs

44,02934,591
8,527
87,147

4,987,986
3,918,774
966,095
9,872,855

41.8
32.9
8.1
82.8

4,780,268
2,982,577
1,090,870
8,853,715

45.5
28.3
10.4
84.2

4.3
31.4
(11.4)
11.5

4,963,835
2,910,262
243,699
8,117,796

50.2
29.5
2.5
82.2

0.5
34.7
296.4
21.6

Sales and marketing
General and administrative
Research and development
Total costs and expenses

7,058
6,171
441
100,817799,562
699,166
49,947
11,421,530

6.7
5.8
0.4
95.7

711,661
612,526
52,237
10,230,139

6.8
5.8
0.5
97.3

12.4
14.1
(4.4)
11.6

767,801
713,91733,904
9,633,418

7.8
7.2
0.3
97.5

4.1
(2.1)
47.3
18.6

Operating income

4,478

507,297

4.3

282,189

2.7

79.8

246,678

2.5

105.7

Other income (expenses)

5,204

589,617

4.9(10,188)(0.1)(5,887.4)

435,233

4.4

35.5

Income before income tax expense, minority interest
and equity in net income of equity method investee

9,682

1,096,914

9.2

272,001

2.6

303.3

681,911

6.9

60.9

Income tax expense
Minority interests in earnings of subsidiarie
Equity in net income of equity method investee

387
(722)
260

43,900(81,777)
29,403

0.4
(0.7)
0.3

15,506(42,837)
15,548

0.1
(0.4)
0.1

183.1
90.9
89.1

38,111(23,855)
2,729

0.4
(0.2)
0.0

15.2
242.8
977.4

Net income

8,833

1,000,640

8.4%

229,206

2.2%

336.6%

622,674

6.3%

60.7%

Systems integration revenues
Equipment sales
Total revenues

Basic Net Income Per Share
Diluted Net Income Per Share
Basic Net Income Per ADS Equivalen
Diluted Net Income Per ADS Equivalen
Weighted Average Number of Share
Weighted Average Number of Shares (including potential share
Weighted Average Number of ADS Equivalents
Weighted Average Number of ADS Equivalents (including potential share

26,12826,08713.06
13.04
38,29838,35876,595,702
76,715,032

5,983

16,2542.99

8.13

38,31238,30976,623,702

76,618,779

Note (1): The translations of Japanese yen amounts into US dollar amounts with respect to the three months ended Sep 30, 2005 are included solely for the convenience of readers outside Japanand have been made at the rate of JPY 113.29 =$1, the approximate rate of exchange on Sep 30, 2005.

INTERNET INITIATIVE JAPAN INC.
CONSOLIDATED BALANCE SHEETS(UNAUDITED)Appendix 2

As of Sep 30, 2005, Sep 30, 2004 and Jun 30, 2005
(Expressed in Thousands of Japanese Yen (JPY) and U.S. Dollars (USD)) (1)
Sep 30, 2005
Sep 30, 2004

Jun 30, 2005

USD (1)

JPY

%

JPY

%

JPY

%

61,37859,007
2,527
8,737
1,282

6,953,496
6,684,910
286,367
989,785
145,243

19.3%
18.5
0.8
2.7
0.4

11,802,165
6,739,000
262,180
652,061
106,364

27.4%
15.6
0.6
1.5
0.3

5,106,388
304,628
5,792,808
265,286
1,263,409
80,797

15.1%
0.9
17.2
0.8
3.8
0.2

132,931

15,059,801

41.7

19,561,770

45.4

12,813,316

38.0

3,996
71,04480,704
18,537
11,621

452,702
8,048,512
9,142,951
2,100,008
1,316,561

1.3
22.3
25.3
5.8
3.6

783,933
10,657,082
9,045,349
2,080,345
963,895

1.8
24.7
21.0
4.8
2.3

677,035
7,882,229
9,155,981
2,091,237
1,124,441

2.0
23.4
27.1
6.2
3.3

318,833

36,120,535

100.0%

43,092,374

100.0%

33,744,239

100.0%

43,447
13,40345,953
4,554
6,975
22,403
23,9744,922,177
1,518,400
5,205,982
515,976
790,1942,537,997

5,732,204
816,800
4,502,356
448,585
604,868
1,650,139
11,088,000
2,491,070

13.3%
1.9
10.5
1.0
1.4
3.8
25.7
5.8

4,723,387
1,530,400
3,665,233
523,478
918,829
3,187,023

2,716,030

13.6%
4.2
14.4
1.5
2.2
7.0
7.5

2,718,759

14.0%
4.5
10.9
1.6
2.7
9.4
8.1

Total current liabilities

160,70918,206,756

50.4

27,334,022

63.4

17,267,109

51.2

Long-term Borrowings
Capital Lease Obligations-Noncurrent
Accrued Retirement and Pension Costs
Other Noncurrent Liabilities

9,361
34,3971,600
3,418

1,060,476
3,896,848
181,289
387,259

2.9
10.8
0.5
1.1

1,732,473
3,620,613
102,224
300,190

4.0
8.4
0.3
0.7

870,3423,950,359
169,460
246,818

2.6
11.7
0.5
0.7

209,485

23,732,628

65.7

33,089,522

76.8

22,504,088

66.7

8,896

1,007,787

2.8

945,572

2.2

1,053,212

3.1

Shareholders' Equity:
Common stock
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive income
Treasury stock

121,506
208,647(289,617)
60,659(743)

13,765,372
23,637,628(32,810,738)
6,872,096(84,238)38.1
65.4(90.8)
19.0(0.2)

13,765,372
23,637,628(37,349,204)
9,047,484(44,000)

31.9
54.9(86.7)
21.0(0.1)

13,765,372
23,637,628(33,811,378)
6,679,555(84,238)40.8
70.0(100.2)19.8(0.2)

Total shareholders' equity

100,452

11,380,120

31.5

9,057,280

21.0

10,186,939

30.2

Total liabilities and shareholders' equity

318,833

36,120,535

100.0%

43,092,374

100.0%

33,744,239

100.0%ASSETS
Current Assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Inventories
Prepaid expenses
Other current assets
Total current assets
Investments in and Advances to Equity Method Investees
Other Investments
Property and Equipment, net
Guarantee Deposits
Other Assets
Total assets
LIABILITIES ANDSHAREHOLDERS' EQUITYCurrent Liabilities:
Short-term borrowings
Payable under securities loan agreement
Accounts payable
Accrued expenses
Other current liabilities
Long-term borrowings-current portion
Convertible notes
Capital lease obligations-current portion

Total liabilities
Minority Interest-

Note (1): The translations of Japanese yen amounts into US dollar amounts with respect to Sep 30, 2005 are included solely for the convenience of readers outside Japanand have been made at the rate of JPY 113.29 =$1, the approximate rate of exchange on Sep 30, 2005.

-

INTERNET INITIATIVE JAPAN INC.

Appendix 3

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS（UNAUDITED）
For the Three Months Ended Sept 30, 2005, Sept 30, 2004 and Jun 30, 2005
(Expressed in Thousands of Japanese Yen (JPY) and U.S. Dollars (USD)) (1)Sept 30, 2005
USD (1)

JPY

Sept 30, 2004

Jun 30, 2005

JPY

JPY

Operating Activities:
Net income

8,832

1,000,640

229,206

622,674

Depreciation and amortization

8,916

1,010,139

1,011,532

1,013,745

Provision for (reversal of) doubtful accounts(15)(1,673)

19,968(5,339)Equity in net income of equity method investees(260)(29,403)(15,548)(2,729)Minority interests in earnings of subsidiaries

722

81,777

42,83723,855(36)(4,131)(14,152)(6,278)(5,826)(660,039)(98,103)(488,758)

Foreign exchange gains
Net gains on other investments
Decrease (increase) in accounts receivable(7,033)(796,785)(1,396,506)

1,621,419

Increase (decrease) in accounts payable

11,2281,272,038

566,837(1,132,992)

Decrease (increase) in inventories(186)(21,081)

149,969(125,190)

Deferred income taxes(94)(10,681)-

18,343

Other

1,136

128,646

542,953(511,252)

Net cash provided by operating activities

17,384

1,969,447

1,038,993

1,027,498

Purchase of property and equipment(1,008)(114,208)(51,435)(213,485)

Purchase of subsidiary stock(1,696)(192,142)--

Proceeds from sales and redemption of short-term and other investments

8,663

981,420

125,281

514,460

Acquisition of a newly controlled company, net of cash acquired

2,025

229,457

-

-

(7)

(844)

(3,083)(299,311)(39,210)Investing Activities:

Purchase of short-term and other investments
Payment of guarantee deposits-net(64)(7,256)(19,193)

Other

(68)

(7,655)904(5,450)7,845

888,772

52,474(42,996)

Net cash provided by (used in) investing activities
Financing Activities:
Proceeds from long-term borrowings

8,827

1,000,000

1,000,000-

Repayments of long-term borrowings(12,878)(1,458,892)(1,436,943)(208,654)

816,800

Proceeds from securities loan agreement

15,313

1,734,800

Repayments of securities loan agreement(15,419)(1,746,800)-(199,120)

Principal payments under capital leases(6,609)(748,762)(688,418)(766,807)

Net increase (decrease) in short-term borrowings

1,755

198,790369,203(1,246)

Net cash provided by (used in) financing activities(9,011)(1,020,864)

60,642(1,175,827)

86

9,753

22,853

11,236Net Increase (Decrease) in Cash

16,304

1,847,108

1,174,962(180,089)

Cash , Beginning of Period

45,074

5,106,388

10,627,203

5,286,477

Cash, End of Period

61,378

6,953,496

11,802,165

5,106,388

Effect of Exchange Rate Changes on Cash-

Note (1): The translations of Japanese yen amounts into US dollar amounts with respect to the three months ended Sept 30, 2005 are include
solely for the convenience of readers outside Japan and have been made at the rate of JPY113.29 =$1, the approximate rate ofexchange on Sept 30, 2005.