INTERNET INITIATIVE JAPAN IN ADR SPONSORED (IIJI)

[blueskywaves]

IIJI owns 38% of CWCI. S&P shows IIJI as having 44.96M ADS outstanding and CWCI as having 10.04M ADS outstanding. These two stocks started to trade more closely together after IIJI nearly doubled in one day a few weeks ago as profits from the scorching hot Chinese portals started to recycle into secondary and tertiary players.

There are only 17 Japanese companies whose ADRs are listed on Nasdaq. IIJI and CWCI are really the only two broadband pure plays. By way of contrast, I follow more than 50 Chinese plays most of which are regularly being launched into the stratosphere by sheer momentum alone!

These Japanese companies tend to be more inscrutable than the Chinese companies, but IIJI and CWCI are somewhat unique because they bypassed listing on the Japanese exchanges and went straight for NASDAQ listing. There just aren't that many ways to get exposed to Japanese broadband without buying directly on the Japanese exchanges. The average Japanese household, for example, has a telecom (wireless/wireline) budget of around $200 a month, with less than 40% devoted to wireless!!

Once the powerful owners of these two companies clarify their commitments to IIJI and CWCI's capex programs then these companies's stocks will have better access to global capital and will have even higher demand. US institutions, in particular, are seriously underweight Japan.

From IIJI's 6F filing on 6/10/2003.

The Company (IIJI) has incurred shareholders' capital deficiency of 452,748 thousand yen as of the end of March, 2003 as the result of posting of a net loss of 13,765,686 thousand yen for this fiscal year.

Crosswave, 37.85% of which shares are owned by the Company, posted a large operating loss of 11,261,479 thousand yen for the previous fiscal year and 12,628,514 thousand yen for this fiscal year and its operating cash flow has significantly gone negative. Therefore, substantial doubt about the Company's ability to continue as a going concern exists.

In order to resolve such situation, the Company is planning the issuance of shares through third party allocation in an amount of 3,512,880 thousand yen, of which payment shall be made on June 6, 2003. Crosswave is scheduled to receive from the Company, Toyota Motor Corporation and Sony Corporation, its major shareholders, an advance of 3,100,000 thousand yen by the end of May, 2003 and 1,200,000 thousand yen by the end of June, 2003, or 4,300,000 thousand yen in total.

It is also in the coordination process with the Lenders as for when to receive the advance in an amount of 5,000,000 thousand yen which is the outstanding amount of the long-term facility pursuant to the Syndicated Loan Agreement by and between Crosswave and the Lenders as of May 21, 2002, and it is in the negotiation process with the major shareholders, etc. as for the business plan, including the funding thereafter.

The financial statements and schedules are created based upon the Company continuing as a going concern and they do not reflect any effect of aforementioned substantial doubt.

http://www.sec.gov/Archives/edgar/data/1090633/000115752303002374/a4412381.txt