Broadcaster Inc – ‘PRE 14A’ for 2/10/04

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Preliminary Proxy Solicitation Material   —   Schedule 14A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: PRE 14A     Preliminary Proxy Solicitation Material               31    151K 

Document Table of Contents

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 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 WASHINGTON, D.C 20549

SCHEDULE 14A

Proxy Statement Pursuant To Section 14(A) of the
Securities Exchange Act Of 1934.

Filed by the Registrant:   [ ]                                                  

Filed by a party other than the Registrant: [ ]                                 

Check the appropriate box:                                                      

[X ]     Preliminary proxy statement                                            

[  ]     Confidential, for use of the Commission only (as permitted by          
Rule 14a-6(e)(2))                                             

[  ]     Definitive proxy statement                                             

[  ]     Definitive additional materials                                        

[  ]     Soliciting material under Rule 14a-12                                  

------------------------------------------------------------

INTERNATIONAL MICROCOMPUTER SOFTWARE, INC.

(Name of Registrant as specified in its Charter)

------------------------------------------------------------

Payment of filing Fee (Check the appropriate box):                              

[X]      No fee required                                                        

[ ]      Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and     
0-11.                                                         

(1) Title of each class of securities to which transaction applies:             

-----------------------------------------------------                           

(2) Aggregate number of securities to which transaction applies:                

-----------------------------------------------------                           

(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is         
calculated and state how it was determined):                                    

-----------------------------------------------------                           

(4) Proposed maximum aggregate value of transaction:                            

-----------------------------------------------------                           

(5) Total fee paid $___________________________________                         

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[ ] Fee paid previously with preliminary materials.                             

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 
0-11(a)(2) and identify the filing for which the offsetting fee was paid        
previously. Identify the previous filing by registration statement number, or   
the Form or Schedule and the date of its filing.                                

(1) Amount Previously Paid:                                                     

-----------------------------------------------------                           

(2) Form, Schedule or Registration Statement No.:                               

-----------------------------------------------------                           

(3) Filing Party:                                                               

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(4) Date Filed:                                                                 

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INTERNATIONAL MICROCOMPUTER SOFTWARE, INC.

 100 Rowland Way

 Suite 300

Novato, CA 94945

(415) 878-4000

----------------------------------------------------- 

NOTICE AND PROXY STATEMENT FOR

ANNUAL MEETING OF SHAREHOLDERS

 TO BE HELD MARCH 17, 2004

----------------------------------------------------- 

NOTICE

To the Holders of Common Stock of International Microcomputer Software, Inc.:   

The Annual Meeting of Shareholders of International Microcomputer Software, Inc.
(the "Company") will be held at THE SHERATON FOUR POINTS HOTEL - 1010 NORTHGATE 
DRIVE, SAN RAFAEL, CA 94903, ON WEDNESDAY, MARCH 17, 2004 AT 2:00 P.M. PACIFIC  
TIME, for the following purposes:                                               

1.    To elect seven directors for a term of one year.                          

2.    To approve the 2004 Incentive Stock Option Plan.                          

3.    To approve the issuance of options aggregating up to 49.0% of the         
outstanding capitalization.                                         

4.    To ratify the appointment of Grant Thornton LLP as IMSI's independent     
auditors for the fiscal year ending June 30, 2004.                  

5.    To consider and act on such other business as may properly come before the
meeting or any adjournment or adjournments thereof.                 

The Company's Board of Directors has fixed the close of business on February 1, 
2004 as the record date for the determination of shareholders entitled to       
receive notice of and to vote at the meeting and any adjournment thereof.       

                                BY ORDER OF THE BOARD OF DIRECTORS

             WILLIAM J. BUSH

                                 CHIEF FINANCIAL OFFICER & SECRETARY

              FEBRUARY 1, 2004

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 -----------------------------------------------------

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED
ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES.

----------------------------------------------------- 

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INTERNATIONAL MICROCOMPUTER SOFTWARE, INC.

 100 Rowland Way

 Suite 300

Novato, CA 94945

(415) 878-4000

----------------------------------------------------- 

 PROXY STATEMENT

----------------------------------------------------- 

ANNUAL MEETING OF SHAREHOLDERS, MARCH 17, 2004

This Proxy Statement is furnished to shareholders of International Microcomputer
Software, Inc., a California corporation ("IMSI" or the "Company"), in          
connection with the solicitation of proxies by the Board of Directors of the    
Company for use at the annual meeting of shareholders to be held on WEDNESDAY,  
MARCH 17, 2004 AT THE SHERATON FOUR POINTS HOTEL - 1010 NORTHGATE DRIVE, SAN    
RAFAEL, CA 94903 AT 2:00 P.M. PACIFIC TIME and at any adjournment thereof, for  
the purposes set forth in the accompanying Notice of Annual Meeting of          
Shareholders. This Proxy Statement and the accompanying form of Proxy were first
mailed to shareholders of the Company on or about February 15, 2004.            

SOLICITATION AND REVOCATION OF PROXIES

The costs and expenses of solicitation of proxies will be paid by the Company.  
In addition to the use of the mails, proxies may be solicited by directors,     
officers and regular employees of the Company personally or by telephone, but   
such persons will not be specifically compensated for such services.            

Proxies in the form enclosed are solicited on behalf of the Board of Directors. 
Any shareholder giving a proxy in such form may revoke it either by submitting a
new proxy card or by completing a ballot at the meeting at any time before it is
exercised. Such proxies, if received in time for voting and not revoked, will be
voted at the annual meeting in accordance with the specification indicated      
thereon. If no specification is indicated on a proxy, such proxy will be voted  
in favor of Proposals 1 - 4 described herein.                                   

VOTING SECURITIES AND RIGHTS

Only shareholders of record at the close of business on February 1, 2004 are    
entitled to execute proxies or to vote at the annual meeting. As of said date   
there were outstanding 23,447,368 shares of the Company's common stock of no par
value per share (the "Common Shares"). Each holder of Common Shares is entitled 
to one vote for each share held with respect to the matters mentioned in the    
foregoing Notice of Annual Meeting of Shareholders and any other matters that   
may properly come before the meeting. A majority of the outstanding shares      
entitled to vote is required to constitute a quorum at the meeting. The         
affirmative vote of a majority of the Common Shares present, in person or by    
proxy, and entitled to vote at the annual meeting, is required to approve the   
matters mentioned in the foregoing Notice of Annual Meeting. Proxies indicating 
abstention from a vote and broker non-votes will be counted toward determining  
whether a quorum is present at the meeting, but will not be counted toward      
determining if a majority of the Common Shares present has voted affirmatively. 

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PROPOSAL ONE: ELECTION OF BOARD OF DIRECTORS

The Company's Bylaws set the number of directors at eight. The Company's Board  
of Directors is currently comprised of seven directors, five of whom are        
"independent directors" as defined by the proposed rules of the Nasdaq Stock    
Market leaving one vacancy on the Board. The Company's management has nominated 
seven directors to be elected at the annual meeting to serve until the 2005     
annual meeting of shareholders or until their successors have been elected and  
qualified. Unless otherwise instructed, the proxy holders will vote the proxies 
received by them for the seven nominees named below, all of whom are presently  
directors of IMSI.                                                              

In the event that any nominee is unable or declines to serve as a director at   
the time of the Annual Meeting, the proxies will be voted for any nominee who   
shall be designated by the Board of Directors to fill the vacancy. The term of  
office of each person elected as a director will continue until the next annual 
meeting of stockholders or until a successor has been duly elected and          
qualified.                                                                      

The name of and certain information regarding each nominee are set forth below. 
There are no family relationships among any of our directors or executive       
officers.                                                                       

The Board of Directors has nominated the following persons for election:        

                                                        [Enlarge/Download Table]

----------------------------------------------------------- ------------ ------------------------------------------- ---------------
                         NAME                                 AGE                      OCCUPATION                    DIRECTOR SINCE 
----------------------------------------------------------- ------------ ------------------------------------------- ---------------
                                                                                                                                    
Bruce Galloway                                              45           Chairman of the Board of Directors          2001           
----------------------------------------------------------- ------------ ------------------------------------------- ---------------
Martin Wade, III                                            54           Chief Executive Officer                     2001           
----------------------------------------------------------- ------------ ------------------------------------------- ---------------
Evan Binn                                                   64           Director                                    2001           
----------------------------------------------------------- ------------ ------------------------------------------- ---------------
Donald Perlyn                                               60           Director                                    2001           
----------------------------------------------------------- ------------ ------------------------------------------- ---------------
Robert Mayer                                                49           Executive Vice President                    2000           
----------------------------------------------------------- ------------ ------------------------------------------- ---------------
Robert S. Falcone                                           56           Director                                    2002           
---------------------------------------------------------- ------------ ------------------------------------------- ----------------
Richard J. Berman                                           61           Director                                    2002           
----------------------------------------------------------- ------------ ------------------------------------------- ---------------

Mr. Wade was appointed by the existing directors as of September 1, 2001 to fill
a vacancy on the Board. Mssrs. Berman and Falcone were appointed as of February 
14, 2002 by the existing directors to fill vacancies on the Board. The Board of 
Directors has no reason to believe that any of the nominees will be unable to   
serve as a director. It is the intention of the individuals named as proxies to 
vote for the nominees. If any nominee should be unable to serve as a director,  
it is the intention of the individuals named as proxies to vote for the election
of such person or persons as the Board of Directors may, in its discretion,     
recommend.                                                                      

The affirmative vote of a majority of the Common Shares present, in person or by
proxy, and entitled to vote at the annual meeting is required to elect each     
director.                                                                       

Information regarding the persons nominated for election as directors is as     
follows:                                                                        

NOMINEES FOR ELECTION TO BOARD OF DIRECTORS                   

BRUCE R. GALLOWAY, age 46. Mr. Galloway became Chairman of IMSI in August 2001, 
pursuant to the proposed merger agreement between IMSI and Digital Creative     
Development Corporation ("DCDC") signed on August 31, 2001. Mr. Galloway is     
currently a managing director of Burnham Securities Inc., an NASD Broker/Dealer 
an investment bank based in New York and is the President and Founder of        
Galloway Capital Management.. Prior to joining Burnham, from 1991 to 1993, Mr.  
Galloway was a senior vice president at Oppenheimer & Company, an investment    
bank and NASD Broker/Dealer based in New York. Mr. Galloway holds a B.A. degree 
in Economics from Hobart College and an M.B.A. in Finance from New York         
University's Stern Graduate School of Business. He is currently the Chairman of 
Datametrics Corporation as well as a director of Forward Industries, Inc. and   
Waiter.com, Inc. Mr. Galloway serves as a member of the Compensation Committee  
and the Executive Committee.                                                    

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MARTIN WADE III, age 54. Mr. Wade became a director and CEO of IMSI in August   
2001. He brings to the Company a proven track record in mergers and acquisitions
and investment banking. Prior to joining IMSI, he served in several executive   
positions, including CEO, with DCDC beginning in 2000. Mr. Wade served from 1998
to 2000 as an M&A banker at Prudential Securities and from 1996 to 1998 as a    
managing director in M&A at Salomon Brothers. From 1991 to 1996, Mr. Wade was   
National Head of Investment banking at Price Waterhouse, LLC. Martin Wade also  
spent six years in the M&A department at Bankers Trust and eight years at Lehman
Brothers Kuhn Loeb. Mr. Wade is credited with participating in over 200 M&A     
transactions involving various clients such as, Nike, Cornerstone National Gas  
Company, Landmark Graphics and Redken Laboratories, Inc. He is also a member of 
the Board of Directors for DiMon (NYSE: DMN), NexMed (OTC: NEXM) and Energy     
Transfer Group of Dallas, Texas.                                                

DONALD PERLYN, age 60. Mr. Perlyn became a director of IMSI in August 2001. Mr. 
Perlyn serves as Executive Vice President of Nathan's Famous, Inc. and President
of its subsidiary Miami Subs Corporation. He was hired by Miami Subs in May 1989
and became its President in July of 1998. In October 1999 Miami Subs was        
acquired by Nathan's Famous Inc., itself a DCDC subsidiary. Mr. Perlyn is also a
member of the Board of Directors of Nathan's Famous, Inc. (NASDAQ: NATH) Mr.    
Perlyn is an attorney and a 32 year veteran of the of the restaurant industry.  

EVAN BINN, age 64. Mr. Binn became a director of IMSI in August 2001. Mr. Binn  
received his bachelor's degree from the University of California at Los Angeles 
and is a certified public accountant in California. He is a member of the       
California Society of Certified Public Accountants and has maintained a practice
in Los Angeles, California for thirty-seven years.                              

ROBERT MAYER, FOUNDER & EXECUTIVE VICE PRESIDENT OF PRECISION DESIGN, age 49.   
Mr. Mayer became a director in February 2000. Mr. Mayer served as the Company's 
Vice President of Sales from 1990 until 1995 and then as Executive Vice         
President of Worldwide Sales until March 2000 when he left the Company to serve 
as a Vice President at Adventa.com, Inc. Mr. Mayer rejoined the IMSI team in    
November 2000 as Executive Vice President. Mr. Mayer also served as a director  
from 1985 until May 1999. Mr. Mayer received a Bachelors of Arts degree from the
University of California at Berkeley, and Masters of Science degree from the    
University of Washington.                                                       

ROBERT S. FALCONE, age 57. Mr. Falcone became a director in February 2002 and   
has over 32 years of financial management and Board experience. Mr. Falcone has 
served since 2003 as the Executive Vice President and Chief Financial Officer of
Bearing Point, Inc. an international consulting firm serving Global 2000        
companies, medium-sized businesses, government agencies and other organizations.
He served as senior vice president and chief financial officer for Nike, Inc.   
from 1992 to 1998, a time when the company grew annual sales to nearly $10      
billion. He began his career at Price Waterhouse, LLP where he spent 21 years,  
eight of which as an audit partner. Most recently, he was chief financial       
officer for 800.com, a pioneer in consumer electronics Internet retailing. A    
graduate of Villanova University and a certified public accountant, Falcone     
serves on the boards of directors for RadioShack Corporation (NYSE" RSH), and   
The Nautilus Group (NYSE: NLS).                                                 

RICHARD J. BERMAN, age 61. Mr. Berman became a director in February 2002 and his
business career spans 35 years of venture capital, management and mergers and   
acquisitions experience. In the last five years, Mr. Berman was Chairman and CEO
of Internet Commerce Corporation, an Internet supply chain company whose market 
capitalization rose from $1.2 million to about $1 billion. He is Chairman of    
KnowledgeCube, an early stage technology fund and Candidate Resources, Inc, the 
leading manager of human resource websites. He also serves as a Director of     
NexMed (NASDAQ: NEXM), a life sciences company, Stonehedge Partners, a family of
hedge funds and MediaBay (NASDAQ: MBAY) which is the leading distributor of     
audio books.. Previously, Mr. Berman worked at Goldman Sachs; was Senior Vice   
President of Bankers Trust Company where he started the M&A and Leverage Buyout 
departments; created the largest battery company in the world by merging        
Prestolite, General Battery and Exide to form Exide (NYSE); and advised on over 
$4 billion of M&A transactions. He is a past Director of the Stern School of    
Business of NYU where he has a B.S. and an MBA. He also has US and foreign law  
degrees from Boston College and The Hague Academy of International Law,         
respectively.                                                                   

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Each of the nominees has been engaged in the principal occupation set forth     
above during the past five years. There are no family relationships among any   
directors or executive officers of the company. Stock ownership information is  
shown under the heading "Security Ownership of Certain Beneficial Owners and    
Management" and is based upon information furnished by the respective           
individuals.                                                                    

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE NOMINEES ABOVE

COMMITTEES OF THE BOARD OF DIRECTORS                          

The company currently has three standing committees of the Board of Directors   
which include the Executive, Audit and Compensation Committees. The members of  
the committees are identified in the following table.                           

                                                        [Enlarge/Download Table]

----------------------------------------- ---------------------- ------------------------------ ------------------------------------
                                                EXECUTIVE                    AUDIT                         COMPENSATION             
----------------------------------------- ---------------------- ------------------------------ ------------------------------------
                                                                                                                                    
BINN                                                             XX                             XX                                  
----------------------------------------- ---------------------- ------------------------------ ------------------------------------
BERMAN                                    XX                     XX                                                                 
----------------------------------------- ---------------------- ------------------------------ ------------------------------------
FALCONE                                                          Chair                                                              
----------------------------------------- ---------------------- ------------------------------ ------------------------------------
GALLOWAY                                  Chair                                                 Chair                               
----------------------------------------- ---------------------- ------------------------------ ------------------------------------
MAYER                                                                                                                               
----------------------------------------- ---------------------- ------------------------------ ------------------------------------
PERLYN                                                                                          XX                                  
----------------------------------------- ---------------------- ------------------------------ ------------------------------------
WADE                                      XX                                                                                        
----------------------------------------- ---------------------- ------------------------------ ------------------------------------

THE EXECUTIVE COMMITTEE                                       

The Executive Committee may exercise the authority of the Board between Board   
meetings, except (a) to the extent that the Board has delegated authority to    
another committee or to other persons, (b) as limited by California law, and (c)
that the Executive Committee is prohibited from authorizing the sale of all or  
substantially all of the Company's assets. The Executive Committee held five    
meetings in the fiscal year ended June 30, 2003 ("FY 2003") and has held ten    
meetings through January 1, 2004 for the current fiscal year ending June 30,    
2004.                                                                           

THE AUDIT COMMITTEE                                           

The Audit Committee and the Board have ultimate authority and responsibility to 
select, evaluate and, when appropriate, replace the company's independent       
auditors. The Audit Committee recommends for approval by the Board of Directors 
an independent firm of certified public accountants whose duty it is to audit   
the financial statements of the company for the fiscal year in which they are   
appointed. The Audit Committee monitors the activities of the Company's external
auditors, including the audit scope, the external audit fees, auditor           
independence matters and the extent to which the independent auditors may be    
retained to perform advisory services. The Audit Committee also reviews the     
results of the external audit work to assess the adequacy and appropriateness of
the company's financial and accounting controls. The Audit Committee reviews    
changes in accounting standards that impact the financial statements and        
discusses with management major events, including legal matters and tax audits, 
which may have significant financial impact or are the subject of discussions   
with the independent auditors. In addition, the Audit Committee oversees the    
company's internal compliance programs. The composition of the Audit Committee, 
the attributes of its members and the responsibilities of the Audit Committee   
are intended to be in accord with Securities and Exchange Commission rules with 
regard to corporate audit committees. The Audit Committee held four meetings    
during FY 2003. Through January 1, 2004, for the fiscal year ending June 30,    
2004, the Audit Committee had held two meetings.                                

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THE COMPENSATION COMMITTEE                                    

The Compensation Committee administers the Company's stock option plans,        
including the review and grant of stock options to officers and other employees 
under the company's stock option plans. The Compensation Committee also reviews 
and approves various other company compensation policies and matters, and       
reviews and approves salaries and other matters relating to compensation of the 
executive officers of the company. The Compensation Committee had no meetings   
during FY 2003 and has had two meeting in Fiscal 2004 through January 1, 2004.  

The Board of Directors held three meetings during FY 2003 and has held one      
meeting in Fiscal 2004 through January 1, 2004. Each director is expected to    
attend each meeting of the Board and those committees on which he serves. In    
addition to meetings, the Board and its committees review and act upon matters  
through written consent procedures. No director attended less than 75% of all   
the meetings of the Board and those committees on which he served in FY 2003.   

NOMINATION AND SHAREHOLDER COMMUNICTION PROCESSES             

Currently the Board of Directors functions as the company's nominating          
committee. The Board performs the functions typical of a nominating committee,  
including the identification, recruitment and selection of nominees for election
as directors of the Company. Five of the seven members of the Board (Messrs.    
Galloway, Falcone, Berman, Binn & Perlyn) are "independent" as that term is     
defined by the Nasdaq Stock Market listing standards and participate in the     
consideration of director nominees. The nominees for election as directors at   
this Annual Meeting were unanimously recommended by the Board. The Board        
believes that a nominating committee separate from itself is not necessary at   
this time, given the size of the Company and the Board, to ensure that          
candidates are appropriately evaluated and selected. The Board also believes    
that, given the Company's size and the size of its Board, an additional         
committee of the Board would not add to the effectiveness of the evaluation and 
nomination process. For these reasons, the Board believes it is not appropriate 
to have a nominating committee.                                                 

The Board's process for recruiting and selecting nominees is for Board members  
to attempt to identify individuals who are thought to have the business         
background and experience, industry specific knowledge and general reputation   
and expertise that would allow them to contribute as effective directors to the 
Company's governance, and who are willing to serve as directors of a public     
company. To date, the Company has not engaged any third party to assist in      
identifying or evaluating potential nominees. After a possible candidate is     
identified, the individual meets with various members of the Board and is       
sounded out concerning their possible interest and willingness to serve, and    
Board members discuss amongst themselves the individual's potential to be an    
effective Board member. If the discussions and evaluation are positive, the     
individual is invited to serve on the Board.                                    

To date, no shareholder has presented any candidate for Board membership to the 
Company for consideration, and the Company does not have a specific policy on   
shareholder-recommended director candidates. However, the Committee believes its
process for evaluation of nominees proposed by shareholders would be no         
different from the process of evaluating any other candidate. In evaluating     
candidates, the Committee will require that candidates possess, at a minimum, a 
desire to serve on the Company's Board, an ability to contribute to the         
effectiveness of the Board, an understanding of the function of the Board of a  
public company and relevant industry knowledge and experience. In addition,     
while not required of any one candidate, the Committee would consider favorably 
experience, education, training or other expertise in business or financial     
matters and prior experience serving on boards of public companies. In          
evaluating any candidate for director nominee, the Committee will also evaluate 
the contribution of the proposed nominee toward compliance with the Nasdaq Stock
Market listing standards.                                                       

Although the Company has not to date developed formal processes by which        
shareholders may communicate directly to directors, it believes that the        
informal process, in which any communication addressed to the Board at the      
Company's offices at 100 Rowland Way, Suite 300, Novato, Ca. 94945 in care of   
the Chairman of the Board, President or other corporate officer is forwarded to 
the Board, has served the Board's and its shareholders' needs. There is no      
screening process, and all shareholder communications which are received by     
officers for the Board's attention are forwarded to the Board. In view of       
recently adopted SEC disclosure requirements relating to this issue, the Board  
may consider development of more specific procedures. Until any other procedures
are developed, any communications to the Board should be sent to it in care of  
the Chairman of the Board.                                                      

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REMUNERATION OF MEMBERS OF THE BOARD OF DIRECTORS             

IMSI compensates its directors for reasonable expenses incurred in the          
performance of their duties as directors, including participation on the Board  
of Directors and its committees. Except as described below, directors receive no
compensation for their service on the Board or its committees.                  

During fiscal 2002, we issued warrants to our board members, to purchase an     
aggregate of 1,300,000 shares of our Common Stock. These warrants have an       
exercise price of $0.81and expire, depending on the board member, between one   
and three years from the termination of their services to the Company.          

No warrants or stock options were issued to any director during FY 2003 for     
services as a director. During FY 04, Mr. Wade was granted 46,667 as described  
below. These warrants were awarded to Mr. Wade as part of a bonus in connection 
with his services as Chief Executive Officer.                                   

Except as described in "Executive Compensation" below as regards Mr. Wade's     
services as Chief Executive Officer and in "Certain Relationships and Related   
Transactions" regarding a consulting agreement with Mr. Galloway, no director is
a party to any other arrangements pursuant to which such director was           
compensated by IMSI during FY 2003 or through January 1, 2004.                  

The following table outlines the outstanding warrants held by each board member 
at December 31, 2003. None of the persons listed below has exercised any        
warrants since the grant date.                                                  

                                                        [Enlarge/Download Table]

---------------------------------------------------- ----------------- ---------------------- ------------------- ------------------
                                                                            EXPIRATION            NUMBER OF           EXERCISE      
                  NAME OF HOLDER                        ISSUE DATE             DATE                WARRANTS             PRICE       
---------------------------------------------------- ----------------- ---------------------- ------------------- ------------------
                                                                                                                                    
                                                                       1 yr after                                                   
Berman, Richard                                      04/04/02          termination                       250,000              $0.81 
---------------------------------------------------- ----------------- ---------------------- ------------------- ------------------
                                                                       1 yr after                                                   
Binn, Evan                                           04/04/02          termination                        50,000              $0.81 
---------------------------------------------------- ----------------- ---------------------- ------------------- ------------------
                                                                       1 yr after                                                   
Falcone, Robert                                      04/04/02          termination                       250,000              $0.81 
---------------------------------------------------- ----------------- ---------------------- ------------------- ------------------
                                                                       3 yrs after                                                  
Galloway, Bruce                                      04/04/02          termination                       500,000              $0.81 
---------------------------------------------------- ----------------- ---------------------- ------------------- ------------------
                                                                       1 yr after                                                   
Mayer, Robert                                        04/04/02          termination                       250,000              $0.81 
---------------------------------------------------- ----------------- ---------------------- ------------------- ------------------
                                                                       1 yr after                                                   
Perlyn, Donald                                       04/04/02          termination                        50,000              $0.81 
---------------------------------------------------- ----------------- ---------------------- ------------------- ------------------
Wade, Martin                                         07/03/03          07/02/08                           46,667              $0.75 
---------------------------------------------------- ----------------- ---------------------- ------------------- ------------------
TOTAL OUTSTANDING                                                                                      1,346,667                    
---------------------------------------------------- ----------------- ---------------------- ------------------- ------------------

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PROPOSAL TWO: APPROVAL OF THE 2004 INCENTIVE STOCK OPTION PLAN

The Board of Directors of the Company recommends the ratification of the 2004   
International Microcomputer Software, Inc Incentive Stock Option Plan (the "2004
Plan").                                                                         

The Board of Directors and shareholders of the Company adopted the predecessor  
to the 2004 Plan, the 1993 Incentive Option Plan on June 30, 1993 (the "1993    
Plan"). The purpose of the 1993 Plan was to further the growth and general      
prosperity of the Company by enabling employees of the Company to acquire Common
Shares, increasing their personal involvement in the Company and thereby        
enabling the Company to attract and retain those employees.                     

Under existing federal tax laws, certain benefits are not applicable to stock   
options granted under plans adopted more than ten years prior. In particular,   
options granted more than ten years after adoption of the 1993 Plan are not     
eligible for incentive stock option treatment within the meaning of Section 422 
of the Internal Revenue Code of 1986, as amended. The Company believes that the 
ability to grant incentive stock options to its employees is critically         
important if the Company hopes to offer incentive compensation to such employees
on par with those provided by the Company's competitors and others in the       
high-tech industry.                                                             

Furthermore, tax laws and incentive compensation policies have changed since    
adoption of the 1993 Plan, and the Company wishes to take advantage of such     
changes by adopting a new incentive compensation plan conforming to such        
changes. The Board of Directors has accordingly adopted the 2004 Plan to permit 
the Company to offer a wide range of incentives, including incentive and        
non-statutory stock options and stock purchase rights.                          

The 2004 Plan provides for the granting of options to purchase up to an         
aggregate of 3,000,000 Common Shares to employees, directors and other valued   
contributors to of the Company. In the event of a change in corporate structure 
or capitalization affecting the Company's Common Shares, the maximum number of  
shares available under the 2004 Plan and subject to outstanding options will be 
adjusted accordingly. Any options that expire prior to exercise will become     
available for new grants from the "pool" of ungranted options. Options that are 
granted under the 2004 Plan may be either options that qualify as incentive     
stock options under the Internal Revenue Code ("Incentive Options"), or those   
that do not qualify as such incentive stock options ("Non-Incentive Options").  

The 2004 Plan has the following additional features:                            

1. ADMINISTRATION                                             

The Plan is administered by the Board of Directors, which may delegate such     
responsibility to a committee of its choosing.                                  

2. ELIGIBLE EMPLOYEES                                         

All employees are eligible to receive incentive stock options under the 2004    
Plan, including officers of the Company and directors who are also employees of 
the Company. In addition, non-employee directors, contractors, consultants and  
other valued contributors may be granted non-statutory stock options or stock   
purchase rights under the 2004 Plan.                                            

3. OPTION PRICING AND VESTING                                 

Incentive Options may not be granted at a purchase price less than the fair     
market value of the Common Shares on the date of the grant (or, for an option   
granted to a person holding more than 10% of the Company's voting stock, at less
than 110% of fair market value) and Non-Incentive Options may not be granted at 
a purchase price less than 85% of fair market value on the date of grant.       
Options vest and become exercisable in accordance with a schedule to be fixed by
the Compensation Committee. The options become immediately exercisable in full  
if the Company merges or consolidates with another corporation and is not the   
surviving corporation or if the Company transfers all or substantially all of   
its business or assets to another person.                                       

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4. DURATION OF OPTIONS                                        

The term of each option, which is fixed at the date of grant, may not exceed ten
years from the date the option is granted (by law, an Incentive Option granted  
to a person holding more than 10% of the company's voting stock may be          
exercisable only for five years). Options may be made exercisable in whole or in
installments, as determined by the Compensation Committee. Options which have   
been granted to employees who terminate employment due to death or disability   
may be exercised for a period of one year after the employee's termination by   
the optionee or the person(s) to whom the rights under such option shall have   
passed, as the case may be. An optionee who leaves the Company for reasons other
than death, disability or termination for cause has three months after          
termination in which to exercise his or her options.                            

5. TRANSFER                                                   

Options may not be transferred other than by will, the laws of descent and      
distribution, or, if applicable, pursuant to a qualified domestic relations     
order. During the lifetime of an optionee, options may be exercised only by the 
optionee.                                                                       

6. AMENDMENT                                                  

The Board of Directors may amend the 2004 Plan as it deems advisable. The Board 
of Directors may terminate the 2004 Plan at any time, provided that outstanding 
options are not affected.                                                       

7. OUTSTANDING OPTIONS                                        

Please see the Summary Compensation Table for information regarding option      
grants to the Company's Executive Officers.                                     

8. EFFECT OF FEDERAL INCOME TAXATION                          

Counsel for the Company has advised that the federal income tax attributes of   
options granted under the 2004 Plan are as described in the following           
paragraphs:                                                                     

Under the Internal Revenue Code of 1986, as amended (the "Code"), the recipient 
of an option that qualifies as an incentive stock option within the meaning of  
Section 422 of the Code ("Incentive Option") receives a tax benefit of income   
deferral if the recipient meets the holding period requirements of Section 422. 
Neither the grant nor the exercise of an Incentive Option results in taxable    
income to the optionee or a deduction of the issuer; however, the amount by     
which the fair market value of the Common Shares on the date of exercise exceeds
the exercise price is an item of adjustment under the Internal Revenue Code, as 
amended, and may therefore subject the optionee to alternative minimum tax.     
Assuming the holding period requirements are met, upon the ultimate sale of the 
Common Shares acquired upon the exercise of an Incentive Option, the amount by  
which the sale price exceeds the exercise price will be treated as a long-term  
capital gain. There is no limitation on the value of Common Shares subject to   
the Incentive Option; however, the aggregate fair market value of the Common    
Shares (determined as of the date of grant) that may become first exercisable   
with respect to any recipient in any calendar year under the 2004 Plan may not  
exceed $100,000.                                                                

Generally, with respect to options that do not qualify as Incentive Options     
("Non-Incentive Options"), the acquisition of Common Shares through the exercise
of Non-Incentive Options will result in compensation income to the optionee,    
subject to withholding, as of the date of exercise in an amount by which the    
fair market value of the Common Shares at such date exceeds the exercise price. 
Upon exercise, the Company will generally be entitled to a deduction in an      
identical amount. When an optionee disposes of such Common Shares, any          
difference between the amount received and the fair market value of the Common  
Shares on the date of exercise will be treated as a long- or short-term capital 
gain, as the case may be, depending on the period of time the optionee has held 
the Common Shares.                                                              

The foregoing summary of the effect of federal income taxation upon participants
in the 2004 Plan with respect to the receipt of an option or Common Shares      
received upon the exercise of any option does not purport to be complete.       
Reference is made to the applicable provisions of the Code.                     

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The foregoing summary of the 2004 Plan does not purport to be complete and is   
qualified in its entirety by reference to the 2004 Plan itself. The full text of
the 2004 Plan will be provided to any shareholder who desires a copy, upon      
written request to the Company, Attention: Secretary, 100 Rowland Way, Suite    
300, Novato, CA 94945.                                                          

The affirmative vote of a majority of the Common Shares present, in person or by
proxy, and entitled to vote at the annual meeting is required to approve        
Proposal 2.                                                                     

 THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE 2004
INCENTIVE STOCK OPTION PLAN.

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 PROPOSAL THREE: APPROVAL OF ISSUANCE OF OPTIONS AGGREGATING UP TO 49.0%
OF OUTSTANDING CAPITALIZATION 

The Board of Directors of the Company recommends that the Company's shareholders
approve the ISSUANCE BY THE COMPANY OF OPTIONS TO EMPLOYEES, DIRECTORS AND OTHER
VALUABLE CONTRIBUTORS TO THE COMPANY ("Service Providers") IN EXCESS OF THIRTY  
PERCENT (30%) OF THE COMPANY'S OUTSTANDING CAPITALIZATION.                      

California law provides that the number of securities issuable upon exercise of 
outstanding options (including options granted pursuant to stock option plans   
and warrants granted as incentives to service providers, but excluding warrants 
or stock options granted in connection with financing activities by the Company)
may not exceed thirty percent (30%) of the number of shares of the Company's    
capital stock outstanding at such time; provided, however, that such 30% limit  
may be exceeded in the event that a higher percentage is approved by the holders
of a two-thirds majority of the Company's outstanding shares.                   

In the event that the Company issues options in excess of the 30% limit and does
not receive shareholder approval to exceed such limit, certain benefits of      
California securities law may be unavailable to the Company. In particular, the 
Company would be unable to effect a qualification in California of the          
securities reserved to the 2004 Plan discussed in proposal 2 above. The Company 
wishes to register the stock reserved to the 2004 Plan with the SEC as soon as  
is reasonably possible. On doing so, the Company must, under California law,    
make a contemporaneous filing with the California Department of Corporations to 
qualify such stock as freely tradable.                                          

As of January 19, 2004, issued and unexercised options under the 1993 Plan and  
the 2004 Plan, together with warrants granted other than in connection with     
financing activities, are exercisable to purchase an aggregate of 10,922,811    
Common Shares. As of the same date, there were outstanding 23,447,368 Common    
Shares (the Company has issued no shares of preferred stock or other securities 
convertible into common stock). Assuming the issuance of 3,000,000 options      
reserved under the 2004 Plan, the number of securities issuable on exercise of  
all outstanding options and warrants (excluding warrants or stock options       
granted in connection with financing activities by the Company) would equal     
approximately 46.6% percent of the number of issued and outstanding Common      
Shares. The Company requests that the shareholders approve the issuance of      
options exercisable to purchase up to an aggregate of 11,500,000 or 49.0% of the
number of Common Shares issued and outstanding at such time.                    

In the event that such proposal is not approved by the shareholders, the Company
will be unable to affect a registration of shares reserved to the 2004 Plan.    
Holders of options granted under the 2004 Plan will then be unable to exercise  
those options to purchase freely tradable Company stock and would instead be    
required to hold such shares until the expiration of the applicable holding     
period under Rule 144 enacted pursuant to the Securities Act of 1933, as        
amended. The Company intends to grant options under the 2004 Plan as incentives 
to service providers and believes that the restriction described above would    
have a seriously detrimental effect on the value of the options, such that the  
Company could face difficulty attracting and retaining qualified, competent     
service providers as a result.                                                  

The affirmative vote of a two-thirds majority of the Common Shares present, in  
person or by proxy, and entitled to vote at the annual meeting is required to   
approve Proposal 3.                                                             

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE ISSUANCE 
OF OPTIONS EXERCISABLE TO PURCHASE UP TO 49.0% OF THE COMPANY'S ISSUED AND
OUTSTANDING CAPITAL STOCK 

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PROPOSAL FOUR: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

On the recommendation of the Audit Committee, the Board of Directors has        
appointed Grant Thornton LLP, independent auditors, to audit the consolidated   
financial statements of IMSI for the fiscal year ending June 30, 2004, and      
recommends that stockholders vote for ratification of such appointment. In the  
event of a negative vote on such ratification, the Board of Directors will      
reconsider its selection.                                                       

Grant Thornton LLP has audited our financial statements annually since the      
fiscal year ended June 30, 1999.                                                

We expect a representative of Grant Thornton LLP to be present at the meeting   
who will have the opportunity to make a statement if he / she desire to do so   
and will be available to respond to appropriate questions.                      

FEE DISCLOSURE                                                

AUDIT FEES. The aggregate fees billed by Grant Thornton LLP for professional    
services rendered for the audit of the Company's annual financial statements    
which were included on Form 10-KSB for the fiscal year ending June 30, 2003, and
for the reviews of the financial statements included in the Company's Quarterly 
Report on Form 10-QSB for that year were $178,000. As of December 31, 2003, fees
which were billed by Grant Thornton LLP for services provided for the fiscal    
year ending June 30, 2004 were $13,250.                                         

TAX FEES. Grant Thornton LLP, our principal accountant, billed us tax fees in   
the aggregate amounts of $121,000 for the fiscal year ending June 30, 2003. As  
of December 31, 2003, for the year ending June 30, 2004, Grant Thornton LLP has 
billed us $19,543 in tax related fees. These fees relate to the preparation of  
our current income tax filings and for tax advice and planning regarding        
mergers, acquisitions and disposition of assets.                                

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. Grant Thornton LLP
did not provide and the Company did not pay Grant Thornton LLP for any          
professional services rendered for information technology services design and   
implementation for the fiscal year ending June 30, 2003 nor through December 31,
2003.                                                                           

ALL OTHER FEES. There were no other fees billed by Grant Thornton LLP for       
services rendered to the Company, other than services described above, for the  
fiscal year ending June 30, 2003 nor through December 31, 2003.                 

The Audit Committee has considered whether the provision of non-audit services  
by Grant Thornton LLP is compatible with maintaining Grant Thornton's           
independence and has discussed Grant Thornton's independence with them.         

VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION          

The affirmative vote of a majority of the outstanding shares of Common Stock    
present in person or represented by proxy and entitled to vote at the Annual    
Meeting is required to ratify the appointment of Grant Thornton LLP as our      
independent auditors. The effect of an abstention is the same as a vote against 
the ratification of Grant Thornton LLP as our independent auditors. Broker      
non-votes will have no effect on the outcome of the vote.                       

 THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION
OF THE APPOINTMENT OF GRANT THORNTON LLP AS 
OUR INDEPENDENT AUDITORS. 

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BENEFICIAL OWNERSHIP

          OWNERSHIP OF VOTING SECURITIES BY PRINCIPAL HOLDERS AND MANAGEMENT

The following table sets forth, as of December 31, 2003, the beneficial         
ownership of the Company's Common Stock by:                                     

o     Each person who is known by the Company to own of record or   
        beneficially more than five percent (5%) of the Company's Common
           Stock, based solely upon filings made by such persons under Section
       13 of the Securities Exchange Act of 1934 (the "Exchange Act").

o     Each director or nominee                                      

o     Each other executive officer, and                             

      o     All directors and executive officers as a group. Except as otherwise
            indicated, the shareholders listed in the table have sole voting and
          dispositive power with respect to the shares indicated, subject to
community property laws where applicable.               

                                                        [Enlarge/Download Table]

------------------------------------------------------------------------------------ ------------------------ ----------------------
                                                                                       NUMBER OF SHARES OF                          
                                                                                          COMMON STOCK                              
                                       NAME                                          BENEFICIALLY OWNED (1)          PERCENT        
------------------------------------------------------------------------------------ ------------------------ ----------------------
                                                                                                                                    
Digital Creative Development Corp.                                                   7,685,758                33.2%                 
------------------------------------------------------------------------------------ ------------------------ ----------------------
Capital Ventures, Inc.                                                               2,553,791                10. 97%               
------------------------------------------------------------------------------------ ------------------------ ----------------------
Gordon Landies                                                                       1,798,664                7.42%                 
------------------------------------------------------------------------------------ ------------------------ ----------------------
Geoffrey Koblick                                                                     1,022,600                4.33%                 
------------------------------------------------------------------------------------ ------------------------ ----------------------
Robert Mayer                                                                         842,086                  3.58%                 
------------------------------------------------------------------------------------ ------------------------ ----------------------
Paul Jakab                                                                           825,232                  3.45%                 
------------------------------------------------------------------------------------ ------------------------ ----------------------
Bruce Galloway                                                                       500,000                  2.11%                 
------------------------------------------------------------------------------------ ------------------------ ----------------------
William Bush                                                                         302,426                  1.29%                 
------------------------------------------------------------------------------------ ------------------------ ----------------------
Robert Falcone                                                                       250,000                  1.07%                 
------------------------------------------------------------------------------------ ------------------------ ----------------------
Richard Berman                                                                       250,000                  1.07%                 
------------------------------------------------------------------------------------ ------------------------ ----------------------
Donald Perlyn                                                                        50,000                   0.22%                 
------------------------------------------------------------------------------------ ------------------------ ----------------------
Evan Binn                                                                            50,000                   0.22%                 
------------------------------------------------------------------------------------ ------------------------ ----------------------
Martin Wade                                                                          46,667                   0.20%                 
------------------------------------------------------------------------------------ ------------------------ ----------------------
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP                                      5,937,675                21.76%                
------------------------------------------------------------------------------------ ------------------------ ----------------------

  (1)      Includes shares under options / warrants exercisable on
         December 31, 2003 and options / warrants which become
exercisable within 60 days thereafter.      

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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE                         

Section 16(a) of the Exchange Act requires the Company's directors and executive
officers, and persons who own more than ten percent of a registered class of the
Company's equity securities, to file with the Securities and Exchange Commission
("SEC") initial reports of ownership and changes in ownership of Common Shares  
and other equity securities of the Company. Officers, directors and greater than
ten percent shareholders are required by SEC regulation to furnish the Company  
with all Section 16(a) forms they file.                                         

To the Company's knowledge, based solely on review of the copies of such reports
furnished to the Company and written representations that no other reports were 
required, all required Section 16(a) filings applicable to officers, directors  
and greater than ten percent shareholders in the twelve months ended June 30,   
2003 and through January 1, 2004 were timely filed, except as follows:          

                                                        [Enlarge/Download Table]

---------------------------------- -------------------------------- -------------------------------- -------------------------------
              FILER                           POSITION                         SCHEDULE                        DATE FILED           
---------------------------------- -------------------------------- -------------------------------- -------------------------------
                                                                                                                                    
Gordon Landies                     IMSI President                   Form 5                           December 16, 2003              
---------------------------------- -------------------------------- -------------------------------- -------------------------------
Gordon Landies                     IMSI President                   Form 5                           December 16, 2003              
---------------------------------- -------------------------------- -------------------------------- -------------------------------

These two filings were made to amend various Form 4's which had been filed and  
record the transfer of two 10,000 share blocks which were gifted by Mr. Landies 
in March 2002.                                                                  

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MANAGEMENT

EXECUTIVE OFFICERS OF THE COMPANY                             

MARTIN WADE III, CEO. See above.                                                

GORDON LANDIES, PRESIDENT, age 47. Mr. Landies joined IMSI on September 1, 2001 
as President subsequent to the proposed merger agreement between IMSI and DCDC. 
He brings to the Company 19 years of experience in management of software       
companies. Before joining IMSI Mr. Landies was the founder of GL Ventures, LLC  
providing services to software publishing and media companies. In 1999, Mr.     
Landies was the General Manager of the Home and Game division of Mattel         
Interactive. From 1994 to 1998 Mr. Landies held positions of Senior Vice        
President of Sales and Executive Vice President for Mindscape, a $100+ million  
consumer software company. From 1990 to 1994 he was Vice President of Sales for 
The Software Toolworks. Mr. Landies previously served on the Board of Directors 
of IMSI from 1995 to 1998. Mr. Landies graduated in 1981 from Northern Illinois 
University with a Masters of Business Administration and holds a B.S. in        
economics from Elmhurst College.                                                

ROBERT MAYER, EXECUTIVE VICE PRESIDENT OF PRECISION DESIGN. See above.          

WILLIAM J. BUSH, CFO, age 38. Mr. Bush joined our executive team in September   
2002. As the former Director of Business Development for Buzzsaw.com and former 
Corporate Controller and Finance Manager for the AutoCAD Product Division at    
Autodesk, he brings over 15 years of experience in accounting, financial support
and business development to IMSI. Prior to joining IMSI, Mr. Bush was one of the
founding members of Buzzsaw.com, a privately held company spun off from         
Autodesk, Inc. in 1999, focusing on online collaboration, printing and          
procurement applications. At Buzzsaw.com, Mr. Bush was responsible for          
establishing the company's finance and accounting infrastructure as well as     
leading its acquisition and financing efforts. From 1997 to 1999, Mr. Bush      
worked at Autodesk, Inc., the fourth largest software applications company in   
the world. As Corporate Controller at Autodesk, his responsibilities included   
financial planning and analysis, general accounting, and SEC and management     
reporting. Mr. Bush began his career in public accounting with Ernst & Young,   
and later with Price Waterhouse in Munich, Germany. He received a B.S. in       
Business Administration from U.C. Berkeley and is a Certified Public Accountant.

EXECUTIVE COMPENSATION                                        

The following table sets forth all compensation awarded, earned or paid for     
services rendered in all capacities to the Company and its subsidiaries during  
each of the fiscal years ended June 30, 2003, 2002 and 2001 to (i) the Company's
chief executive officer during fiscal 2003; and (ii) the Company's four most    
highly compensated executive officers other than the CEO who were serving as    
executive officers at the end of fiscal 2003.                                   

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                                                        [Enlarge/Download Table]

----------------------------------------------------------------------------------------------------------------------------------
                           SUMMARY COMPENSATION TABLE                                                                             
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                        LONG-TERM COMPENSATION    
                                                                ANNUAL COMPENSATION                              AWARDS           
----------------------------------------------------------------------------------------------------------------------------------
                                                                                      OTHER ANNUAL       SECURITIES UNDERLYING    
                                                   SALARY              BONUS           COMPENSATION          OPTIONS / SARS       
                                    FISCAL                                                                                        
NAME AND PRINCIPAL POSITIONS          YEAR         ($)(1)               ($)              ($) (2)                  (#)             
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                  
Martin Wade III                     2003            175,000           175,000              7,976              (2,000,000)         
----------------------------------------------------------------------------------------------------------------------------------
Chief Executive Officer             2002            100,000            25,000              4,458               2,000,000          
----------------------------------------------------------------------------------------------------------------------------------
                                    2001                 --                --                 --                      --          
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
Gordon Landies                      2003            156,000           221,500              7,976                  30,025          
----------------------------------------------------------------------------------------------------------------------------------
President (3)                       2002            130,000            40,000             65,670               1,250,000          
----------------------------------------------------------------------------------------------------------------------------------
                                    2001                 --                --                 --                      --          
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
Paul Jakab                          2003            151,500            45,000             10,270                 107,500          
----------------------------------------------------------------------------------------------------------------------------------
Chief Operating Officer until       2002            125,000            45,000              7,312                 950,000          
May 31, 2003 (4)                    2001            161,000                --                 --                      --          
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
Robert Mayer                        2003            120,000            18,000             28,708                  57,500          
----------------------------------------------------------------------------------------------------------------------------------
Executive Vice President, (5)       2002            120,000            66,044              3,827                 382,500          
----------------------------------------------------------------------------------------------------------------------------------
Worldwide Sales (6)                 2001            107,638            26,887             69,675                      --          
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
William Bush                        2003             99,279           106,000                 --                 162,426          
----------------------------------------------------------------------------------------------------------------------------------
Chief Financial Officer             2002                 --                --                 --                      --          
----------------------------------------------------------------------------------------------------------------------------------
                                    2001                 --                --                 --                      --          
----------------------------------------------------------------------------------------------------------------------------------

    (1)   Amounts stated above are the actual amounts received. Amounts paid
         in fiscal 2003 are based upon the following annual salaries: Wade
            $200,000, Landies $156,000, Jakab $156,000, Mayer $120,000, and Bush
$120,000.                                               

   (2)   Includes payments of medical and dental insurance premiums by the
Company.                                                

(3)   Includes $55,000 of consulting fees.                          

    (4)   Mr. Jakab accepted his new position of Business Affairs Advisor in
         May 2003. Mr. Jakab ceased to be an officer of IMSI in June 2003.

   Until May 2001 Mr. Jakab had been Executive Vice President,
          International Sales and Business development for IMSI. He rejoined
          IMSI on September 1, 2001 as Chief Operating Officer subsequent to
            the signing of the merger agreement between IMSI and DCDC. Salary in
fiscal 2001 included $21,000 of severance.              

  (5)   Mr. Mayer worked for IMSI on a full-time basis through March 31,
            2000, at which time he became a consultant to the Company. Mr. Mayer
      rejoined the Company in his current capacity in November 2000.

    (6)   Includes the forgiveness in June 2001 of a note receivable owed by
Mr. Mayer to IMSI in the amount of $69,675.             

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

       EXECUTIVE EMPLOYMENT AGREEMENT AND AMENDMENTS TO EXECUTIVE EMPLOYMENT
AGREEMENT                                                     

On November 12, 2002, we amended the Employment Agreement between IMSI and Mr.  
Martin Wade III whereby both parties agree to the full and complete cancellation
of all outstanding warrants granted to Mr. Wade.                                

Furthermore, both parties agreed that upon the sale or merger of IMSI, or the   
acquisition of at least fifty one percent (51%) of our common stock by a single 
corporate entity (excluding the ownership of existing stockholders), while Mr.  
Wade is employed as our Chief Executive Officer, we shall pay him the following:

     o     1.75% of the total amount of the transaction for any transaction of
at least $1.25 per net share                            

o     7.5% of the amount of the transaction over $1.25 per net share

      o     Such payment shall not be made in preference, but on an equal basis,
to any payments made to the common shareholders of IMSI.

AMENDMENT OF MANAGEMENT AGREEMENTS (PAUL JAKAB, FORMER COO)   

As of September 2001 we entered into a management agreement with Paul Jakab     
pursuant to which Mr. Jakab was named Chief Operating Officer of the Company. As
compensation for their services, Mr. Jakab was to receive a monthly base salary 
of $13,000; options or warrants totaling 350,000; a quarterly bonus of up to 25%
of his base pay, depending upon the extent to which profit and cash goals (to be
agreed to by our Executive Committee) are met; and the right to participate in  
our benefit plans.                                                              

In June 2003 Mr. Jakab resigned as an officer of IMSI, and was re-engaged in a  
consulting capacity as Business Affairs Advisor, where he will be responsible   
for certain international sales and from time to time certain legal matters as  
directed by the company. Mr. Jakab will be paid $8,000 per month for such       
services.                                                                       

CONSULTING AGREEMENT                                          

On May 1, 2003, we entered into a consulting agreement with Mr. Bruce Galloway, 
chairman of our board of directors, to provide services to the company related  
to potential acquisitions and divestitures. In return for his services, Mr.     
Galloway could be entitled to a fee from zero to $200,000 dependent on his      
involvement and the consideration received or paid by us as a result of the     
transaction. Upon the successful sale of ArtToday in June 2003 we paid Mr.      
Galloway a fee of $150,000 per the terms of the agreement.                      

 FIVE-YEAR, 15% SECURED PROMISSORY NOTES, WITH WARRANTS ATTACHED

In March 2003, we initiated a private placement of five-year, 15% secured       
promissory notes to accredited investors. We were successful in raising         
$805,000. Purchasers of the notes also received warrants to purchase IMSI's     
common stock at the rate of one warrant for each $2.00 of principal of the      
notes. These warrants have a strike price of $0.45 and will expire on June 30,  
2006. The notes were secured by a pledge of the common stock of ArtToday.com.   

None of the participants in these private placements, except for our Chief      
Financial Officer, Mr. William J. Bush and Mr. Joseph Abrams (an IMSI related   
party as a former beneficial owner of IMSI Common Stock) who participated in the
amounts of $80,000 and $50,000 respectively and received 40,000 and 25,000      
warrants to purchase shares of IMSI's stock respectively, were deemed to be an  
"affiliate" or a "related party" as defined in Statement of Financial Accounting
Standards No.57, "Related Party Disclosures".                                   

The offering was conducted directly by IMSI. Proceeds of the offering were      
intended to retire existing debt, purchase of and/or license of digital content 
and software assets and fund general working capital needs.                     

Concurrent with the sale of ArtToday on June 30, 2003, we repaid the notes in   
full with an early repayment penalty of 2% which was $16,000.                   

DEBT TO EQUITY CONVERSION                                     

In November 2001, we entered into a stock purchase agreement with DCDC to       
acquire all issued and outstanding shares of capital stock of Keynomics. As of  
the date of the purchase, Keynomics had promissory notes outstanding in the     
aggregate principal amount of $245,000. Subsequent to the execution of the stock
purchase agreement, holders of an aggregate of $225,000 of the outstanding notes
agreed to convert them into 661,765 shares of IMSI's capital stock at $0.34 per 
share. Gordon Landies, our President, and Paul Jakab, our then Chief Operating  
Officer, received 192,079 and 10,232 shares of IMSI's capital stock,            
respectively, in exchange for their outstanding promissory notes from Keynomics.
Joe Abrams, an IMSI related party as a former beneficial owner of IMSI common   
stock, received 287,389 shares in exchange for his outstanding promissory note  
to Keynomics.                                                                   

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EMPLOYEE AND DIRECTOR STOCK OPTIONS AND WARRANTS
EMPLOYEE STOCK INCENTIVE PLANS AND EQUITY RELATED TRANSACTIONS

The 1993 Employee Incentive Plan, as amended, permits us to grant options to    
purchase up to 2,925,000 shares of common stock to employees, directors and     
consultants at prices not less than the fair market value at date of grant for  
incentive stock options and not less than 85% of fair market value for          
non-statutory stock options. These options generally expire 10 years from the   
date of grant and become exercisable ratably over a 3 to 5-year period. At June 
30, 2003, 2,660 shares were available for future grants under the 1993 plan.    

Option activity under the plan is as follows:                                   

                                                        [Enlarge/Download Table]

                                                                                                              WEIGHTED AVERAGE      
                                                                                     NUMBER OF SHARES          EXERCISE PRICE       
---------------------------------------------------------------------------------- ---------------------- --------------------------
                                                                                                                                    
OUTSTANDING, JULY 01, 2001                                                                   1,976,164              $0.97           
---------------------------------------------------------------------------------- ---------------------- --------------------------
Granted (weighted average fair value of $0.45)                                               1,346,000               0.43           
---------------------------------------------------------------------------------- ---------------------- --------------------------
Exercised                                                                                     (109,500)              0.20           
---------------------------------------------------------------------------------- ---------------------- --------------------------
Cancelled                                                                                   (1,061,526)              0.87           
---------------------------------------------------------------------------------- ---------------------- --------------------------
OUTSTANDING, JUNE 30, 2002                                                                   2,151,138              $0.72           
---------------------------------------------------------------------------------- ---------------------- --------------------------
Granted (weighted average fair value of $0.54)                                                 974,351              $0.66           
---------------------------------------------------------------------------------- ---------------------- --------------------------
Exercised                                                                                      (29,333)              0.20           
---------------------------------------------------------------------------------- ---------------------- --------------------------
Cancelled                                                                                     (835,403)              0.85           
---------------------------------------------------------------------------------- ---------------------- --------------------------
OUTSTANDING, JUNE 30, 2003                                                                   2,260,753              $0.66           
---------------------------------------------------------------------------------- ---------------------- --------------------------

Warrants have been granted from time to time in conjunction with financings,    
debt settlements, Board of Directors and employee compensation and consulting   
arrangements. Warrant activity is as follows:                                   

                                                        [Enlarge/Download Table]

----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                      AVERAGE     
                                                                                       NUMBER OF                      EXERCISE    
                                                                                       WARRANTS                        PRICE      
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                  
OUTSTANDING, JULY 01, 2001                                                                  729,291                          4.31 
----------------------------------------------------------------------------------------------------------------------------------
Granted (weighted average fair value of $0.68)                                            7,619,786                          0.76 
----------------------------------------------------------------------------------------------------------------------------------
Exercised                                                                               (1,282,500)                          0.25 
----------------------------------------------------------------------------------------------------------------------------------
OUTSTANDING, JUNE 30, 2002                                                                7,066,577                         $1.22 
----------------------------------------------------------------------------------------------------------------------------------
Granted (weighted average fair value of $0.90)                                            1,302,500                        (0.95) 
----------------------------------------------------------------------------------------------------------------------------------
Exercised                                                                               (2,112,500)                        (0.81) 
----------------------------------------------------------------------------------------------------------------------------------
OUTSTANDING, JUNE 30, 2003                                                                6,256,577                         $1.16 
----------------------------------------------------------------------------------------------------------------------------------

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Additional information regarding options and warrants outstanding as of June 30,
2003 is as follows:                                                             

                                                        [Enlarge/Download Table]

                                       OPTIONS OUTSTANDING                                              OPTIONS EXERCISABLE       
---------------------- ----------------- ----------------------------------- --------------------- ---------------- --------------
                                                                                                                      WEIGHTED    
                                                                                                                        AVG.      
 RANGE OF EXERCISE         NUMBER             WEIGHTED AVG. REMAINING           WEIGHTED AVG.          NUMBER         EXERCISE    
       PRICES            OUTSTANDING           CONTRACTUAL LIFE (YRS)           EXERCISE PRICE       EXERCISABLE        PRICE     
---------------------- ----------------- ----------------------------------- --------------------- ---------------- --------------
                                                                                                                                  

$0.20-$0.35                 531,166                     8.3                            0.27              365,153        0.25      
----------------------------------------------------------------------------------------------------------------------------------
$0.41-$0.70                 539,238                     9.5                            0.58              221,337        0.62      
----------------------------------------------------------------------------------------------------------------------------------
$0.71-$0.75                 761,426                     8.2                            0.73              421,833        0.75      
----------------------------------------------------------------------------------------------------------------------------------
$0.80-$0.95                 343,960                     8.4                            0.90              191,461        0.89      
----------------------------------------------------------------------------------------------------------------------------------
$1.06-$4.17                  84,963                     5.6                            1.95               71,630        2.12      
----------------------------------------------------------------------------------------------------------------------------------
                          2,260,753                                                                    1,271,414                  
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                            WARRANTS OUTSTANDING                                             WARRANTS EXERCISABLE                 
----------------------------------------------------------------------------------------------------------------------------------
  RANGE OF EXERCISE                                                                                                               
        PRICES            NUMBER OUTSTANDING    WEIGHTED AVG. EXERCISE PRICE   NUMBER EXERCISABLE   WEIGHTED AVG. EXERCISE PRICE  
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                  
$0.15 - $0.32                   1,070,000                   0.25                     1,070,000                  0.25              
----------------------------------------------------------------------------------------------------------------------------------
$0.45 - $0.46                   1,002,500                   0.46                     1,002,500                  0.46              
----------------------------------------------------------------------------------------------------------------------------------
$0.50 - $0.75                     670,286                   0.61                       670,286                  0.61              
----------------------------------------------------------------------------------------------------------------------------------
$0.81                           2,737,500                   0.81                     2,012,500                  0.81              
----------------------------------------------------------------------------------------------------------------------------------
$0.90 - $1.03                     382,000                   0.93                       244,000                  0.93              
----------------------------------------------------------------------------------------------------------------------------------
$5.00 - $14.85                    394,291                   9.05                       394,291                  9.05              
----------------------------------------------------------------------------------------------------------------------------------
                                6,256,577                                            5,393,577                                    
----------------------------------------------------------------------------------------------------------------------------------

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OPTION / WARRANT GRANTS                                       

OPTION GRANTS                               

The following table sets forth the individual grants of stock options made      
during the last fiscal year to each of the named executive officers. There were 
no SAR grants.                                                                  

                                                        [Enlarge/Download Table]

------------------------- --------------------------------- ------------------------------------- ------------------ ---------------
                          NUMBER OF SECURITIES UNDERLYING      PERCENT OF TOTAL OPTIONS/SARS      EXERCISE OR BASE    EXPIRATION    
        OFFICER                 OPTIONS/SARS GRANTED        GRANTED TO EMPLOYEES IN FISCAL YEAR         PRICE             DATE      
------------------------- --------------------------------- ------------------------------------- ------------------ ---------------
                                                                                                                                    
Bush, William                        100,000                              10.3%                         $0.93            09/08/07   
------------------------- --------------------------------- ------------------------------------- ------------------ ---------------
Bush, William                         10,000                               1.0%                          0.60            12/04/07   
------------------------- --------------------------------- ------------------------------------- ------------------ ---------------
Bush, William                          8,900                               0.9%                          0.41            04/26/08   
------------------------- --------------------------------- ------------------------------------- ------------------ ---------------
Bush, William                         10,100                               1.0%                          0.53            05/27/08   
------------------------- --------------------------------- ------------------------------------- ------------------ ---------------
Bush, William                         33,426                               3.4%                          0.71            06/28/08   
------------------------- --------------------------------- ------------------------------------- ------------------ ---------------
Jakab, Paul                          100,000                              10.3%                          0.63            10/30/07   
------------------------- --------------------------------- ------------------------------------- ------------------ ---------------
Jakab, Paul                            7,500                               0.8%                          0.41            04/26/08   
------------------------- --------------------------------- ------------------------------------- ------------------ ---------------
Landies, Gordon                       12,525                               1.3%                          0.41            04/26/08   
------------------------- --------------------------------- ------------------------------------- ------------------ ---------------
Landies, Gordon                       17,500                               1.8%                          0.53            05/27/08   
------------------------- --------------------------------- ------------------------------------- ------------------ ---------------
Mayer, Robert                          7,500                               0.8%                          0.41            04/26/08   
------------------------- --------------------------------- ------------------------------------- ------------------ ---------------
Mayer, Robert                         10,000                               1.0%                          0.70            06/17/08   
------------------------- --------------------------------- ------------------------------------- ------------------ ---------------
Mayer, Robert                         40,000                               4.1%                          0.71            06/28/08   
------------------------- --------------------------------- ------------------------------------- ------------------ ---------------

WARRANT GRANTS                                                

No grants of warrants were made during the last fiscal year to any of the named 
executive officers. During fiscal 2003 we granted 50,000 warrants to Mr.        
Geoffrey Koblick, our former Chairman and CEO and currently an employee and     
significant shareholder. These warrants have an exercise price of $0.86 and     
expire on September 20, 2007.                                                   

Subsequent to fiscal year end, we issued to our Chief Executive Officer, Mr.    
Martin Wade III, 46,667 warrants to purchase shares of IMSI common stock at an  
exercise price of $0.75 per share. These warrants were awarded to Mr. Wade as   
part of a bonus.                                                                

On November 12, 2002, we amended the Employment Agreement between us and Mr.    
Martin Wade III whereby both parties agreed to the full and complete            
cancellation of all the 2,000,000 outstanding warrants granted to Mr. Wade as   
part of his Employment Agreement. When the warrants were issued, we calculated  
$1,037,000 of intrinsic value as a result of the difference between the exercise
price of the warrants and the then current market price. We were amortizing this
amount over the vesting period of the warrants (twelve months). In the quarter  
ending December 31, 2002, we reversed the charges related to the amortization of
the intrinsic value of these warrants as they were unvested at the time of this 
amendment. As a result, general and administrative expense was reduced by       
$432,000 in the quarter ending December 31, 2002.                               

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OPTIONS EXERCISED                                             

No options were exercised by the named executives in fiscal year 2003 or through
January 1, 2004.                                                                

The following table sets forth information with respect to the number of shares 
covered by both exercisable and non-exercisable stock options as of June 30,    
2003. Also reported are the values for "in-the-money" options, which represent  
the positive spread between the exercise price of any such existing stock       
options and the fiscal year-end price of the Common Stock.                      

                                                        [Enlarge/Download Table]

-----------------------------------------------------------------------------------------------------------------------------------
                                       AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND                                     
                                                      FY-END OPTION/SAR VALUES                                                     
------------------------------------------------------------ ------------------------------------ ---------------------------------
                                                                                                         VALUE OF UNEXERCISED      
                                                             NUMBER OF UNEXERCISED OPTIONS/SARS          IN-THE-MONEY OPTIONS      
                                                                    AT JUNE 30, 2003 (1)               AT JUNE 30, 2003 ($) (2)    
--------------------------- -------------- ----------------- ------------------------------------ ---------------------------------
           NAME              EXERCISE #     VALUE REALIZED              EXERCISABLE /                       EXERCISABLE /          
                                                 ($)                    UNEXERCISABLE                       UNEXERCISABLE          
--------------------------- -------------- ----------------- ------------------------------------ ---------------------------------
                                                                                                                                   
Martin Wade III             --             --                               -- / --                            $-- / $--           
--------------------------- -------------- ----------------- ------------------------------------ ---------------------------------
Bush, William               --             --                          42,503 / 119,923                      $550 / $5,038         
--------------------------- -------------- ----------------- ------------------------------------ ---------------------------------
Jakab, Paul                 --             --                          183,340 / 24,160                     $45,503 / $9,747       
--------------------------- -------------- ----------------- ------------------------------------ ---------------------------------
Landies, Gordon             --             --                           50,000 / 30,025                       $-- / $6,907         
--------------------------- -------------- ----------------- ------------------------------------ ---------------------------------
Mayer, Robert               --             --                           50,000 / 57,500                     $25,500 / $2,350       
--------------------------- -------------- ----------------- ------------------------------------ ---------------------------------

(1)   These options, which have a four-year vesting period, become  
     exercisable over time based on continuous employment with the
       Company and in certain cases are subject to various performance
 criteria or vest in full upon acquisition of the Company.

      (2)   Based on the difference between the market price of the Common Stock
            at June 30, 2003 ($.71 per share), and the aggregate exercise prices
of options shown in the table.                          

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REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS       

The Audit Committee is a subcommittee of the Board of Directors comprised solely
of independent directors as required by the listing standards of the NASDAQ     
National Market. The composition of the Audit Committee, the attributes of its  
members and the responsibilities of the Audit Committee are intended to be in   
accordance with applicable requirements for corporate audit committees. The     
Audit Committee reviews and assesses the adequacy of its charter on an annual   
basis.                                                                          

The purpose of the Audit Committee is to assist the Board of Directors in       
fulfilling its oversight responsibilities by reviewing the financial reporting, 
the systems of internal control and the audit process; and by monitoring        
compliance with applicable laws, regulations and policies.                      

The Audit Committee reviewed and discussed the audited financial statements for 
fiscal 2003 and the unaudited interim statements for fiscal 2004 with management
and Grant Thornton LLP, IMSI's independent auditors. Management is responsible  
for the quarterly and annual financial statements and the reporting process,    
including the systems of internal controls. Grant Thornton LLP is responsible   
for expressing an opinion on the conformity of our audited financial statements 
with generally accepted accounting principles. In addition, we received from and
discussed with Grant Thornton LLP the written disclosures and the letter        
required by Independence Standards Board Standard No. 1, Independence           
Discussions with Audit Committees, discussed Grant Thornton LLP's independence  
with them, considered whether the provision of tax related services by Grant    
Thornton LLP is compatible with maintaining the auditor's independence, and     
discussed with Grant Thornton LLP the matters required to be discussed by       
Statement on Auditing Standards No. 61, Communications with Audit Committees,   
each as currently in effect.                                                    

The Audit Committee discussed with IMSI's independent auditor the overall scope 
and plans for their audit. In addition, the Audit Committee met with the        
independent auditors, with and without management present, and discussed the    
results of their examinations and the overall quality of IMSI's financial       
reporting. On the basis of these reviews and discussions, the Audit Committee   
recommended to the Board of Directors (and the Board of Directors has approved) 
that IMSI's audited financial statements be included in IMSI's Annual Report on 
Form 10-KSB for the FY 2003 for filing with the Securities and Exchange         
Commission.                                                                     

                                     AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

                     BY: /S/ ROBERT S. FALCONE
                                         -------------------------------------
                     Robert S. Falcone
                             Director, Chairman of the
                   Audit Committee

             BY: /S/ EVAN BINN
                                         -------------------------------------
             Evan Binn
            Director

                     BY: /S/ RICHARD J. BERMAN
                                         -------------------------------------
                     Richard J. Berman
            Director

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REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

The Compensation Committee of the Board of Directors is comprised of three      
non-employee directors. Members of this Committee are required to meet the      
independence requirements for non-employee directors under the NASDAQ           
Marketplace Rules, Rule 16b-3 promulgated under Section 16 of the Securities    
Exchange Act of 1934 and Section 162(m) of the Internal Revenue Code of 1986.   
During fiscal year 2003 and as of January 1, 2004, the Compensation Committee   
consisted of Bruce Galloway, Chairman, Donald Perlyn and Evan Binn.             

The purpose of the Compensation Committee is to ensure the Company has programs 
in place to attract, retain and develop a highly effective management team and  
to discharge the Board's responsibilities relating to certain compensation      
matters of the Company.                                                         

Specifically, the Compensation Committee is responsible for establishing the    
policies and programs that determine the compensation of our executive officers.
The Compensation Committee sets base cash compensation and bonus compensation on
an annual basis for the Chief Executive Officer and other executive officers of 
IMSI and, in addition, has exclusive authority to grant stock options to        
executive officers. The Compensation Committee considers both internal data,    
including financial and non-financial corporate goals and individual            
performance, as well as data from outside compensation consultants and          
independent executive compensation data from comparable high technology         
companies, in determining executive officers' compensation.                     

The Compensation Committee also reviews IMSI's executive and leadership         
development policies, practices and plans to ensure that they support the       
Company's ability to retain and develop the superior executive and leadership   
talent required to deliver against the Company's short term and long term       
business strategies.                                                            

COMPENSATION PHILOSOPHY                                     

IMSI operates in an extremely competitive and rapidly changing high technology  
industry.                                                                       

When creating policies and making decisions concerning executive compensation,  
the Compensation Committee:                                                     

    o     ensures that the executive team has clear goals and accountability
          with respect to financial and non-financial corporate performance;

o     establishes pay opportunities that are competitive based on   
           prevailing practices for the industry, the stage of growth of IMSI,
        and the dynamic and challenging high technology labor markets in
which IMSI operates;                                    

      o     independently assesses operating results on a regular basis in light
of our expected performance; and                        

o     aligns pay incentives with the long-term interests of our     
stockholders.                                           

The challenging and very uncertain economic conditions experienced during the   
fiscal year ending June 30, 2003 affected IMSI's performance during the year and
are reflected in the Compensation Committee's actions for the year.             

COMPENSATION PROGRAM                                          

IMSI's executive compensation program has three major components, all of which  
are intended to attract, retain and motivate highly effective executives:       

1.    Base salary for executive officers is set annually by reviewing the       
    competitive pay practices of comparable high technology companies. Local
     and national compensation data are examined and taken into account, along
 with the skills and performance of each officer and the needs of IMSI

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2.    Cash incentive compensation is designed to motivate executives to attain  
short-term and longer-term corporate, business unit and individual  
     management goals. The actual annual cash bonuses received by an executive
   depend upon attainment of these specified business goals, together with
   discretionary analysis of individual contribution. Payment of incentive
   bonuses for fiscal year 2003 depended upon the achievement of corporate
     financial goals. In setting goals and measuring performance against those
    goals, the Compensation Committee considers compensation practices among
companies competing for a common employee pool, as well as general  
   economic and market conditions. It is the intention of the Compensation
Committee in fiscal year 2004 to continue this linkage between the  
     achievement of specific financial targets, corporate and individual goals
    and the payment of incentive cash compensation to our officers and other
executives.                                                         

3.    Equity-based incentive compensation has been provided to employees and    
     management through our stock incentive plans. Under these plans, officers
and employees are eligible to be granted stock options based on     
      competitive market data, as well as their responsibilities and position at
   IMSI. These options allow participants to purchase shares of our Common
  Stock at the market price on the date of the grant, subject to vesting
 during the participant's employment with IMSI. Our stock option plans
   utilize vesting periods to encourage employees and executives to remain
with IMSI and to focus on longer-term results.                      

IMSI believes that its executive compensation program falls within the typical  
range of compensation programs offered by comparable high technology companies. 

CHIEF EXECUTIVE OFFICER COMPENSATION                        

In determining Mr. Wade's compensation for FY 2003, the Compensation Committee  
reviewed industry surveys of compensation paid to chief executive officers of   
comparable companies, with a focus on those companies located in the San        
Francisco Bay Area, and evaluated achievement of corporate and individual       
objectives for the fiscal year. Overall, Mr. Wade received $175,000 in annual   
base compensation for fiscal year 2003.                                         

In addition, Mr. Wade was rewarded an incentive bonus in the amount of $175,000 
determined on the basis of achievement of financial and non-financial individual
and corporate goals.                                                            

OTHER EXECUTIVE COMPENSATION                                

IMSI provides certain compensation programs to executives that are also         
available to our other employees, including pre-tax savings plans and           
medical/dental/vision benefits. There are no pension programs. We generally do  
not provide executive perquisites such as club memberships.                     

                                COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

      BY: /S/ BRUCE GALLOWAY
                              --------------------------------------
      Bruce Galloway
                              Director, Chairman of the Compensation
                            Committee & Chairman of the Board of
 Directors

     BY: /S/ DONALD PERLYN
                              --------------------------------------
     Donald Perlyn
Director

 BY: /S/ EVAN BINN
                              --------------------------------------
 Evan Binn
Director

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 COMPANY STOCK PRICE PERFORMANCE

The following graph shows a five-year comparison of cumulative return (stock    
appreciation) for our common stock, the Standard & Poor's 500 stock index, the  
NASDAQ Composite Index and the Dow Jones Industrial Average Index.              

 [COMPANY STOCK PRICE PERFORMANCE CHART]

 [GRAPH OMITTED]

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 OTHER MATTERS

PROPOSALS OF SHAREHOLDERS                                     

FISCAL YEAR 2004 STOCKHOLDER PROPOSALS OR NOMINATIONS. From time to time,       
stockholders of the company submit proposals that they believe should be voted  
upon at the annual meeting or nominate persons for election to the Board of     
Directors. Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934,    
some stockholder proposals may be eligible for inclusion in the company's Fiscal
Year 2004 proxy statement. Any such stockholder proposals must be submitted in  
writing to the Secretary of the company no later than April 30, 2004.           
Stockholders interested in submitting such a proposal are advised to contact    
knowledgeable counsel with regard to the detailed requirements of applicable    
securities laws. The submission of a stockholder proposal does not guarantee    
that it will be included in the company's proxy statement.                      

MISCELLANEOUS                                                 

The Board of Directors is not aware that any matter other than those described  
in the Notice of Annual Meeting of Shareholders to which this Proxy Statement is
appended will be presented for action at the meeting. If, however, other matters
do properly come before the meeting, it is the intention of the persons named in
the proxy to vote the proxied shares in accordance with their best judgment on  
said matters.                                                                   

It is important that proxies be returned promptly with instructions as to       
voting. Shareholders who do not expect to attend the meeting in person are urged
to mark, sign, date and send in the proxies by return mail.                     

                                            By Order of the Board of Directors

                                                                February 1, 2004

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INTERNATIONAL MICROCOMPUTER SOFTWARE, INC.

ANNUAL MEETING OF STOCKHOLDERS

 WEDNESDAY, MARCH 17, 2004

 2:00 P.M., LOCAL TIME

THE SHERATON FOUR POINTS HOTEL

1010 NORTHGATE DRIVE

SAN RAFAEL, CA 94903

 PROXY

         THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL
MEETING ON MARCH 17, 2004.                                                      

       The undersigned hereby appoints Martin Wade, III and William J. Bush,
or either of them, the attorneys and proxies of the undersigned, with full power
of substitution, to attend the annual meeting of shareholders of International  
Microcomputer Software, Inc., a California corporation (hereinafter called the  
"Company"), to be held ON WEDNESDAY, MARCH 17, 2004 AT THE SHERATON FOUR POINTS 
HOTEL - 1010 NORTHGATE DRIVE, SAN RAFAEL, CA 94903 AT 2:00 P.M. LOCAL TIME, and 
any adjournment thereof, and thereat to vote the undersigned's shares in the    
Company.                                                                        

 THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER SPECIFIED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO SPECIFICATION IS MADE, 
THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4. 

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED   
ENVELOPE.                                                                       

SEE REVERSE FOR VOTING INSTRUCTIONS.                                            

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PLEASE DETACH HERE                                              

[LOGO] INTERNATIONAL MICROCOMPUTER SOFTWARE, INC                                

INTERNATIONAL MICROCOMPUTER SOFTWARE, INC                                       
100 Rowland Way, Suite # 300                                                    
Novato, CA 94945                                                                
Phone:   (415) 878-4000                                                         
Fax:     (415) 897 -2544                                                        

                                                        [Enlarge/Download Table]

                                  THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 AND 4.                                 
------------------------------------------------------------------------------------------------------------------------------------
PROPOSAL 1: Election of directors.                                                                                                  
------------------------------------------------------------------------------------------------------------------------------------
                              NOMINEE                                   [ ] VOTE FOR ALL NOMINEES       [ ] VOTE WITHHELD FROM ALL  
                                                                            (EXCEPT AS MARKED)                   NOMINEES           
-------------------------------------------------------------------- --------------------------------- -----------------------------
                                                                                                                                    
01 Evan Binn                                                                                                                        

02 Richard Berman                                                                                                                   

03 Robert Falcone                                                                                                                   

04 Bruce Galloway                                                                                                                   

05 Robert Mayer                                                                                                                     

06 Donald Perlyn                                                                                                                    

07 Martin Wade III                                                                                                                  

------------------------------------------------------------------------------------------------------------------------------------

INSTRUCTIONS TO PROPOSAL 1: To Withhold Authority To Vote For Any Indicated     
Nominee, Write The Number(S) Of The Nominee(S) In The Box Provided To The Right.

                                                        [Enlarge/Download Table]

---------------------------------------------------------------- ---------------------- --------------------- ----------------------
                                                                                                                                    
PROPOSAL 2: To Approve The 2004 Incentive Stock Option Plan.     [ ] Vote For           [ ] Against           [ ] Abstain           

---------------------------------------------------------------- ---------------------- --------------------- ----------------------

PROPOSAL 3: To approve the Issuance of Options Aggregating Up    [ ] Vote For           [ ] Against           [ ] Abstain           
to 49.0% of the Company's Outstanding Stock                                                                                         

---------------------------------------------------------------- ---------------------- --------------------- ----------------------

PROPOSAL 4: To ratify the appointment of Grant Thornton LLP as   [ ] Vote For           [ ] Against           [ ] Abstain           
IMSI's independent auditors for the fiscal year ending June                                                                         
30, 2004.                                                                                                                           

---------------------------------------------------------------- ---------------------- --------------------- ----------------------

AUTHORIZED SIGNATURES -- SIGN HERE -- THIS SECTION MUST BE COMPLETED FOR YOUR   
INSTRUCTIONS TO BE EXECUTED. This proxy card should be marked, dated, and signed
by the stockholder(s) exactly as his or her name appears hereon, and returned   
promptly in the enclosed envelope. Persons signing in a fiduciary capacity      
should so indicate. If shares are held by joint tenants or as community         
property, all should sign.                                                      

                                                        [Enlarge/Download Table]

------------------------------------------------------------------------------------------------------------------------------------
                SIGNATURE 1                               SIGNATURE 2                             DATE (DD/MM/YYYY)                 
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
                                                                                                    /          /                    
------------------------------------------------------------------------------------------------------------------------------------

31

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘PRE 14A’ Filing		Date		First		Last			Other Filings
		9/20/07		23
		6/30/06		20					10KSB,  10KSB/A,  NT 10-K
		6/30/04		3		31			10KSB,  10KSB/A,  4,  5
		4/30/04		29
		3/17/04		3		30			DEF 14A
		2/15/04		5
Filed on / For Period End:		2/10/04
		2/1/04		3		29
		1/19/04		14
		1/1/04		8		26
		12/31/03		10		16			10QSB,  4
		12/16/03		17					5
		6/30/03		8		26			10KSB,  4
		5/31/03		19
		5/1/03		20					8-K
		12/31/02		23					10QSB,  4
		11/12/02		20		23
		6/30/02		18					10KSB,  5,  NT 10-K
		2/14/02		6					10QSB,  8-K
		9/1/01		6		19
		8/31/01		6					3,  8-K
		6/30/01		18					10-K,  NT 10-K
		3/31/00		19					10-Q,  10-Q/A,  NT 10-Q
		6/30/99		15					10-K/A,  10-K405,  10-K405/A
		6/30/93		11
									List all Filings