Internet Initiative Japan Inc.
http://www.iij.ad.jp/
2003 年 11 月 21 日
株式会社インターネットイニシアティブ
Tel. 03-5259-6500
Fax. 03-5259-6311
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 ページ目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。

2003 年度第 2 四半期（7-9月）決算発表（抄訳）
四半期（
本決算発表に関するカンファレンス・コールの模様を 2003 年 11 月 21 日 23:00 よりインター
ネット上（URL:
www.vcall.com）で公開しております。
）で公開しております。
ネット上（2003 年度第 2 四半期（7-9月）決算発表 要約
四半期（

2003 年度第 2 四半期
・ 2003 年度第 2 四半期の売上高は、システム・インテグレーション（SI）およびデータセンター、その他付加価値サービスでの売上回復により、前期比 10.1%増の 9,185 百万円となった（前年同期比では 13.1%減）。
・ 営業損失は SI の利益率改善と国内バックボーンコストの見直し等により、830 百万円と前期の 1,206 百万円から減少した（前年同期は 194 百万円）。また（株）クロスウェイブ コミュニケーションズ（以下クロスウェイブ）に関する売掛金等（更生債権部分）287 百万円を全額処理した。
・ 償却前営業利益（Adjusted EBITDA）は 126 百万円と、前期の▲243 百万円から改善したが、前年同期の662 百万円よりは低い水準となった。
・ クロスウェイブの会社更生手続申請による、クロスウェイブに関する投融資、売掛金などの損失処理は上記の売掛金の損失処理によってすべて終了した。クロスウェイブに対する持分法適用の終了により、当期損失は前年同期の 2,326 百万円から 278 百万円へ大幅に改善した。従来 IIJ の財務諸表に大きな影響を与えていたクロスウェ
イブからの持分法損失は今後発生しない見込みである。
・ 2003 年 9 月 16 日付けにて NTT グループ（日本電信電話株式会社及びエヌ・ティ・ティ・コミュニケーションズ株式会社）、伊藤忠商事株式会社及び住友商事株式会社、その他 3 社を割当先とする約 120 億円の第三者割当
増資の払込手続が完了した。本増資により、クロスウェイブの会社更生手続開始に伴う財務損失を補い、財務基盤を強化した結果、債務超過状態は解消した。
・

米国ナスダック市場への登録については、米国ナスダック（以下ナスダック）より登録廃止を示唆する通知を受領したものの、ナスダックのパネルによるレビュー手続の結果、ナスダックより登録継続決定の通知を受領した。ティッカーシンボルの末尾への"E"の付与については、登録継続の決定とは別に、2003 年 3 月期の年次報告書に付与された監査人のクロスウェイブに関する意見の限定状態が回復するまで、継続される見込み。

業績見通し
・ SI の利益率改善と売上高の拡大により、営業損益ベースで第 3 四半期はブレークイーブン、第 4 四半期は黒字化を見込む。また第 3 四半期にはディーエルジェイディレクト・エスエフジー証券株式会社の株式売却益約 16 億円および 2005 年償還の円建転換社債買入消却による利益約 1.2 億円が計上される見込み。

IIJ 2Q03

Internet Initiative Japan Inc.
http://www.iij.ad.jp/
概況
事業動向
ブロードバンド化の進展やネットワークの複雑化といった昨今のネットワーク環境の急激な変化により、インターネット
接続も含め企業の社内ネットワークに対する投資の必要性についての認識は高まっており、日本経済が回復の兆しを見せる中で、これらの投資を取り巻く環境も今後改善していくものと認識している。IIJ ではこれに対応して「ネットワーク・インテグレーション」という新しいコンセプトのもと、拠点間接続の高速化やコスト低減の実現、インターネット向け
トラフィックに対するセキュリティの確保、システム運用のアウトソース請負など、企業内ネットワーク向け SI サービスの充実を図っている。すでにいくつかの案件を受注しており、SI の利益率が改善しているほか、これら受注案件の売上も第 3 四半期に継続して計上されるものと理解している。今後接続系サービスの利用顧客に対してこれらの新しいサービスを販売し、より利益率の高い売上基盤の拡大に努めることで、今年度下半期での営業損益の黒字化を目指したい。
また 2003 年 9 月 16 日に払込手続が完了した第三者割当増資により、NTT グループが筆頭株主となったが、今後
IIJ の経営の独立性は維持されつつ、技術開発や営業分野で協力関係を構築していくことを予定している。
今回の増資により、クロスウェイブの会社更生手続開始に伴う財務損失は補われたと認識しており、またこれに関する
クロスウェイブへの投融資、売掛金などの損失処理は第 2 四半期で終了している。従来 IIJ の財務諸表に大きな影響を与えていたクロスウェイブからの持分法損失は今後発生しない見込みである。

サービス動向インターネット接続分野では、インターネット VPN 技術による拠点間接続のアクセス回線としてのブロードバンドサー
ビス利用といった新たな需要が見られる。すでに 100 ヶ所以上の拠点を接続する案件をいくつか受注しており、これらの需要が接続系サービスの売上維持や、関連したネットワーク・インテグレーション、機器販売の売上増加に寄与すると期待している。
SI 分野では、製造業や金融業を中心にいくつかのネットワーク・インテグレーション案件を受注しており、電子メールのウィルスチェック、監査*、記録を請け負う「Mail ゲートウェイサービス」や、ホームページへの接続を記録・制限する「Web ゲートウェイサービス」、ネットワーク運用のアウトソースならびにネットワークの災害対策に関するコンサルティン
グなどとなっている。またデータベースサーバ、ウェブサーバ、データストレージやファイアウォールなど、機器販売の売上も増加している。
*

事前にネットワーク管理者がキーワードを設定しておき、そのキーワードが含まれている電子メールを管理者が許可するまで送信保留にすることで、情報の外部漏洩などを防止する機能（ご参考）統計値について
表 1.営業収益の内訳
営業収益の内訳

（百万円）
前年

2Q03

2Q02

3,236
784
4,020
1,081
536

3,546
792
4,338
893
468

インターネット接続及び付加価値サービス収入合計

5,637

5,699

システムインテグレーション
機器販売

2,549
999
9,185

3,094 (17.6%)
1,775 (43.7%)
10,568 (13.1%)

インターネット接続及び付加価値サービス：
専用線接続サービス
ダイアルアップ接続サービス
インターネット接続サービス収入合計
付加価値サービス
その他

営業収益合計1Q03

前期比(8.7%)(1.0%)(7.3%)
21.0%
14.6%

3,321
768
4,089
987
520

(2.6%)
2.1%(1.7%)
9.5%
3.2%(1.1%)

5,596

0.7%

同期比

2,408
5.9%
340 193.2%
8,344 10.1%

IIJ 2Q03

Internet Initiative Japan Inc.
http://www.iij.ad.jp/
表 2. 専用線接続サービスの売上高内訳（百万円）

IP サービス＋インターネットデーターセンター接続サービス
その他
専用線接続サービス合計

2Q03

2Q02

2,485

2,657

751
3,236

889
3,546

1Q03

前期比

(6.5%)

2,534(2.0%)(15.4%)(8.7%)

787
3,321(4.5%)(2.6%)

前年同期比

表 3. 契約数
IP サービス

64kbps – 128kbps
192kbps – 768kbps
1Mbps – 2Mbps
3Mbps – 1.2Gbps
1
インターネットデータセンター接続サービス契約数2
その他
専用線接続サービス合計
IIJ4U （個人向けダイアルアップ接続サービス）
その他ダイアルアップ接続サービス
ダイアルアップ接続サービス合計

2Q03
79
23
226
336
184
5,402
6,250
72,560563,086
635,646

2Q02
111
30
266
205
129
3,568
4,309
84,432309,950
394,382

2Q03
51.6
15.1
66.7

2Q02
18.0
4.7
22.7

表 4. 契約帯域数の総和

契約帯域合計
表 5．付加価値サービスの売上高内訳．付加価値サービスの売上高内訳

付加価値サービス合計

90
26
239
294
171
5,056
5,876
76,209515,363591,572（単位：Gbps）

専用線接続サービス
インターネットデータセンター接続サービス

インターネットデータセンターサービス
その他付加価値サービス

1Q03

1Q03
41.1
10.3
51.4
（百万円）

2Q03
371
710
1,081

2Q02
371
522
893

前年同期比

0.0%
36.0%
21.0%

表 6．営業費用．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

1Q03
337
650
987

前期比

10.1%
9.2%
9.5%
（百万円）

2Q03
5,127
2,275
935
8,337
1,100
482
96
10,015

2Q02 前年同期比
5,081
0.9%
2,682 (15.1%)
1,648 (43.3%)
9,411 (11.4%)
743
47.9%
514
(6.2%)
94
2.7%
10,762(6.9%)

1

インターネットデータセンター接続サービスに、ホスティングサービスは含まれていない。

2

その他： IIJ FiberAccess/F、IIJ Ethernet Standard、 IIJ DSL/F、IIJT1 スタンダード、IIJ エコノミー。

前期比
1Q03
5,234
(2.1%)
2,324(2.1%)
311 200.6%
7,869
6.0%
973
13.0%
612 (21.2%)
96
0.0%
9,550
4.9%

IIJ 2Q03

Internet Initiative Japan Inc.
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表 7. バックボーンコスト
国際バックボーンコスト
国内バックボーンコスト

（百万円）

2Q03
247
993

2Q02
448
815

前年同期比

2Q03
126
579
984

2Q02
662
1,504
884

前年同期比

(44.8%)
21.9%

表 8. 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）
3
減価償却費

1Q03
261
1,057

前期比

(5.2%)(6.0%)（百万円）

81.0%(61.5%)
11.3%

1Q03
前期比
(243) (152.0%)
1,421(59.2%)
990(0.7%)

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。このプレゼンテー
ション資料の記載のうち、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 経営陣の仮定およ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およ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。

3

減価償却費は転換社債発行費用の償却額を含む。

IIJ 2Q03

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

2003年
年9月期、
月期、2002年
年9月期、月期、2003年
年6月期
月期
月期、
月期、
JPY/千円単位、
千円単位、USD/千米ドル単位
千米ドル単位 (1)千円単位、前年同四半期比較
2003年9月期
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

対営業収益
%

JPY

2002年9月期
対営業収益%

対前年同四半期%

JPY

前四半期比較
2003年6月期
対営業収益 対前四半期%%

29,044
7,032
9,700
4,814
50,5903,236,405
783,589
1,080,876
536,389
5,637,259

35.2%
8.5
11.8
5.9
61.4

3,546,372
791,738
893,135
467,976
5,699,221

33.6%
7.5
8.4
4.4
53.9

(8.7%)
(1.0)
21.0
14.6
(1.1)

3,321,229
767,418
987,198
519,7095,595,554

39.8%
9.2
11.9
6.2
67.1

(2.6%)
2.1
9.5
3.2
0.7

22,8798,962
82,4312,549,379
998,6219,185,259

27.7
10.9
100.0

3,094,168
1,774,953
10,568,342

29.3
16.8
100.0

(17.6)(43.7)(13.1)

2,407,923
340,569
8,344,046

28.8
4.1
100.0

5.9
193.2
10.1

46,00820,423
8,388
74,8195,126,708
2,275,704
934,7118,337,123

55.8
24.8
10.2
90.8

5,081,186
2,681,946
1,648,106
9,411,238

48.1
25.3
15.6
89.0

0.9
(15.1)(43.3)(11.4)

5,234,158
2,323,392
310,946
7,868,496

62.7
27.9
3.7
94.3

(2.1)
(2.1)
200.6
6.0

9,868
4,327
863
89,877

1,099,560
482,218
96,11810,015,019

12.0
5.2
1.0
109.0

743,230
514,082
93,574
10,762,124

7.0
4.9
0.9
101.8

47.9
(6.2)
2.7
(6.9)

973,054612,047
96,0989,549,695

11.7
7.3
1.2
114.5

13.0
(21.2)
0.0
4.9

営業損失

(7,446)(829,760)(9.0)(193,782)

(1.8)

328.2

(1,205,649)(14.5)(31.2)

その他の費用

(1,412)(157,294)(1.7)(160,247)

(1.5)

(1.8)

(204,398)(2.4)(23.0)

税引前当期損失(8,858)(987,054)(10.7)(354,029)

(3.3)

178.8

(1,410,047)(16.9)(30.0)

法人税等、住民税及び事業税
少数株主損益持分法による投資利益（損失）：持分法投資利益（損失）
クロスウェイブに対する投資等評価損(5,130)1,677(571,642)
186,931(6.2)
2.0

514,872
23,1464.9
0.2(211.0)707.6(390,035)
254,886

(4.7)
3.0

46.6
(26.7)(448)(49,945)(0.5)(1,480,411)(14.0)(96.6)

10,559(1,719,981)

0.1(20.6)(573.0)(100.0)

当期損失(2,499)(278,426)(3.0%)(2,326,166)(22.0%)(88.0%)(2,474,548)(29.7%)(88.7%)

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

1株あたり当期損失
米国預託証券１単位あたり当期損失
期中平均発行済株式総数
期中平均発行済米国預託証券総数(10,082)(5.04)
27,61755,233,050

注記(1): 2003年9月期につきましては、米ドル換算レート111.43円=1米ドル(2003/9/30)にて参考表示しております。

(103,477)(51.74)
22,48044,960,000(109,440)(54.72)
22,61145,222,494

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）

Appendix 2

2003年
年9月期、
月期、2002年
年9月期、月期、2003年
年6月期
月期
月期、
月期、
JPY/千円単位、
千円単位、USD/千米ドル単位
千米ドル単位 (1)千円単位、USD (1)

2003年9月期
JPY

2002年9月期
JPY
%

資産の部
流動資産：
現金及び現金同等物
売掛金
棚卸資産
前払費用
その他流動資産105,743
60,366
2,410
5,871
4,168

11,782,935
6,726,563
268,519654,269
464,418

30.7%
17.5
0.7
1.7
1.2

4,772,753
7,844,256
415,771498,668
141,923

12.2%
20.1
1.1
1.3
0.3

2,819,007
5,889,315
347,971845,908
534,025

10.2%
21.3
1.3
3.1
1.9

流動資産合計178,558

19,896,704

51.8

13,673,371

35.0

10,436,226

37.8

関連会社投資等
その他投資
有形固定資産等
拘束預金
敷金保証金
その他資産

9,926
49,476
81,744

1,106,062
5,513,137
9,108,783

2.9
14.3
23.7

4.1
14.4
33.5

2,080,764
728,580

5.4
1.9

15.1
9.6
22.1
12.8
3.6
1.8

1,141,728
3,967,719
9,244,442

18,6736,539

5,896,219
3,751,532
8,617,873
5,000,000
1,392,519
706,828

2,082,118
714,367

7.6
2.6

資産合計

344,916

38,434,030

100.0%

39,038,342

100.0%

27,586,600

100.0%

38,633
43,582
4,393
3,685
26,442
23,2304,304,906
4,856,325
489,568
410,577
2,946,377
2,588,505

11.2%
12.6
1.3
1.1
7.7
6.7

4,832,286
5,131,068
271,557
442,564
1,400,000
2,271,145

12.4%
13.1
0.7
1.1
3.6
5.8

5,675,341
4,406,928
537,236542,538
1,545,452
2,677,038

20.6%
16.0
1.9
1.9
5.6
9.7

139,965

15,596,258

40.6

14,348,620

36.7

15,384,533

55.7

長期借入金
転換社債
長期リース債務退職給付引当金
その他固定負債

17,793
134,61428,700626
1,732

1,982,612
15,000,000
3,198,073
69,794
193,043

5.2
39.0
8.3
0.2
0.5

3,400,000
15,000,000
3,250,922
83,058
153,993

8.7
38.4
8.4
0.2
0.4

3,419,555
15,000,000
3,407,735
74,764
187,579

12.4
54.4
12.3
0.3
0.7

負債合計

323,430

36,039,780

93.8

36,236,593

92.8

37,474,166135.8

少数株主持分

3,928

437,678

1.1

942,650

2.4

624,609

2.3

123,534
212,130(335,980)
17,875(1)

13,765,372
23,637,628(37,438,265)
1,991,900
(63)

35.8
61.5
(97.4)
5.2
0.0

7,082,336
17,068,353(23,129,652)
838,06218.1
43.7(59.2)
2.2

7,765,048
17,751,065(37,159,839)
1,131,644
(93)

28.2
64.3
(134.7)
4.1
0.0

資本合計

17,558

1,956,572

5.1

1,859,099

4.8(10,512,175)(38.1)

負債、少数株主持分及び資本合計

344,916

38,434,030

100.0%

39,038,342

100.0%

27,586,600

100.0%%

2003年6月期
JPY%

負債及び資本の部
流動負債：
短期借入金
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
短期リース債務
流動負債合計資本：
資本金 (2)
資本準備金 (2)欠損金
その他有価証券評価差額金等
自己株式

注記(1): 2003年9月期につきましては、米ドル換算レート111.43円=1米ドル(2003/9/30)にて参考表示しております。
注記(2): 2003年9月17日付け新規株式12,615株を発行、正味増資額は11,886,887千円です。

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）
2003年
年9月期、
月期、2002年
年9月期、月期、2003年
年6月期
月期
月期、
月期、
JPY/千円単位、
千円単位、USD/千米ドル単位
千米ドル単位 (1)千円単位、

2003年9月期
USD (1)
JPY

2002年9月期
JPY

2003年6月期
JPY

営業活動によるキャッシュフロー：当期損失(2,499)(278,426)(2,326,166)(2,474,548)

減価償却費等

8,828

983,736

883,732

990,190

貸倒引当金繰入（戻入）額2,818

313,968(5,048)149,378

持分法による投資損失（益）448

クロスウェイブに対する投資等評価損
少数株主損益49,945

1,480,411(10,559)---

1,719,981(1,677)(186,931)(23,146)(254,886)

為替差損（差益）

30

3,282

(39,060)

3,245

投資有価証券評価損等

875

97,53013,62037,572

売掛金の減少（増加）額(9,878)(1,100,671)(972,056)

4,229,010

買掛金及び未払金の増加（減少）額

1,941

216,306

7,462(3,671,049)

650

72,432(142,950)

69,689

法人税等調整額(5,182)(577,444)

509,228(395,698)

その他(1,078)(120,151)(3,003)

264,043

営業活動によるキャッシュフロー(4,724)(526,424)(616,976)

656,368

有形固定資産等の取得による支出(1,328)(148,007)(222,308)(933,646)

その他投資の売却による収入

1,101

122,650480

棚卸資産の減少（増加）額

投資活動によるキャッシュフロー：関連会社への投資および貸付

34,672---

短期投資の取得による支出(2,733)(304,517)(33,294)(12,971)

敷金保証金の返還（支出）

11

1,199

(87,518)

123,632

その他
投資活動によるキャッシュフロー(1,719,981)

88

9,875

2,473

11

(2,861)(318,800)(340,167)(2,508,283)

財務活動によるキャッシュフロー：長期借入金の返済による支出
リース債務の元本返済による支出(323)(36,017)-(434,994)(6,025)(671,376)(601,144)(697,830)

282,164

短期借入金の純増減額(12,299)(1,370,436)

普通株式の発行による収入

106,676

11,886,887-

1,365,424

財務活動によるキャッシュフロー

88,0299,809,058(318,980)

1,084,342

現金及び現金同等物に係る換算差額

194

34,183(1,772)

現金及び現金同等物の増加（減少）額

80,445

8,963,928(1,241,940)(769,345)

現金及び現金同等物の期首残高

25,2982,819,007

6,014,693

3,588,352

現金及び現金同等物の期末残高

105,743

11,782,935

4,772,753

2,819,007

注記(1):2003年9月期につきましては、米ドル換算レート111.43円=1米ドル(2003/9/30)にて参考表示しております。

851,742Internet Initiative Japan Inc.
http://www.iij.ad.jp/en/

For Immediate Release
For inquiries please contact:
Taisuke Ono / Hiroaki Tsuno
IIJ Investor/Media Relations Office
ir@iij.ad.jp or +81-3-5259-6500(Tel)

IIJ Announces Second Quarter Results for the Year Ending March 31, 2004
Tokyo, November 21, 2003 / New York, November 20, 2003 -- Internet Initiative Japan Inc. (Nasdaq:
IIJIE) (“IIJ”), one of Japan’s leading Internet access and comprehensive network solutions providers,
today announced its financial results for the 2nd quarter of the fiscal year ending March 31, 2004 ("Fiscal
Year 2003").

Second Quarter FY2003 Highlights1
2nd Quarter FY2003:
・ Revenues totaled JPY 9,185 million ($ 82.4 million), an increase of 10.1% from JPY 8,344 million in
1Q03, though a decrease of 13.1% compared to 2Q02. The increase from 1Q03 is mainly due torevenue increases from Systems Integration ("SI"), Data Center and other value-added services.
・ Operating loss was JPY 830 million ($ 7.4 million), a decrease from 1,206 million in 1Q03 and anincrease from JPY 194 million in 2Q02. The loss includes accounts receivable write-offs of JPY 287
million that related to transactions with Crosswave Communications Inc. ("Crosswave"), a former
equity method affiliate of IIJ. The improvement in operating loss from 1Q03 was mainly due toincreased SI profitability and a reduction of domestic backbone costs.
・ Adjusted EBITDA2 was JPY 126 million ($ 1.1 million), an increase from the JPY 243 million
adjusted EBITDA loss in 1Q03, though a decrease from JPY 662 million in 2Q02.
・ On August 20, Crosswave filed a voluntary petition for the commencement of corporate
reorganization proceedings in Japan. IIJ has written-off all of its investments in, deposits for, loans
to and accounts receivable due from Crosswave regarding the above through the end of thisquarter. As a result of Crosswave no longer being accounted for under the equity method, the net
loss decreased from JPY 2,326 million in 2Q02 to JPY 278 million in 2Q03. IIJ will not have further
equity loss from Crosswave, which in the past had a significant negative impact on IIJ's financial
statements.
・ IIJ completed an approximately JPY 12 billion private placement to NTT Group, Itochu Corporation,
Sumitomo Corporation and three other companies on September 17, 2003. With this capital
injection, the financial impact due to Crosswave's reorganization proceedings has been offset. As aresult, IIJ's shareholders' equity has become positive.
・ IIJ received notice from Nasdaq that IIJ's American Depositary Shares will continue to be listed on
the Nasdaq National Market, subject to requirements that IIJ file its annual report on Form 20-F for
the fiscal year ending March 31, 2004 with the U.S. Securities and Exchange Commission andNasdaq on or before September 30, 2004, and the IIJ demonstrate compliance with all
requirements for continued listing on the Nasdaq National Market throughout this period. The fifthcharacter "E" will remain appended to IIJ's trading symbol pending confirmation that IIJ has
evidenced full compliance with Nasdaq's filling requirement and all other requirements for continued
listing on the Nasdaq Stock Market.

1

Unless otherwise stated, all financial figures discussed in this announcement are prepared in accordance with U.S. GAAP.
All financial figures are unaudited, consolidated, and represent comparisons between the three-month period ended
September 30, 2003, and the equivalent three-month period ended September 30, 2002. For all 2Q03 results, translations ofJapanese yen amounts into US dollars are solely for the convenience of readers outside of Japan and have been made at therate of JPY111.43 = US$1., the approximate exchange rate on September 30, 2003.

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IIJ 2Q03

Internet Initiative Japan Inc.
http://www.iij.ad.jp/en/
Outlook:・

By improving gross-margins and expanding SI service revenues, IIJ expects to reach a break-evenlevel of operating income in 3Q03 and to achieve positive operating income in 4Q03. In addition, IIJ
expects an additional one-time increase in "other income" of approximately JPY 1.6 billion in 3Q03
from the sales of our shares of DLJdirectSFG Securities Inc. and approximately JPY 120 million by
repurchasing and canceling a portion of IIJ's convertible notes that are due in 2005.

Overview of 2nd Quarter FY2003 Financial Results and Business Outlook3
Financial Results and Business Outlook"As Japan's economy is beginning to show indications that it is in a recovery phase, there seems to be
an environment where Japanese corporate customers are considering investing in their networks,"
said Koichi Suzuki, President and CEO of IIJ. "With the rapid changes in corporate networks, as
expansion of broadband and increasing complexity, Japanese corporate customers are focusing moreon in-house networks including the gateway to Internet. For example, Japanese companies are starting
to use the latest network technology to connect branch offices or other sites at higher speeds with lower
cost, increasing security on Internet traffic and outsourcing the operations of network equipment andservers. We are currently changing our SI development and business to meet those demands rapidly.
We call this "Network Integration". Our strategy in the coming quarters is to seek new source ofrevenue by cross-selling these new solutions to meet the requirements of our current connectivity
customers".
Koichi Suzuki continued, "On September 17, we completed the private placement to third parties toimprove our capital structure, and NTT Group became our largest shareholder holding 31.6%. While
we will retain our operating independence even after the private placement, we are going to have acollaborative relationship with NTT in the technological development and sales partnership".
"In 2Q03, revenues recovered compared to 1Q03, mainly driven by sales of SI, Data Center Services
and other value-added services", said Yasuhiro Nishi, CFO of IIJ. "We have succeeded in acquiring
new customers for network integration services, and the revenue from these cases will be accounted
for in 3Q03. By continuing to expand in the higher-margin SI area and cross-selling to customers aswell as reducing costs, we will keep on track for a recovery in profitability and hopefully achieve positive
operating income in the second half of the year".
Yasuhiro Nishi also stated, "As for Crosswave's commencement of reorganization proceedings, wehave written off all investments in, deposits for, loans to and accounts receivable due from Crosswave
regarding the above through this quarter. We believe that the private placement on September 17 will
cover the financial impact of Crosswave's reorganization, and we will not have further equity losses
from Crosswave, which in the past had a significant negative impact on IIJ's financial statements".
Recent Trends in Major Services and Contracts
As for connectivity services, there appears to be new demand for broadband services such as using
2

Please refer to the Reconciliation of Non-GAAP Financial Measures on page 6.
This Overview and Business Outlook contains forward-looking statements and projections such as statements regarding
3Q03 total revenues and operating profitability 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 contained in IIJ’s
filings on Form 20-F and Form 6-K, 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 thispractice at any time. IIJ intends to publish its next Overview and Business Outlook in its 3Q03 earnings release, presently
scheduled for February 12, 2004.
3

Page 2 of 8

IIJ 2Q03

Internet Initiative Japan Inc.
http://www.iij.ad.jp/en/these services for access lines for site connectivity utilizing Internet VPN technology. IIJ has alreadyacquired several customers for these services connecting over 100 sites. In addition to proposing
bandwidth upgrades to existing customers and approaching new customers, we expect these new
demands might help us to maintain current levels of revenue of connectivity services, as well as related
network integration and equipment sales.
Revenues for SI services benefited as IIJ won several network integration customers from the
manufacturing and financial sectors. The major contents of the integration work was mail and web
gateway services that control outgoing and incoming e-mails and web access, server housing in Data
Centers and outsourcing of operation and network consultation for disaster recovery. Also, we
increased revenues from equipment sales, such as database servers, web servers, data storage andfirewall equipment.

2nd Quarter FY2003 Financial Results
Revenues
Revenues in 2Q03 totaled JPY 9,185 million, a decrease of 13.1% compared to 2Q02 and an increaseof 10.1% from JPY 8,344 million in 1Q03.
Table 1. Revenues (JPY in millions)

Revenues

2Q03

Connectivity and value-added services:
Dedicated access services
Dial-up access services
Total Connectivity Services
Value-added services
Other
Total Connectivity and value-added services
Systems integration revenues
Equipment sales
Total revenues

YoY% change

2Q02

3,236
784
4,020
1,081
536
5,637
2,549
999
9,185

3,546
792
4,338
893
468
5,699
3,094
1,775
10,568(8.7%)(1.0%)(7.3%)
21.0%
14.6%(1.1%)(17.6%)(43.7%)(13.1%)

QoQ% change

1Q03
3,321
768
4,089
987
520
5,596
2,408
340
8,344

(2.6%)
2.1%(1.7%)
9.5%
3.2%
0.7%
5.9%
193.2%
10.1%

Connectivity and value-added services revenues were JPY 5,637 million in 2Q03, a decrease of
1.1% compared to 2Q02, but an increase of 0.7% compared to 1Q03.
Table 2. Connectivity Services (JPY in millions)

Connectivity Services
2Q03
Dedicated access services:
IP Service + DC (connectivity)
Others4
Total Dedicated Access Services

2,485
751
3,236

2Q02
2,657
889
3,546

YoY
% change(6.5%)(15.4%)(8.7%)

1Q03

QoQ% change

2,534
787
3,321

(2.0%)(4.5%)(2.6%)

Dedicated access services revenues were JPY 3,236 million in 2Q03, a decrease of 8.7% compared to
2Q02 and a decrease of 2.6% compared to 1Q03. IP Service, including Data Center Connectivity
services, decreased by 6.5% in 2Q03 compared to 2Q02 and decreased by 2.0% compared to 1Q03,
mainly due to the decline of unit prices despite an increase in the number of contracts. Customers
continued to shift from dedicated line-based connectivity services such as IIJ T1 Standard and IIJ
Economy, to lower-cost broadband services such as IIJ FiberAccess/F service (Maximum 10100Mbps), and the increase in IIJ FiberAccess/F service did not offset the decrease in IIJ T1 Standard
and IIJ Economy.

4

Others are IIJ FiberAccess/F service, IIJ Ether Standard, IIJ DSL/F service, IIJ T1 Standard and IIJ Economy.

Page 3 of 8

IIJ 2Q03

Internet Initiative Japan Inc.
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Table 3. Number of Contracts

IP Services

64kbps – 128kbps
192kbps – 768kbps
1Mbps – 2Mbps
3Mbps – 1.2Gbps
Number of Contracts of DC Connectivity Services
Other
Total Dedicated Access Services
IIJ4U (Dial-up access services for retail market)
Other Dial-Up Access Services
Total Dial-Up Access Services

2Q03

2Q02

1Q03

79
23
226
336
184
5,402
6,250
72,560563,086
635,646

111
30
266
205
129
3,568
4,309
84,432309,950
394,382

90
26
239
294
171
5,056
5,876
76,209515,363591,572

Dial-up access service revenues were JPY 784 million in 2Q03, a decrease of 1.0% compared to 2Q02
and an increase of 2.1% compared to 1Q03. The revenue increased sequentially because of continued
revenue increases of OEM services including CDN platform and NTT's regional L-mode service.
Table 4. Number of Contract Bandwidth (Unit: Gbps)

2Q03
51.6
15.1
66.7

Dedicated Access Services
DC Connectivity Services
Total Contract Bandwidth

2Q02
18.0
4.7
22.7

1Q03
41.1
10.3
51.4

Value-added service revenues were JPY 1,081 million in 2Q03, an increase of 21.0% compared to
2Q02 and an increase of 9.5% compared to 1Q03. These increases were mainly due to revenue
increases from Data Center services and security related services, including mail gateway service.
Table 5. Value-added Services (JPY in millions)

Value-Added Services

2Q03
Internet Data Center services
Other value-added services
Total Value-Added Service Revenues

2Q02

YoY
% change

1Q03

QoQ% change

371
710

371
522

0.0%
36.0%

337
650

10.1%
9.2%

1,081

893

21.0%

987

9.5%

Systems integration services revenues decreased 17.6% to JPY 2,549 million in 2Q03 compared to
2Q02 but recovered 5.9% compared to 1Q03 due to increase of new network integration contracts.
Equipment sales revenues were JPY 999 million in 2Q03, a decrease of 43.7% compared to 2Q02
but an increase of 193.2% compared to 1Q03.
Cost and expenses
Cost of total revenues was JPY 8,337 million in 2Q03, a decrease of 11.4% compared to 2Q02, and anincrease of 6.0% compared to 1Q03.

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IIJ 2Q03

Internet Initiative Japan Inc.
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Table 6. Costs and Expenses (JPY in millions)YoY% change

Costs and expenses:
Cost of Revenues:
Cost of connectivity and value-added
services
Cost of systems integration
Cost of equipment sales
Total of Cost of Revenues
Sales and marketing
General and administrative
Research and development
Total costs and expenses

2Q03

2Q02

5,127
2,275
935
8,337
1,100
482
96
10,015

5,081
2,682
1,648
9,411
743
514
94
10,7620.9%(15.1%)(43.3%)(11.4%)
47.9%(6.2%)
2.7%(6.9%)

1Q03

5,234
2,324
311
7,869
973
612
96
9,550

QoQ
% change(2.1%)(2.1%)
200.6%
6.0%
13.0%(21.2%)
0.0%
4.9%

Cost of connectivity and value-added services was JPY 5,127 million, an increase of 0.9%
compared to 2Q02 and a decrease of 2.1% compared to 1Q03. The gross margin ratio for connectivity
and value-added services in 2Q03 was 9.1%, compared to 10.8% in 2Q02 and 6.5% in 1Q03. The
improvement of the gross margin ratio compared to 1Q03 was as a result of our effort for overall cost
reduction such as backbone costs, the expense for network nodes and office rent expenses.
International backbone costs were JPY 247 million, a decrease of 44.8% compared to 2Q02 and adecrease of 5.2% compared to 1Q03. The monthly unit backbone costs per Mbps declined by 61%
compared to 2Q02 and by 29% compared to 1Q03.
Table 7. Backbone Costs (JPY in millions)

Backbone Costs
2Q03
International Backbone Costs
Dom estic Backbone Costs

247
993

2Q02

448
815

YoY
% Change(44.8%)
21.9%

1Q03

261
1,057

QoQ
% Change(5.2%)(6.0%)

Domestic backbone costs were JPY 993 million, an increase of 21.9% compared to 2Q02 and adecrease of 6.0% compared to 1Q03. The year-over-year increase was due to an increase inconnection fees with NTT’s regional access networks (FLET’S), along with our broadband strategy tostrengthen our backbone network to provide various broadband network services and solutions
nationwide.
Cost of SI Revenues was JPY 2,275 million in 2Q03, a decrease of 15.1% compared to 2Q02 and adecrease of 2.1% compared to 1Q03. The gross margin for SI deteriorated to 10.7% in 2Q03 compared
to 13.3% in 2Q02 but improved from 3.5% in 1Q03. The gross margin ratio in 2Q03 improved
compared to 1Q03 because of improvement of profitability in SI development contracts.
Sales and Marketing Expenses were JPY 1,100 million in 2Q03, an increase of 47.9% compared to
2Q02 and an increase of 13.0% compared to 1Q03. The 2Q03 expenses include the written-off
accounts receivable due from Crosswave, which amounted to JPY 287 million.
General and administrative expenses were JPY 482 million in 2Q03, a decrease of 6.2% comparedto 2Q02 and a decrease of 21.2% compared to 1Q03. The 1Q03 expenses included the cost of themove to new headquarters.
Operating loss
Operating loss increased to JPY 830 million in 2Q03 compared to a loss of JPY 194 million in 2Q02.
The increase is primarily due to the write-off of accounts receivable from Crosswave and a decrease inconnectivity service revenues. The operating loss in 2Q03 declined compared to a loss of JPY 1,206
million in 1Q03, due to improved profitability in IIJ's SI business.

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IIJ 2Q03

Internet Initiative Japan Inc.
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Other expenses for 2Q03 were JPY 157 million, compared to JPY 160 million in 2Q02 and JPY 204
million in 1Q03. IIJ recorded a gain on sales of available-for-securities, which amounted to JPY 47
million in 2Q03.
Income tax benefit (expense) for 2Q03 was a benefit of JPY 572 million, compared to an expense of
JPY 515 million in 2Q02 and a benefit of JPY 390 million in 1Q03. This is due to a decrease in thevaluation allowance for deferred tax assets attributable primarily to the income tax effect of increasing
unrealized gains during the quarter on certain available-for-sale securities.
Equity in net loss of equity method investees amounted to JPY 50 million in 2Q03, compared to
JPY 1,480 million in 2Q02, and JPY 1,709 million in 1Q03. The equity in net loss of Crosswave is
included in the equity in net loss of equity method investees in 1Q03 and 2Q02, but not included in
2Q03.
Net loss was JPY 278 million in 2Q03, compared to JPY 2,326 million in 2Q02 and JPY 2,475 million in
1Q03. The decreases in net loss was a result of the increasing income tax benefit reflecting theincreasing unrealized gains on available-for-sale securities and the absence of equity method loss in
Crosswave due to the full write-down of IIJ's equity investment in Crosswave. Basic net loss per ADS
equivalent was JPY -5.04 in 2Q03, compared to JPY -51.74 in 2Q02 and JPY -54.72 in 1Q03.
Table 8. Other Financial Statistics (JPY in millions)

Other Financial Statistics
5

Adjusted EBITDA
6
CAPEX, including capitalized leases
7
Depreciation and amortization

2Q03
126
579
984

2Q02

1Q03

YoY
% Change

662
1,504
884

81.0%
(61.5%)
11.3%

(243)
1,421
990

QoQ
% Change(152.0%)(59.2%)(0.7%)

Reconciliation of Non-GAAP Financial Measures
The following table summarizes the reconciliation of adjusted EBITDA to net loss per the consolidated
statements of operations prepared and presented in accordance with U.S. generally accepted
accounting principles in Appendices 1:
Table 9. Adjusted EBITDA (JPY in millions)

2Q03
Adjusted EBITDA
8
Depreciation and amortization
Operating loss
Other expenses
Income tax expense (benefit)
Minority interests in consolidated subsidiaries
Equity in net loss of equity method investees
Net loss

126
(956)
(830)
(157)
(572)
187
(50)
(278)

2Q02
662
(856)
(194)
(160)
515
23
(1,480)(2,326)

1Q03
(243)
(963)
(1,206)
(204)
(390)
254
(1,709)(2,475)

The following table summarizes the reconciliation of capital expenditures to purchase of property andequipment per the consolidated statements of cash flows prepared and presented in accordance with
the U.S. generally accepted accounting principles in Appendices 3:

5

Please refer to the Reconciliation of Non-GAAP Financial Measures on this page.
Please refer to the Reconciliation of Non-GAAP Financial Measures on this page.
7
Depreciation and amortization includes amortization of issuance cost of convertible notes.
8
Depreciation and amortization excludes amortization of issuance cost of convertible notes that was presented as otherexpenses.
6

Page 6 of 8

IIJ 2Q03

Internet Initiative Japan Inc.
http://www.iij.ad.jp/en/
Table 10. CAPEX (JPY in millions)

Capital expenditures
Acquisition of assets by entering into capital leases
Purchase of property and equipment

2Q03
579
431
148

2Q02
1,504
1,282
222

1Q03
1,421
487
934

2nd Quarter FY2003 Business Review
Service Development
Outsourcing Solutions: Under IIJ Technology, the IIJ Group further expanded its Integration &Business Platform Service (IBPS) product line. IBPS is a service offered to corporate customers whichallows them to combine ready-made network service components with integration. These components
include network equipment, controlling functions of outgoing and incoming Internet traffic (virus check,auditing and archiving e-mails and controlling web-access), data storage, operational resources, etc.
By providing these components on demand at the Group's data centers and allowing customers to use
these network components without having to purchase them, IIJ's corporate customers can launch the
network systems more smoothly and cost effectively. In October 2003, IIJ Technology started toprovide over 40 terabyte storage service.
Network Management Solutions: In 2Q03, we began "IIJ NetLightning", based on Netli, Inc's
technology which improves web application performance. By using IIJ NetLightning, end users canmore quickly access to customer websites and customers can reduce the cost to set up mirror sites.

Also in June 2003, IIJ launched IIJ SMF (SEIL Management Framework), a service which provides
remote configuration and monitoring features for IIJ's high-end SEIL/neu Series routers at customer
remote sites from central management servers at IIJ and customer main office/data center. SMF, thetechnology used for this service is patent pending.
Hosting Services: In 2Q03, we began "IIJ Document Exchange Service" for medium and small-sizedcorporate customers. This service allows the creation of virtual folders on Internet, and customers toshare files with workers outside the office or with commercial partners.
Network Infrastructure Development and Optimization
In 2Q03, IIJ increased the capacity of ten of its domestic backbone network lines and also established
two new lines. IIJ also increased the capacity of three U.S. backbone network lines and established
one additional U.S. backbone network line to maintain current throughput and quality. At the same time,from a cost point of view, IIJ is now trying to optimize the network in accordance with the number ofcustomers connected to the network nodes, and has ceased the operations of several network nodes
for dedicated line-based Internet connectivity services.
FinanceFinancial Impact of Crosswave's Commencement of Reorganization Proceedings:
On August 20, Crosswave filed a voluntary petition for the commencement of corporate reorganization.
In light of Crosswave's reorganization, IIJ has fully written-off the accounts receivable due from
Crosswave prior to entering corporate reorganization, amounting to JPY 287 million in 2Q03. As aresult, IIJ has fully written-off the remaining value of its investment in and deposits for, loans to andaccounts receivable due from Crosswave through the end of this quarter.
Capital Improvement Plan:
On September 17, 2003, IIJ completed a private placement to NTT Group, Itochu Corporation,
Sumitomo Corporation and three other companies for a total amount of approximately JPY 12 billion.
With this capital injection, the financial impact of Crosswave's commencement of reorganization has
been offset and IIJ's shareholders' equity has turned positive.

Page 7 of 8

IIJ 2Q03

Internet Initiative Japan Inc.
http://www.iij.ad.jp/en/
Key Developments of the IIJ GroupIP*VLANIn November 2003, IIJ developed and announced a new technology called, IP*VLAN (Internet
Protocol-Virtual Local Area Network). This technology is for the construction and management of layer
2 networks over existing IP networks (layer 3) for Internet or corporate users. It enables PCs and otherclient devices to connect to the same LAN, regardless of distances between offices, and it enables
access control for all services without requiring client certification (patent pending).

Teleconference/Webcast
On November 21 at 9:00 am (EST), IIJ will host a conference call to discuss the results and theCompany’s outlook. There will be a simultaneous webcast available at www.vcall.com. A replay will
also be available at the same URL.

Company Information
Founded in 1992, Internet Initiative Japan Inc. (IIJ, NASDAQ: IIJIE) is Japan's leading Internet-accessand comprehensive network solutions provider. The company has built one of the largest Internet
backbone networks in Japan, and between Japan and the United States. IIJ and its group of companies
provide total network solutions that mainly cater to high-end corporate customers. Services range fromthe delivery of new generation network services over an optical-fiber infrastructure that is optimized fordata communications, to the construction of pan-Asian IP backbone networks. The company alsooffers high-quality systems integration and security services, internet access, hosting/housing, andcontent design.
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 3Q03 total revenues and operating profitability, aresubject to various risks, uncertainties and other factors that could cause IIJ’s actual results to differ
materially from those contained in any forward-looking statement. These risks, uncertainties and otherfactors include: IIJ’s expectation that net losses will continue or may increase; IIJ’s ability to raise additional
capital to cover its accumulated deficit; IIJ’s ability to continue to increase subscribers to its connectivity
services, particularly at higher bandwidths; IIJ’s ability to generate significant revenues from its otherservices such as systems integration; the ability to compete in a rapidly evolving and competitivemarketplace; the impact of technological changes in its industry; and other risks referred to from time to timein IIJ’s filings on Form 20F of its annual report and other filings with the United States Securities andExchange Commission.

Tables to follow

Page 8 of 8

IIJ 2Q03

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

For the Three Months Ended Sept 30, 2003, Sept 30, 2002 and Jun 30, 2003
(Expressed in Thousands of Japanese Yen (JPY) and U.S. Dollars (USD) Except for Per Share and ADS Data) (1)Year-over-year Comparison
Sept 30, 2003
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

JPY

% of
Total
Revenues

JPY

Sept 30, 2002
% of
Total
Revenues

YOY
Chg %

Sequential Comparison
Jun 30, 2003
% of
Total
QOQ
JPY
Revenues
Chg %29,044
7,032
9,700
4,814
50,5903,236,405
783,589
1,080,876
536,389
5,637,259

35.2%
8.5
11.8
5.9
61.4

3,546,372
791,738
893,135
467,976
5,699,221

33.6%
7.5
8.4
4.4
53.9

(8.7%)
(1.0)
21.0
14.6
(1.1)

3,321,229
767,418
987,198
519,7095,595,554

39.8%
9.2
11.9
6.2
67.1

(2.6%)
2.1
9.5
3.2
0.7

22,8798,962
82,4312,549,379
998,6219,185,259

27.7
10.9
100.0

3,094,168
1,774,953
10,568,342

29.3
16.8
100.0

(17.6)(43.7)(13.1)

2,407,923
340,569
8,344,046

28.8
4.1
100.0

5.9
193.2
10.1

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

46,00820,423
8,388
74,8195,126,708
2,275,704
934,7118,337,123

55.8
24.8
10.2
90.8

5,081,186
2,681,946
1,648,106
9,411,238

48.1
25.3
15.6
89.0

0.9
(15.1)(43.3)(11.4)

5,234,158
2,323,392
310,946
7,868,496

62.7
27.9
3.7
94.3

(2.1)
(2.1)
200.6
6.0

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

9,868
4,327
863
89,877

1,099,560
482,218
96,11810,015,019

12.0
5.2
1.0
109.0

743,230
514,082
93,574
10,762,124

7.0
4.9
0.9
101.8

47.9
(6.2)
2.7
(6.9)

973,054612,047
96,0989,549,695

11.7
7.3
1.2
114.5

13.0
(21.2)
0.0
4.9

Operating loss

(7,446)(829,760)(9.0)(193,782)

(1.8)

328.2

(1,205,649)(14.5)(31.2)

Other expenses(1,412)(157,294)(1.7)(160,247)

(1.5)

(1.8)

(204,398)(2.4)(23.0)

Loss before income tax expense(benefit)(8,858)(987,054)(10.7)(354,029)

(3.3)

178.8

(1,410,047)(16.9)(30.0)

Income tax expense(benefit)
Minority interests in consolidated subsidiaries
Equity in net loss of equity method investees:
Equity method net income(loss)(5,130)1,677(571,642)
186,931(6.2)
2.0

514,872
23,1464.9
0.2(211.0)707.6(390,035)
254,886

(4.7)
3.0

46.6
(26.7)(448)(49,945)(0.5)(1,480,411)(14.0)(96.6)

10,559(1,719,981)

0.1(20.6)(573.0)(100.0)(2,499)(278,426)(3.0%)(2,326,166)(22.0%)(88.0%)(2,474,548)(29.7%)(88.7%)

Systems integration revenues
Equipment sales
Total revenues

Impairment loss on investment in and advances to Crosswave

Net loss
Basic Net Loss Per Share
Basic Net Loss Per ADS Equivalent
Weighted Average Number of Shares
Weighted Average Number of ADS Equivalents(10,082)(5.04)
27,61755,233,050(103,477)(51.74)
22,48044,960,000(109,440)(54.72)
22,61145,222,494

Note (1):The translation of Japanese yen amounts into US dollar amounts with respect to the three months ended Sept 30, 2003 are included solely for the convenience of readers outside Japanand have been made at the rate of JPY 111.43 =$1, the approximate rate of exchange on Sept 30, 2003.

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

As of Sept 30, 2003, Sept 30, 2002 and Jun 30, 2003
(Expressed in Thousands of Japanese Yen (JPY) and U.S. Dollars (USD)) (1)USD (1)ASSETS
Current Assets:
Cash and cash equivalent
Accounts receivable, net
Inventories
Prepaid expenses
Other current assets

Sept 30, 2003
JPY%

Sept 30, 2002
JPY%

Jun 30, 2003
JPY%

105,743
60,366
2,410
5,871
4,168

11,782,935
6,726,563
268,519654,269
464,418

30.7%
17.5
0.7
1.7
1.2

4,772,753
7,844,256
415,771498,668
141,923

12.2%
20.1
1.1
1.3
0.3

2,819,007
5,889,315
347,971845,908
534,025

10.2%
21.3
1.3
3.1
1.9

178,558

19,896,704

51.8

13,673,371

35.0

10,436,226

37.8

9,926
49,476
81,744

1,106,062
5,513,137
9,108,783

2.9
14.3
23.7

4.1
14.4
33.5

2,080,764
728,580

5.4
1.9

15.1
9.6
22.1
12.8
3.6
1.8

1,141,728
3,967,719
9,244,442

18,6736,539

5,896,219
3,751,532
8,617,873
5,000,000
1,392,519
706,828

2,082,118
714,3677.6
2.6

344,916

38,434,030

100.0%

39,038,342

100.0%

27,586,600

100.0%

Short-term borrowings
Accounts payable
Accrued expenses
Other current liabilities
Long-term borrowings-current portion
Capital lease obligations-current portion

38,633
43,582
4,393
3,685
26,442
23,2304,304,906
4,856,325
489,568
410,577
2,946,377
2,588,505

11.2%
12.6
1.3
1.1
7.7
6.7

4,832,286
5,131,068
271,557
442,564
1,400,000
2,271,145

12.4%
13.1
0.7
1.1
3.6
5.8

5,675,341
4,406,928
537,236542,538
1,545,452
2,677,038

20.6%
16.0
1.9
1.9
5.6
9.7

Total current liabilities

139,965

15,596,258

40.6

14,348,620

36.7

15,384,533

55.7

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

17,793
134,61428,700626
1,732

1,982,612
15,000,000
3,198,073
69,794
193,043

5.2
39.0
8.3
0.2
0.5

3,400,000
15,000,000
3,250,922
83,058
153,993

8.7
38.4
8.4
0.2
0.4

3,419,555
15,000,000
3,407,735
74,764
187,579

12.4
54.4
12.3
0.3
0.7

323,430

36,039,780

93.8

36,236,593

92.8

37,474,166

135.8

3,928

437,678

1.1

942,650

2.4

624,609

2.3

123,534
212,130(335,980)
17,875(1)

13,765,372
23,637,628(37,438,265)
1,991,900
(63)

35.8
61.5
(97.4)
5.2
0.0

7,082,336
17,068,353(23,129,652)
838,06218.1
43.7(59.2)
2.2

7,765,048
17,751,065(37,159,839)
1,131,644
(93)

28.2
64.3
(134.7)4.1
0.0

Total shareholders' equity(capital deficiency)

17,558

1,956,572

5.1

1,859,099

4.8(10,512,175)(38.1)

Total liabilities andshareholders' equity(capital deficiency)

344,916

38,434,030

100.0%

39,038,342

100.0%

27,586,600

100.0%

Total current assets
Investments in and Advances to Equity Method Investees
Other Investments
Property and Equipment, net
Restricted Cash
Guarantee Deposits
Other Assets
Total assets
LIABILITIES ANDSHAREHOLDERS' EQUITY(CAPITAL DEFICIENCY)
Current Liabilities:

Total liabilities
Minority Interest
Shareholders' Equity(Capital Deficiency):
Common stock(2)Additional paid-in capital (2)Accumulated deficit
Accumulated other comprehensive income
Treasury stock

Note (1): The translation of Japanese yen amounts into US dollar amounts with respect to Sept 30, 2003 are included solely for the convenience of readers outside Japanand have been made at the rate of JPY111.43 =$1, the approximate rate of exchange on Sept 30, 2003.
Note (2): New 12,615 shares have been issued on Sept 17, 2003, in the net proceeds of JPY11,886,887.

INTERNET INITIATIVE JAPAN INC.

Appendix 3

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS（（UNAUDITED））
For the Three Months Ended Sept 30, 2003, Sept 30, 2002 and Jun 30, 2003
(Expressed in Thousands of Japanese Yen (JPY) and U.S. Dollars (USD)) (1)Sept 30, 2003
USD (1)

Sept 30, 2002

Jun 30, 2003

JPY

JPY

(278,426)(2,326,166)(2,474,548)

JPY

Operating Activities:
Net loss(2,499)Depreciation and amortization

8,828

983,736

883,732

990,190

Provision for doubtful accounts

2,818

313,968(5,048)149,378

Equity method net loss (income)

448

Impairment loss on investment in and advances to Crosswave
Minority interests in net loss of consolidated subsidiaries

49,945

1,480,411(10,559)---

1,719,981(1,677)(186,931)(23,146)(254,886)

Foreign exchange losses (gains)

30

3,282

(39,060)

3,245

Losses on other investments

875

97,53013,62037,572

Decrease (increase) in accounts receivable(9,878)(1,100,671)(972,056)

4,229,010

Increase (decrease) in accounts payable

1,941

216,306

7,462(3,671,049)

650

72,432(142,950)

69,689(395,698)

Decrease (increase) in inventories
Deferred income taxes(5,182)(577,444)

509,228

Other(1,078)(120,151)(3,003)

264,043

Net cash provided by (used in) operating activities(4,724)(526,424)(616,976)

656,368

Purchase of property and equipment(1,328)(148,007)(222,308)(933,646)

Proceeds from sales of other investment

1,101

122,650

480

Investing Activities:

Investments in and advances to equity method investees
Purchase of other investments
Refund (payment) of guarantee deposits-net
Other
Net cash used in investing activities

34,672---(1,719,981)(2,733)(304,517)(33,294)(12,971)

11

1,199

(87,518)

123,632

88

9,875

2,473

11

(2,861)(318,800)(340,167)(2,508,283)

Financing Activities:
Repayments of long-term borrowings(323)(36,017)-(434,994)

Principal payments under capital leases(6,025)(671,376)(601,144)(697,830)

282,164

Net increase (decrease) in short-term borrowings(12,299)(1,370,436)

Proceeds from issuance of common stock

106,676

11,886,887-

1,365,424

Net cash provided by (used in) financing activities

88,0299,809,058(318,980)

1,084,342

1

94

34,183(1,772)Net Increase (Decrease) in Cash

80,445

8,963,928(1,241,940)(769,345)

Cash, Beginning of Period

25,2982,819,007

6,014,693

3,588,352

Cash, End of Period

105,743

11,782,935

4,772,753

2,819,007

Effect of Exchange Rate Changes on Cash851,742

Note (1): The translations of Japanese yen amounts into US dollar amounts with respect to the three months ended Sept 30, 2003 are included
solely for the convenience of readers outside Japan and have been made at the rate of JPY111.43 =$1, the approximate rate ofexchange on Sept 30, 2003.