2005 年 8 月 12 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 1 四半期（4-6 月）決算発表（抄訳）＜前年同期比大幅に業績改善、2005 年度通期の業績ターゲット達成に向けて順調なスタート＞

本決算発表に関するマネジメント・メッセージを 2005 年 8 月 13 日より弊社ホームページ上（URL: http://www.iij.ad.jp/IR/）にて公開予定です。

2005 年度第 1 四半期決算
・ 営業収益（売上高）は、前年同期比 13.9%増の 9,880 百万円となりました。
・ 営業利益は、247 百万円と、前年同期の営業損失 100 百万円から大幅に改善し、黒字転換いたしました。
・ 当期利益は、623 百万円と、前年同期の当期損失 238 百万円から黒字転換いたしました。
・ 企業の IT 投資の季節変動要因から、年度中の売上高が最も低くなる第 1 四半期において、米国ナスダック・ナショナルマーケット上場以来の黒字転換を果たす等、2005 年度通期の業績ターゲットの達成に向け、順調なスタートとなりました。

2005 年度通期の業績ターゲット
・ 2005 年 5 月 27 日公表の 2005 年度通期の業績ターゲットには、変更はありません。

経営の概況
第 1 四半期は、企業のＩＴ投資の季節変動要因より年度中の売上高が最も低くなる時期となりますが、当期は前年同期の 100 百万円の営業損失から大幅に収益改善し、第 1 四半期としては米国ナスダック・ナショナルマーケット上場以来初めての黒字転換を果たすことができました。IIJ の主要市場である大企業・官公庁においては、インターネット
技術が社内ネットワークや業務システムに更に浸透し、業務トラフィックの増大やネットワークの複雑化が進んでいます。第 1 四半期においても、これら企業のアウトソーシングニーズを的確に捕え、信頼性の高いトータル・ネットワーク・
ソリューションを提供することで、着実に実績を積み重ねました。売上高については、データセンター、電子メールアウ
トソーシング、ネットワークアウトソーシング等の付加価値サービスおよびシステムインテグレーションの運用アウトソー
シング売上といった収益性の高い恒常的な売上が順調に推移したことから前年同期比大幅増収となり、大きく収益改善を図ることができました。
2005 年度通期の連結業績につきましては、2004 年度に確立した収益体質を更に改善することで、過去最高売上、最高益の更新を目標としております。既に公表済の 2005 年度通期の連結業績ターゲットについては、変更はありません。
IIJ は、国内でのプレゼンス強化等を目的に、従前より国内上場の準備を進めてまいりましたが、この 6 月に予定していた東京証券取引所マザーズへの上場は、マザーズの上場基準で定める株式の分布状況（上場時の株式の公募による株主数の増加）を満たすことができず、中止となりました。これは、マザーズ上場に関わる新株式の発行価格決定
後、米国ナスダック・ナショナルマーケットにおいて IIJ の発行する米国預託証券（ADR）の価格が下落したことにより、発行価格と ADR 価格との乖離が生じたことが主要な原因と考えられます。今回、こうした結果となったことは、極めてIIJ 1Q05

残念なことでありますが、IIJ としては当面の資金需要に問題はなく、事業についても影響はありません。今後も、ネットワーク・ソリューション事業を推進することで、引続きの事業拡大を図ります。国内上場につきましては、重要な経営課題として、早急に新たな取組を行ってまいります。

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 スタンダードおよび IIJ エコノミー*2
インターネットデータセンター接続サービス
IIJ FiberAccess/F および 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*3
契約総帯域

1Q05
12,274
65
637
131
208
234

1Q04
8,076
76
594
82
421
224

4Q04
11,243
89
660
114
276
231

10,999

6,679

9,873

677,207
66,125611,082
140.9Gbps

708,586
693,976
73,22568,068635,361
625,908
95.6Gbps 121.2Gbps*1 IPv6 サービスを含む*2 1Q04 では、「機能限定型」と表記していたもの（回線専有型、割当 IP アドレス数等に制限あり、64kbps、128kbps、1.5Mbps）*3 他サービス事業者向け OEM サービス

2005 年度第 1 四半期においても、引続き専用線接続サービスの契約数、契約総帯域は順調に増加しました。
IP サービスでは、顧客企業が業務トラフィックの増大を背景に、より広帯域のサービスにシフトしており、特に1Gbps 以上の IP サービスの契約数は前四半期比＋9 回線増の 33 回線となりました。
また、ブロードバンド対応型の契約数は、インターネット VPN を用いた多拠点接続ソリューションの展開に伴う新規契約の獲得により引続き増加し、契約数は 10,000 回線を大きく上回りました。

IIJ 1Q05

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*4
IIJ T1 スタンダードおよび IIJ エコノミー*5
IIJ FiberAccess/F および 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*6OEM 提供*7
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
売上高合計
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

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

1Q04
3,671
2,919
2,279
275

前年同期比

447

（百万円）
前四半期比

(6.1%)(5.9%)(5.0%)(51.2%)

4Q04
3,559
2,841
2,235
171

365

22.5%

435

2.7%

699
466
233
1,388
933

752
509
243
1,187
592

(7.1%)(8.4%)(4.3%)
16.9%
57.5%

718
471
247
1,322
979

(2.7%)(1.2%)(5.6%)
5.0%(4.7%)

5,767

5,450

5.8%

5,860

(1.6%)

4,964
864
13.9%

4,811
985
11.7%

3.2%
(12.3%)

5,018
831
14.4%

(1.1%)
3.9%(3.2%)(3.3%)(3.1%)(21.4%)*4 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）*5 1Q04 では、「機能限定型」と表記していたもの（回線専有型、割当 IP アドレス数等に制限あり、64kbps、128kbps、1.5Mbps）*6 各種法人向けおよ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*7 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の売上は、IP サービスにおける顧客企業の広帯域サービスへのシフト、多拠点接続
ソリューションの展開に伴うブロードバンド型サービスの契約増加はあったものの、一部大口顧客のネットワーク
統合、価格見直し等があったことから、前年同期比、前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、データセンターサービス、電子メール等のサーバアウトソーシングサービス、多拠点接続案件に伴う SEIL、SMF 等の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、広域 LAN サービスの好調により前年同期比で大幅増収となりました。前四半期比では、2004
年度第 4 四半期に検収となった広域 LAN サービスや社内 LAN 関連サービスに係る一時売上、初期費用分の減少のため微減収となりました。
売上総利益率は、収益性の高い付加価値サービスの売上増加、バックボーンコストを主体とする固定的売上原価の抑制により前年同期の 11.7%から 2.2 ポイント改善し、13.9%となりました。

IIJ 1Q05

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収入合計
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

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

1Q04
2,695
1,040
1,655
2,157
20.0%

前年同期比

42.5%
14.7%
60.0%
34.9%

（百万円）

4Q04
5,352
2,786
2,566
4,030
24.7%

前四半期比

(28.2%)(57.2%)
3.2%(27.8%)

システムインテグレーションの売上は、昨年 10 月に営業譲受し設立した㈱アイアイジェイフィナンシャルシステム
ズの証券システム開発・運用事業の売上寄与、および収益性の高い運用アウトソーシングサービスの順調な推移から、前年同期比大幅増収となりました。前四半期比では、システムインテグレーションの構築案件の季節変動要因（第 1 四半期は、年度中で最も弱含みな四半期となる）から減収となりました。
安定した収益基盤である運用アウトソーシングサービスが引続き好調で増収となったことから、売上総利益率は
前年同期の 20.0%から 4.2 ポイント改善し、24.2%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
機器販売売上高機器販売原価
売上総利益率

1Q05
273
244
10.9%

（百万円）

1Q04
530
475
10.4%

前年同期比

(48.5%)(48.7%)

4Q04
1,042
964
7.6%

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*10

前四半期比(73.8%)(74.7%)

（百万円）

1Q05
1,261
533
1,014

1Q04
884
1,300
1,004

前年同期比

42.6%
(59.0%)
1.0%

4Q04
1,698
724
1,061

前四半期比

(25.8%)(26.3%)(4.4%)*10 1Q04 および 4Q04 においては、転換社債発行費用の償却額を含む。

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。
本資料における 2004 年度第 1 四半期の決算数値については、IIJ の 2005 年 4 月 11 日付プレスリリースにて既報の決算修正を反映した数値としています。

IIJ 1Q05

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6月期、2004年6月期、2005年3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6月期
2004年6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

前四半期比較
2005年3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
%

24,767
6,299
12,514
8,413
51,9932,746,900
698,670
1,387,893
933,120
5,766,583

27.8%
7.1
14.1
9.4
58.4

2,918,488
751,933
1,186,837
592,3905,449,648

33.6%
8.7
13.7
6.8
62.8

(5.9%)
(7.1)
16.9
57.5
5.8

2,840,903
718,285
1,321,816
978,940
5,859,944

23.2%
5.8
10.8
8.0
47.8

(3.3%)
(2.7)
5.0
(4.7)
(1.6)

34,623
2,466
89,0823,840,075
273,438
9,880,096

38.9
2.7
100.0

2,694,638
530,6218,674,907

31.1
6.1
100.0

42.5
(48.5)
13.9

5,351,865
1,042,540
12,254,349

43.7
8.5
100.0

(28.2)(73.8)(19.4)

44,756
26,2402,197
73,193

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

50.2
29.5
2.5
82.2

4,811,341
2,156,620
475,466
7,443,427

55.5
24.8
5.5
85.8

3.2
34.9
(48.7)
9.1

5,018,522
4,030,274
963,665
10,012,461

40.9
32.9
7.9
81.7

(1.1)
(27.8)(74.7)(18.9)

6,923
6,437
305
86,858

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

7.8
7.2
0.3
97.5

662,950
620,651
48,3688,775,396

7.6
7.2
0.6
101.2

15.8
15.0
(29.9)
9.8

736,219
799,929
49,968
11,598,577

6.0
6.5
0.4
94.6

4.3
(10.8)(32.1)(16.9)

営業利益(損失)

2,224

246,678

2.5(100,489)(1.2)(345.5)655,772

5.4(62.4)

その他の収益 (費用)3,924

435,233

4.4(150,700)(1.7)(388.8)1,729,122

14.1(74.8)

税引前当期利益(損失)6,148

681,9116.9(251,189)(2.9)(371.5)2,384,894

19.5(71.4)

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

344
(215)
25

38,111(23,855)
2,729

0.4
(0.2)
0.0

15,08939,184(10,995)

0.2
0.5
(0.1)

152.6
(160.9)(124.8)29,839(62,468)(36,966)

0.3
(0.5)
(0.3)

27.7
(61.8)(107.4)

当期利益 (損失）5,614

622,674

6.3%(238,089)(2.7%)(361.5%)2,255,621

18.4%(72.4%)

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及び希薄化後 1株あたり当期利益 (損失）基本的及び希薄化後米国預託証券１単位あたり当期利益 (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

16,2548.13
38,30976,618,779

注記(1): 2005年6月期につきましては、米ドル換算レート110.91円=1米ドル(2005/6/30)にて参考表示しております。

(6,214)(3.10)
38,312
76,623,702

58,87529.44
38,312
76,623,702

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6月期、2004年6月期、2005年3月期
JPY/千円単位、 USD/千米ドル単位 (1)2005年6月期

Appendix 2

2004年6月期

2005年3月期

USD (1)

JPY

%

JPY

%

JPY

%

資産の部
流動資産：
現金及び現金同等物
短期投資
売掛金
棚卸資産
前払費用
その他流動資産46,041
2,747
52,2302,392
11,391728

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

10,627,203
5,377,230
413,477
932,097457,325

25.3%
12.8
1.0
2.2
1.1

5,286,477
7,407,439
140,096604,935
108,228

14.2%
20.0
0.4
1.6
0.3

流動資産合計115,529

12,813,316

38.0

17,807,332

42.4

13,547,175

36.5

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

6,105
71,06982,55318,855
10,138677,035
7,882,229
9,155,981
2,091,237
1,124,441

2.0
23.4
27.1
6.2
3.3

769,363
11,919,229
8,567,329
2,059,980
915,548

1.8
28.3
20.4
4.9
2.2

713,6079,930,781
9,722,366
2,050,665
1,151,877

1.9
26.8
26.2
5.5
3.1

資産合計

304,249

33,744,239

100.0%

42,038,781

100.0%

37,116,471

100.0%

42,588
13,79933,0474,720
8,284
28,73524,513

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

5,363,001

12.8%

-

-

3,754,214
480,824
728,386
1,549,189
11,088,000
2,403,477

8.9
1.1
1.7
3.7
26.4
5.7

4,724,633
1,729,520
4,860,733
541,118
817,517
2,736,056

2,718,759

14.0%
4.5
10.9
1.6
2.7
9.4
8.1

2,774,974

12.7%
4.7
13.1
1.4
2.2
7.4
7.5

155,686

17,267,109

51.2

25,367,091

60.3

18,184,551

49.0

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

7,847
35,6181,528
2,225

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

2.6
11.7
0.5
0.7

2,270,366
3,123,878
89,037233,046

5.4
7.4
0.2
0.6

1,529,963
4,339,028
143,346
275,533

4.1
11.7
0.4
0.7

負債合計

202,904

22,504,088

66.7

31,083,418

73.9

24,472,421

65.9

少数株主持分

9,496

1,053,212

3.1

901,0882.2

1,028,977

2.8

124,113
213,125(304,854)
60,225(760)

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

13,765,372
23,637,628(37,578,410)
10,273,685(44,000)

32.8
56.2(89.4)
24.4(0.1)

13,765,372
23,637,628(34,434,052)
8,690,125(44,000)

37.1
63.7(92.8)
23.4
(0.1)

資本合計

91,84910,186,939

30.2

10,054,275

23.9

11,615,073

31.3

負債、少数株主持分及び資本合計

304,249

33,744,239

100.0%

42,038,781

100.0%

37,116,471

100.0%

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6月期につきましては、米ドル換算レート110.91円=1米ドル(2005/6/30)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6月期、2004年6月期、2005年3月期
JPY/千円単位、USD/千米ドル単位 (1)2005年6月期
USD (1)

2004年6月期

2005年3月期

JPY

JPY

JPY

営業活動によるキャッシュフロー：
当期利益（損失）

5,614

622,674(238,089)

2,255,621

減価償却費等

9,140

1,013,745

1,004,170

1,060,944(48)(5,339)(12,936)

36,204

貸倒引当金繰入（戻入）額
持分法による投資損益(25)(2,729)10,99536,966

少数株主損（益）215

23,855(39,184)

62,468

為替差損（差益）(56)(6,278)(7,585)(8,641)

転換社債償還差損

-

-

5,195

-

その他投資に係る損益(4,407)(488,758)

2,749(1,816,676)

売掛金の減少（増加）額

14,6191,621,419

3,627,399(1,206,074)

買掛金及び未払金の増加（減少）額(10,215)(1,132,992)(3,094,772)

1,205,665

棚卸資産の減少（増加）額(1,129)(125,190)

24,958

221,788

法人税等調整額

165

18,343-(11,656)

その他(4,609)(511,252)(255,036)

704,443

営業活動によるキャッシュフロー

9,264

1,027,498

1,027,864

2,541,052(1,925)(213,485)(323,210)---

投資活動によるキャッシュフロー：有形固定資産等の取得による支出
子会社株式の取得による支出(96,542)(50,000)

その他投資の売却による収入

4,639

514,460

91,2862,008,650

短期投資及びその他投資の取得による支出(2,699)(299,311)(2,290)(2,339)(3,330)

敷金保証金の返還（差入）(354)(39,210)

14,528

その他(49)(5,450)(4,851)(9,495)

投資活動によるキャッシュフロー(388)(42,996)(224,537)

1,846,944(1,881)(208,654)(36,710)(308,414)---

1,729,520(1,796)(199,120)-(722,800)--(745,488)(11,088,000)

リース債務元本の返済(6,914)(766,807)(669,047)(753,177)

短期借入金の純増減額(11)(1,246)(1,201,093)(101,211)--

188,632-

財務活動によるキャッシュフロー(10,602)(1,175,827)(2,463,706)(11,244,082)

現金及び現金同等物に係る換算差額

101

11,236

3,343(16,227)

現金及び現金同等物の減少額(1,624)(180,089)(1,657,036)(6,872,313)

現金及び現金同等物の期首残高

47,6655,286,477

12,284,239

12,158,790

現金及び現金同等物の期末残高

46,041

5,106,388

10,627,203

5,286,477

財務活動によるキャッシュフロー：長期借入金の返済
有価証券貸借取引による担保金預り収入
有価証券貸借取引による預かり担保金の返済
転換社債の償還

子会社による普通株式の発行による収入

注記(1):2005年6月期につきましては、米ドル換算レート110.91円=1米ドル(2005/6/30)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 First Quarter Results for the Year Ending March 31, 2006
- Highest revenues and profits for the first quarter, the weakest period in the fiscal year historicallyTokyo and New York, August 12, 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 first quarter of the fiscal year ending March 31, 2006 (“FY2005”).1

Highlights of First Quarter FY2005 Results
・ Revenue totaled JPY 9,880 million ($89.1 million), an increase of 13.9% from 1Q04.
・ Operating income was JPY 247 million ($2.2 million), a substantial improvement from theoperating loss of JPY 100 million in 1Q04.
・ Net income was JPY 623 million ($5.6 million), compared to a net loss of JPY 238 million in
1Q04.
Target for FY20052
・ We maintain the target for FY2005 that we announced on May 27, 2005.
Overview of 1st Quarter of FY2005 Financial Results and Business Outlook2"An increase in demand from corporate customers for outsourced network operations and systems
integration utilizing broadband technology continued to support our growth in 1Q05,” said Koichi Suzuki,
President and CEO of IIJ. “Despite the fact that our first quarter has historically been our weakest
quarter due to seasonal fluctuations in Japanese corporate investment spending, we recorded asignificant improvement compared to 1Q04. In particular, revenue increased by 13.9% compared to
1Q04, and profits improved substantially. It was the first time since our NASDAQ listing that we achieved
positive operating and net income in the first quarter, which was primarily due to our continued focus on
steadily increasing recurring monthly revenues from outsourced network operations."
Mr. Suzuki continued, "We planned to list our shares in Japan in June 2005 and we are disappointed that
we could not complete it. We did not attract a sufficient number of new shareholders to meet the listing
requirements of the Tokyo Stock Exchange, most likely due to adverse ADS price fluctuations on
NASDAQ after the pricing day of the Japanese offering. However, we believe that this will not have amaterial effect on our financial condition. We will continue to make our future listing in Japan one of ourhighest priorities.""We had a remarkable start to our 2005 fiscal year given that the first quarter is historically the weakest
period due to seasonal fluctuation in Japan," said Akihisa Watai, CFO of IIJ. "We outperformed our1Unless 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 1Q05 results, translations of Japanese yen amounts into US dollars aresolely for the convenience of readers outside of Japan and have been made at the rate of JPY 110.91 = US$1.00, theapproximate exchange rate on June 30, 2005. 1Q04 figures have been restated to reflect the change in income 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 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 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 2Q05 earnings
release, presently scheduled for release in November 2005.

Page 1 of 7

IIJ 1Q05

internal targets for 1Q05, in both revenues and profits, and maintain the target for FY2005 that weannounced on May 27, 2005. We believe that the strengthening Japanese economy and favorable
business trends will continue to bring us profits, with steady monthly revenues from outsourced network
operations and higher-margin revenues from systems integration ("SI"), including network design,consulting and implementation."

1st Quarter FY2005 Financial Results
Operating Result Summary

1Q05
Total Revenues
Total Costs
SG&A Expenses and R&D
Operating Income
Net Income (Loss)
Revenues
Revenues in 1Q05 totaled JPY
9,880 million, an increase of
13.9% from JPY 8,675 million in
1Q04 and a decrease of 19.4%
from JPY 12,254 million in 4Q04.

YoY %change
13.9%
9.1%
13.8%
(345.5%)(361.5%)

1Q04
8,675
7,443
1,332
(100)
(238)

9,880
8,118
1,516
247
623

(JPY in millions)

4Q04
12,254
10,012
1,586
656
2,256

Revenues
1Q05

1Q04

9,880
5,767
3,840
273

8,675
5,450
2,695
530

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
1Q05, an increase of 5.8 % from JPY 5,450
million in 1Q04 and a decrease of 1.6% from JPY
5,860 million in 4Q04.
Dedicated access service revenues were JPY
2,747 million in 1Q05, a decrease of 5.9%
compared to 1Q04 and a decrease of 3.3%
compared to 4Q04. The decrease was mainly due
to cancellation of IP Service by certain large
customers and the failure of an increase inrevenues from broadband services to offset a
decrease in revenues from T1 Standard or IIJ
Economy.

QoQ %Change(19.4%)(18.9%)(4.4%)(62.4%)(72.4%)(JPY in millions)YoY %change
13.9%
5.8%
42.5%
(48.5%)

4Q04
12,254
5,860
5,352
1,042

QoQ %
change(19.4%)(1.6%)(28.2%)(73.8%)

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

Equipment Sales

Dial-up access service revenues were JPY 699 million in 1Q05, a decrease of 7.1% compared to 1Q04
and a decrease of 2.7% compared to 4Q04. The decrease from 1Q04 is mainly due to the decrease inrevenues from IIJ4U. The decrease from 4Q04 is mainly due to the decrease in OEM service revenues.
VAS revenues were JPY 1,388 million in 1Q05, an increase of 16.9% compared to 1Q04 and anincrease of 5.0% compared to 4Q04. The increase compared to 1Q04 and 4Q04 is mainly due to anincrease in revenues from data center services and various types of packaged outsource services, suchas e-mail and web hosting and network services such as managed router services.
Other revenues were JPY 933 million in 1Q05, an increase of 57.5% compared to 1Q04 and a decreaseof 4.7% compared to 4Q04. The increase from 1Q04 is mainly due to an increase in revenues from
Wide-area Ethernet Services.
SI revenues increased 42.5% to JPY 3,840 million in 1Q05 from JPY 2,695 million in 1Q04 anddecreased 28.2% from JPY 5,352 million in 4Q04. The increase from 1Q04 is mainly due to additional
revenues from the purchase of the security system business operations of Yamatane Co. Ltd. in OctoberPage 2 of 7

IIJ 1Q05

2004 and solid growth of revenues from outsourced operations. The decrease from 4Q04 is mainly due
to the decrease in systems development contracts, mainly due to a seasonal fluctuation.
Equipment sales revenues were JPY 273 million in 1Q05, a decrease of 48.5% compared to 1Q04 anda decrease of 73.8% compared to 4Q04.
Cost and expense
Cost of revenues was JPY 8,118
million in 1Q05, an increase of 9.1%
compared to 1Q04 and a decrease of
18.9% compared to 4Q04.

Cost of Revenues

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

Cost of Connectivity and VAS
revenues was JPY 4,964 million, an
increase of 3.2% compared to 1Q04 and a decreaseof 1.1% compared to 4Q04. The increase from 1Q04
is mainly due to an increase in personnel expenses
and cost for local access lines for Wide-area
Ethernet Services. The decrease from 4Q04 is
mainly due to a decrease in depreciation andamortization.
Thegross-margin
ratio
for
Connectivity and VAS in 1Q05 was 13.9%,
compared to 11.7% in 1Q04 and 14.4% in 4Q04.
The improvement from 1Q04 was mainly due to anincrease in revenues from higher-margin VAS, anda decrease in backbone costs.

1Q05

1Q04

8,118
4,964
2,910
244

7,443
4,811
2,157
475

YoY %
change
9.1%
3.2%
34.9%
(48.7%)(JPY in millions)

4Q04
10,012
5,018
4,030
964

QoQ %
change(18.9%)(1.1%)(27.8%)(74.7%)

Quarterly Cost and Gross Margin Ratio
12,00030.0%(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 Connectivity and VAS (Gross Margin Ratio)

Cost of SI revenues was JPY 2,910 million in 1Q05,
Cost of SI Cost (Gross Margin Ratio)
an increase of 34.9% compared to 1Q04 and a
Cost of Equipment Sales
decrease of 27.8% compared to 4Q04. The grossmargin ratio for SI in 1Q05 was 24.2%, compared to 20.0% in 1Q04 and 24.7% in 4Q04. The
improvement in margin compared to 1Q04 was mainly due to the increase in higher-margin systems
integration contracts.
Sales and marketing expenses were JPY 768 million in 1Q05, an increase of 15.8% compared to
1Q04 and an increase of 4.3% compared to 4Q04. The increase from 1Q04 is mainly due to increases inpersonnel and advertising expenses. The increase from 4Q04 is mainly due to an increase in personnel
expenses.
General and administrative expenses were JPY 714 million in 1Q05, an increase of 15.0% comparedto 1Q04 and a decrease of 10.8% compared to 4Q04. The increase from 1Q04 is mainly due to anincrease in personnel expenses. The decrease from 4Q04 is mainly due to absence of write down ofsoftware licenses that we recorded in 4Q04.
Operating income
Operating income was JPY 247 million in 1Q05,
compared to an operating loss of JPY 100 million in
1Q04 and an operating income of JPY 656 million in
4Q04. The increase from 1Q04 was mainly due toimproved gross-margins in Connectivity, VAS and SI.
The decrease from 4Q04 was mainly due to adecrease in SI revenues.
Other income (expenses) in 1Q05 was JPY 435
million, compared to other expenses of JPY 151
million in 1Q04 and other income of JPY 1,729 million
in 4Q04. The increase from 1Q04 or the decrease
from 4Q04 is mainly due to an increase or decrease

Page 3 of 7

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

IIJ 1Q05

in gain from sale of available-for-sale securities. The differences to 1Q04 or 4Q04 also includes theabsence of interest payments for the convertible notes due March 31, 2005.
Income tax expense for 1Q05 was JPY 38 million, compared to JPY 15 million in 1Q04 and JPY 30
million in 4Q04.
Quarterly Net Income (Loss)
Equity in net income (loss) of equity method
3,000(JPY in millions)investees amounted to net income of JPY 3 million
in 1Q05, compared to net loss of JPY 11 million in
2,000
1Q04 and net loss of JPY 37 million in 4Q04.
Net income (loss) was net income of JPY 623
million in 1Q05, compared to a net loss of JPY 238
million in 1Q04 and net income of JPY 2,256 million
in 4Q04. The increase from 1Q04 or the decrease
from 4Q04 is mainly due to the improvement ordecrease in operating income, and an increase or
decrease in gain from sale of available-for-salesecurities.

1,000

0

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

1st 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 Economy4
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, OEM5
Total Contracted Bandwidth

1Q05
12,274
65
637
131
208
234

1Q04
8,076
76
594
82
421
224

4Q04
11,243
89
660
114
276
231

10,999

6,679

9,873

677,207
66,125611,082
140.9Gbps

708,586
73,225635,361
95.6Gbps

693,976
68,068625,908
121.2Gbps

The total number of contracts for dedicated access services continued to increase steadily in 1Q05. In IP
Services, which are mainly used for critical services in corporate headquarters, contracts for 100Mbps
and higher increased significantly. The number of contacts higher than 1Gbps substantially increased to
33 in 1Q05, from 24 in the previous quarter. The number of contracts recorded for broadband services
was over 10,000 and most new contracts are for multi-site connectivity. These services are provided withvalue-added services and systems integration.
Connectivity and VAS Revenue Breakdown and Cost
1Q05
Connectivity Service Revenues
Dedicated Access Service Revenues
IP Service 6

3,446
2,747
2,166

YoY %
Change3,671(6.1%)
2,919(5.9%)
2,279(5.0%)

1Q04(JPY in millions)

QoQ %change3,559(3.2%)
2,841(3.3%)
2,235(3.1%)

4Q04

3

Including IPv6 Services.
Referred to as "Limited Functionality Services" in 1Q04 for the services with local access not shared, limited on several
functionality compared to IP service such as number of IP address allocated and fixed speed of 64kbps, 128kbps and 1.5Mbps.
5OEM stands for Original Equipment Manufacturer.
4

Page 4 of 7

IIJ 1Q05

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
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

134

275

(51.2%)

171(21.4%)

447

365

22.5%

435

2.7%

699
466
233
1,388
933
5,767
4,964

752
509
243
1,187
592
5,450
4,811

(7.1%)(8.4%)(4.3%)
16.9%
57.5%
5.8%
3.2%

718
471
247
1,322
979
5,860
5,018

(2.7%)(1.2%)(5.6%)
5.0%(4.7%)(1.6%)(1.1%)

864

985(12.3%)

831

3.9%

13.9%

11.7%

14.4%

VAS revenues increased reflecting an increase in revenues from data centers and other managed
services, reflecting an increase in demand for 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 1Q05 by 12.3% compared to 1Q04 and increased by 3.9% compared to
4Q04.
Systems Integration
Systems Integration
Revenue Breakdown and Cost

Systems Integration Revenues
Systems Integration
Outsourced Operation
Cost of Systems Integration
Systems Integration Gross Margin Ratio

1Q05

1Q04

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

2,695
1,040
1,655
2,157
20.0%

(JPY in millions)

YoY %
QoQ %
4Q04
changechange42.5% 5,352 (28.2%)
14.7% 2,786 (57.2%)
60.0% 2,566
3.2%
34.9% 4,030 (27.8%)
24.7%

Our SI projects are becoming bigger in scale as we include the whole stream of consulting, design,
project management, implementation and operation. SI revenues in 1Q05 increased compared to 1Q04
largely due to the steady increase in monthly revenues from outsourced operations. In addition, theincrease from 1Q04 reflected additional revenues from the purchase of the security system business
operations of Yamatane Co. Ltd. ("Yamatane").
Equipment Sales

Equipment Sales Revenue and Cost
1Q05

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

273
244
10.9%

(JPY in millions)

YoY %
QoQ %
4Q04
changechange530 (48.5%) 1,042 (73.8%)475 (48.7%)
964 (74.7%)
10.4%
7.6%

1Q04

Other Financial Statistics
Other Financial Statistics
1Q05
Adjusted EBITDA7
CAPEX, including capital leases8
6
7

1,261
533

(JPY in millions)

YoY %
QoQ %
4Q04
changechange884
42.6% 1,698 (25.8%)
1,300 (59.0%)
724 (26.3%)

1Q04

IP Service revenues includes revenues from Data Center Connectivity Service.
Please refer to the Reconciliation of Non-GAAP Financial Measures on the next page.

Page 5 of 7

IIJ 1Q05

Depreciation and amortization9

1,004

1,014

1.0%

1,061

(4.4%)

Major Topics
ADS ratio change and stock split:
In August 2005, IIJ announced that its board of directors approved a change in the ratio of its American
Depositary Shares ("ADSs") to the shares of common stock of IIJ ("Shares") from 1 ADS = 1 / 2,000 of a
Share to 1 ADS = 1 / 400 of a Share and a stock split (1 to 5) of Shares. The ratio change and stock split
will not affect the total number of ADSs in issue and are not expected to affect the ADS trading price on
the NASDAQ market, because: (1) the ADS ratio change will be reciprocal to the stock split and (2) the
effective date for the ratio change will be the payable date for the stock split. In connection with the ratiochange and stock split, the ADS depositary facility at The Bank of New York will be temporarily closed
for deposits of Shares for delivery of American Depositary Receipts ("ADRs") representing the ADSs
and withdrawal of Shares upon surrender of ADRs from and including Friday, August 26, 2005, to, andincluding, the payable date for the stock split, Tuesday, October 11, 2005. The holders of IIJ ADSs will
be able to trade its ADSs on the NASDAQ market as usual during the period in which the depositaryfacility is closed for deposits and withdrawals of Shares.
IIJ and IIJ Technology to form alliance with HP Japan to deliver RFID platform:
In August 2005, IIJ, IIJ Technology and Hewlett-Packard Japan, Ltd. announced that they have formed
a business alliance for the commercialization of a radio frequency identification ("RFID") platform using
networks based on international RFID standards called the EPCglobal NetworkTM. Through thisalliance, the three companies will offer global real-time supply chain management ("SCM"), which canbe put to practical use for intercompany and international logistics.
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
Adjusted EBITDA
Depreciation and Amortization10
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)(JPY in millions)

1Q04
4Q04
1Q05
884
1,698
1,261
(984) (1,042)(1,014)
(100)
656
247
(151)
1,729
435
15
30
38
(24)

39

(62)

3

(11)

(37)

623

(238)

2,256

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)

1Q04
4Q04
1Q05
1,300
724
533
320

977

627

213

323

97

8

Please refer to the Reconciliation of Non-GAAP Financial Measures on the next page.
Depreciation and amortization includes amortization of issuance cost of convertible notes and intangible assets.
10
Depreciation and amortization excludes amortization of issuance cost of convertible notes that was included in otherexpenses.
9

Page 6 of 7

IIJ 1Q05

Target
IIJ maintains its target for FY2005. As announced on May 27, 2005, the targets for consolidated financial
results for FY2005 are as follows:
Revenue - JPY 46,330 million (an increase of 11.1% compared to FY2004)
Operating income - JPY 2,320 million (an increase of 85.9% compared to FY2004)
Net income - JPY 3,700 million (an increase of 27.3% compared to FY2004)

Management Message/Webcast
On August 13, 2005, IIJ will present its management message and the Company's results and outlook
by webcast. For details, please access the 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 achieve or sustain profitability in the near future; IIJ's ability to compete effectively against
competitors which have greater financial, marketing and other resources; IIJ's ability to attract and retain
qualified personnel; and other risks referred to in IIJ’s annual report on Form 20-F filed with the United States
Securities and Exchange Commission ("SEC") on August 3, 2005, and from time to time in other filings with
the SEC available at www.sec.gov.

Tables to follow

Page 7 of 7

IIJ 1Q05

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

For the Three Months Ended Jun 30, 2005, Jun 30, 2004 and Mar 31, 2005
(Expressed in Thousands of Japanese Yen (JPY) and U.S. Dollars (USD) Except for Per Share and ADS Data)(1)Year-over-year Comparison
Sequential Comparison
Jun 30, 2005
Jun 30, 2004
Mar 31, 2005
% of
% of
% of
Total
Total
YOY
Total
QOQ
USD (1)
JPY
Revenues
JPY
Revenues
Chg %JPY
Revenues
Chg %Revenues:
Connectivity and value-added services:
Dedicated access services
Dial-up access services
Value-added services
Other
Total connectivity and value-added services

24,767
6,299
12,514
8,413
51,9932,746,900
698,670
1,387,893
933,120
5,766,583

27.8%
7.1
14.1
9.4
58.4

2,918,488
751,933
1,186,837
592,3905,449,648

33.6%
8.7
13.7
6.8
62.8

(5.9%)
(7.1)
16.9
57.5
5.8

2,840,903
718,285
1,321,816
978,940
5,859,944

23.2%
5.8
10.8
8.0
47.8

(3.3%)
(2.7)
5.0
(4.7)
(1.6)

34,623
2,466
89,0823,840,075
273,438
9,880,096

38.9
2.7
100.0

2,694,638
530,6218,674,907

31.1
6.1
100.0

42.5
(48.5)
13.9

5,351,865
1,042,540
12,254,349

43.7
8.5
100.0

(28.2)(73.8)(19.4)

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

44,756
26,2402,197
73,193

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

50.2
29.5
2.5
82.2

4,811,341
2,156,620
475,466
7,443,427

55.5
24.8
5.5
85.8

3.2
34.9
(48.7)
9.1

5,018,522
4,030,274
963,665
10,012,461

40.9
32.9
7.9
81.7

(1.1)
(27.8)(74.7)(18.9)

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

6,923
6,437
305
86,858

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

7.8
7.2
0.3
97.5

662,950
620,651
48,3688,775,396

7.6
7.2
0.6
101.2

15.8
15.0
(29.9)
9.8

736,219
799,929
49,968
11,598,577

6.0
6.5
0.4
94.6

4.3
(10.8)(32.1)(16.9)

Operating income (loss)

2,224

246,678

2.5(100,489)(1.2)(345.5)655,772

5.4(62.4)

Other income (expenses)

3,924

435,233

4.4(150,700)(1.7)(388.8)1,729,122

14.1(74.8)

Income (loss) before income tax expense, minority interestsand equity in net income (loss) of equity method investees

6,148

681,9116.9(251,189)(2.9)(371.5)2,384,894

19.5(71.4)

Income tax expense
Minority interests in (earnings) losses of subsidiaries
Equity in net income (loss) of equity method investees

344
(215)
25

38,111(23,855)
2,729

0.4
(0.2)
0.0

15,08939,184(10,995)

0.2
0.5
(0.1)

152.6
(160.9)(124.8)29,839(62,468)(36,966)

0.3
(0.5)
(0.3)

27.7
(61.8)(107.4)

Net income (loss)

5,614

622,674

6.3%(238,089)(2.7%)(361.5%)2,255,621

18.4%(72.4%)

Systems integration revenues
Equipment sales
Total revenues

Basic And Diluted Net Income (Loss) Per Share
Basic And Diluted Net Income (Loss) Per ADS Equivalent
Weighted Average Number of Shares
Weighted Average Number of ADS Equivalents

16,2548.13
38,30976,618,779(6,214)(3.10)
38,312
76,623,702

Note (1): The translations of Japanese yen amounts into US dollar amounts with respect to the three months ended Jun 30, 2005 are included solely for the convenience of readers outside Japanand have been made at the rate of JPY 110.91 =$1, the approximate rate of exchange on Jun 30, 2005.

58,87529.44
38,312
76,623,702

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

As of Jun 30, 2005, Jun 30, 2004 and Mar 31, 2005
(Expressed in Thousands of Japanese Yen (JPY) and U.S. Dollars (USD)) (1)
Jun 30, 2005
Jun 30, 2004

Mar 31, 2005

USD (1)

JPY

%

JPY

%

JPY

%

46,041
2,747
52,2302,392
11,391728

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

10,627,203
5,377,230
413,477
932,097457,325

25.3%
12.8
1.0
2.2
1.1

5,286,477
7,407,439
140,096604,935
108,228

14.2%
20.0
0.4
1.6
0.3

115,529

12,813,316

38.0

17,807,332

42.4

13,547,175

36.5

6,105
71,06982,55318,855
10,138677,035
7,882,229
9,155,981
2,091,237
1,124,441

2.0
23.4
27.1
6.2
3.3

769,363
11,919,229
8,567,329
2,059,980
915,548

1.8
28.3
20.4
4.9
2.2

713,6079,930,781
9,722,366
2,050,665
1,151,877

1.9
26.8
26.2
5.5
3.1

304,249

33,744,239

100.0%

42,038,781

100.0%

37,116,471

100.0%

42,588
13,79933,0474,720
8,284
28,73524,513

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

5,363,001

12.8%

-

-

3,754,214
480,824
728,386
1,549,189
11,088,000
2,403,477

8.9
1.1
1.7
3.7
26.4
5.7

4,724,633
1,729,520
4,860,733
541,118
817,517
2,736,056

2,718,759

14.0%
4.5
10.9
1.6
2.7
9.4
8.1

2,774,974

12.7%
4.7
13.1
1.4
2.2
7.4
7.5

Total current liabilities

155,686

17,267,109

51.2

25,367,091

60.3

18,184,551

49.0

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

7,847
35,6181,528
2,225

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

2.6
11.7
0.5
0.7

2,270,366
3,123,878
89,037233,046

5.4
7.4
0.2
0.6

1,529,963
4,339,028
143,346
275,533

4.1
11.7
0.4
0.7

202,904

22,504,088

66.7

31,083,418

73.9

24,472,421

65.9

9,496

1,053,212

3.1

901,0882.2

1,028,977

2.8

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

124,113
213,125(304,854)
60,225(760)

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

13,765,372
23,637,628(37,578,410)
10,273,685(44,000)

32.8
56.2(89.4)
24.4(0.1)

13,765,372
23,637,628(34,434,052)
8,690,125(44,000)

37.1
63.7(92.8)
23.4(0.1)

Total shareholders' equity

91,84910,186,939

30.2

10,054,275

23.9

11,615,073

31.3

Total liabilities and shareholders' equity

304,249

33,744,239

100.0%

42,038,781

100.0%

37,116,471

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 Jun 30, 2005 are included solely for the convenience of readers outside Japanand have been made at the rate of JPY 110.91 =$1, the approximate rate of exchange on Jun 30, 2005.

-

INTERNET INITIATIVE JAPAN INC.

Appendix 3

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS（UNAUDITED）
For the Three Months Ended Jun 30, 2005, Jun 30, 2004 and Mar 31, 2004
(Expressed in Thousands of Japanese Yen (JPY) and U.S. Dollars (USD)) (1)
Jun 30, 2005
USD (1)JPY

Jun 30, 2004

Mar 31, 2005

JPY

JPY

Operating Activities:
Net income (loss)

5,614

622,674(238,089)

2,255,621

Depreciation and amortization

9,140

1,013,745

1,004,170

1,060,944(48)(5,339)(12,936)

36,204

Provision for (reversal of) doubtful accounts
Equity in net (income) loss of equity method investees(25)(2,729)10,99536,966

Minority interests in earnings (losses) of subsidiaries

215

23,855(39,184)

62,468Foreign exchange gains(56)(6,278)(7,585)(8,641)

-

-

5,195

-

Loss on retirement of convertible notes
Net losses (gains) on other investments(4,407)(488,758)

2,749(1,816,676)

Decrease (increase) in accounts receivable

14,6191,621,419

3,627,399(1,206,074)

Increase (decrease) in accounts payable(10,215)(1,132,992)(3,094,772)

1,205,665

Decrease (increase) in inventories(1,129)(125,190)

24,958

221,788

Deferred income taxes

165

18,343-(11,656)

Other(4,609)(511,252)(255,036)

704,443

Net cash provided by operating activities

9,264

1,027,498

1,027,864

2,541,052

Investing Activities:
Purchase of property and equipment(1,925)(213,485)(323,210)(96,542)---(50,000)

Purchase of subsidiary stock
Proceeds from sales of other investments

4,639

514,460

91,2862,008,650

Purchase of short-term and other investments(2,699)(299,311)(2,290)(2,339)Refund (payment) of guarantee deposits-net(354)(39,210)

14,528(3,330)

Other

(49)

(5,450)(4,851)(9,495)

Net cash provided by (used in) investing activities(388)(42,996)(224,537)

1,846,944

Financing Activities:
Repayments of long-term borrowings(1,881)(208,654)(36,710)(308,414)

Proceeds from securities loan agreement

-

-

-

1,729,520

Repayments of securities loan agreement(1,796)(199,120)-(722,800)--(745,488)(11,088,000)

Principal payments under capital leases(6,914)(766,807)(669,047)(753,177)

Net decrease in short-term borrowings(11)(1,246)(1,201,093)(101,211)

Redemption of convertible notes

Proceeds from issuance of common stock of a subsidiary--

188,632-

Net cash used in financing activities(10,602)(1,175,827)(2,463,706)(11,244,082)

Effect of Exchange Rate Changes on Cash101

11,236

3,343(16,227)

Net Decrease in Cash and Cash Equivalents(1,624)(180,089)(1,657,036)(6,872,313)

Cash and Cash Equivalents, Beginning of Period

47,6655,286,477

12,284,239

12,158,790

Cash and Cash Equivalents, End of Period

46,041

5,106,388

10,627,203

5,286,477

Note (1): The translations of Japanese yen amounts into US dollar amounts with respect to the three months ended Jun 30, 2005 are included
solely for the convenience of readers outside Japan and have been made at the rate of JPY110.91 =$1, the approximate rate ofexchange on Jun 30, 2005.