IMSI Announces Year-Over-Year Sales Growth

Triple Digit Growth With Higher Margins in Houseplans(TM) Business

NOVATO, Calif., Nov. 15 /PRNewswire-FirstCall/ -- IMSI(R) , a leading provider of house plans online and a leading developer and publisher of precision design, and consumer and business software solutions, announced its financial results for the first quarter of fiscal year 2006. For the quarter ended September 30, 2005, IMSI reported a net loss of $2.0 million or ($0.07) per share on net revenues of $4.0 million. The net loss was derived from an operating loss of $881,000, a loss from the sale of discontinued operations of $843,000 and other non operating expenses of $227,000. This compares to a net loss of $275,000 or ($0.01) per share on net revenues of $3.1 million for the quarter ended September 30, 2004. Net revenues increased by one hundred and eighty three percent (183%) in our Houseplans(TM) business, as compared to the comparable period from the previous fiscal year, reflecting the acquisition of Weinmaster Homes, Ltd. that we completed in July 2005 and the continued organic growth in the underlying Houseplans(TM) business.

On a sequential basis, net revenues for the quarter increased by $0.5 million and operating results improved by approximately $1.6 million as we improved our overall gross margin from 58% to 63% and as we reduced our overall operating expenses by approximately $1.1 million.

The following are highlights for the first quarter of fiscal 2006:

-- Sales from the direct marketing channel accounted for 70% of total revenues for the first quarter of fiscal year 2006 as compared to 52% in the same period of the previous fiscal year.

-- Gross margin in the Internet Content segment improved to 61% from 53% during the fiscal quarter ended September 30, 2005, as compared to the same period from the previous fiscal year.

-- Sequentially, operating loss narrowed from $2.5 million to $0.9 million as we improved our gross margins and reduced our operating expenses.

-- Consolidated non-cash depreciation and amortization expense for the September 2005 quarter was $360,000.

-- Our operating results were negatively impacted by approximately $200,000 of severance charges during the quarter ended September 30, 2005.

-- We have yet to benefit from gains on sale of securities we received as part of the total consideration relating to the Allume sale. As of September 30, 2005, we had $478,000 of unrealized gains on restricted securities. This item was accounted for as comprehensive income during the first quarter of fiscal 2006 and was not included in our net earnings because the underlying securities were restricted as of the quarter end. Our subsequent sale of these securities in the December quarter generated a gain of approximately $0.9 million over our basis in the stock.

"The Houseplans(TM) business continues to lead our growth and with our internal efforts and the addition of Weinmaster Homes we have the largest and, we believe, the best collection of house plans on the web," said Martin Wade, Chief Executive Officer. "This is a great consumer benefit and our customers continue to respond to the choices we provide," continued Mr. Wade. "We are looking forward to the seasonal pickup as customers plan for the coming season. We had $9.9 million in cash or cash equivalents and $1.5 million of available for sale securities as of September 30, 2005. Our cash balance provides an opportunity for business development. Our software business is adapting to the current environment after the July divestiture and we expect it to resume a stronger growth track going forward."


    Selected Financial Data
    (In thousands)

                                       FY 2005             FY 2006
                             Q1      Q2      Q3      Q4       Q1

    Net revenues           $3,135  $3,478  $3,799  $3,462  $3,965

    Gross profit            2,114   2,356   2,512   2,010   2,510
      As % of net revenues    67%     68%     66%     58%     63%

    Operating loss           -564    -526    -462  -2,472    -881
      As % of net revenues   -18%    -15%    -12%    -71%    -22%

    Net (loss) income        -275     129    -386  -1,222  -1,951
      As % of net revenues    -9%      4%    -10%    -35%    -49%


         INTERNATIONAL MICROCOMPUTER SOFTWARE, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEET
                     (In thousands, except share amounts)

                                                 September 30,       June 30,
                                                      2005             2005
                                                   Unaudited
    ASSETS
    Current assets:
      Cash and cash equivalents                     $9,887            $4,347
      Available-for-sale securities                  1,524                --

      Trading securities                                --               714
      Receivables, less allowances
       for doubtful accounts,
       discounts and returns of $437
       as of September 30, 2005 and
       $626 as of June 30, 2005.                     1,554               773
      Inventories, net                                             834                              758
            Receivables,  other  (related  to
              discontinued  operations)                                                  --                          2,000
            Receivables,  other                                                                --                                30
            Other  current  assets                                                          989                              530
            Assets  related  to  discontinued
              operations                                                                              --                        12,231
        Total  current  assets                                                        14,788                        21,383

        Fixed  assets,  net                                                                    373                              377

        Intangible  Assets
            Capitalized  software,  net                                                434                              494
            Domain  names  and  brands,  net                                      2,101                          1,574
            Distribution  rights  and
              proprietary  plans,  net                                                    789                              170
            Capitalized  customer  lists,
              agreements  and  relationships                                    1,424                              326
            Goodwill                                                                              3,665                          2,090
            Trademarks                                                                                21                                  1
        Total  intangible  assets                                                    8,434                          4,655

        Other  long  term  assets                                                              8                                --

        Total  assets                                                                        23,603                        26,415

        LIABILITIES  AND  SHAREHOLDERS'  EQUITY
        Current  liabilities:
            Short  term  debt                                                                1,713                          2,764
            Trade  accounts  payable                                                  1,600                          2,245
            Accrued  and  other  liabilities                                    1,907                          1,871
            Liabilities  related  to
              discontinued  operations                                                    --                          1,037
            Deferred  revenues                                                                  62                                38
        Total  current  liabilities                                                5,282                          7,955

        Long-term  debt  and  other  obligations                              200                              230

        Total  liabilities                                                                5,482                          8,185

        Shareholders'  equity
          Common  stock,  no  par  value;
            300,000,000  authorized;
            29,713,760  issued  and
            outstanding  as  of  September
            30,  2005  and  28,796,886
            issued  and  outstanding  as  of
            June  30,  2005.                                                                44,839                        43,663
              Accumulated  deficit                                                  (27,282)                    (25,331)
              Accumulated  other
                comprehensive  income  (loss)                                        564                            (102)
          Total  shareholders'  equity                                          18,121                        18,230

          Total  liabilities  and
            shareholders'  equity                                                  $23,603                      $26,415


                                    INTERNATIONAL  MICROCOMPUTER  SOFTWARE,  INC.
                                                              AND  SUBSIDIARIES
        CONSOLIDATED  STATEMENTS  OF  OPERATIONS  and  COMPREHENSIVE  (LOSS)  INCOME
                                      (In  thousands,  except  per  share  amounts)

                                                                                                              Three  months  ended
                                                                                                                      September  30,
                                                                                                            2005                            2004
          Net  revenues                                                                        $3,965                        $3,135
          Product  costs                                                                        1,455                          1,021
          Gross  margin                                                                          2,510                          2,114

          Costs  and  expenses
              Sales  and  marketing                                                        1,531                          1,350
              General  and  administrative                                          1,425                              859
              Research  and  development                                                  435                              469
          Total  operating  expenses                                                  3,391                          2,678

          Operating  loss                                                                        (881)                          (564)

          Other  income  and  (expense)
              Interest  and  other,  net                                                    (69)                                6
              Realized  /  unrealized  loss  on
                marketable  securities                                                    (158)                            (50)
          Loss  before  income  tax                                                    (1,108)                          (608)

          Income  tax  provision                                                                --                                (5)

          Loss  from  continuing  operations                                  (1,108)                          (613)

          Income  from  discontinued  operations,
            net  of  income  tax                                                                    --                              285
          Gain  (loss)  from  the  sale  of
            discontinued  operations,  net  of
            income  tax                                                                              (843)                              53

          Net  loss                                                                              ($1,951)                        ($275)

          Other  comprehensive  income  (loss)
                  Unrealized  gain  on
                    restricted  securities                                                  478                                --
                  Foreign  currency  translation
                    adjustments                                                                      188                              (10)
          Comprehensive  loss                                                          ($1,285)                        ($285)

          Basic  earnings  (loss)  per  share
                  Loss  from  continuing  operations                          ($0.04)                      ($0.02)
                  Income  from  discontinued  operations,
                    net  of  income  tax                                                      $0.00                          $0.01
                  Income  (loss)  from  the  sale  of
                    discontinued  operations,  net  of
                    income  tax                                                                  ($0.03)                        $0.00
                  Net  loss                                                                        ($0.07)                      ($0.01)
          Diluted  earnings  (loss)  per  share
                  Loss  from  continuing  operations                          ($0.04)                      ($0.02)
                  Income  from  discontinued  operations,
                    net  of  income  tax                                                      $0.00                          $0.01
                  Income  (loss)  from  the  sale  of
                    discontinued  operations,  net  of
                    income  tax                                                                  ($0.03)                        $0.00
                    Net  loss                                                                      ($0.07)                      ($0.01)

          Shares  used  in  computing  basic
            earnings  (loss)  per  share                                            29,689                        26,462
          Shares  used  in  computing  diluted
            earnings  (loss)  per  share                                            29,689                        26,462


                                    INTERNATIONAL  MICROCOMPUTER  SOFTWARE,  INC.
                                                              AND  SUBSIDIARIES
                                        CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
                                                                (In  thousands)

                                                                                            Three  months  ended  September  30,
                                                                                                        2005                            2004
          Cash  flows  from  operating
            activities:
          Net  cash  provided  by  (used  in)
            operating  activities                                                      ($394)                      $1,643
          Cash  flows  from  investing
            activities:
              Proceeds  from  sale  of  discontinued
                operations                                                                      9,304                                --
              Proceeds  from  sale  of  product  line                              --                              250
              Acquisition  of  subsidiaries                                    (1,807)                            (30)
              Acquisition  of  software  development
                and  trademarks                                                                    --                              (92)
              Purchases  of  equipment  and  software                          (20)                            (27)
              Transfer  cash  to  escrow  for
                Jupitermedia                                                                        --                            (499)
              Other                                                                                        (8)                              --
              Cash  used  in  discontinued  operations
                in  investing  activities                                                  --                              (46)
          Net  cash  provided  by  (used  in)
            investing  activities                                                      7,469                            (444)
          Cash  flows  from  financing
            activities:
              Proceeds  from  borrowings                                                850                              400
              Repayments  of  notes                                                    (2,935)                      (1,040)
              Proceeds  from  warrants  and  options
                exercised                                                                              63                                65
              Cash  used  in  discontinued  operations
                in  financing  activities                                                  --                              (20)
          Net  cash  used  in  financing
            activities                                                                        (2,022)                          (595)
          Effect  of  exchange  rate  change  on
            cash  and  cash  equivalents                                                    9                              (10)
          Unrealized  gain  on  available-for-
            sale  securities                                                                    478                                --
          Net  increase  in  cash  and  cash
            equivalents                                                                        5,540                              594
          Cash  and  cash  equivalents  at
            beginning  of  period                                                        4,347                          3,212
          Cash  and  cash  equivalents  at  end  of
            the  period                                                                        $9,887                        $3,806

                                                                                                                Three  months  ended
                                                                                                                        September  30,
                                                                                                            2005                            2004
          SUPPLEMENTAL  DISCLOSURE  OF  CASH  FLOW
            INFORMATION
          Interest  paid                                                                            55                                57

          SUPPLEMENTAL  DISCLOSURE  OF  NON-CASH
            FINANCING  ACTIVITIES
            Notes  payable  incurred  in
              conjunction  with  acquisitions                                  1,000                              440
            Capital  stock  issued  in  conjunction
              with  settlement  of  debt                                                    --                          1,034
            Capital  stock  issued  in  conjunction
              with  acquisitions                                                          1,046                              503
          Warrants  issued  in  conjunction  with
            short-term  debt                                                                      68                                --


        About  IMSI 


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