Internet Initiative Japan Inc.
http://www.iij.ad.jp/
2004 年 2 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
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 3 四半期（10-12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 2 0 04 年 2 月 1 2 日 2 3:0 0 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 3 四半期（10-12月）決算発表 要約
四半期（

2003 年度第 3 四半期
・ 2003 年度第 3 四半期は、利益率の高いシステム・インテグレーション案件の獲得とバックボーンコストの削減によるインターネット接続および付加価値サービスの粗利拡大により、前期の業績見通しを上回り、営業黒字を達成、1999 年 8 月の株式公開以来の当期利益を計上した。
・ 営業収益は、SI および付加価値サービスの売上増加により、9,633 百万円と前期の 9,185 百万円から 4.9%増加した（前年同期比では 8.8%減）。
・ 営業損益は、236 百万円の黒字となり、前期の▲830 百万円および前年同期の▲567 百万円から大幅に改善した。株式会社クロスウェイブ コミュニケーションズに対する更生債権 287 百万円のうちの戻り分 71 百万円を除いても営業黒字である。
・ 償却前営業利益（Adjusted EBITDA）は、1,218 百万円と、前期の 126 百万円および前年同期の 349 百万円
から大幅に改善した。
・ 税引前当期損益は、営業損益の黒字化と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
1,572 百万円、2005 年償還の円建転換社債買入消却による利益 89 百万円の寄与により、1,806 百万円の黒字となり、前期の▲987 百万円から大幅に改善した。
・ 当期損益は 1,979 百万円となり、前期の▲278 百万円および前年同期の▲2,266 百万円から改善した。
・ 第 4 四半期は、引き続き利益率の高いサービスの売上増加により、営業損益ベースで黒字を維持する見込み。

IIJ 3Q03

Internet Initiative Japan Inc.
http://www.iij.ad.jp/（ご参考）統計値について
表 1.営業収益（売上高）の内訳
営業収益（売上高）の内訳

（百万円）

3Q03

3Q02

3,204
780
3,984
1,125
525

3,404
776
4,180
913
468

インターネット接続及び付加価値サービス収入合計

5,633

5,561

システムインテグレーション
機器販売

2,889
1,111
9,633

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

前年

2Q03

前期比

(5.9%)
0.4%(4.7%)
23.2%
12.3%

3,236
784
4,020
1,081
536

(1.0%)(0.5%)(0.9%)
4.0%(2.1%)

1.3%

5,637

(0.1%)

3,684 (21.6%)
1,319 (15.8%)
10,564 (8.8%)

2,549
999
9,185

13.3%
11.2%
4.9%

同期比

表 2. 専用線接続サービスの売上高の内訳（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

3Q03

3Q02

2,485

2,548

(2.5%)

2,485

0.0%

719
3,204

856
3,404

(16.0%)(5.9%)

751
3,236(4.3%)(1.0%)

前年同期比

2Q03

前期比

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

3Q03
76
22
226
381
188
5,991
6,884
69,688597,232
666,920

3Q02
130
37
279
212
139
3,922
4,719
82,193
370,543452,736

3Q03
60.3
15.5
75.8

3Q02
23.3
7.0
30.3

表 4. 契約帯域数の総和

2Q03
79
23
226
336
184
5,402
6,250
72,560563,086
635,646（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
契約帯域合計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。

2Q03
51.6
15.1
66.7

IIJ 3Q03

Internet Initiative Japan Inc.
http://www.iij.ad.jp/
表 5．付加価値サービスの売上高の内訳．付加価値サービスの売上高の内訳
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
付加価値サービス合計

（百万円）

3Q03
373
752
1,125

3Q02
359
554
913

前年同期比

3.7%
35.8%
23.2%

2Q03
371
710
1,081

表 6．営業費用の内訳．営業費用の内訳

3Q03
4,877
2,199
1,050
8,125
699
486
87
9,397

3Q02
5,180
3,173
1,254
9,607
894
512
117
11,130

前年同期比(5.9%)(30.7%)(16.3%)(15.4%)(21.8%)(4.9%)(25.6%)(15.6%)

前期比
2Q03
5,127
(4.9%)
2,275(3.4%)
935
12.3%
8,337
(2.5%)
1,100 (36.4%)
482
0.9%
96
(9.5%)
10,015(6.2%)

表 7. バックボーンコストの内訳

（百万円）

3Q03
156
939

3Q02
432
902

前年同期比

(63.9%)
4.1%

2Q03
247
993

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

0.3%
6.0%
4.0%
（百万円）

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
営業費用合計国際バックボーンコスト
国内バックボーンコスト

前期比

前期比

(36.9%)(5.5%)
（百万円）

3Q03
1,218
508
1,004

3Q02
349
1,519
943

前年同期比

249.0%(66.6%)
9.8%

2Q03
126
579
984

前期比

866.7%(12.3%)
2.1%

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 3Q03

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12月期、
月期、2002年
年12月期、
月期、2003年
年9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12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12月期
対営業収益%

対前年同四半期%

JPY

前四半期比較
2003年9月期
対営業収益 対前四半期%%

29,908
7,277
10,497
4,902
52,584

3,204,046
779,544
1,124,596
525,106
5,633,292

33.3%
8.1
11.7
5.4
58.5

3,404,016
776,173
913,152
467,6295,560,970

32.2%
7.4
8.6
4.4
52.6

(5.9%)
0.4
23.2
12.3
1.3

3,236,405
783,589
1,080,876
536,389
5,637,259

35.2%
8.5
11.8
5.9
61.4

(1.0%)
(0.5)
4.0
(2.1)
(0.1)

26,966
10,37089,9202,888,936
1,110,927
9,633,155

30.0
11.5
100.0

3,683,978
1,318,630
10,563,578

34.9
12.5
100.0

(21.6)(15.8)(8.8)

2,549,379
998,6219,185,259

27.7
10.9
100.0

13.3
11.2
4.9

45,522
20,523
9,798
75,843

4,876,741
2,198,668
1,049,663
8,125,072

50.6
22.8
10.9
84.3

5,179,920
3,173,211
1,254,073
9,607,204

49.0
30.0
11.9
90.9

(5.9)
(30.7)(16.3)(15.4)

5,126,708
2,275,704
934,7118,337,123

55.8
24.8
10.2
90.8

(4.9)
(3.4)
12.3
(2.5)

6,524
4,540
812
87,719698,948486,332
86,966
9,397,318

7.3
5.1
0.9
97.6

894,340
511,604
116,950
11,130,098

8.5
4.9
1.1
105.4

(21.8)(4.9)(25.6)(15.6)

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

12.0
5.2
1.0
109.0

(36.4)
0.9
(9.5)
(6.2)

営業利益（損失）

2,201

235,837

2.4(566,520)(5.4)(141.6)(829,760)(9.0)(128.4)

その他の利益（費用）14,655

1,569,957

16.3(228,058)(2.1)(788.4)(157,294)(1.7)(1,098.1)

税引前当期利益（損失）16,856

1,805,794

18.7(794,578)(7.5)(327.3)(987,054)(10.7)(282.9)

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損失(2,618)
(455)
(545)

(280,406)(48,710)(58,354)

(2.9)
(0.5)
(0.6)

137,936
41,813(1,375,338)

1.3
0.4(13.0)(303.3)(216.5)(95.8)(571,642)
186,931(49,945)

(6.2)
2.0
(0.5)

(50.9)(126.1)16.8

当期利益（損失）

18,474

1,979,136

20.5%(2,266,039)(21.4%)(187.3%)(278,426)(3.0%)(810.8%)

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株あたり当期利益（損失）
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

51,65825.83
38,312
76,623,702(100,802)(50.40)22,48044,960,000

注記(1): 2003年12月期につきましては、米ドル換算レート107.13円=1米ドル(2003/12/31)にて参考表示しております。

(10,082)(5.04)
27,61755,233,050

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

Appendix 2

月期累計、2002年
月期累計
2003年
年12月期累計、年12月期累計
月期累計、
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、前年同四半期累計比較

2003年12月期累計
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

2002年12月期累計

対営業収益
%

JPY

対営業収益
%

対前年同四半期%

91,12021,75429,802
14,760157,436

9,761,680
2,330,551
3,192,670
1,581,204
16,866,105

35.9%
8.6
11.8
5.8
62.1

10,473,722
2,390,179
2,671,448
1,344,530
16,879,879

33.8%
7.7
8.6
4.4
54.5

(6.8%)
(2.5)
19.5
17.6
(0.1)

73,24022,871
253,547

7,846,238
2,450,117
27,162,460

28.9
9.0
100.0

10,107,204
3,994,039
30,981,122

32.6
12.9
100.0

(22.4)(38.7)(12.3)

142,235
63,453
21,426
227,114

15,237,607
6,797,764
2,295,320
24,330,691

56.1
25.0
8.5
89.6

15,353,621
8,842,530
3,778,191
27,974,342

49.6
28.5
12.2
90.3

(0.8)
(23.1)(39.2)(13.0)

25,871
14,754
2,606
270,345

2,771,562
1,580,597
279,182
28,962,032

10.2
5.8
1.0
106.6

2,386,931
1,543,002
301,304
32,205,579

7.7
5.0
1.0
104.0

16.1
2.4
(7.3)
(10.1)

営業損失(16,798)(1,799,572)(6.6)(1,224,457)

(4.0)

47.0

その他の利益（費用）11,2781,208,265

4.4(909,141)(2.9)(232.9)

税引前当期損失(5,520)(591,307)(2.2)(2,133,598)(6.9)(72.3)

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損失：
持分法投資損失
クロスウェイブに対する投資等評価損(11,594)
3,670(1,242,083)
393,107(4.6)
1.5

814,109
131,9092.6
0.4(252.6)
198.0

(912)
(16,055)(97,740)(1,719,981)

(0.4)
(6.3)

(4,371,424)(14.1)(97.8)

当期損失(7,223)(773,838)(2.8%)(7,187,222)(23.2%)(89.2%)

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(26,198)(13.10)29,53859,076,611

注記(1): 2003年12月期につきましては、米ドル換算レート107.13円=1米ドル(2003/12/31)にて参考表示しております。

(319,716)(159.86)
22,48044,960,000

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 3

2003年
年12月期、
月期、2002年
年12月期、
月期、2003年
年9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12月期
JPY

2002年12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113,326
61,982
1,832
8,171
3,657

12,140,595
6,640,226
196,252
875,338
391,766

31.5%
17.3
0.5
2.3
1.0

4,270,613
7,305,169
813,863882,854
135,828

11.4%
19.5
2.2
2.4
0.4

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

30.7%
17.5
0.7
1.7
1.2

流動資産合計188,968

20,244,177

52.6

13,408,327

35.9

19,896,704

51.8

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

9,560
54,34478,861

1,024,126
5,821,912
8,448,327

2.7
15.1
22.0

2.9
14.3
23.7

2,076,387
849,954

5.4
2.2

12.1
9.2
23.8
13.4
3.7
1.9

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

19,382
7,934

4,522,602
3,461,695
8,898,123
5,000,000
1,369,596
699,998

2,080,764
728,580

5.4
1.9

資産合計

359,049

38,464,883

100.0%

37,360,341

100.0%

38,434,030

100.0%

63,14243,047
4,798
5,554
18,17722,5486,764,410
4,611,586
513,996594,974
1,947,309
2,415,596

17.6%
12.0
1.3
1.5
5.1
6.3

4,510,000
5,852,779
364,366
570,719
1,200,000
2,424,701

12.1%
15.7
1.0
1.5
3.2
6.5

4,304,906
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

157,266

16,847,871

43.8

14,922,565

40.0

15,596,258

40.6

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

18,160110,445
26,155631
1,683

1,945,434
11,832,000
2,801,993
67,557
180,329

5.0
30.7
7.3
0.2
0.5

3,400,000
15,000,000
3,463,132
75,047
184,847

9.1
40.1
9.3
0.2
0.5

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

5.2
39.0
8.3
0.2
0.5

負債合計

314,340

33,675,184

87.5

37,045,591

99.2

36,039,780

93.8

少数株主持分4,540

486,3881.3

900,837

2.4

437,678

1.1

128,492
220,645(330,992)
22,025(1)

13,765,372
23,637,628(35,459,129)
2,359,503
(63)

35.8
61.5
(92.2)
6.1
0.0

7,082,336
17,068,353(25,395,691)
658,91518.9
45.7(68.0)
1.8

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

35.8
61.5
(97.4)
5.2
0.0

資本合計

40,1694,303,311

11.2(586,087)(1.6)

1,956,572

5.1

負債、少数株主持分及び資本合計

359,049

38,464,883

100.0%

37,360,341

100.0%

38,434,030

100.0%%

2003年9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12月期につきましては、米ドル換算レート107.13円=1米ドル(2003/12/31)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、発行価額は12,000,649千円です。

株式会社 インターネットイニシアティブ

Appendix 4

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12月期、
月期、2002年
年12月期、
月期、2003年
年9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12月期
USD (1)
JPY

2002年12月期

2003年9月期

JPY

JPY

営業活動によるキャッシュフロー：
当期利益（損失）

18,474

1,979,136(2,266,039)

減価償却費等

9,374

1,004,236

942,854983,736

貸倒引当金繰入（戻入）額(377)(40,428)

59,019313,968

持分法による投資損失545

58,354

1,375,338

49,945

少数株主損（益）455

48,710(41,813)(186,931)

為替差損（差益）115

12,27932,8343,282

転換社債償還差益(278,426)(830)(88,975)-

その他投資に係る損（益）(14,301)(1,532,033)--

売掛金の減少（増加）額

1,292

138,452

493,961(1,100,671)

買掛金及び未払金の増加（減少）額(656)(70,261)

1,033,939

216,306

棚卸資産の減少（増加）額

674

72,267(398,092)

72,432(577,444)

50,490

法人税等調整額(2,672)(286,208)

132,230

その他(1,957)(209,740)(111,975)(73,111)

営業活動によるキャッシュフロー

10,136

1,085,789

1,252,256(526,424)

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(3,170)(339,621)(505,169)

その他投資の売却による収入

18,173

1,946,875-

122,650

その他投資の取得による支出(56)(6,039)(28,377)(304,517)(148,007)

敷金保証金の返還

6727

22,972

1,199

その他

(2)

(225)

(30,506)

9,875

14,951

1,601,717(541,080)(318,800)(36,017)

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：長期借入金の返済(9,673)(1,036,247)(200,000)

転換社債の償還(28,446)(3,047,460)--

リース債務元本の返済(6,267)(671,339)(651,546)(671,376)

短期借入金の純増減額

22,9582,459,505(322,254)(1,370,436)

-

-

-

11,886,887

財務活動によるキャッシュフロー(21,428)(2,295,541)(1,173,800)

9,809,058

現金及び現金同等物に係る換算差額(320)(34,305)(39,516)94

現金及び現金同等物の増加（減少）額

3,339

357,660(502,140)

8,963,928

現金及び現金同等物の期首残高

109,987

11,782,935

4,772,753

2,819,007

現金及び現金同等物の期末残高

113,326

12,140,595

4,270,613

11,782,935

普通株式の発行による収入

注記(1):2003年12月期につきましては、米ドル換算レート107.13円=1米ドル(2003/12/31)にて参考表示しております。

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 Positive Quarterly Operating and Net Income for Third
Quarter Results for the Year Ending March 31, 2004
Tokyo, February 12, 2004 / New York, February 11, 2004 - 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 3rd quarter of the fiscal year ending March 31, 2004 (“fiscal
2003”).

Third Quarter 2003 Highlights1
3rd Quarter 2003:
・ IIJ recorded positive quarterly operating income for the first time since 4Q01; and net income for the
first time since its Initial Public Offering ("IPO") in August 1999.
・ Revenues totaled JPY 9,633 million ($ 89.9 million), an increase of 4.9% from JPY 9,185 million in
2Q03, though a decrease of 8.8% compared to 3Q02. The increase from 2Q03 is mainly due toincreased revenues from SI and value-added services.
・ Operating income was JPY 236 million ($ 2.2 million), a significant improvement from the operating
losses of 830 million in 2Q03 and JPY 567 million in 3Q02. This was mainly due to increased SI
profitability and reduced backbone costs.
・ Adjusted EBITDA2 was JPY 1,218 million ($ 11.4 million), an increase from an adjusted EBITDA of
JPY 126 million in 2Q03 and JPY 349 million in 3Q02.
・ Income before income tax was JPY 1,806 million ($ 16.9 million), a substantial improvement fromthe loss before tax of JPY 987 million in 2Q03. The improvement was primarily a result of positive
operating income of JPY 236 million, an extraordinary gain of JPY 1,572 million that was generated
by the sale in the Company's stake in DLJdirect SFG Securities Inc. ("DLJdirect SFG Securities")and a gain of JPY 89 million that came from repurchasing and canceling a portion of IIJ's convertible
notes that are due in 2005.

・ Net income was JPY 1,979 million ($ 18.5 million), a marked improvement from the net losses of
JPY 278 million in 2Q03 and JPY 2,266 million in 3Q02.
・ IIJ expects quarterly operating income in 4Q03 to remain positive as a result of its efforts to increase
the revenues of high margin services and further reduce costs.

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
December 31, 2003, and the equivalent three-month period ended December 31, 2002. For all 3Q03 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 JPY 107.13 = US$1.00, the approximate exchange rate on December 31, 2003.
2

Please refer to the Reconciliation of Non-GAAP Financial Measures on page 6.

Page 1 of 7

IIJ 3Q03

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

Overview of 3rd Quarter FY2003 Financial Results and Business Outlook3
Financial Results and Business Outlook"3Q03 was quite remarkable for us," said Koichi Suzuki, President and CEO of IIJ. "We achieved both
positive quarterly operating income for the first time since 4Q01 and positive quarterly net income forthe first time since our IPO. Our breakthrough to profitability was the result of our successful efforts at
cutting costs while increasing revenues from our more profitable services. Though the competition in
the Japanese market is still severe, we plan to capitalize on our industry leading skills to continue toincrease revenues and seek higher profitability on a continuous basis by actively providing anddeveloping services that meet the demand of corporate customers for advanced network solutions. We
are receiving many sales leads, particularly in our Network Integration business which we expect tobecome one of the main drivers of our future growth.""In this quarter, we were particularly successful at reducing our backbone costs which contributed to
improved connectivity service profitability," said Yasuhiro Nishi, CFO of IIJ. "In our SI business,revenue from operational outsourcing services increased steadily and contributed to improved
operating income. Operating income would have turned positive even without the recovery related to apreviously reserved accounts receivable of Crosswave Communications Inc., formerly written-off but
now became collectible. Net income turned positive as a result of operating income turning positive andthe approximately JPY 1.6 billion of gain on the sale of shares of DLJdirect SFG Securities. We expect
operating income to remain positive during 4Q03."

3rd Quarter FY2003 Financial Results
Revenues
Revenues in 3Q03 totaled JPY 9,633 million, a decrease of 8.8% from JPY 10,564 million in 3Q02 andan increase of 4.9% from JPY 9,185 million in 2Q03.
Table 1. Revenues (JPY in millions)

Revenues
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

3Q03
3,204
780
3,984
1,125
525
5,633
2,889
1,111
9,633

3Q02
3,404
776
4,180
913
468
5,561
3,684
1,319
10,564YoY% change(5.9%)
0.4%(4.7%)
23.2%
12.3%
1.3%
(21.6%)(15.8%)(8.8%)

2Q03
3,236
784
4,020
1,081
536
5,637
2,549
999
9,185

QoQ
% change(1.0%)(0.5%)(0.9%)
4.0%(2.1%)(0.1%)
13.3%
11.2%
4.9%

Connectivity and value-added services revenues were JPY 5,633 million in 3Q03, an increase of
1.3% compared to 3Q02 and almost flat compared to 2Q03.
3This Overview and Business Outlook contains forward-looking statements and projections such as statements regarding
4Q03 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 4Q03 earnings release, presently
scheduled for May 2004.

Page 2 of 7

IIJ 3Q03

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

Table 2. Connectivity Services (JPY in millions)

Connectivity Services
3Q03
Dedicated access services:
IP Service + DC (connectivity)
Others4
Total Dedicated Access Services

2,485
719
3,204

3Q02
2,548
856
3,404

YoY
% change(2.5%)(16.0%)(5.9%)

2Q03
2,485
751
3,236

QoQ
% change
0.0%(4.3%)(1.0%)

Dedicated access service revenues were JPY 3,204 million in 3Q03, a decrease of 5.9% compared to
3Q02 and a slight decrease of 1.0% compared to 2Q03. IP Service, including Data Center Connectivity
services, decreased by 2.5% in 3Q03 compared to 3Q02 but stayed nearly flat compared to 2Q03.
Customers continued to shift from dedicated line-based connectivity services such as IIJ T1 Standard
and IIJ Economy Service to lower-cost broadband services such as IIJ FiberAccess/F Service(Maximum 10-100Mbps), However, the increase in IIJ FiberAccess/F Service did not offset thedecrease in IIJ T1 Standard and IIJ Economy Service.
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

3Q03

3Q02

2Q03

76
22
226
381
188
5,991
6,884
69,688597,232
666,920

130
37
279
212
139
3,922
4,719
82,193
370,543452,736

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

3Q03
60.3
15.5
75.8

3Q02
23.3
7.0
30.3

2Q03
51.6
15.1
66.7

Table 4. Number of Contract Bandwidth (Unit: Gbps)

Dedicated Access Services
DC Connectivity Services
Total Contract Bandwidth

Dial-up access service revenues were JPY 780 million in 3Q03, an increase of 0.4% compared to 3Q02
and a decrease of 0.5% compared to 2Q03. The steady revenue growth of OEM services, including the
CDN platform and NTT's regional L-mode service, mostly offset the decrease in IIJ4U service
revenues.
Value-added service revenues were JPY 1,125 million in 3Q03, an increase of 23.2% compared to
3Q02 and an increase of 4.0% compared to 2Q03. These increases were mainly due to revenue
increases from security related services and IIJ VPN standard services.

4

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

Page 3 of 7

IIJ 3Q03

Internet Initiative Japan Inc.
http://www.iij.ad.jp/en/
Table 5. Value-added Services (JPY in millions)

Value-Added Services

3Q03
Internet Data Center services
Other value-added services
Total Value-Added Service Revenues

YoY% change

3Q02

2Q03

QoQ
% change

373
752

359
554

3.7%
35.8%

371
710

0.3%
6.0%

1,125

913

23.2%

1,081

4.0%

Systems integration services revenues decreased 21.6% to JPY 2,889 million in 3Q03 compared to
3Q02 but recovered 13.3% compared to 2Q03 due to an increase in recurring fees of outsourcing
services such as mail and web gateway services.
Equipment sales revenues were JPY 1,111 million in 3Q03, a decrease of 15.8% compared to 3Q02
and an increase of 11.2% compared to 2Q03.
Cost and expenses
Cost of total revenues was JPY 8,125 million in 3Q03, a decrease of 15.4% compared to 3Q02, and adecrease of 2.5% compared to 2Q03.
Table 6. Costs and Expenses (JPY in millions)YoY% change

Costs and expenses:
3Q03
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

4,877
2,198
1,050
8,125
699
486
87
9,397

3Q02

5,180
3,173
1,254
9,607
894
512
117
11,130(5.9%)(30.7%)(16.3%)(15.4%)(21.8%)(4.9%)(25.6%)(15.6%)

2Q03

5,127
2,275
935
8,337
1,100
482
96
10,015QoQ% change(4.9%)(3.4%)
12.3%(2.5%)(36.4%)
0.9%(9.5%)(6.2%)

Cost of connectivity and value-added services was JPY 4,877 million, a decrease of 5.9%
compared to 3Q02 and a decrease of 4.9% compared to 2Q03. The gross margin ratio for connectivity
and value-added services in 3Q03 was 13.4%, compared to 6.9% in 3Q02 and 9.1% in 2Q03. The
improvement in gross margin compared to 2Q03 was a result of our continuous efforts to reduce
backbone costs.
Table 7. Backbone Costs (JPY in millions)

Backbone Costs
3Q03
International Backbone Costs
Domestic Backbone Costs

156
939

3Q02

432
902

YoY
% Change(63.9%)
4.1%

2Q03

247
993

QoQ
% Change(36.9%)(5.5%)

International backbone costs were JPY 156 million, a decrease of 63.9% compared to 3Q02 and adecrease of 36.9% compared to 2Q03 as we continued to benefit from our efforts to optimize our
network.
Domestic backbone costs were JPY 939 million, an increase of 4.1% compared to 3Q02 and adecrease of 5.5% compared to 2Q03. 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 ofstrengthening our backbone network to provide various broadband network services and solutions

Page 4 of 7

IIJ 3Q03

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

nationwide. The quarter-over-quarter decrease reflects a decline in backbone prices, which offset anincrease in connection fees with FLET’S.

Cost of SI Revenues was JPY 2,199 million in 3Q03, a decrease of 30.7% compared to 3Q02 and adecrease of 3.4% compared to 2Q03. The gross margin for SI improved to 23.9% in 3Q03 compared to
13.9% in 3Q02 and 10.7% in 2Q03. The gross margin in 3Q03 improved compared to 2Q03 because of
an improvement in profitability in SI development contracts and an increase in outsourcing service
revenues.
Sales and Marketing Expenses were JPY 699 million in 3Q03, a decrease of 21.8% compared to
3Q02 and a decrease of 36.4% compared to 2Q03. The 2Q03 expenses included the write-off of JPY
287 million in accounts receivable from Crosswave Communications Inc. ("Crosswave"). In 3Q03, JPY
71 million of the amount that was written-off became collectible. This amount was recorded as income
as a result of the reversal of allowance for doubtful receivables from Crosswave.
General and administrative expenses were JPY 486 million in 3Q03, a decrease of 4.9% compared
to 3Q02 and an increase of 0.9% compared to 2Q03.
Operating income (loss)
Operating income increased to JPY 236 million in 3Q03 compared to a loss of JPY 567 million in 3Q02
and a loss of JPY 830 million in 2Q03. The improvement from 2Q03 is due to improved profitability in SI,
cost reduction for international and domestic backbones and the expected collection of a portion of
accounts receivable from Crosswave which required the reversal of related services, that werepreviously written-off.
Other income for 3Q03 was JPY 1,570 million, compared to other expenses of JPY 228 million in
3Q02 and JPY 157 million in 2Q03. IIJ recorded a gain on the sale of its shares of DLJdirect SFG
Securities, which amounted to JPY 1,572 million and gains from the repurchase and subsequent
retirement before maturity of convertible notes, which amounted to JPY 89 million in 3Q03.
Income tax benefit (expense) for 3Q03 was a benefit of JPY 280 million, compared to an expense of
JPY 138 million in 3Q02 and a benefit of JPY 572 million in 2Q03. 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 58 million in 3Q03, compared to
JPY 1,375 million in 3Q02, and JPY 50 million in 2Q03.
Net income was JPY 1,979 million in 3Q03, compared to net losses of JPY 2,266 million in 3Q02 andJPY 278 million in 2Q03. The improvement from 3Q02 is primarily due to the absence in equity method
net loss in Crosswave, and the improvement from 2Q03 is due to the return of positive operating
income, the gain on the sale of the shares of DLJdirect SFG Securities and the retirement of convertible
notes. Basic net income per ADS equivalent was JPY 25.83 in 3Q03, compared to a net loss of JPY
50.40 in 3Q02 and JPY 5.04 in 2Q03.
Table 8. Other Financial Statistics (JPY in millions)

Other Financial Statistics
5

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

3Q03
1,218
508
1,004

3Q02
349
1,519
943

YoY
% Change249.2%(66.5%)
6.5%

2Q03
126
579
984

QoQ
% Change

863.5%(12.3%)
2.1%

5

Please refer to the Reconciliation of Non-GAAP Financial Measures below.
Please refer to the Reconciliation of Non-GAAP Financial Measures below.
7
Depreciation and amortization includes amortization of issuance cost of convertible notes.
6

Page 5 of 7

IIJ 3Q03

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

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 and presented in accordance with U.S.
generally accepted accounting principles in Appendix 1:
Table 9. Adjusted EBITDA (JPY in millions)

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

3Q03
1,218
(982)
236
1,570
(280)
(49)
(58)
1,979

3Q02
349
(916)
(567)
(228)
138
42
(1,375)(2,266)

2Q03
126
(956)
(830)
(157)
(572)
187
(50)
(278)

The following table summarizes the reconciliation of capital expenditures to purchase of property andequipment according to the consolidated statements of cash flows that are prepared and presented inaccordance with U.S. generally accepted accounting principles in Appendix 4:
Table 10. CAPEX (JPY in millions)

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

3Q03
508
168
340

3Q02
1,519
1,014
505

2Q03
579
431
148

3rd Quarter FY2003 Business Review
Service Development
Development of new high-performance routers for cost effective site connectivity network:
In November 2003, IIJ announced the development of the latest model of the SEIL series of highperformance routers. The router supports higher throughput to maximize utilization of broadband
circuits and enhanced VPN functionality with hardware processing to help customers build more costeffective site connectivity networks over the Internet.
New movement against spam:
In January 2004, IIJ and IIJ America Inc. started to move against email message abuse. IIJ and IIJ
America participated in founding a working group against spam with 19 other international
telecommunications companies, Internet Service Providers (ISPs) and related businesses. The kick-off
meeting was held in December 2003, and it aims to develop measures that will combat spam emails
and other unethical uses of the Internet.
Introducing new technology to JP DNS Service in cooperation with JPRS:
In January 2004, IIJ announced the introduction of IP Anycast technology to JP Domain Name System(DNS) Service with Japan Registry Service (JPRS). This is the first case of this technology being
applied to JP DNS Service and it enables more redundancy and effectiveness for users to access themail servers and websites with ".jp" domain names.

8

Depreciation and amortization excludes amortization of issuance cost of convertible notes that was presented as otherexpenses.

Page 6 of 7

IIJ 3Q03

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

Network Infrastructure Development
In 3Q03, IIJ continued to enhance its Internet backbone to maintain the network quality that it provides
to its customers. This quarter, IIJ installed one new circuit and upgraded one circuit for the international
backbone, and installed one new circuit and upgraded three circuits for the domestic backbone. IIJ is
considering cost effectiveness and overall profitability in undertaking the upgrades.
Finance
Repurchase and cancellation of convertible notes:
On November 19, 2003, IIJ announced that it had repurchased a portion of its convertible notes thatwere to be due in 2005 and cancelled them. As a result, IIJ recorded a one-time gain of JPY 89 million.
Key Developments of the IIJ Group
Outsourcing Solutions:
In 3Q03, IIJ Technology continued to expand its variety of outsourcing solutions. "SoMail" is a largescale mail system solution that helps customers with more than thousand employees to build a mailserver with system extensibility, reliability and stability by adapting open-source-based software.
Enhanced Version of Data Integration Service is the world's first platform service that serves as an
Internet-based purchasing system (IBPS) top layer and EAI service provider. IBPS Web Application
Inspection Service is a service that checks the security vulnerabilities that occur when implementing
Web applications. These solutions are provided in cooperation with the vendors with each area's
specialty.

Teleconference/Webcast
On February 12 at 9:00 am (EST), IIJ will host a conference call to discuss the Company's results andoutlook. 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 one of Japan's leading
Internet-access and comprehensive network solutions providers. The company has built one of thelargest 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 from the delivery of new generation network services over an optical-fiber infrastructurethat is optimized for data communications, to the construction of pan-Asian IP backbone networks. The
company also offers high-quality systems integration and security services, Internet access,hosting/housing, and content 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 4Q03 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 20-F of its annual report and other filings with the United States Securities andExchange Commission.

Tables to follow

Page 7 of 7

IIJ 3Q03

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

For the Three Months Ended Dec 31, 2003, Dec 31, 2002 and Sept 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
Dec 31, 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

Dec 30, 2002
% of
Total
Revenues

YOY
Chg %

Sequential Comparison
Sep 30, 2003
% of
Total
QOQ
JPY
RevenuesChg %29,908
7,277
10,497
4,902
52,584

3,204,046
779,544
1,124,596
525,106
5,633,292

33.3%
8.1
11.7
5.4
58.5

3,404,016
776,173
913,152
467,6295,560,970

32.2%
7.4
8.6
4.4
52.6

(5.9%)
0.4
23.2
12.3
1.3

3,236,405
783,589
1,080,876
536,389
5,637,259

35.2%
8.5
11.8
5.9
61.4

(1.0%)
(0.5)
4.0
(2.1)
(0.1)

26,966
10,37089,9202,888,936
1,110,927
9,633,155

30.0
11.5
100.0

3,683,978
1,318,630
10,563,578

34.9
12.5
100.0

(21.6)(15.8)(8.8)

2,549,379
998,6219,185,259

27.7
10.9
100.0

13.3
11.2
4.9

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

45,522
20,523
9,798
75,843

4,876,741
2,198,668
1,049,663
8,125,072

50.6
22.8
10.9
84.3

5,179,920
3,173,211
1,254,073
9,607,204

49.0
30.0
11.9
90.9

(5.9)
(30.7)(16.3)(15.4)

5,126,708
2,275,704
934,7118,337,123

55.8
24.8
10.2
90.8

(4.9)
(3.4)
12.3
(2.5)

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

6,524
4,540
812
87,719698,948486,332
86,966
9,397,318

7.3
5.1
0.9
97.6

894,340
511,604
116,950
11,130,098

8.5
4.9
1.1
105.4

(21.8)(4.9)(25.6)(15.6)

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

12.0
5.2
1.0
109.0

(36.4)
0.9
(9.5)
(6.2)

Operating income(loss)

2,201

235,837

2.4(566,520)(5.4)(141.6)(829,760)(9.0)(128.4)

Other income(expenses)

14,655

1,569,957

16.3(228,058)(2.1)(788.4)(157,294)(1.7)(1,098.1)

Income(Loss) before income tax expense(benefit)

16,856

1,805,794

18.7(794,578)(7.5)(327.3)(987,054)(10.7)(282.9)

Income tax expense(benefit)
Minority interests in consolidated subsidiaries
Equity in net loss of equity method investees(2,618)
(455)
(545)

(280,406)(48,710)(58,354)

(2.9)
(0.5)
(0.6)

137,936
41,813(1,375,338)

1.3
0.4(13.0)(303.3)(216.5)(95.8)(571,642)
186,931(49,945)

(6.2)
2.0
(0.5)

(50.9)(126.1)
16.8

Net income(loss)

18,474

1,979,136

20.5%(2,266,039)(21.4%)(187.3%)(278,426)(3.0%)(810.8%)Systems integration revenues
Equipment sales
Total revenues

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

51,65825.83
38,312
76,623,702(100,802)(50.40)22,48044,960,000(10,082)(5.04)
27,61755,233,050

Note (1):The translation of Japanese yen amounts into US dollar amounts with respect to the three months ended Dec 31, 2003 are included solely for the convenience of readers outside Japanand have been made at the rate of JPY 107.13 =$1, the approximate rate of exchange on Dec 31, 2003.

Appendix 2

INTERNET INITIATIVE JAPAN INC.
CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)For the Nine Months Ended Dec 31, 2003 and Dec 31, 2002
(Expressed in Thousands of Japanese Yen (JPY) and U.S. Dollars (USD) Except for Per Share and ADS Data) (1)Year-over-year Comparison
Dec 31, 2003

Dec 31, 2002
% of

% of
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

Total
Revenues

JPY

Total
Revenues

YoY
Chg %

91,12021,75429,802
14,760157,436

9,761,680
2,330,551
3,192,670
1,581,204
16,866,105

35.9%
8.6
11.8
5.8
62.1

10,473,722
2,390,179
2,671,448
1,344,530
16,879,879

33.8%
7.7
8.6
4.4
54.5

(6.8%)
(2.5)
19.5
17.6
(0.1)

73,24022,871
253,547

7,846,238
2,450,117
27,162,460

28.9
9.0
100.0

10,107,204
3,994,039
30,981,122

32.6
12.9
100.0

(22.4)(38.7)(12.3)

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

142,235
63,453
21,426
227,114

15,237,607
6,797,764
2,295,320
24,330,691

56.1
25.0
8.5
89.6

15,353,621
8,842,530
3,778,191
27,974,342

49.6
28.5
12.2
90.3

(0.8)
(23.1)(39.2)(13.0)

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

25,871
14,754
2,606
270,345

2,771,562
1,580,597
279,182
28,962,032

10.2
5.8
1.0
106.6

2,386,931
1,543,002
301,304
32,205,579

7.7
5.0
1.0
104.0

16.1
2.4
(7.3)
(10.1)

Operating loss

(16,798)(1,799,572)(6.6)(1,224,457)

(4.0)

47.0

Other income(expenses)

11,2781,208,265

4.4(909,141)(2.9)(232.9)Loss before income tax expense(benefit)(5,520)(591,307)(2.2)(2,133,598)(6.9)(72.3)

Income tax expense(benefit)
Minority interests in consolidated subsidiaries
Equity in net loss of equity method investees:
Equity method net loss
Impairment loss on investment, advances and deposits for Crosswave(11,594)
3,670(1,242,083)
393,107(4.6)
1.5

814,109
131,9092.6
0.4(252.6)
198.0

(912)
(16,055)(97,740)(1,719,981)

(0.4)
(6.3)

(4,371,424)(14.1)(97.8)Net loss(7,223)(773,838)(2.8%)(7,187,222)(23.2%)(89.2%)

Systems integration revenues
Equipment sales
Total revenues

Basic Net Loss Per Share
Basic Net Loss Per ADS Equivalent
Weighted Average Number of Shares
Weighted Average Number of ADS Equivalents(26,198)(13.10)29,53859,076,611(319,716)(159.86)
22,48044,960,000

Note (1):The translations of Japanese yen amounts into US dollar amounts with respect to the year ended Dec 31, 2003 are included solely for the convenience of readers outside Japanand have been made at the rate of JPY 107.13 =$1, the approximate rate of exchange on Dec 31, 2003.

INTERNET INITIATIVE JAPAN INC.
CONSOLIDATED BALANCE SHEETS(UNAUDITED)Appendix 3

As of Dec 31, 2003, Dec 31, 2002 and Sept 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

Dec 31, 2003
JPY%

Dec 31, 2002
JPY%

Sep 30, 2003
JPY%

113,326
61,982
1,832
8,171
3,657

12,140,595
6,640,226
196,252
875,338
391,766

31.5%
17.3
0.5
2.3
1.0

4,270,613
7,305,169
813,863882,854
135,828

11.4%
19.5
2.2
2.4
0.4

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

30.7%
17.5
0.7
1.7
1.2

188,968

20,244,177

52.6

13,408,327

35.9

19,896,704

51.8

9,560
54,34478,861

1,024,126
5,821,912
8,448,327

2.7
15.1
22.0

2.9
14.3
23.7

2,076,387
849,954

5.4
2.2

12.1
9.2
23.8
13.4
3.7
1.9

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

19,382
7,934

4,522,602
3,461,695
8,898,123
5,000,000
1,369,596
699,998

2,080,764
728,5805.4
1.9

359,049

38,464,883

100.0%

37,360,341

100.0%

38,434,030

100.0%

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

63,14243,047
4,798
5,554
18,17722,5486,764,410
4,611,586
513,996594,974
1,947,309
2,415,596

17.6%
12.0
1.3
1.5
5.1
6.3

4,510,000
5,852,779
364,366
570,719
1,200,000
2,424,701

12.1%
15.7
1.0
1.5
3.2
6.5

4,304,906
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

Total current liabilities

157,266

16,847,871

43.8

14,922,565

40.0

15,596,258

40.6

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

18,160110,445
26,155631
1,683

1,945,434
11,832,000
2,801,993
67,557
180,329

5.0
30.7
7.3
0.2
0.5

3,400,000
15,000,000
3,463,132
75,047
184,847

9.1
40.1
9.3
0.2
0.5

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

5.2
39.0
8.3
0.2
0.5

314,340

33,675,184

87.5

37,045,591

99.2

36,039,780

93.8

4,540

486,3881.3

900,837

2.4

437,678

1.1

128,492
220,645(330,992)
22,025(1)

13,765,372
23,637,628(35,459,129)
2,359,503
(63)

35.8
61.5
(92.2)
6.1
0.0

7,082,336
17,068,353(25,395,691)
658,91518.9
45.7(68.0)
1.8

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

35.8
61.5
(97.4)
5.2
0.0

Total shareholders' equity(capital deficiency)

40,1694,303,311

11.2(586,087)(1.6)

1,956,572

5.1

Total liabilities andshareholders' equity(capital deficiency)

359,049

38,464,883

100.0%

37,360,341

100.0%

38,434,030

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 Dec 31, 2003 are included solely for the convenience of readers outside Japanand have been made at the rate of JPY107.13 =$1, the approximate rate of exchange on Dec 31, 2003.
Note (2): New 12,615 shares have been issued on Sep 17, 2003, in the net proceeds of JPY11,886,887.

INTERNET INITIATIVE JAPAN INC.

Appendix 4

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS（（UNAUDITED））
For the Three Months Ended Dec 31, 2003, Dec 31, 2002 and Sept 30, 2003
(Expressed in Thousands of Japanese Yen (JPY) and U.S. Dollars (USD)) (1)
Dec 31, 2003
USD (1)

Dec 31, 2002

Sept 30, 2003

JPY

JPY

JPY

Operating Activities:
Net income (loss)

18,474

1,979,136(2,266,039)(278,426)

Depreciation and amortization

9,374

1,004,236

942,854983,736

Provision for doubtful accounts(377)(40,428)

59,019313,968

Equity method net loss

545

58,354

1,375,338

49,945

Minority interests in net income (loss) of consolidated subsidiaries

455

48,710(41,813)(186,931)

Foreign exchange losses

115

12,27932,834

3,282

Gain on retirement of convertible bonds(830)(88,975)-

Net losses (gains) on other investments(14,301)(1,532,033)--

Decrease (increase) in accounts receivable

1,292

138,452

493,961(1,100,671)

Increase (decrease) in accounts payable(656)(70,261)

1,033,939

216,306

Decrease (increase) in inventories

674

72,267(398,092)

72,432(577,444)

50,490

Deferred income taxes(2,672)(286,208)

132,230

Other(1,957)(209,740)(111,975)(73,111)

Net cash provided by (used in) operating activities

10,136

1,085,789

1,252,256(526,424)

Investing Activities:
Purchase of property and equipment(3,170)(339,621)(505,169)

Proceeds from sales of other investment

18,173

1,946,875-

122,650(56)(6,039)(28,377)(304,517)

Purchase of other investments(148,007)

Refund of guarantee deposits-net

6727

22,972

1,199

Other

(2)

(225)

(30,506)

9,875

14,951

1,601,717(541,080)(318,800)

Repayments of long-term borrowings(9,673)(1,036,247)(200,000)(36,017)

Repurchase of convertible notes(28,446)(3,047,460)--

Principal payments under capital leases(6,267)(671,339)(651,546)(671,376)

Net increase (decrease) in short-term borrowings

22,9582,459,505

Net cash provided by (used in) investing activities
Financing Activities:(322,254)(1,370,436)

-

-

-

11,886,887(21,428)(2,295,541)(1,173,800)

9,809,058

Effect of Exchange Rate Changes on Cash

(320)

(34,305)(39,516)94

Net Increase (Decrease) in Cash

3,339

357,660(502,140)

8,963,928

Cash, Beginning of Period

109,987

11,782,935

4,772,753

2,819,007

Cash, End of Period

113,326

12,140,595

4,270,613

11,782,935

Proceeds from issuance of common stock
Net cash provided by (used in) financing activities

Note (1): The translations of Japanese yen amounts into US dollar amounts with respect to the three months ended Dec 31, 2003 are included
solely for the convenience of readers outside Japan and have been made at the rate of JPY107.13 =$1, the approximate rate ofexchange on Dec 31, 2003.