Internet Initiative Japan Inc.
August 14, 2001
Page 1

CONTACT IN JAPANInternet Initiative Japan Inc.
Junko Higasa
Investor Relations/Media Relations

For Immediate Release

CONTACT IN THE UNITED STATESThomson Financial / Carson
Mami Ogawa
Investor Relations

ir@iij.ad.jp

mami.ogawa@tfn.com

81-3-5259-6500

212-701-1824

IIJ Announces Financial Results for the 1st Quarter Ended June 30, 2001
− Positive Operating Income Forecasted For the Fiscal 2001 −Tokyo and New York, August 14, 2001 – 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 ended June 30, 2001. On August 15 at 9:00am (EDT), the Company
will host a conference call, which will be simultaneously webcasted at www.vcall.com. Replay will also
be available at the same URL.

The 1st Quarter of FY2001 Results Summary
z

z

z

z

z

(*1)

Total revenues for 1Q01 were in line with expectations at JPY8.3 billion, which increased
15.0% from 1Q00 and decreased 9.4% from 4Q00. This growth from 1Q00 was due to thesteady revenue flow from high-end corporate customers despite the sluggish Japanese
economy with 0% growth. The decline from 4Q00 reflected the expected seasonality in the
Systems Integration (SI) business.
Gross margin for 1Q01 increased to 12.5% from 6.3% in 1Q00 and from 8.7% in 4Q00,
largely reflecting the rapid decline of international backbone costs and the Company’s
continuous focus on cost reduction initiatives to achieve profitability.
The Company recorded an operating loss of (-)JPY300 million for 1Q01, which was at thesmaller end of the estimate range announced in the Company’s previous earnings release.
The operating loss ratio was (-)3.6%, an improvement of 8.3 percentage points from 1Q00
and 0.7 percentage points from 4Q00. EBITDA(*1) improved to JPY376 million, a 27.5%
increase from 4Q00.
For 2Q01, IIJ expects total revenues to be between JPY9.0 billion and JPY9.5 billion,
operating (loss) income to be between (-)JPY100 million and (+)JPY50 million, and
EBITDA to be between JPY580 million to JPY730 million.
IIJ expects to report positive operating income for the fiscal 2001, due to a combination ofcontinued declines in international backbone costs, its largest cost reduction item, andincreased sales revenues from each sales category under its total network solutions approach.
IIJ expects revenues from SI services to be stronger in the second half of this fiscal year.
EBITDA represents operating income (loss) plus depreciation and amortization.

Internet Initiative Japan Inc.
August 14, 2001
Page 2
Overview and Business Outlook
Overview of the 1Q Results and Business Outlook“In this quarter, I’m glad to demonstrate our clear path for profitability,” said Koichi Suzuki,
President and CEO of IIJ. “As a result of our continuous focus to achieve profitability byincreasing sales revenues from total network solutions and by realizing reductions in ourinternational backbone costs, gross margin for this quarter sharply increased, the operating loss
ratio improved, and EBITDA also positively grew, notwithstanding Japan’s sluggish economy.”“With this path for profitability, we expect the Company to achieve around breakeven in operating
income for the next quarter, to further improve its operating performance in the second half of thisfiscal year, and to have positive operating income for the fiscal 2001.”“We successfully reduced our international backbone costs by 38.4% from 4Q00 by renegotiating
contracts with a number of international cable carriers, even though we have approximately
doubled our bandwidth of Japan-US lines since fiscal 1999.” said Yasuhiro Nishi, CFO of IIJ. “In
the fiscal 2001, we expect further substantive declines in our international backbone costs in total
terms, as the unit cost for lines are expected to decline for the year by about two-thirds.” “We also
expect sales revenues in the fiscal 2001 to increase from each sales category under our total
network solutions approach. We believe that revenues from SI services will be stronger in thesecond half of this fiscal year.”
Anticipated Financial Performance for the 2nd Quarter (JPY in millions)
The 2nd Quarter of the Fiscal 2001
Revenues
9,000 – 9,500
Operating Income (Loss)(-)100 – (+)50
EBITDA
580 – 730
Strategies Taking For the Growth
Enhancing Relations with High-end Corporate Customers
According to a recent survey by Accenture, Japan’s BtoB market size in 2000 reached JPY22
trillion, and is forecasted to grow five-fold to JPY110 trillion in 2005. “Industry in Japan has been
built around manufacturing. With this strong industrial structure in place, I believe the future
demand for new networking systems within Japan’s BtoB market is huge as indicated in the survey,
and we are in a solid position to leverage our strong corporate customer base to capitalize on thisgrowth opportunity,” said Suzuki.
In the fiscal year 2000, one third of IIJ’s total revenues were generated from IIJ’s top 40 high-end
corporate customers such as Toyota, Sharp, Konami, Toppan, Daiwa Research Institute, Sanwa
Bank, NTT Docomo, Japan Telecom and Its Communication (former Tokyu CATV). The threemain industries in which these top customers operate are manufacturing, financial services andtelecommunications. “Although the number of high-end corporate customers in the market is notlarge, the revenue stream is very solid. We continue to strengthen our customer relationships andincrease their satisfaction by offering a wide range of services as components of our total network
solutions, ” said Suzuki.
Strengthening business in Network and Systems Management Services
As announced on August 14, Net Care, Inc. (“Net Care”), IIJ’s subsidiary specializing in thecustomer support business, will issue an additional 11,000 shares of their common stock in theInternet Initiative Japan Inc.
August 14, 2001
Page 3amount of JPY825 million, of which IIJ will purchase 6,000 shares. Upon completion of thetransaction, which is subject to approval at the shareholders’ meeting scheduled on August 28,
IIJ’s equity interests in Net Care will increase to 52.5% from the 50.0%. As strategic shareholders,
JGC Corporation, one of the world's six biggest full-service engineering and construction groups,
and CRC Solutions Corp., a leading IT solutions and data center provider in Japan, will alsopurchase shares and will each hold 12.5% of Net Care’s common stock. Net Care will use theproceeds to strengthen its business in network and systems management services.
“Along with both our network services and systems integration services, network and systems
management services are expected to grow to be one of the key offerings in IIJ group’s totalsolutions strategy,” said Suzuki. “As the scale of corporations’ new network systems grows larger,
secure operation and management services with around-the-clock support are increasingly critical
for these systems. With an anticipated growing demand for comprehensive management andoperation services, we plan to strengthen our capabilities in this field through Net Care.”
Net Care will initially focus on enhancing network and systems management services targetingcustomers of Internet data centers, systems integration services, and security services. As businessgrows, Net Care aims to integrate these services into comprehensive outsourcing solutions forlarge-scale network systems.
Capturing Demand in Japan’s Broadband BusinessJapan’s broadband access market has been rapidly expanding. According to Japan’s Ministry of
Public Management, Home Affairs, Posts and Telecommunications, the contract number of DSL
lines in Japan totaled to 400,760 by the end of July 2001, which is an increase of 250 times in ayear period. The Ministry also reported that CATV (cable modem) Internet subscribers increasedby 3 times since June 2000 to approximately 967,000 subscribers by the end of June 2001. “As oneof the largest nationwide backbone providers and data center operators in Japan, IIJ is abeneficiary of the expanding broadband demand by regional network operators and content
providers for full-fledged connectivity and data center services. Also as a top quality service
provider, we are in a position to attract customers in the end corporate and individual markets that
require high performance in Internet connectivity geared to new access lines such as DSL and
FTTH (Fiber To The Home),” said Suzuki. “We continue to benefit from the increasing flow ofInternet traffic by leveraging our position in the market place.”
Status of Overview and Business Outlook
This Overview and Business Outlook contains certain forward-looking statements and projections that are
subject to known and unknown risks and uncertainties that could cause actual results to differ materially fromthose expressed or implied by such statements. These risks and uncertainties include, but are not limited to thefactors noted at the end of this release and to the risk factors and other information contained in IIJ’s filings withand other documents furnished to the Securities and Exchange Commission on, e.g., Form 20-F and Form 6-K.
IIJ will keep this press release publicly available on its Web site (www.iij.ad.jp). Unless IIJ is in a quiet period
described below or unless IIJ publishes an update press release stating otherwise, the public can continue to relyon the Overview and Business Outlook announced in this 1Q01 press release as being IIJ's current expectations
on matters covered. IIJ intends to publish its next Overview and Business Outlook in its 2Q01 earnings release,presently scheduled for November 13, 2001. In conjunction with the 2Q01 earnings announcement, IIJ will holda webcasted conference made available to the public for listening over the Company’s website. Additionally, IIJ
will observe a two-week quiet period from October 31, 2001 until publication of the 2Q01 earnings release.
During the quiet period, readers are referred to the documents filed with or furnished to the SEC by IIJ,
specifically the most recent reports on Forms 20-F and 6-K. These documents speak to the timeframe prior to thequiet period only, and are not subject to update by the Company. During the quiet period, IIJ representatives will
not comment on IIJ's financial results or expectations.

Internet Initiative Japan Inc.
August 14, 2001
Page 4
The 1st Quarter of FY2001 Operating Highlights
Network Infrastructure and Internet Data Center Development (International and Domestic)
During 1Q01, IIJ upgraded its Japan-US backbone lines to approximately 1.7Gbps from 1.4Gbps.
Also, IIJ announced that it will open its ninth data center in Kyoto this fall, in cooperation with its
37.9% affiliate, Crosswave Communications ("Crosswave", NASDAQ: CWCI).
Taking the Lead in the Japanese Broadband Market
IIJ’s broadband network platform, HSMN (High Speed Media Network), delivers more than 20
broadband content applications, such as games, sports, movie, music and broadcasting, to CATVInternet users in Japan through an alliance with regional CATV network operators. Recently, IIJ
began transmitting the entire content (both text and image) of Sankei Shimbun, one of Japan’s
leading daily newspapers, over HSMN.
Utilizing HSMN, IIJ began transmitting various broadband content for CDN Japan, which is analliance formed by IIJ, Oracle and Cisco. The alliance aims to help content providers more
effectively deliver broadband content by controlling the data transmission flow. Additionally, IIJ
and Sun Microsystems, K.K. (Sun) formed an alliance to support start-up broadband content
providers in their business launch through a special program named "IIJ HSMN/Sun Startup
Accelerator Alliance". While Sun provides a package of servers and software, IIJ provides housing
space in its Internet data centers, Internet connectivity and connection to the HSMN platform.
To continue providing a variety of high-quality, high-speed options to Japan’s diversifying
broadband access market, IIJ launched a new broadband connectivity service, which is adapted to
the regional NTT’s ADSL access lines for corporate and individual customers, and enables amaximum speed of 1.5Mbps. Also during this quarter, IIJ announced the launch in August of
broadband connectivity services, which are adapted to the regional NTT’s FTTH access lines, forcorporate and individual customers, and enables a maximum speed of 100Mbps.
New Services Offered as Part of the IIJ Total Solutions Strategy
As a new lineup in the Value-added services category, IIJ commercially launched its on-line
backup services for corporate users and individual users. Also during the quarter, IIJ announced
the launch in July of a new e-mail hosting service called "IIJ Post Office/Virus Protection Service"that detects and removes computer viruses. In June, IIJ launched a new VPN (Virtual Private
Network) service optimally suited for extranet use, which is an optional service to "IIJ Security
Premium", the Company’s large-scale managed firewall service.
Expansion of IPv6-Capable Services
During this quarter, IIJ announced the launch of the IPv6 (Internet protocol version 6, the next
generation Internet protocol) Solutions Services in early July. The new service utilizes IIJ's
technological and operational know-how in offering total IPv6 business support, and the offerings
range from project-base consulting, through to systems and network integration. At the same time,
IIJ upgraded its original router named "SEIL T1" with IPv6-compatible software.
Stock Option Grant
At the shareholders’ meeting held in June 2001, IIJ resolved to grant subscription rights for new
shares of total 395 common stock to 44 directors and employees with the aim of further raising
their motivation and morale to improve business performance. The Company granted the rights tothe subject directors and employees at the early August 2001.

Internet Initiative Japan Inc.
August 14, 2001
Page 5Affiliate Companies
Crosswave has signed a contract with U's Communications, an FTTH operator, to provide
gigabit-class nationwide high-speed backbone services by interconnecting with U's
Communications' last mile network beginning in October 2001.
Internet Multifeed Co., a 26.0% affiliate, began full commercial operation of JPNAP, which is a
distributed IX (Internet eXchange point) service. JPNAP already has 14 network operators
including IIJ and NTT Communications as customers.
Asia Internet Holding (“AIH”), a 26.7%(*2) affiliate and operator of "A-Bone", one of the largest IP
backbone networks in Asia, expanded its "A-Bone VPN Service" to Korea by cooperating with
Hanaro Telecom, one of Korea's leading telecommunications and Internet services providers. ABone VPN Service covers 7 countries in Asia.
(*2)

As of August 13, 2001, IIJ’s equity interests in AIH was increased to 26.7% from 20.6%.

The 1st Quarter of FY2001 Financial Results
Due mainly to the large growth in Internet data center services, IIJ has changed its segmentation
disclosure for its revenues in the statements of operations, starting from 1Q01 results in quarterly
earnings release.
Revenues
Revenues in 1Q01 totaled JPY8,333 million, up 15.0% compared with 1Q00 but decreased by
9.4% compared with 4Q00.
Connectivity services and value-added services revenues increased 24.0% from 1Q00 to JPY5,704

million in 1Q01 and grew by 6.7% from 4Q00. The year-over-year increase was due to the steadyrevenue growth of Dedicated access services and Value-added services. Among the Value-added
services, data center services and security-related services were particularly strong.
Systems integration services revenues decreased by 11.7% from 1Q00 to JPY2,280 million in 1Q01
and by 27.0% from 4Q00, which was consistent with the Company’s expectations.

Table 1. Number of Contracts
Internet Access Services
IP Service

64kbps – 128kbps
192kbps – 768kbps
1Mbps – 2Mbps
3Mbps – 600Mbps
IIJ T1 Standard 1.5Mbps
Total IP Service
IIJ Economy
64kbps – 128kbps(*3)
IIJ DSL/F
Maximum 1.5Mbps
Total Dedicated Access Services Contracts
(*3)

1Q01
245
61
246
115
662
1,329
1,283
45
2,657

4Q00
295
80
240
111
575
1,301
1,295
NA
2,596

1Q00
427
122
184
82
255
1,070
1,115
NA
2,185

94,802
66,341
161,143

95,273
66,857
162,130

87,29760,778148,075

IIJ DSL/F is a new service launched in May 2001.

IIJ4U (dialup service for individuals)
OthersTotal Dial-up Access Services Contracts

Internet Initiative Japan Inc.
August 14, 2001
Page 6
Total Data Center Services Contracts

116

Table 2. Revenue Breakdown in Dedicated Access Services
1Q01
Total IP Service (IP Service and IIJ T1 Standard)
3,048
IIJ Economy + IIJ DSL/F
339

113

(JPY in millions)
4Q00
1Q00
3,020
2,703
333
285

Table 3. Contracted Bandwidth
1Q01
Dedicated Access Services

4Q00
4.6

47

(Unit: Gbps)
1Q00
3.5
2.2

Cost and expenses
Cost of total revenues increased 7.4% to JPY7,288 million in 1Q01 from 1Q00 but declined by

13.2% from 4Q00.
International backbone costs decreased 39.5% from 1Q00 to JPY867 million in 1Q01, and by
38.4% from 4Q00. These decreases on both a year-over-year and sequential basis reflect the sharp
reduction of Japan-US backbone lines cost. Monthly unit backbone cost declined byapproximately 65% in the year-over-year comparison and by approximately 39% in the quarterover-quarter comparison.
Domestic backbone costs increased 34.1% from 1Q00 to JPY774 million in 1Q01, and by 8.4%
from 4Q00. These increases reflect a substantial upgrade of IIJ’s domestic backbone lines in order
to install large-capacity backbones for the deployment of its multi-site Internet data centers.
Table 4. Backbone Costs
International Backbone Costs
Domestic Backbone Costs

1Q01
867
774

(JPY in millions)
4Q00
1Q00
1,409
1,433
714
577

Cost of SI revenues decreased 16.0% to JPY1,914 million in 1Q01 from 1Q00 and by 26.7% from
4Q00 reflecting the decrease in SI revenues. Due to the increase of iBPS contracts, IIJ’s e-businesssolutions packages service, the gross margin ratio improved steadily in the year-over-yearcomparison.
Sales and marketing expenses decreased 2.6% to JPY819 million in 1Q01 and increased 7.8%
from 4Q00. This decrease from 1Q00 was due to a decrease in advertising costs. Sales personnel
expense increased 24.6% to JPY341 million in 1Q01 from 1Q00 and by 8.7% from 4Q00.
Mainly as a result of the decrease in international backbone cost, operating loss decreased to
JPY300 million in 1Q01, compared to JPY865 million in 1Q00 and to JPY394 million in 4Q00.
The operating loss ratio against revenues for 1Q01 improved to (-)3.6%, compared to (-)11.9% in
1Q00, and to (-)4.3% in 4Q00.
Other income (expenses)
Other expenses for 1Q01 was JPY61 million, compared to other expenses of JPY162 million in
1Q00 and to other income of JPY127 million in 4Q00. Due to the depreciation of the Japanese yen
against the US dollar, IIJ recorded a foreign exchange gain of JPY412 million in 4Q00 and moremodest gain in 1Q01 of JPY23 million.

Internet Initiative Japan Inc.
August 14, 2001
Page 7
Equity in net loss of affiliated companies
Equity in the net loss of affiliated companies increased to JPY1,219 million in 1Q01, compared to
JPY1,005 million in 1Q00 and JPY1,179 million in 4Q00, mainly resulting from the equity loss in
Crosswave.
Net loss
Net loss was JPY1,665 million in 1Q01, compared to JPY2,031 million in 1Q00 and JPY1,353
million in 4Q00. Basic net loss per ADS equivalent was JPY(-)37.03 in 1Q01, compared to
JPY(-)45.18 in 1Q00 and JPY(-)30.09 in 4Q00.
Table 5. Other Financial Statistics
1Q01
376
1,076
706

EBITDACAPEX, including capitalized leases
Depreciation and amortization(*4)(*4)(JPY in millions)
4Q00
1Q00
295
(-)251
1,115
686
714
639

Depreciation and amortization includes amortization of issuance cost of convertible notes.

Company Information
Internet Initiative Japan Inc. is one of Japan’s leading Internet-access and comprehensive Internet solution
providers mainly targeting high-end corporate customers. Founded in 1992, IIJ 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 solutions ranging from new generation network services over optical-fiber infrastructure optimized
for data communications to construction of Asia-wide IP backbone networks, high-quality Internet access,security system services, hosting/housing, content design and systems integration.
Statements made in this press release that state 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 forward-looking
statements are subject to various risks, uncertainties and other factors that could cause IIJ’s actual results todiffer materially from those contained in any forward-looking statement. These risks, uncertainties and otherfactors include: IIJ’s ability to continue to increase subscribers to its connectivity services, particularly athigher bandwidths; IIJ’s ability to generate significant revenues from its other services such as systems
integration; the success of IIJ’s investments in Crosswave; the ability to compete in a rapidly evolving andcompetitive marketplace; the impact of technological changes in its industry; and other risks referred from time
to time in IIJ’s filings with the Securities and Exchange Commission.

Tables to follow

INTERNET INITIATIVE JAPAN INC.
CONSOLIDATED STATEMENTS OF OPERATIONSAppendix 1

For the Three Months Ended Jun 30, 2001, Jun 30, 2000 and Mar 31, 2001
(Expressed in Thousands of Japanese Yen (JPY) and U.S. Dollars (USD) Except for Per Share and ADS Data) (1)Year-over-year Comparison
Jun 30, 2001

USD (1)
Revenues:
Connectivity and value-added services:
Dedicated access services
Dial-up access services
Value-added services:
Internet datacenter services
Other value-added services
Total value-added services
Other
Total connectivity and value-added services

JPY

% of
Total
Revenues

JPY

Jun 30, 2000
% of
Total
Revenues

YOY
Chg %

Sequential Comparison
Mar 31, 2001
% of
Total
QOQ
JPY
Revenues
Chg %27,154
7,885

3,386,912
983,461

40.6%
11.8

2,987,266
1,159,801

41.2%
16.0

13.4%
(15.2)

3,353,198
1,033,029

36.5%
11.2

1.0%
(4.8)

3,923
3,141
7,064
3,625
45,728489,385
391,731
881,116452,126
5,703,615

5.9
4.7
10.6
5.4
68.4

165,621
179,678
345,299
106,696
4,599,062

2.3
2.5
4.8
1.5
63.5

195.5
118.0
155.2
323.8
24.0

431,640
267,749
699,389
260,885
5,346,501

4.7
2.9
7.6
2.8
58.1

13.4
46.3
26.0
73.3
6.7

18,2782,801
66,8072,279,854
349,429
8,332,898

27.4
4.2
100.0

2,582,732
64,001
7,245,795

35.6
0.9
100.0

(11.7)
446.0
15.0

3,124,909
728,165
9,199,575

34.0
7.9
100.0

(27.0)(52.0)(9.4)

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

40,623
15,3472,463
58,433

5,066,856
1,914,254
307,1887,288,298

60.8
23.0
3.7
87.5

4,458,138
2,279,004
51,126
6,788,268

61.5
31.5
0.7
93.7

13.7
(16.0)
500.8
7.4

5,073,952
2,609,855
714,916
8,398,723

55.1
28.4
7.8
91.3

(0.1)
(26.7)(57.0)(13.2)

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

6,564
3,520
694
69,211

818,786
439,030
86,5988,632,712

9.8
5.3
1.0
103.6

840,892
406,159
75,187
8,110,506

11.6
5.6
1.0
111.9

(2.6)
8.1
15.2
6.4

759,660
369,039
66,2059,593,627

8.3
4.0
0.7
104.3

7.8
19.0
30.8
(10.0)(2,404)(299,814)(3.6)(864,711)(11.9)(65.3)(394,052)(4.3)(23.9)(493)(61,484)(0.7)(162,462)(2.3)(62.2)

126,6771.4(148.5)

Loss before income tax expense (benefit)(2,897)(361,298)(4.3)(1,027,173)(14.2)(64.8)(267,375)

(2.9)

35.1

Income tax expense (benefit)
Minority interests in consolidated subsidiaries
Equity in net loss of affiliated companies

1,020
344
(9,775)

127,197
42,834(1,219,215)

1.5
0.5(14.7)

32,372
32,831(1,004,574)

0.4
0.5(13.9)

292.9
30.5
21.4

(96,070)(2,550)(1,179,050)(1.0)(12.8)(232.4)(1,779.8)
3.4

Net loss(13,348)(1,664,876)(20.0%)(2,031,288)(28.0%)(18.0%)(1,352,905)(14.7%)

Systems integration revenues
Equipment sales
Total revenues

Operating loss
Other income (expenses)

Basic Net Loss Per Share
Basic Net Loss Per ADS Equivalent
Weighted Average Number of Shares
Weighted Average Number of ADS Equivalents(74,060)(37.03)22,48044,960,000(90,360)(45.18)22,48044,960,000(60,183)(30.09)22,48044,960,000

Note (1):The translations of Japanese yen amounts into US dollar amounts with respect to the three months ended Jun 30, 2001 are included solely for the convenience of readers outside Japanand have been made at the rate of JPY 124.73 =$1, the approximate rate of exchange on Jun 29, 2001.

23.1%

INTERNET INITIATIVE JAPAN INC.
CONSOLIDATED BALANCE SHEETSAppendix 2

As of Jun 30, 2001, Jun 30, 2000 and Mar 31, 2001
(Expressed in Thousands of Japanese Yen (JPY) and U.S. Dollars (USD)) (1)USD (1)ASSETS
Current Assets:
Cash
Short-term investments
Accounts receivable, net
Inventories
Prepaid expenses
Other current assets

Jun 30, 2001
JPY%

Jun 30, 2000
JPY%

Mar 31, 2001
JPY%

100,816
0
43,145
2,113
3,793
3,958

12,574,744
0
5,381,435
263,553
473,154493,692

25.9%
0.0
11.1
0.5
1.0
1.0

17,660,882
6,028,260
4,488,683
414,310380,227
351,873

38.7%
13.2
9.8
0.9
0.8
0.8

13,570,707
05,417,456
245,520
253,648347,600

26.8%
0.0
10.7
0.5
0.5
0.7

153,825

19,186,578

39.5

29,324,235

64.2

19,834,931

39.2

101,748
62,27058,918
7,116
5,382

12,690,980
7,766,900
7,348,823
887,636
671,331

26.2
16.0
15.1
1.8
1.4

4,384,444
4,773,356
5,609,707
804,367
751,449

9.6
10.5
12.3
1.8
1.6

13,895,654
8,455,840
6,927,575
837,115
689,687

27.4
16.7
13.7
1.6
1.4

389,259

48,552,248

100.0%

45,647,558

100.0%

50,640,802

100.0%

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

40,24732,167
2,254
3,864
0
14,3305,020,000
4,012,148
281,105
481,9940
1,787,436

10.3%
8.3
0.6
1.0
0.0
3.7

8,420,260
3,182,090
252,354363,718
690,000
1,525,097

18.4%
7.0
0.6
0.8
1.5
3.3

5,620,000
4,313,811
211,302455,2120
1,644,354

11.1%
8.5
0.4
0.9
0.0
3.3

Total current liabilities

92,862

11,582,683

23.9

14,433,519

31.6

12,244,679

24.2

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

27,259120,260
23,762997
208

3,400,000
15,000,000
2,963,868
124,368
25,941

7.0
30.9
6.1
0.2
0.1

200,000
15,000,000
2,198,515
123,328
9,081

0.4
32.9
4.8
0.3
0.0

2,800,000
15,000,000
2,679,224
124,640
188,413

5.5
29.6
5.3
0.2
0.4

265,348

33,096,860

68.2

31,964,443

70.0

33,036,956

65.2

5,077

633,2621.3

803,1151.8

676,096

1.3

Shareholders' Equity:
Common stock
Additional paid-in capital(2)Accumulated deficit
Accumulated other comprehensive income

56,781
136,843(99,633)
24,843

7,082,336
17,068,353(12,427,210)
3,098,647

14.6
35.1
(25.6)
6.4

7,082,336
12,028,557(8,093,400)
1,862,507

15.5
26.3
(17.7)
4.1

7,082,336
17,068,353(10,762,334)
3,539,395

14.0
33.7
(21.2)
7.0

Total shareholders' equity

118,834

14,822,126

30.5

12,880,000

28.2

16,927,750

33.5

Total liabilities and shareholders' equity

389,259

48,552,248

100.0%

45,647,558

100.0%

50,640,802

100.0%

Total current assets
Investments in and Advances to Affiliated Companies
Other Investments
Property and Equipment, net
Guarantee Deposits
Other Assets
Total assets
LIABILITIES ANDSHAREHOLDERS' EQUITYCurrent Liabilities:

Total liabilities
Minority Interest

Note (1): The translations of Japanese yen amounts into US dollar amounts with respect to Jun 30, 2001 are included solely for the convenience of readers outside Japanand have been made at the rate of JPY124.73 =$1, the approximate rate of exchange on Jun 29, 2001.
Note (2):The effect of increase in equity in net assets of Crosswave resulting from IPO proceeds, net of IIJ's additional investment, has been accounted for
as capital transactions.

INTERNET INITIATIVE JAPAN INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSAppendix 3

For the Three Months Ended Jun 30, 2001, Jun 30, 2000 and Mar 31, 2001
(Expressed in Thousands of Japanese Yen (JPY) and U.S. Dollars (USD)) (1)

Jun 30, 2001
JPY
USD (1)
Operating Activities:
Net loss
Depreciation and amortization
Equity in net loss of affiliated companies
Minority interests in consolidated subsidiaries
Foreign exchange losses (gains)
Decrease (increase) in accounts receivable
Decrease in accounts payable
Deferred income tax
Other
Net cash used in operating activities
Investing Activities:
Purchase of property and equipment
Investments in and advances to affiliated companies
Purchase of short-term investments
Purchase of other investments
Proceeds from redemption of short-term investments
Payment of insurance policies-net
Payment of guarantee deposits-net
Other
Net cash provided by (used in) investing activities
Financing Activities:
Proceeds from long-term borrowings
Net proceeds from issuance of convertible notes
Repayments of long-term borrowings
Principal payments under capital leases
Net increase (decrease) in short-term borrowings
Net cash provided by (used in) financing activities

Jun 30, 2000
JPY

Mar 31, 2001
JPY

(13,348)
5,664
9,775
(343)
(183)
126
(2,391)976(2,129)(1,853)(1,664,876)
706,463
1,219,215(42,834)(22,776)
15,781(298,183)
121,705(265,574)(231,079)(2,031,288)
638,528
1,004,574(32,831)
57,462
11,002(400,392)
18,133(362,329)(1,097,141)(1,352,905)
714,130
1,179,050
2,550(411,981)(1,449,025)(2,027,616)(113,444)
613,635(2,845,606)(1,436)(179,145)
-

-

-

(397)

(49,500)

-

-

23
(404)
(209)
(2,423)

2,802(50,353)(26,067)(302,263)(147,100)(89,017)(8,416,096)(622,724)
3,253,320(1,868)(102,456)
27,437(6,098,504)(501,808)-(478,500)
3,136,244(3,422)(10,145)(103,925)
2,038,444

4,810

600,000-

400,000--

14,502,639--(3,815)(4,810)(3,815)(475,813)(600,000)(475,813)(453,417)(5,270,680)
8,778,542(90,000)(500,144)(489,436)(679,580)

106

13,192(80,454)454,633(7,985)(995,963)

1,502,443(1,032,109)

Cash, Beginning of Period

108,801

13,570,707

16,158,439

14,602,816

Cash, End of Period

100,816

12,574,744

17,660,882

13,570,707

Effect of Exchange Rate Changes on CashNet Increase (Decrease) in Cash-

Note (1): The translations of Japanese yen amounts into US dollar amounts with respect to the three months ended Jun 30, 2001 are included solely for the convenienceof readers outside Japan and have been made at the rate of JPY124.73 =$1, the approximate rate of exchange on Jun 29, 2001.