<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 20549
                                  FORM 10-QSB/A


[  X  ]   Quarterly  Report  Pursuant  to  Section  13  or  15(d)  of the
          Securities  Exchange  Act  of  1934

               For  the  quarter  ended                    MARCH  31,  2002
                                                           ----------------

[    ]    TRANSITION  REPORT  PURSUANT  TO  SECTION  13  OR  15(d)  OF THE
          SECURITIES  EXCHANGE  ACT  OF  1934

For  the  transition  period  from                    to
                                   ------------------     -------------------


                       Commission File Number     0-15949
                   INTERNATIONAL MICROCOMPUTER SOFTWARE, INC.
             (Exact name of registrant as specified in its charter)


          CALIFORNIA                                       94-2862863
          ----------                                       ----------
     (State  or  other  jurisdiction of                    (I.R.S. Employer
      incorporation or organization)                       identification No.)

     75  ROWLAND  WAY,  NOVATO,  CA                        94945
     ------------------------------                        -----
     (Address of principal executive offices)                 (Zip code)

                                 (415) 878-4000
                                 --------------
               (Registrant's telephone number including area code)


Indicate  by check mark whether registrant (1) has filed all reports required to
be  filed  by  Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding  12  months, and (2) has been subject to such filing requirements
for  the  past  90  days.

                                  YES     NO  X
                                             ---

As  of December 27, 2002, 22,794,232 shares of Registrant's common stock, no par
value,  were  outstanding.

<PAGE>
                   INTERNATIONAL MICROCOMPUTER SOFTWARE, INC.
                                AND SUBSIDIARIES
                                      INDEX

                                Explanatory Note
The  purpose  of this Amendment to the Company's Quarterly Report on Form 10-QSB
is  to incorporate changes and in response to further interpretive guidance that
the  company  has  received  regarding  the  accounting  change discussed below.

This  filing  on  Form  10-QSB/A  is  amending  our original Form 10-QSB for the
interim  period  ended  March 31, 2002 as filed with the Securities and Exchange
Commission  on May 20, 2002.  In consideration of further interpretive guidance,
we  are restating our interim condensed financial statements for the same period
to  account  for  our  acquisition of Keynomics, Inc. and the exchange of shares
with  Digital Creative Development Corporation for their retirement of the Union
Bank  Note, as disclosed in Notes 1, 2, 3 & 4 to the Financial Statements, using
fair  values  as  compared  to  the  previous accounting which accounted for the
transactions  as  transfers  between  entities  under  common  control.

This  Quarterly  Report on Form 10-QSB/A does not reflect events occurring after
the  filing  of  the registrant's Quarterly Report on Form 10-QSB for the fiscal
quarter  ended March 31, 2002, or modify or update those disclosures, except  as
discussed  above.

PART  I  -  FINANCIAL  INFORMATION                                      3

ITEM  1.    CONDENSED  CONSOLIDATED  FINANCIAL  STATEMENTS              3

  CONDENSED  CONSOLIDATED  BALANCE  SHEETS                              3
  CONDENSED  CONSOLIDATED  STATEMENTS OF OPERATIONS and
  COMPREHENSIVE INCOME                                                  4
  CONDENSED  CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS                  5
  NOTES  TO  CONDENSED  CONSOLIDATED  FINANCIAL  STATEMENTS             6

ITEM  2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF  OPERATIONS                                    19

ITEM  3. CONTROLS  AND  PROCEDURES                                     36

PART  II  -  OTHER  INFORMATION                                        37

ITEM  1.  LEGAL  PROCEEDINGS                                           37

ITEM  2.  CHANGES  IN  SECURITIES  AND  USE  OF  PROCEEDS              37

ITEM  3.  DEFAULTS  UPON  SENIOR  SECURITIES                           38

ITEM  4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS          38

ITEM  5.  OTHER  INFORMATION                                           38

ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K                        38

SIGNATURES                                                             40

EXHIBIT  99.1                                                          41

EXHIBIT  99.2                                                          42

EXHIBIT  99.3                                                          43

EXHIBIT  99.4                                                          44

                                        2
<PAGE>

                          PART I FINANCIAL INFORMATION
                          ----------------------------

ITEM  1.  CONDENSED  CONSOLIDATED  FINANCIAL  STATEMENTS

           INTERNATIONAL MICROCOMPUTER SOFTWARE, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    (In thousands, except per share amounts)
<TABLE>
<CAPTION>
<S>                                                     <C>      <C>
                                                      ------------  -----------
                                                        March 31,     June 30,
                                                      (Unaudited)   (Restated)
                                                       (Restated)
                                                      ------------  -----------

ASSETS
Current assets:                                            $2,352       $1,230
Cash and cash equivalents:
Receivables, less allowances for doubtful accounts,           999          940
discounts and returns of $193 and $182                        387          113
Inventories                                                    28          229
Prepaid royalties and licenses                                366          362
                                                      ------------  -----------
Other current assets                                        4,132        2,874
TOTAL CURRENT ASSETS
                                                              429          580
Fixed assets, net
                                                            1,118        1,305
Capitalized software development costs, net                 1,229        1,229
                                                      ------------  -----------
Other assets, net                                          $6,908       $5,988
                                                      ===========  ============
TOTAL ASSETS

LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:                                       $2,271      $1,1682
Current portion long-term debt                              2,163        2,353
Trade accounts payable                                         52        2,293
Accrued interest and penalties payable                      2,758        2,717
Accrued and other liabilities                                 179          131
Accrued arbitration award-current                           1,337        1,178
Deferred revenue                                            8,760       20,354
TOTAL CURRENT LIABILITIES
                                                              625          702
Accrued arbitration award                                     387          179
Long term debt and other obligations                        9,772       21,235
TOTAL LIABILITIES

Shareholders' deficit:
Common stock, no par value; 300,000,000 authorized;        33,921       28,754
Issued and outstanding 21,402,827 and 9,695,740 shares    (36,787)     (44,008)
Accumulated deficit                                             2            7
                                                      ------------  -----------
Accumulated other comprehensive income                     (2,864)     (15,247)
TOTAL SHAREHOLDERS' DEFICIT                                $6,908       $5,988
                                                      ============  ===========
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT

</TABLE>

See Notes to Consolidated Financial Statements

                                        3
<PAGE>

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

<TABLE>
<CAPTION>
<S>                                                                          <C>      <C>     <C>      <C>

                                                                                (Unaudited)        (Unaudited)
                                                                           Three Months Ended   Nine Months Ended
                                                                                  March 31,          March 31,
                                                                           -------------------  ------------------
                                                                               2002     2001      2002      2001
                                                                           (Restated)(Restated)(Restated)(Restated)
                                                                           -------------------  ------------------
Net revenues                                                                  $3,661   $3,107    $9,385    $9,399
Product costs                                                                    712      720     2,229     2,521
                                                                           -------------------  ------------------
GROSS MARGIN                                                                   2,949    2,387     7,156     6,878

Costs and expenses:
Sales and marketing                                                              846      800     2,040     1,971
General and administrative                                                     1,114    1,047     3,433     3,029
Research and development                                                         535      666     1,680     2,023
                                                                           -------------------  ------------------
TOTAL OPERATING EXPENSES                                                       2,495    2,513     7,153     7,023
                                                                           -------------------  ------------------
OPERATING INCOME (LOSS)                                                          454     (126)        3      (145)

Gain on product line sale                                                         --       --        20       285
Interest and other, net                                                         (394)    (572)     (779)   (1,661)
Gain (loss) on disposition of fixed assets                                         9       (6)       10        (9)
Gain on extinguishment of debt                                                    --       --     7,970        --
Settlement of fee agreement                                                       --       --        --      (187)
                                                                           -------------------  ------------------
INCOME (LOSS) BEFORE INCOME TAX AND CUMULATIVE EFFECT
OF ACCOUNTING CHANGE                                                              69     (704)    7,224    (1,717)

Income tax provision (benefit)                                                     1      (14)        3       (21)
                                                                           -------------------  ------------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE                       68     (690)   7,221     (1,696)

Cumulative effect of change in accounting principle                               --       --        --      (285)
                                                                           -------------------  ------------------
NET INCOME (LOSS)                                                                $68    $(690)   $7,221   $(1,981)
                                                                           ===================  ==================
Other comprehensive income, net of tax:
    Foreign currency translation, net of tax                                       6       10        (5)       13
                                                                           -------------------  ------------------
    OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX                                $74    $(680)   $7,216   $(1,968)
                                                                           ===================  ==================
BASIC EARNINGS (LOSS) PER SHARE
  Earnings (loss) per share before cumulative effect of
  change in accounting                                                         $0.01   $(0.07)    $0.65    $(0.17)
  Cumulative effect of change in accounting principle per
  share                                                                           --       --        --     (0.03)
  Net income (loss) per share                                                  $0.01   $(0.07)    $0.65    $(0.20)
DILUTED EARNINGS (LOSS) PER SHARE
  Earnings (loss) per share before cumulative effect of
  change in accounting                                                         $0.01   $(0.07)    $0.59    $(0.17)
  Cumulative effect of change in accounting principle per share                                             (0.03)
  Net income (loss) per share                                                  $0.01   $(0.07)    $0.59    $(0.20)

Shares used in computing basic earnings (loss) per share                      14,082    9,694    11,180     9,685

Shares used in computing diluted earnings (loss) per share                    15,056    9,694    12,154     9,685
</TABLE>


            See Notes to Condensed Consolidated Financial Statements

                                        4
<PAGE>




           INTERNATIONAL MICROCOMPUTER SOFTWARE, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                     (UNAUDITED)
<TABLE>
<CAPTION>

<S>                                                          <C>               <C>
                                                                         (Unaudited)
                                                                 Nine Months Ended March 31,
                                                             ---------------------------------
                                                             2002 (Restated)   2001 (Restated)
                                                             ---------------  ----------------
Cash flows from operating activities:
NET CASH PROVIDED BY OPERATING ACTIVITIES                           $ 1,809             $  561
                                                             ---------------  ----------------
Cash flows from investing activities:
Proceeds from product line and domain name sales                         20                   285
Purchase of equipment and furniture                                     (71)             (352)
Software development costs                                              (17)               --
Acquisition of subsidiary from affiliated company                      (266)               --
Other                                                                  (155)               (6)
                                                             ---------------  ----------------
NET CASH USED BY INVESTING ACTIVITIES                                  (489)              (73)
                                                             ---------------  ----------------
Cash flows from financing activities:
Increase in notes payable                                               479                --
Repayment of loans                                                   (1,209)              (20)
Repayment of capital lease obligations                                 (218)             (149)
Proceeds from issuance of common stock                                  755                11
                                                             ---------------  ----------------
NET CASH USED BY FINANCING ACTIVITIES                                  (193)             (158)
                                                             ---------------  ----------------

Effect of exchange rate change on cash and cash equivalents              (5)               13
NET INCREASE IN CASH AND CASH EQUIVALENTS                             1,122               343
Cash and cash equivalents at beginning of period                      1,230             1,477
                                                             ---------------  ----------------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD                      $ 2,352            $1,820
                                                             ===============  ================
</TABLE>


            See Notes to Condensed Consolidated Financial Statements
                                        5
<PAGE>


          INTERNATIONAL MICROCOMPUTER SOFTWARE, INC.  AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.  BASIS  OF  PRESENTATION
---------------------------

This  filing  on  Form  10-QSB/A  is  amending  our original Form 10-QSB for the
interim  period  ended  March 31, 2002 as filed with the Securities and Exchange
Commission  on  May  20,  2002.   We  are  restating  our  interim  condensed
consolidated  financial statements for the same period to account for the change
in  accounting treatment relative to the Keynomics' acquisition and the exchange
of  shares  and  cash with Digital Creative Development Corporation ("DCDC") for
their  retirement  of  the  Union  Bank  note  as  disclosed  in Notes 2, 3 & 4.

This  amended  filing  has  not  been  updated  for  events  which have occurred
subsequent  to  the  initial  filing of the Form 10-QSB on May 20, 2002 with the
exception  of  the  modification  for  the accounting treatment of the Keynomics
acquisition and the termination of the merger with DCDC as disclosed in Notes 2,
3  &  4.

The  originally filed Form 10-QSB for the quarter ended March 31, 2002 presented
restated  historical  financial statements as of June 30, 2001 and for the three
and  nine  months ended March 31, 2002 to reflect the Keynomics transaction as a
transfer  among  entities  under  common control.  This treatment required us to
present our financial information as if Keynomics had been a part of IMSI in all
periods  presented.  As a result of revising the accounting treatment to reflect
the  business combination as a purchase, the financial statements as of June 30,
2001  and  for the three and nine months ended March 31, 2002 have been adjusted
to  include  the  results  of  Keynomics  only  from  the  date  of acquisition.

The  interim condensed consolidated financial statements have been prepared from
the  records  of  International  Microcomputer  Software,  Inc. and Subsidiaries
("IMSI")  without  audit.  In  the opinion of management, all adjustments, which
consist  only  of  normal recurring adjustments, necessary to present fairly the
financial  position  at  March  31,  2002 and the results of operations and cash
flows as of and for the three and nine months ended March 31, 2002 and 2001 have
been  made.  The  interim  condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes thereto
contained  in  our Annual Report on Form 10-K for the fiscal year ended June 30,
2001.  The  results  of operations for the three and nine months ended March 31,
2002  are not necessarily indicative of the results to be expected for any other
interim  period  or  for  the  full  year.

We  have  revised  our accounting for certain transactions with DCDC as follows:
     -    The  Keynomics  transaction  has  been  accounted  for  using purchase
          accounting.
     -    The  exchange of shares and cash with DCDC for their retirement of the
          Union  Bank  note  as  a  fair  value  transaction.

Both  of these transactions had been accounted for under the assumption that the
two  companies,  DCDC  and IMSI, were under common control. This resulted in the
Keynomics  transaction  being  recorded  using  the  "pooling  of  interests"
methodology  and  the  extinguishment of the note with Union Bank and subsequent
issuance  of  9,000,000 IMSI common shares to DCDC as a capital transaction with
no  gain  or  loss  recorded.

Since  these  transactions  were  initially disclosed in our Form 10-QSB for the
periods  ended  December  31,  2001 and March 31, 2002, we have received further
interpretive  guidance  and  have  concluded  that  the  transactions  should be
recorded  using  fair  values.

2.  KEYNOMICS  ACQUISITION  (RESTATED)
--------------------------------------

On  November  29,  2001,  we entered into an agreement to acquire all issued and
outstanding  shares  of  the  capital  stock  of  Keynomics,  Inc., a California
corporation  focused  on  productivity  enhancement  software.  Keynomics  was a
wholly  owned  subsidiary of DCDC.  We originally accounted for this acquisition
as  a  transfer between entities under common control because at the time of the
acquisition,  the  IMSI  board  of  directors was identical to the DCDC board of
directors,  with  the  exception  of Mr. Robert Mayer, who was a board member of
IMSI only. Additionally, Mr. Martin Wade and Mr. Vincent DeLorenzo served as the
Chief  Executive  Officer  and  Chief  Financial  Officer, respectively, of both
companies.  Using the guidance for accounting for entities under common control,
                                        6
<PAGE>


we  had  restated  the  financial  statements for all prior periods similar to a
pooling  of  interests.

However,  in consideration of further interpretive guidance, we have revised our
treatment  of  this  transaction  to account for it using the purchase method of
accounting.  This  change  in  accounting  treatment  has  been reflected in our
financial statements as of November 29, 2001.  Our filing on Form 10-QSB for the
period  ended  December  31, 2000,  has  been  amended  to  reflect this change.
The  aggregate  purchase  price,  using purchase accounting, was $300,000 and we
assumed approximately $566,000 of liabilities from Keynomics.  The consideration
was  comprised  of  three  components;  i)  $50,000 in cash paid at closing, ii)
$100,000  in  management  fees and iii) a $150,000 note payable.  As of June 30,
2002,  $300,000  had  been  paid  to  DCDC.

The  agreement  also called for contingent consideration depending on Keynomics'
performance.  These  amounts,  payable  60  days after the end of the next three
fiscal  years,  consist  of  50%  of Keynomics' net operating income, if any, in
excess  of:

-     $500,000  in  the  fiscal  year  ending  June  30,  2003
-     $1,000,000  in  the  fiscal  year  ending  June  30,  2004
-     $1,500,000  in  the  fiscal  year  ending  June  30,  2005

Furthermore,  potential  payments  would  have  been  due  DCDC  if  we had sold
substantially  all  of  the  capital stock or substantially all of the assets of
Keynomics  before  June 2002. Such payments would have been fifty percent of any
amount  in  excess  of  $1.2  million.  No  payments  were  due  or earned as no
transactions  to  sell  substantially  all  of  the assets of Keynomics occurred
before  June  2002.

As  of  the  date  of  the  purchase, Keynomics had $245,000 of promissory notes
outstanding.  Subsequent  to the acquisition of Keynomics by IMSI, holders of an
aggregate  $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 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,
received  287,389  shares  in  exchange  for  his outstanding promissory note to
Keynomics.  Mr.  Abrams  holds  IMSI  stock  options  and  warrants,  which  if
exercised,  would  result  in  ownership  exceeding  5%  of  the  total  shares
outstanding.

The  allocation  of  the  purchase  price  is  as  follows  (in  thousands):


--------------------------------------------------------------------------------
        CONSIDERATION  PAID
        -------------------
        Cash                                   $      50
        Note Payable                                 150
        Management Fees                              100
              TOTAL CONSIDERATION                            $           300
                                                          ==================


        ALLOCATION  OF  CONSIDERATION  TO  ASSETS
        -----------------------------------------
        Current Assets                               379
        Long Term Assets                              73
        Liabilities Assumed                         (566)
        Identifiable Intangibles                     235
        Assumed Goodwill                             179
              ALLOCATED ASSETS                               $           300
                                                          ==================
--------------------------------------------------------------------------------

The  identifiable intangibles consist of software development costs that will be
amortized  over  3  years.  At  March  31,  2002, we had amortized approximately
$27,000  with  a  remaining  balance  of  approximately  $208,000.

We  began  to  consolidate  Keynomics  from  the  date  of  the acquisition. The
following  unaudited  condensed balance sheets as of June 30, 2001 and unaudited
condensed  income  statements for the nine months ended March 31, 2002 and three
and  nine  months  ended  March  31,  2001  reflect  our  pro  forma

                                        7
<PAGE>

financial  results as if we had completed the acquisition of Keynomics effective
July  1,  2000.


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

                                                    JUNE 30, 2001
                                                    -------------
BALANCE  SHEET  (IN  THOUSANDS)

ASSETS
Current assets                                          $3,311
Long term assets                                         3,180
TOTAL ASSETS                                             6,491

LIABILITIES  AND  SHAREHOLDERS'  DEFICIT
Current Liabilities                                     21,128
Long term liabilities                                      933
TOTAL LIABILITIES                                       22,061

TOTAL SHAREHOLDERS' DEFICIT                            (15,570)

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT             $6,491


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


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


                                                THREE MONTHS
                                               ENDED MARCH 31,
                                                     2001
                                                     ----

    STATEMENTS OF OPERATIONS (IN THOUSANDS)
    ---------------------------------------

Net revenues                                       $3,314
Product costs                                         727
GROSS MARGIN                                        2,587

Total operating expenses                            2,907

OPERATING INCOME (LOSS)                              (320)

Other Income  (Expense)                              (582)

INCOME (LOSS) BEFORE INCOME TAX                      (902)

Income tax expense (benefit)                          (14)

NET INCOME (LOSS)                                   $(888)

DILUTED EARNINGS (LOSS) PER SHARE                  $(0.09)

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

                                        8
<PAGE>


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

<TABLE>
<CAPTION>

                                                                         NINE MONTHS ENDED MARCH 31,

STATEMENTS OF OPERATIONS (IN THOUSANDS)                                        2002      2001
                                                                               ----      ----

<S>                                                                           <C>      <C>

Net revenues                                                                  $9,981   $ 9,944
Product costs                                                                  2,213     2,536
Gross margin                                                                   7,768     7,408

Total operating expenses                                                       7,716     8,132

OPERATING INCOME (LOSS)                                                           52      (724)

Other Income (Expense)                                                          (559)   (1,576)
Gain on extinguishment of debt                                                 7,970        --

GAIN (LOSS) BEFORE INCOME TAX AND CUMULATIVE EFFECT OF ACCOUNTING
PRINCIPLE                                                                      7,463    (2,300)

Income tax expense (benefit)                                                       3       (21)

GAIN (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE         7,460    (2,279)

Cumulative effect of change in accounting principle                               --      (285)

NET INCOME (LOSS)                                                             $7,460   $(2,564)

 DILUTED EARNINGS (LOSS) PER SHARE                                            $ 0.67   $ (0.26)

</TABLE>

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


3.  DCDC  DEBT  CONVERSION  (RESTATED)
--------------------------------------

On  August  31, 2001, IMSI and DCDC entered into an Agreement and Plan of Merger
and  Reorganization  ("merger  agreement") pursuant to which DCDC was to acquire
51% of IMSI. Simultaneously and pursuant to the merger agreement, DCDC purchased
for $2,500,000 all rights as lender and holder under the promissory note between
Union  Bank  of  California  and  IMSI  with  a  remaining  principal  amount of
$3,580,000.

On  March  1, 2002, the merger agreement with DCDC was terminated. In connection
with  the  termination,  DCDC  agreed to cancel the entire outstanding principal
amount  of  $3,580,000  and  all interest due under the Union promissory note in
return  for  9,000,000  shares of common stock of IMSI and cash in the amount of
$250,000  to  be  paid  in  monthly  installments  over  15  months  as follows:

-     $10,000  per  month for the first five installments starting March 1, 2002
-     $20,000  per  month  for  ten  months  thereafter

Consistent  with the Keynomics transaction, we had previously accounted for this
transaction  as  an  arrangement between entities under common control, and as a
result  did  not  record  any  gain  or  loss on the extinguishment of the note.

However, in consideration of further interpretive guidance from the staff of the
Securities  and  Exchange  Commission,  we  have  revised  our treatment of this
transaction  to  account  for it using fair values.  This change has resulted in
our  recognizing  a  loss  on  the  transaction  of  $495,000.  The  loss  on
extinguishment was determined as follows (dollars in thousands, except per share
amounts):

                                        9
<PAGE>
--------------------------------------------------------------------------------


BOOK  VALUE  OF  DEBT                                 $    3,580
                                                     ============

 FMV  OF  STOCK
    Shares  Issued                 9,000,000
    Market  Value  per  Share        $  0.425
    TOTAL  VALUE  OF  STOCK                    $    3,825

 CASH  PAID                                    $      250

 TOTAL  CONSIDERATION                          $          4,075
                                                     ============


 LOSS  FROM  STOCK  ISSUANCE                   $            (495)
                                                     ============

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



4.  UNAUDITED  QUARTERLY  FINANCIAL  INFORMATION  (RESTATED)
------------------------------------------------------------

As  discussed in Note 1, we have revised our accounting for certain transactions
with  DCDC  as  follows:
-     The  Keynomics  transaction  accounted  for  using  purchase  accounting.
-     The  exchange  of  shares  and  cash with DCDC for their retirement of the
Union  Bank  note  as  a  fair  value  transaction.

Both  of these transactions had been accounted for under the assumption that the
two  companies,  DCDC  and IMSI, were under common control. This resulted in the
Keynomics  transaction  being  recorded  using  the  "pooling  of  interests"
methodology  and  the  extinguishment of the note with Union Bank and subsequent
issuance  of  9,000,000 IMSI common shares to DCDC as a capital transaction with
no  gain  or  loss  recorded.

Since  these  transactions  were  initially disclosed in our Form 10-QSB for the
periods  ended  December  31,  2001 and March 31, 2002, we have received further
interpretive  guidance  and  have  concluded  that  the  transactions  should be
recorded  using  fair  values.  The  effect  of  this restatement is as follows:

                                       10
<PAGE>



CONSOLIDATED STATEMENT OF INCOME

in thousands, except per share data
all amounts unaudited

<TABLE>
<CAPTION>
<BTB>

<S>                                           <C>       <C>        <C>               <C>        <C>        <C>
                                                             UNAUDITED                              UNAUDITED
                                                  Quarter Ended September 30, 2001        Quarter Ended December 31, 2001

                                              As                                      As
                                             Reported   Restated   Difference        Reported   Restated   Difference
                                             --------   --------   ----------        --------   --------   ----------
Net Revenues                                 $  2,664   $  2,575        ($89) (1)    $  3,656   $  3,149        ($507) (1)

Product Costs                                     709        709           -              812        809            3
                                             --------------------------------        ---------------------------------
Gross Margin                                    1,955      1,866         (89)           2,844      2,340         (504)


Costs and Expenses
   Sales and Marketing                            697        524         173 (1)          811        668          143  (1)
   General and Administrative                   1,206      1,073         133 (1)        1,298      1,246           53  (1) & (3)
   Research and Development                       641        608          33 (1)          566        537           29  (1)
                                             --------------------------------        ---------------------------------
Total Operating Expenses                        2,544      2,205         399            2,675      2,451          224
                                             --------------------------------        ---------------------------------
Operating Income (Loss)                          (589)      (339)        250              169       (111)        (280)
                                             ================================        =================================
Other Income (Expense)
   Interest and Other Expense                    (437)      (431)          6 (1)         (262)        44          306 (1) & (4)
   Gain (loss) on issuance of stock                 -          -           -                -          -            -
   Gain (loss) Disposal of Assets                   -         (5)         (5)               8          8            -
   Gain on Sales of Product Lines                   -          -           -               20         20            0
   Gain on Extinguishment of Debt               5,727       5,727          -            2,243      2,243            -

                                             --------------------------------        ---------------------------------
Income (Loss) Before Taxes                      4,701       4,952        251            2,178      2,204           26
                                             --------------------------------        ---------------------------------

Income Tax Expense (Benefit)                        1           1          -                1          1            -
                                             --------------------------------        ---------------------------------
Net Income                                   $  4,700      $4,951       $251         $  2,177   $  2,203          $26
                                             ================================        =================================

</TABLE>


                                       11
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
(CONTINUED)

in thousands, except per share data
all amounts unaudited

<TABLE>
<CAPTION>
<BTB>

<S>                                           <C>       <C>        <C>               <C>        <C>        <C>

                                                             UNAUDITED                           UNAUDITED
                                                  Quarter Ended March 31, 2002           Quarter Ended March 31, 2002

                                              As                                      As
                                             Reported   Restated   Difference        Reported   Restated    Difference
                                             --------   --------   ----------        --------   --------   ------------
Net Revenues                                 $  3,661   $  3,661   $        0         $  9,981   $  9,385        ($596)

Product Costs                                     692        712         (20) (2)       2,213      2,229           16
                                             --------------------------------        ----------------------------------
Gross Margin                                    2,969      2,949         (20)           7,768      7,156         (612)


Costs and Expenses
   Sales and Marketing                            846        846           -            2,356      2,040          (316)
   General and Administrative                   1,114      1,114           -            3,617      3,433          (184)
   Research and Development                       535        535           -            1,743      1,680           (63)
                                             --------------------------------        ----------------------------------
Total Operating Expenses                        2,495      2,495           -            7,716      7,153           563
                                             --------------------------------        ----------------------------------
Operating Income (Loss)                           474        454         (20)              52          3           (49)
                                             ================================        ==================================
Other Income (Expense)
   Interest and Other Expense                     101        101           -             (589)      (284)          305
   Gain (loss) on issuance of stock                 -       (495)       (495) (5)           -       (495)         (495)
   Gain (loss) Disposal of Assets                   5          9           4               10         10             -
   Gain on Sales of Product Lines                   -                      -               20         20             -
   Gain on Extinguishment of Debt                   -                      -            7,970      7,970             -

                                             --------------------------------        ----------------------------------
Income (Loss) Before Taxes                        580         69        (511)           7,463      7,244          (239)
                                             --------------------------------        ----------------------------------

Income Tax Expense (Benefit)                        1           1          -                3          3            -
                                             --------------------------------        ----------------------------------
Net Income                                   $    579    $     68      ($511)         $ 7,460   $  7,221         ($239)
                                             ================================        ==================================



</TABLE>


                                       12
<PAGE>


INDEX  TO  ADJUSTMENTS:
-----------------------

     1)   Reflects  the  reversal  of  revenue  and  expense  amounts  that were
          included  in  our  results  when recording the transaction as entities
          under  common control. The amounts are excluded from our results using
          purchase  accounting.

     2)   Reflects  the  amortization  of  the  intangible  software  asset  of
          $235,000.  We will amortize this asset over 3 years in accordance with
          our  normal  policy;  quarterly amortization is approximately $20,000.

     3)   We  initially  expensed  $100,000  of management fees paid to DCDC. As
          part  of  our  revised  accounting  we  have  treated this amount as a
          component  of  the  total  consideration  paid  to  DCDC.

     4)   We  initially  expensed $200,000 related to amounts payable to DCDC as
          part  of  the  acquisition.  As part of our revised accounting we have
          treated  this amount as a component of the total consideration paid to
          DCDC.

     5)   Accounting  for  the  extinguishment  of the Union Bank Note as a fair
          value  transaction  resulted  in  a  loss  of  $495,000on  the  early
          extinguishment  of  debt  due  to the issuance of 9,000,000 shares and
          obligation  to  pay  $250,000  in  cash  to  DCDC


5.  REALIZATION  OF  ASSETS
---------------------------

The  financial  statements  have  been prepared on a basis that contemplates our
continuation as a going concern and the realization of assets and liquidation of
liabilities  in  the ordinary course of business. We have an accumulated deficit
of  $36,787,000 and negative working capital of $4,628,000 as of March 31, 2002.

It is possible that we will require additional capital, either through equity or
other  financing  arrangements.  Our  large  accumulated losses and the negative
amount  of shareholders' equity as of March 31, 2002 make it difficult for us to
obtain  new  debt  financing or to obtain equity financing at attractive prices.

The  financial  statements  do  not  include  any  adjustments  relating  to the
recoverability  or classification of assets or the amounts and classification of
liabilities  that  might  result  from  the  outcome  of  this  uncertainty.

6.  EQUITY  RELATED  TRANSACTIONS
---------------------------------

The  following  tables  detail the activity regarding our common stock, warrants
and  stock  options  for  the  nine-month  period  ended  March  31,  2002:

                                       13
<PAGE>
<TABLE>
<CAPTION>

                                                                                     NUMBER OF
TRANSACTION TYPE                                GROUP                               SECURITES          AMOUNT
---------------------------------------------   ------------------------------  -----------------   -------------
<S>                                                 <C>                              <C>                 <C>
SHARES OUTSTANDING AS OF JUNE 30, 2001                                          9,695,740           $  29,088,425

    Private placement                           Accredited investors              835,000                 417,500

    Capital Contribution                        Former Keynomics owner                                    116,580

    Debt to equity conversion                   Related Parties                 9,661,764               3,555,000

    Options issued for consulting services      Consultants                                                41,956

    Warrants issued for consulting services     Consultants                                               269,272

    Options exercised                           Employees and Consultants          82,000                  16,794

    Warrants exercised                          Executives & advisers to IMSI   1,282,500                 318,750

    Settlement shares and warrants              Vendors                            45,823                  88,388

    Retirement into treasury                    Broderbund settlement            (200,000)                (52,000)

    Variable accounting charge                  Re-priced stock options                                    16,131
                                                                              ------------           -------------
      TOTAL                                                                    11,707,087             $ 4,788,371

                                                                              ------------           -------------
SHARES OUTSTANDING AS OF MARCH 31, 2002                                        21,402,827             $33,876,796
                                                                              ------------           -------------

</TABLE>
--------------------------------------------------------------------------------

                                   OPTIONS          WARRANTS

OUTSTANDING AT JUNE 30, 2001      1,976,164          729,291

  Granted                         1,056,000        2,092,500

  Exercised                         (82,000)      (1,282,500)

  Cancelled                        (899,927)
                               -------------    -------------
OUTSTANDING AT MARCH 31, 2002     2,050,237        1,539,291

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

7.  SEGMENT  INFORMATION
------------------------

We  have  four  reportable operating segments based on the sales market.  Two of
these  are  geographic segments and generate revenues and incur expenses related
to  the  sale  of  our  PC  productivity software.  The third and forth segments
comprise  the  revenues and expenses related to ArtToday.com, our graphic design
Internet  subsidiary  and to Keynomics, our newly acquired business applications
subsidiary.  The  following  table  details  segment information (in thousands):


                                       14
<PAGE>
<TABLE>
<CAPTION>

<S>                            <C>      <C>     <C>      <C>    <C>      <C>
                                                            NORTH     OTHER
           RESTATED              ARTTODAY.COM   KEYNOMICS  AMERICA   FOREIGN  ELIMINATIONS  TOTAL
           --------              ------------   ---------  -------   -------  ------------  -----

                                                  RESTATED                               RESTATED
--------------------------------------------------------------------------------------------------
THREE  MONTHS  ENDED  MARCH  31,
2002  (RESTATED)
--------------------------------------------------------------------------------------------------
Net Revenues-external                  $1,082      $ 239    $2,219      $121       --      $3,661
Operating income (loss)                   402        (84)      137        (1)      --         454
Identifiable assets                     1,989         89     4,964       (97)     (37)      6,908

THREE MONTHS ENDED MARCH 31,
2001 (RESTATED)
--------------------------------------------------------------------------------------------------
Net Revenues-external                  $  778               $2,269      $ 60       --      $3,107
Operating income (loss)                   (28)                 (57)      (40)      --        (126)
Identifiable assets                     2,324                6,453       205   (1,587)      7,395

NINE MONTHS ENDED MARCH 31,
2002 (RESTATED)
--------------------------------------------------------------------------------------------------
Net Revenues-external                  $3,013      $ 320    $5,650      $402       --      $9,385
Operating income (loss)                 1,008       (103)     (932)       31       --           3
Identifiable assets                        1,989         89     4,964       (97)     (37)      6,908

NINE MONTHS ENDED MARCH 31,
2001 (RESTATED)
--------------------------------------------------------------------------------------------------
Net Revenues-external                  $2,309               $6,845      $245       --      $9,399
Operating income (loss)                      101                 (231)      (15)      --        (145)
Identifiable assets                        2,324                6,453       205   (1,587)      7,395

</TABLE>


                                       16
<PAGE>



8.  EARNINGS  (LOSS)  PER  SHARE
--------------------------------

Basic  earnings  per  share  are  computed  using the weighted average number of
common  shares  outstanding  during  the  period. Diluted earnings per share are
computed  using  the  weighted average number of common and potentially dilutive
securities  outstanding  during  the  period.  Potentially  dilutive  securities
consist  of  the  incremental  common  shares issuable upon on exercise of stock
options  and  warrants  (using  the treasury stock method). Potentially dilutive
securities  are  excluded from the computation if their effect is anti-dilutive.

The  following  tables  set  forth the computation of basic and diluted earnings
(loss)  per  share:


<TABLE>
<CAPTION>
<S>                                                                                    <C>               <C>
                                                                                              THREE MONTHS ENDED
                                                                                       -------------------------------
                                                                                       MARCH 31, 2002   MARCH 31, 2001
                                                                                       --------------   --------------



NUMERATOR:
----------
 Net income (loss)                                                                        $        72            (680)

 Numerator for basic earnings per share (loss) available to common stockholders                    72            (680)

 Numerator for diluted earnings per share (loss) available to common stockholders
 after assumed conversions                                                                         72            (680)

DENOMINATOR:
------------

Denominator for basic earnings per share - weighted average shares outstanding             14,081,521       9,693,892

 Effect of dilutive securities using the treasury stock method as at March 31, 2001
664,291 Warrants Outstanding                                                                       --              --
2,142,855 Stock Options Outstanding                                                                --              --
Effect of dilutive securities using the treasury stock method as at March 31, 2002
 1,539,291Warrants Outstanding                                                                488,856              --
2,050,237 Stock Options Outstanding                                                           485,171              --

 Dilutive potential common shares                                                             974,027              --

 Denominator for diluted earnings per share                                                15,055,548       9,693,892

 BASIC EARNINGS (LOSS) PER SHARE                                                          $      0.01     $     (0.07)

 DILUTED EARNINGS (LOSS) PER SHARE                                                        $      0.01     $     (0.07)


</TABLE>
                                       17
<PAGE>


<TABLE>
<CAPTION>

<S>                                                                                 <C>          <C>

                                                                                      NINE MONTHS ENDED
                                                                                   ----------------------
                                                                                   MARCH 31,    MARCH 31,
2001
                                                                                   ----------------------
NUMERATOR:
----------

Net income (loss)                                                                    $7,216      $(1,968)

Numerator for basic earnings per share (loss) available to common
stockholders                                                                          7,216       (1,968)

Numerator for diluted earnings per share (loss) available to common
stockholders after assumed conversions                                                7,216       (1,968)

DENOMINATOR:

Denominator for basic earnings per share - weighted average shares
outstanding                                                                      11,179,696    9,684,590

Effect of dilutive securities using the treasury stock method as at March
31, 2001
664,291 Warrants Outstanding                                                             --           --
2,142,855 Stock Options Outstanding                                                      --           --
Effect of dilutive securities using the treasury stock method as at March
31, 2002
1,539,291Warrants Outstanding                                                       488,856           --
2,050,237 Stock Options Outstanding                                                 485,171           --

Dilutive potential common shares                                                    974,027           --

Denominator for diluted earnings per share                                       12,153,723    9,684,590

BASIC EARNINGS (LOSS) PER SHARE                                                       $0.65       $(0.20)

DILUTED EARNINGS (LOSS) PER SHARE                                                     $0.59       $(0.20)

</TABLE>

9.  NEW  ACCOUNTING  STANDARDS
------------------------------

In  June  2001,  the  Financial  Accounting Standards Board adopted SFAS No. 142
Goodwill  And  Intangible  Assets.  SFAS  No.  142 addresses the methods used to
amortize  intangible  assets and to assess impairment of those assets, including
goodwill  resulting  from business combinations accounted for under the purchase
method.  SFAS No. 142 is effective for fiscal years beginning after December 15,
2001,  except  for  the  non-amortization provisions of the statement, which are
effective  for business combinations completed after June 30, 2001.  Included in
our  assets at March 31, 2002, is goodwill with a net carrying value of $112,000
and  $179,000  relating  to  the  acquisitions  of  ArtToday.com  and Keynomics,
respectively.  OrgPlus  goodwill,  which  was included in this category prior to
September  30,  2001,  was  transferred  to  capitalized  distribution rights in
conjunction  with  the  settlement  of  our  software  license  and distribution
agreement  with  Broderbund  and  concurrent  software  assignment,  license and
distribution  agreements  with  Human  Concepts.

Upon  adoption  of  SFAS No. 142, we will no longer amortize goodwill related to
ArtToday.com, decreasing amortization expense by approximately $81,000 in fiscal
2003.  We  are  required  to  assess this goodwill for impairment in the year of
                                       18
<PAGE>


adoption.   We  do  not  expect  the adoption of SFAS No. 142 to have a material
effect on our financial condition or results of operation. Since we restated our
accounting  of  the  Keynomics' acquisition to account for it using the purchase
methodology, and since the acquisition occurred after June 30, 2001, we will not
record  any  amortization  relating  to the Keynomics' goodwill, instead we will
assess  this  goodwill  for  impairment  and  will  adjust  the  carrying  value
accordingly  if  such  impairment  exists.

In  2001, the FASB issued SFAS 143, Accounting for Asset Retirement Obligations.
SFAS 143 applies to all entities that have legal obligations associated with the
retirement  of  a tangible long-lived asset.  SFAS 143 requires that a liability
for  an  asset  retirement  obligation be recognized if the obligation meets the
definition  of  a  liability in FASB Concepts Statement 6, Elements of Financial
Statements,  and  if  the  amount  of the liability can be reasonably estimated.
When  a retirement obligation is initially recognized, the asset retirement cost
is capitalized by increasing the carrying amount of the related long-lived asset
by  an  amount  equal to the liability.  The initial recording of the obligation
should  be  at  fair  market  value.  SFAS  143  is  effective  for fiscal years
beginning  after  June  15,  2002,  but  earlier application is encouraged   The
Company  does  not  expect  this  statement  to  have  a  material effect on its
financial  statements.

In  2001, the FASB issued SFAS 144, Accounting for the Impairment or Disposal of
Long-Lived  Assets.  SFAS 144 supersedes SFAS 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of, as well as the
provisions  of  APB  Opinion 30, Reporting the Results of Operations - Reporting
the  Effects  of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions, that address the disposal of
a  business.  SFAS 144 also amends ARB 51, Consolidated Financial Statements, to
eliminate  the exception to consolidate a subsidiary for which control is likely
to  be  temporary.  SFAS  144  carries  over  the  recognition  and  measurement
provisions  of  SFAS 121, but differs from SFAS 121 in that it provides guidance
for estimating future cash flows to test recoverability.  SFAS 144 also includes
criteria  that  have  to  be met for an entity to classify a long-lived asset or
asset  group  as  held  for  sale,  and extends the presentation of discontinued
operations  permitted  by  Opinion  30 to include disposals of a component of an
entity.  SFAS  144  is  effective  for fiscal years beginning after December 15,
2001, except for the disposal provisions, which are immediately effective. We do
not  expect  the  adoption  of  SFAS  No.  144  to have a material effect on our
financial  condition  or  results  of  operation.

10.  GAIN  ON  EXTINGUISHMENT  OF  DEBT
---------------------------------------

During  the  fiscal  quarter ended December 31, 2001, we recognized a $2,243,000
gain  from extinguishment of debt.  $2,062,000 was related to the forgiveness of
a  portion  of the principal and accrued interest on the promissory note payable
to  Silicon  Valley  Bank,  one  of  our  senior secured creditors. $140,000 was
related  to  the forgiveness of amounts payable to Light Work Design and $40,500
was  related  to  the  forgiveness  of  amounts payable to Microsoft. Light Work
Design  and  Microsoft  are  two  unsecured  creditors that were owed royalties.

In  the quarter ended September 30, 2001, we recorded a gain from extinguishment
of  debt of $5,727,000 related to the forgiveness of debt to BayStar Capital and
DelRay  Technologies.  BayStar Capital agreed to settle for 10% of the principal
and  accrued  interest  and  penalties outstanding.  According to the agreement,
payments  are  to  be  made in four quarterly installments of $177,534 beginning
September  30,  2002,  with  interest  accruing at the rate of 8% per annum from
August  31, 2001 to the date of the first installment.  Thereafter, the interest
rate is 12% per annum until the note is paid in full on or before June 30, 2003.
DelRay  Technologies  agreed  to  a one-time payment of $20,000 as settlement in
full  of  its  outstanding  claim.
                                       19
<PAGE>



These  combined  transactions  resulted into an aggregate extinguishment of debt
gain  of  $7,970,000  for  the  nine-month  period  ended  March  31,  2002.

The  tax  expense  on  the  gain  on  extinguishment  of  debt  is approximately
$3,183,000  as  calculated at our marginal tax rate of 39.94%. This expense will
be  entirely  offset  by  the  net  operating  loss  carryforward.

11.  EXECUTIVE  EMPLOYMENT  AGREEMENT
-------------------------------------

As of April 27, 2002 we entered into a three-year executive employment agreement
commencing  January  1,  2002, with Martin Wade, which outlined the terms of Mr.
Wade's employment by us as Chief Executive Officer of IMSI.  As compensation for
his  services, Mr. Wade is to receive the following: warrants totaling 1,250,000
at  an exercise price of $0.35, vesting on March 1, 2003 and expiring five years
after the grant date; an additional 2 million warrants upon the sale, merger, or
acquisition  of  at  least  fifty one percent of the Company's common stock by a
single  corporate  entity  at an exercise price representing the average closing
price of the Company's stock over the twelve months preceding the execution of a
definitive  agreement for such sale, merger, or acquisition; an initial bonus of
$25,000;  an  annual  bonus  for fiscal 2002 of $25,000 if the Company meets its
annual  plan; two subsequent annual bonuses of $50,000 each if the Company meets
its annual plans for fiscal years 2003 and 2004; and the right to participate in
the  Company's  benefit  plans.

12.  SUBSEQUENT  EVENTS:  SILICON  VALLEY  NOTE  RESTRUCTURE
------------------------------------------------------------

On  October  9,  2001  we  signed  an  agreement  with Silicon Valley Bank for a
settlement  of  its  existing  secured  note,  which  had  a  balance (including
penalties  and  interest) of approximately $3.2 million. The settlement provided
for  a  new secured promissory note for $1.2 million with 12 monthly payments of
$100,000  plus interest at 12% interest per annum beginning October 20, 2001. We
had  made  the  first  five  payments  as  of  March  31,  2002.

On April 3, 2002, we amended this agreement whereby we offered to Silicon Valley
Bank  and  Silicon Valley Bank accepted an early payment of the $700,000 balance
of  the  note  at  a  $100,000 discount. The payment of the $600,000 was made on
April 5, 2002, on which date Silicon Valley Bank declared all our obligations to
them  under the revised promissory note, the related ArtToday Security Agreement
and  the  related Pledge Agreement to have been satisfied and therefore released
its  interest  in  the  collateral  securing  the  note  and  the  note  itself.

During  the  quarter  ended  June 30, 2002, we will recognize an additional gain
from  forgiveness  of  debt  of  $100,000  arising  from  this transaction as an
extraordinary  item.
                                       20
<PAGE>




ITEM  2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF  OPERATIONS

The  following  information  should be read in conjunction with the consolidated
financial  statements and the notes thereto and in conjunction with Management's
Discussion  and Analysis of Financial Condition and Results of Operations in our
Fiscal  2001  Form  10-K  and previously filed fiscal 2002 Forms 10-QSB/A.  This
quarterly  report  on  Form  10-QSB/A,  and  in  particular  this  "Management's
Discussion  and  Analysis of Financial Condition and Results of Operations," may
contain  forward-looking  statements  regarding  future  events  or  our  future
performance.  These  future  events and future performance involve certain risks
and  uncertainties  including  those  discussed  in  the "Other Factors That May
Affect  Future  Operating  Results" section of this Form 10-QSB/A, as well as in
our  Fiscal 2001 Form 10-K, as filed with the Securities and Exchange Commission
("SEC").  Actual  events or our actual future results may differ materially from
any  forward-looking  statements due to such risks and uncertainties.  We assume
no  obligation  to  update  these  forward-looking  statements to reflect actual
results  or  changes  in  factors  or assumptions affecting such forward-looking
statements.  This analysis is not intended to serve as a basis for projection of
future  events.

This  filing  on  Form  10-QSB/A  is  amending  our original Form 10-QSB for the
interim  period  ended  March 31, 2002 as filed with the Securities and Exchange
Commission  on May 20, 2002. We are restating our interim condensed consolidated
financial  statements  for  the  same  period to reflect the modification of our
accounting treatment relative to our acquisition of Keynomics' and the DCDC debt
conversion  to  account  for  these  transactions  using fair values.  All other
subsequent  events  and  their  effect on our financial conditions have not been
reflected  in  this  Form  10-QSB/A.

CRITICAL  ACCOUNTING  POLICIES
------------------------------

In  accordance  with  recent  Securities and Exchange Commission guidance, those
material  accounting  policies  that  we  believe  are  the  most critical to an
investor's  understanding  of  our  financial  results  and  condition have been
expanded  and  are  discussed  below. Certain of these policies are particularly
important  to  the portrayal of our financial position and results of operations
and  require  the  application  of  significant  judgment  by  our management to
determine the appropriate assumptions to be used in the determination of certain
estimates.

REVENUE  RECOGNITION

Revenue  is recognized in accordance with American Institute of Certified Public
Accountants  Statement  of  Position ("SOP") 97-2, Software Revenue Recognition,
and  SOP  98-9,  Modification of SOP 97-2, With Respect to Certain Transactions.
Revenue  is  recognized  when  persuasive  evidence  of  an  arrangement  exists
(generally  a  purchase order), product has been delivered, the fee is fixed and
determinable  and  collection  of  the  resulting  account  is  probable.

-    Revenue  from packaged product sales to resellers and end users is recorded
     at  the  time  of  the  sale  net  of  estimated  returns.

-    Revenue  from  sales  to  distributors is recognized when the product sells
     through  to  retailers  and end users. Sales to distributors permit limited
     rights  of  return  according  to  the  terms  of  the  contract.

-    For  software  delivered  via  the  Internet,  revenue is recorded when the
     customer  downloads  the  software.

-    Subscription  revenue  is  recognized  ratably  over  the  contract period.
                                       21
<PAGE>




-    Revenue  from  hybrid  products  is  allocated to the underlying components
     based  on  the  ratio of the value of each component to the total price and
     each  portion  is  recognized  accordingly.

-    Non-refundable  advanced payments received under license agreements with no
     defined  terms  are  recognized  as  revenue  when the customer accepts the
     delivered  software.

-    Revenue  from  software licensed to developers, including amounts in excess
     of  non-refundable  advanced  payments,  is recorded as the developers ship
     products  containing  the  licensed  software.

-    Revenue  from  minimum  guaranteed  royalties in republishing agreements is
     recognized  ratably  over the term of the agreement. Royalties in excess of
     the  guaranteed  minimums  are  recognized  when  collected.

-    Revenue  from Original Equipment Manufacturer (OEM) contracts is recognized
     upon  completion  of  our  contractual  obligations.  The  purpose  of  OEM
     contracts  is to increase our customer base by seeding the marketplace with
     older versions of our software, bundled with other manufacturers' products.

RESERVE  FOR  RETURNS,  PRICE  DISCOUNTS  AND  REBATES

Reserves for returns, price discounts and rebates are estimated using historical
averages, open return requests, channel inventories, recent product sell-through
activity  and market conditions. Our allowances for returns, price discounts and
rebates  are  based upon management's best judgment and estimates at the time of
preparing  the financial statements. Reserves are subjective estimates of future
activity  that  are subject to risks and uncertainties, which could cause actual
results  to  differ  materially  from  estimates.

Our return policy generally allows our distributors to return purchased products
primarily in exchange for new products or for credit towards future purchases as
part  of  stock  balancing  programs.  These  returns  are  subject  to  certain
limitations  that  may  exist  in  the  contract with an individual distributor,
governing,  for  example,  aggregate  return amounts, and the age, condition and
packaging of returned product. Under certain circumstances, such as terminations
or  when  a  product  is  defective, distributors could receive a cash refund if
returns  exceed  amounts  owed.

INVENTORIES

Inventories  are  valued at the lower of cost or market and are accounted for on
the  first-in,  first-out  basis.  Management  performs  periodic assessments to
determine  the  existence  of obsolete, slow moving and non-salable inventories,
and  records  necessary  provisions to reduce such inventories to net realizable
value.

GOODWILL,  INTANGIBLE  AND  OTHER  LONG  LIVED  ASSETS

Property,  equipment,  intangible  and  certain  other  long-lived  assets  are
amortized  over  their  useful  lives.  Useful  lives  are based on management's
estimates  of  the  period  that  the  assets will generate revenues. Long-lived
assets  and  goodwill  are written down to fair value whenever events or changes
indicate that the carrying amount of an asset may not be recoverable. Our policy
is to review the recoverability of all long-lived assets including goodwill at a
minimum  of  once  per year and record an impairment loss when the fair value of
the  assets  does  not  exceed  the  carrying  amount  of  the  asset.

                                       22
<PAGE>




RECENT  EVENTS
--------------

     FISCAL  QUARTER  ENDED  MARCH  31,  2002.

           MERGER  TERMINATION

On  August  31,  2001 IMSI and DCDC entered into an Agreement and Plan of Merger
and Reorganization ("Merger Agreement") pursuant to which DCDC was to merge with
and  into  "DCDC  Merge,  Inc".  ("Merger  Sub"), a California corporation and a
wholly owned subsidiary of IMSI, and Merger Sub was to continue as the surviving
corporation. Simultaneously and pursuant to the Merger Agreement, DCDC agreed to
purchase  for $2,500,000 all rights as lender and holder under a promissory note
between  Union  Bank  of California and IMSI in the original principal amount of
$3,580,000.

On  March  1, 2002, we entered into a "Mutual Termination Agreement and Release"
with  DCDC  whereby  the  Merger  Agreement  was terminated and each company was
released  from  all  duties, rights, claims, obligations and liabilities arising
from,  in  connection  with,  or  relating  to,  the  Merger  Agreement.

Furthermore  the  two  companies  agreed  to  enter  into  an agreement entitled
Promissory  Note Conversion and General Release pursuant to which DCDC agreed to
cancel  the  entire  outstanding principal amount of $3,580,000 and all interest
due on the promissory note that DCDC had acquired in return for 9,000,000 shares
of common stock of IMSI and cash in the amount of $250,000 to be paid in monthly
installments  over  15  months  as  follows:

     -    $10,000  per  month  for the first five installments starting March 1,
          2002
     -    $20,000  per  month  for  ten  months  thereafter

Consistent  with  the  acquisition of Keynomics, we had previously accounted for
this transaction as an arrangement between entities under common control, and as
a  result did not record any gain or loss on the extinguishment of the note with
Union  Bank  and  subsequent  issuance  of 9,000,000 IMSI common shares to DCDC.

HOWEVER,  SINCE  THIS TRANSACTION WAS INITIALLY DISCLOSED IN OUR FORM 10-QSB FOR
THE  PERIOD  ENDED  MARCH 31, 2002, AND IN CONSIDERATION OF FURTHER INTERPRETIVE
GUIDANCE,  WE  HAVE  REVISED OUR TREATMENT OF THIS TRANSACTION TO ACCOUNT FOR IT
USING  FAIR  VALUES.  THIS  CHANGE HAS RESULTED IN OUR RECOGNIZING A LOSS ON THE
TRANSACTION  OF  $495,000.

The  loss  on extinguishment was determined as follows (in thousands, except per
share  amounts):


                                       23
<PAGE>

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

BOOK  VALUE  OF  DEBT                                     $     3,580
                                                          ===========
FMV  OF  STOCK
    Shares  Issued                   9,000,000
    Market  Value  per  Share        $     0.425
    Total  Value  of  Stock                  $     3,825

 CASH  PAID                                  $       250

 TOTAL  CONSIDERATION                                              $    4,075
                                                          ===========


 LOSS  FROM  STOCK  ISSUANCE                               $    (495)
                                                          ===========

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


     PRIVATE PLACEMENT OF SHARES AND WARANTS EXERCISED

During  the  fiscal  quarter ended March 31, 2002, we were successful in raising
additional working capital through a private offering of IMSI shares. We offered
shares  of  common  stock  at  $.50  per share to certain investors in a private
placement  offering  to  qualified  private investors. The money received in the
offering,  together  with  additional funds received pursuant to certain warrant
exercises  (as described below), contributed significantly to our ability to pay
off early and at a $100,000 discount the remaining $700,000 principal balance of
the  Silicon  Valley  Bank  note.  This  repayment  occurred  on  April 5, 2002.

As  of  March  31,  2002,  we  had  received formal commitment from investors to
purchase 1,005,000 shares of IMSI's capital stock at an aggregate purchase price
of  $502,500. We received funds totaling $417,500 from the subscribers as of the
end  of  the  quarter.  Subsequently  and  as  of  the  date of this filing, all
committed  funds  have  been  received  and  deposited  and all shares have been
issued.  None  of  the  participants  in this private placement, except Mr. John
Wade  who  is  our  CEO's  brother  and  Mr. Matthew Rexon who is our chairman's
cousin,  were deemed to be an "affiliate" or a "related party" as defined in the
Glossary  to  Statement of Financial Standards No.57, Related Party Disclosures.

The shares related to the offering have not been registered under the Securities
Act  of  1933  nor  have  they  been registered under the securities laws of any
state.  The  offer  and  sale  of  the shares was exempt from registration under
section  4(2)  of  the  Securities  Act  of  1933,  and Rule 506 of Regulation D
thereunder  and  exempt  from the qualification requirements of state securities
laws  under  the  respective  rules  and  regulations of the states in which the
shares  were  being  offered  and  sold.

Also,  during  the  fiscal  quarter  ended  March 31, 2002, certain officers and
advisors  to  the  company exercised previously issued warrants in the aggregate
number  of  1,282,500  at  exercise  prices ranging from $.20 to $.30 (averaging
$.25).  The proceeds to the company from this warrant exercise totaled $318,750.

     SILICON  VALLEY  NOTE  RESTRUCTURE

On  October  9,  2001,  we  signed  an  agreement with Silicon Valley Bank for a
settlement  of  its  existing  secured  note,  which  had  a  balance (including
penalties  and  interest) of approximately $3.2 million. The settlement provided
for  a  new secured promissory note for $1.2 million with 12 monthly payments of
$100,000  plus interest at 12% interest per annum beginning October 20, 2001. We
had  made  the  first  five  payments  as  of  March  31,  2002.
                                       24
<PAGE>




On April 3, 2002, we amended this agreement whereby we offered to Silicon Valley
Bank  and  Silicon Valley Bank accepted an early payment of the $700,000 balance
of  the  note  at  a  $100,000 discount. The payment of the $600,000 was made on
April 5, 2002, on which date Silicon Valley Bank declared all our obligations to
them  under the revised promissory note, the related ArtToday Security Agreement
and  the  related Pledge Agreement to have been satisfied and therefore released
its  interest  in  the  collateral  securing  the  note  and  the  note  itself.

In  the  next  fiscal  quarter,  we  will  recognize  an  additional  gain  from
forgiveness  of  debt  of  $100,000  arising  from  this  transaction  as  an
extraordinary  item.

     FISCAL  QUARTERS  ENDED  DECEMBER  31,  2001

          KEYNOMICS  ACQUISITION

On  November  29,  2001,  we entered into an agreement to acquire all issued and
outstanding  shares  of  the  capital  stock  of  Keynomics,  Inc., a California
corporation  focused  on  productivity  enhancement  software.  Keynomics  was a
wholly  owned  subsidiary of DCDC.  We originally accounted for this acquisition
as  a  transfer  between  entities  under  common  control as at the time of the
acquisition,  the  IMSI  board  of  directors was identical to the DCDC board of
directors,  with  the  exception  of Mr. Robert Mayer, who was a board member of
IMSI only. Additionally, Mr. Martin Wade and Mr. Vincent DeLorenzo served as the
Chief  Executive  Officer  and  Chief  Financial  Officer, respectively, of both
companies.  Using the guidance for accounting for entities under common control,
we  had  restated  the  financial  statements for all prior periods similar to a
pooling  of  interests.

However,  in consideration of further interpretive guidance, we have revised our
treatment  of  this  transaction  to account for it using the purchase method of
accounting.  This  change  in  accounting  treatment  has  been reflected in our
financial  statements  as  of  November  29,  2001.

The  aggregate purchase price was $300,000 and we assumed approximately $566,000
of  liabilities  from  Keynomics.  The  consideration  was  comprised  of  three
components;  i) $50,000 in cash paid at closing, ii) $100,000 in management fees
and  iii) a $150,000 note payable.  As of June 30, 2002, the entire $300,000 had
been  paid  to  DCDC.

The  agreement  also called for contingent consideration depending on Keynomics'
performance.  These  amounts,  payable  60  days after the end of the next three
fiscal  years,  consist  of  50%  of Keynomics' net operating income, if any, in
excess  of:

          -    $500,000  in  the  fiscal  year  ending  June  30,  2003
          -    $1,000,000  in  the  fiscal  year  ending  June  30,  2004
          -    $1,500,000  in  the  fiscal  year  ending  June  30,  2005

Furthermore,  potential  payments  would  have  been  due  DCDC  if  we had sold
substantially  all  of  the  capital stock or substantially all of the assets of
Keynomics  before  June 2002. Such payments would have been fifty percent of any
amount  in  excess  of  $1.2  million.  No  payments  were  due  or earned as no
transactions  to  sell  substantially  all  of  the assets of Keynomics occurred
before  June  2002.

As  of  the  date  of  the  purchase, Keynomics had $245,000 of promissory notes
outstanding.  Subsequent  to the acquisition of Keynomics by IMSI, holders of an
aggregate  $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 Chief Operating Officer, received 192,079 and


                                       25
<PAGE>



10,232  shares  of  IMSI's  capital  stock,  respectively, in exchange for their
outstanding  promissory notes from Keynomics. Joe Abrams, an IMSI related party,
received  287,389  shares  in  exchange  for  his outstanding promissory note to
Keynomics.  Mr.  Abrams  holds  IMSI  stock  options  and  warrants,  which  if
exercised,  would  result  in  ownership  exceeding  5%  of  the  total  shares
outstanding.

The  allocation  of  the  purchase  price  is  as  follows  (in  thousands):


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

CONSIDERATION  PAID
-------------------
Cash                                  $       50
Note Payable                                 150
Management Fees                              100
     Total Consideration                               $      300
                                                       ==========

ALLOCATION  OF  CONSIDERATION  TO  ASSETS
-----------------------------------------
Current Assets                               379
Long Term Assets                              73
Liabilities Assumed                         (566)
Identifiable Intangibles                     235
Assumed Goodwill                             179
     Allocated Assets                                  $      300
                                                       ==========

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


     DEBT  RESTRUCTURING

Along with the termination of the merger agreement with DCDC and the restructure
of  the Silicon Valley Bank note, we restructured our remaining outstanding debt
as  follows:

     -    On  July  27,  2001, and as subsequently amended on September 24, 2001
          and  October 5, 2001, IMSI and Imageline, Inc agreed on the settlement
          of  a)  an  arbitration  award  issued  in  January  2000  in favor of
          Imageline;  and  b)  a  variety of on going issues between the parties
          involving  the  intellectual  property  rights  of  Imageline.  The
          agreement,  effective  September  30,  2001,  calls  for us to provide
          Imageline  a  variety  of  considerations  including  the  following:

               o    The  dismissal  of  any  further  appeal of the award (which
                    dismissal  occurred  on  October  11,  2001).

               o    Cash  installments  over  a 12-year period, starting October
                    2001.  These  payments  are  to  be  made as follows: twelve
                    monthly  payments  of  $11,500 beginning on October 5, 2001;
                    four  equal  quarterly  payments  of  $78,750  beginning  on
                    September  30,  2002  and,  132  monthly  payments of $6,500
                    thereafter.  These  payments had a net present value at June
                    30,  2001  of approximately $833,000 assuming a 12% discount
                    rate.

               o    Certain  rights  to  royalties,  licenses,  and  inventories
                    pertaining  to  our  MasterClips  line  of  products.

               o    A  percentage  of  any  net  recovery  we  obtain  from  an
                    indemnification  claim  we  have  against  a  third  party
                    associated  with  the  original circumstances leading to the
                    arbitration  award.  On March 28, 2002 we received a payment
                    in  the  amount  of  $300,000  as  settlement of all and any
                    claims  we  had  regarding  the  adverse  arbitration  award
                    arising  from  the  ImageLine  dispute. On April 26, 2002 we
                    made  a  payment  to  ImageLine  in  the  amount  of $30,000
                    representing  an  advance  on  its share of the net recovery
                    from  the indemnification claims. The remaining balance will


                                       26
<PAGE>


                    be  paid as soon as information regarding related legal fees
                    necessary  to  compute  the  net  recovery  amount  becomes
                    available.


     -    On  July  30,  2001  we entered into an agreement with Baystar Capital
          wherein  Baystar  agreed  to  accept  $626,000  as  settlement  of all
          obligations  due  totaling  $6,260,000.  According  to  the agreement,
          payments are to be made in four quarterly payments beginning September
          30,  2002.  Interest is to accrue at 8% per annum from August 31, 2001
          until  the  September  2002  payment,  and at 12% per annum thereafter
          until  the  claim  is  paid  in  full  on  or  before  June  30, 2003.

     -    We  negotiated  an  agreement  with  most  of  our remaining unsecured
          creditors,  which  provides  for  the  discounting  to  10%  of  all
          outstanding  amounts  owed  to them (plus the payment of interest from
          February  1,  2000 at the rate of 8% per annum). These payments are to
          be  made  in  quarterly  installments beginning August 15, 2002. These
          unsecured  creditors  comprise approximately $3,800,000 of debt on our
          balance  sheet.

We  believe  that  the  reduction in our liabilities under planned and completed
settlements will assist us to become profitable in the future and help provide a
remedy to our working capital needs.  In addition, we will continue to engage in
discussions  with  third  parties  concerning  the  sale  or license of non-core
product lines; the sale or license of part of our assets; and raising additional
capital  investment  through  the  issuance of stock and short or long term debt
financing.

RESULTS  OF  OPERATIONS
-----------------------

The  following  tables  set  forth  our  results of operations for the three and
nine-month  periods  ended  March 31, 2002 and 2001 in absolute dollars and as a
percentage  of  net  revenues. It also details the changes from the prior fiscal
year  in  absolute  dollars  and  in  percentages:


                                       27
<PAGE>


<TABLE>
<CAPTION>


                                                THREE MONTHS ENDED MARCH 31,
                                          ---------------------------------------

                                            2002 (restated)   2001 (restated)
                                          ---------------------------------------  ------------------
                                                                                 $ CHANGE  % CHANGE
                                             $      AS %     $      AS %           FROM      FROM
                                                  OF SALES        OF SALES        PREVIOUS PREVIOUS
                                                                                    YEAR      YEAR
                                          ---------------------------------------  ------------------
<S>                                       <C>      <C>     <C>      <C>     <C>     <C>

Net Revenues                              $3,661   100.0%  $3,107   100.0%         $ 554     17.8%

Product Cost                                 712    19.4%     720    23.2%            (8)    -1.1%

GROSS MARGIN                               2,949    80.6%   2,387    76.8%           562     23.5%

Operating Expenses
Sales & Marketing                            846    23.1%     800    25.7%            46      5.8%
General & Administrative                   1,114    30.4%   1,047    33.7%            67      6.4%
Research & Development                       535    14.6%     666    21.4%          (131)   -19.7%
TOTAL OPERATING EXPENSES                   2,495    68.2%   2,513    80.9%           (18)    -0.7%

OPERATING INCOME/(LOSS)                      454    12.4%    (126)   -4.1%           580    460.3%

Other Income (Expenses)
Interest expense                             (75)   -2.0%    (572)  -18.4%           497     86.9%
Interest income                                3     0.1%       -     0.0%             3      100%
Foreign exchange gain                         14     0.4%       -     0.0%            14      100%
Other Income                                 159     4.3%       -     0.0%           159      100%
Loss from Stock Issuance                    (495)  -13.5        -     0.0%         (495)    -100%
Gain (loss) on disposal of fixed assets        9     0.2%      (6)   -0.2%           15    250.0%
TOTAL OTHER EXPENSES                        (385)  -10.5%    (578)  -18.6%          193     33.4%

INCOME (LOSS) BEFORE TAX                      69     1.9%    (704)  -22.7%          773    109.8%

Income tax expense (benefit)                   1     0.0%     (14)   -0.5%           15   -107.1%

NET INCOME (LOSS)                         $   68     1.9%  $ (690)  -22.2%        $ 758    109.9%

</TABLE>



                                       28
<PAGE>


<TABLE>
<CAPTION>




<S>                                <C>      <C>     <C>       <C>     <C>      <C>

                                       NINE MONTHS ENDED MARCH 31,
                                   -----------------------------------

                                   2002 (restated)     2001 (restated)
                                   -----------------------------------  ------------------
                                                                        $ CHANGE  % CHANGE
                                      $      AS %         $      AS %      FROM      FROM
                                            OF SALES          OF SALES   PREVIOUS PREVIOUS
                                                                          YEAR      YEAR
                                   -----------------------------------  ------------------
Net Revenues                       $9,385   100.0%    $ 9,399   100.0%  $  (14)    -0.1%

Product Cost                        2,229    23.8%      2,521    26.8%    (292)   -11.6%

GROSS MARGIN                        7,156    76.2%      6,878    73.2%     278      4.0%

Operating Expenses
Sales & Marketing                   2,040    21.7%      1,971    21.0%      69      3.5%
General & Administrative            3,433    36.6%      3,029    32.2%     404     13.3%
Research & Development              1,680    17.9%      2,023    21.5%    (343)   -17.0%
TOTAL OPERATING EXPENSES            7,153    76.2%      7,023    74.7%     130      1.9%

OPERATING INCOME/(LOSS)                 3     0.0%       (145)   -1.5%     148    102.1%

Other Income (Expenses)
Interest expense                     (547)   -5.8%     (1,661)  -17.7%   1,114     67.1%
Interest income                         9     0.1%          -     0.0%       9    100.0%
Foreign exchange gain                  15     0.2%          -     0.0%      15    100.0%
Other Income                          239     2.5%          -     0.0%     239   -100.0%
Loss from Stock Issuance             (495)   -5.3%          -     0.0%    (495)  -100.0%
Gain (loss) on disposal of fixed
assets                                 10     0.1%         (9)   -0.1%      19    211.1%
Gain on sales of product line          20     0.2%        285     3.0%    (265)   -93.0%
Gain from extinguishment of debt    7,970    84.9%          -     0.0%   7,970    100.0%
Settlement costs                        -                (187)   -2.0%     187    100.0%
TOTAL OTHER EXPENSES                7,221    76.9%     (1,572)  -16.7%   8,793    559.4%

INCOME (LOSS) BEFORE TAX AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE                7,224    77.0%     (1,717)  -18.3%   8,941    520.7%

Income tax expense (benefit)            3     0.0%        (21)   -0.2%      24    114.3%

INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE                           7,221    76.9%     (1,696)  -18.0%   8,917    525.8%

Cumulative effect of change in
accounting principle                    -     0.0%       (285)   -3.0%     285    100.0%

NET INCOME (LOSS)                  $7,221    76.9%    $(1,981)  -21.1%  $9,202    464.5%

</TABLE>


                                       29
<PAGE>



NET  REVENUES

Net  revenues  of  each  of our principal product categories in dollars and as a
percentage  of  total  net  revenues  for the three and nine-month periods ended
March  31,  2002  and  2001  are summarized in the following table (in thousands
except  for  percentage  amounts):


<TABLE>
<CAPTION>
<S>                           <C>     <C>  <C>     <C>  <C>   <C>  <C>     <C>  <C>     <C>  <C>     <C>

                                     THREE MONTHS ENDED MARCH 31,       NINE MONTHS ENDED MARCH 31,
                                     ----------------------------       ---------------------------
                                RESTATED     RESTATED                     RESTATED      RESTATED
                                --------     --------                     --------      --------
                                  2002         2001       CHANGES      2002        2001         CHANGES
                                  ----         ----       -------      ----        ----         -------
                                $     %      $     %      $     %     $     %     $      %      $     %
                                -     -      -     -      -     -     -     -     -      -      -     -


VISUAL DESIGN                 $1,427  39%  $1,306  42%  $121   9%  $3,371  36%  $3,594  38%  $(223)  -6%
GRAPHIC DESIGN                 1,340  37%   1,208  39%   132  11%   3,775  40%   4,073  43%   (298)  -7%
BUSINESS APPLICATION & OTHER     937  25%     641  21%   296  46%   2,299  25%   2,114  23%    185    9%

PROVISION FOR RETURNS AND
REBATES NOT YET RECEIVED        (43)  -1%     (48) -2%     5 -11%     (59) -1%    (382) -4%    323  -85%

--------------------------------------------------------------------------------------------------------
NET REVENUES                  $3,661 100% $ 3,107 100%  $554  18%  $9,385 100%  $9,399 100%  $ (14)   0%
========================================================================================================

</TABLE>

For  the  fiscal  quarter  ended March 31, 2002, sales of FloorPlan and TurboCAD
increased  as compared to the same reporting period in the previous fiscal year.
This  increase is the result of more focused direct marketing campaigns targeted
toward  the  end  users  of  these  products.  Sales of IMSI's flagship product,
TurboCAD, decreased in the nine-month period ended March 31, 2002 as compared to
the  same  reporting period in the previous fiscal year, resulting in an overall
decrease  in  revenues  in  the visual design category.  The intense competition
that  characterized  the  computer-aided  design  market  and  the  delays  in
introducing  the  new  version  8.0 of TurboCAD negatively impacted sales of the
visual  design  category  in  the  nine-month  period  ended  March  31,  2002.

In  the  three  and  nine  month  periods  ended March 31, 2002, revenues in the
graphic  design  category  consisted mostly of subscription revenues for graphic
content from our wholly owned subsidiary ArtToday.com. When compared to the same
periods  in  the  previous  fiscal  year,  ArtToday.com's sales increased in the
quarter  ended March 31, 2002 from $778,000 to $1,082,000 and from $2,310,000 to
$3,012,000 for the nine-months ended March 31, 2002. This increase is the result
of  more  paid subscribers as a result of a wider range of subscription choices.
Because  ArtToday.com's  revenues  are based on subscriptions, these amounts are
initially  deferred  and  then  amortized  over  the subscription periods, which
extend  up  to twelve months.  As of March 31, 2002, approximately $1,044,000 of
revenue  related  to ArtToday.com remained deferred. The following table details
the  amortization  schedule  of  these  deferred revenues for the upcoming year:


                                 ARTTODAY.COM DEFERRED REVENUES TO BE RECOGNIZED
4th  Quarter  of  Fiscal  2002          $  543,000
1st  Quarter  of  Fiscal  2003          $  296,000
2nd  Quarter  of  Fiscal  2003          $  162,000
3rd  Quarter  of  Fiscal  2003          $   43,000
TOTAL                                   $  1,044,000

                                       30
<PAGE>


The  decrease  in  overall  revenues  in  the  graphic  design  category for the
nine-month  period  ended March 31, 2002 is attributable to the steep decline in
the revenues from our historically most important revenue producing product line
within  this  category,  MasterClips,  and to the decline in sales of our Hijaak
product  line.  The significant decrease in Masterclips' revenues was the result
of  decreased  sales from our republisher Vivendi who acquired the rights to the
product during the previous fiscal year. The republishing agreement with Vivendi
expired  according to its own terms and we subsequently released new versions of
Masterclips  in  December  2001.

We  intend  to  continue  publishing  new versions of Masterclips in the future.
Future  sales  of  Masterclips  along  with the increasing trend of ArtToday.com
sales  should  contribute  to  higher revenues in the graphic design category in
future reporting periods. The 40% increase in ArtToday's revenues in the quarter
ended  March  31,  2002 as compared to the same quarter from the previous fiscal
year  more than offset the decreases in the revenues from MasterClips and Hijaak
resulting in an overall increase in the revenues derived from the graphic design
category.

During  the  quarter  ended  December 31, 2001, we acquired Keynomics, a company
focused  on  productivity  enhancement  software.  Sales  of Keynomics' products
contributed $239,000 and $320,000 to the business application and other category
during  the  three  and  nine-month  periods ended March 31, 2002, respectively.

Prior  to  September  30,  2000,  our  focus  had been primarily on our Internet
business and our graphic and visual design products. Because we did not spend as
much  on marketing non-core products as during previous periods, sales of Flow!,
FormTool,  Maplinx,  MasterPublisher,  OrgPlus,  People  Scheduler, Web Business
Builder  and  TurboProject all declined up to March 2001. These factors combined
to  bring  revenues  from  the business application and other category to an all
time low. During the nine month period ended March 31, 2002, however, demand for
some  of our non-core products in this category such as Flow!, FormTool, OrgPlus
and  Graphics converter increased. This increased demand along with the $320,000
increase  in  Keynomics' revenues replaced lost revenues from the sale of Update
Now,  a  Y2K  related product that was popular during fiscal 2001, and therefore
maintain  revenues  from the business application and other category at the same
level  as  in  the  previous  fiscal  year.

Net  revenues from domestic sales increased by $626,000 or 23% to $3,377,000 and
were  92% of total net revenues for the three-month period ended March 31, 2002.
This  compares  to  net  revenues  from domestic sales of  $2,751,000, or 89% of
total  net  revenues, for the comparable period in the previous fiscal year. For
the  nine  month  period  ended March 31, 2002, net revenues from domestic sales
decreased  slightly  to  $8,433,000  and  were  90%  of total net revenues. This
compares  to  $8,503,000 or 90% of total net revenues, for the comparable period
in  the  previous  fiscal  year.

Net  revenues  from  international  sales  decreased by $72,000 or 20%, and were
$284,000  or 8% of net revenues for the three-month period ended March 31, 2002.
This  compares  to  $356,000  or  11% of net revenues for the three months ended
March  31,  2001.  For  the nine month period ended March 31, 2002, net revenues
from  international sales increased by $55,000 or 6% to $951,000 and were 10% of
total  net  revenues. This compares to $896,000 or 9% of total net revenues, for
the  comparable  period  in  the  previous  fiscal  year.

We  are  currently  serving  the domestic and international retail markets using
direct sales methods and republishing agreements. In addition, we are increasing
our  presence  in  the retail market through selected distribution channels. Low
barriers  to  entry,  intense  price  competition,  and  business consolidations
continue  to  characterize  the  consumer  software  industry.  Any one of these
factors  along  with  the  intermittent unfavorable retail conditions, including
erosion of margins from competitive marketing and high rates of product returns,
may  adversely  affect  our  revenues  in  the  future.
                                       31
<PAGE>




PRODUCT  COSTS

Our  product costs include the costs of CD-ROM duplication, printing of manuals,
packaging and fulfillment, freight-in, freight out, license fees, royalties that
we  pay  to third parties based on sales of published software, and amortization
of  capitalized  software  acquisition  and development costs.  Costs associated
with  the  return of products, such as refurbishment and the write down in value
of  returned  goods are also included in product costs.  The decrease in product
costs  in  absolute dollars and as a percentage of net revenues in the three and
nine-month periods ended March 31, 2002 as compared to the same periods from the
previous  fiscal  year  was  primarily attributable to lower amortization costs.

We  amortize  capitalized  software  development  costs  and  license  fees on a
product-by-product  basis.  The  amortization for each product is the greater of
the  amount  computed using (a) the ratio of current gross revenues to the total
of  current  and  anticipated  future  gross revenues for the product or (b) the
economic  life  of the product.  During the first nine months of fiscal 2002, we
capitalized  new software development costs in the amount of $292,000 related to
purchases  made  by  ArtToday  and  Keynomics.  Amortization  of  such costs was
$478,000,  and  $1,006,000  in  the  nine-month periods ended March 31, 2002 and
March  31,  2001,  respectively.

SALES  AND  MARKETING

Our  sales  and  marketing  expenses  consist  primarily  of sales and marketing
personnel  salaries  and benefits, commissions, advertising, printing and direct
mail  expenses.  Increase  sales  and  marketing expenses relating to Keynomics'
business in part offset decreased commissions paid to our sales force along with
reduced  advertising  expenses  and  were  the  primary  reasons for the overall
increase  in  sales  and  marketing  expenses in the three and nine months ended
March 31, 2002. The steady ratio of sales and marketing expenses as a percentage
of  net  revenues  over  the  three  and nine-month periods ended March 31, 2002
reflects  our  commitment  to  our core products and ArtToday's online products.

GENERAL  AND  ADMINISTRATIVE

Our  general  and  administrative  expenses  consist  primarily  of salaries and
benefits  for  employees  in  the  legal,  finance, accounting, human resources,
information  systems  and  operations  departments  and fees to our professional
advisors.  Additional  general  and  administrative  expenses  relating  to  the
Keynomics'  business  were  the  main  reason  of  the  increase  in general and
administrative  expenses  in the quarter ended March 31, 2002 as compared to the
same  period  from  the previous year. For the nine-month period ended March 31,
2002,  a one time charge of $211,000 relating to issuance of warrants to outside
consultants,  totaling  785,000 warrants with an average exercise price of $0.27
and  terms  of  three  to ten years, combined with the severance cost of $60,000
payable  to  one  of  our  former  executives  and  the  additional  general and
administrative  expenses  relating  to  the Keynomics' business were the primary
causes  of  the  increase  in  general  and  administrative  expense.

RESEARCH  AND  DEVELOPMENT

Our research and development expenses consist primarily of salaries and benefits
for  research and development employees and payments to independent contractors.
Research  and  development  costs  decreased in the three and nine-month periods
ended  March  31, 2002 as compared to the same reporting periods in the previous
fiscal  year.  This  decrease is mainly due to lower payroll charges and outside
consulting  fees  relating  to  the  Design.Net  division,  which  was  spun off
effective  October  1, 2001, and to the decrease in the number of products under
development.  Despite this decrease in research and development expenses, we are
                                       32
<PAGE>



still  committed to sustaining our investment in developing our core products by
maintaining  strong  relationships  with  our  development  team  in  Russia.

INTEREST  AND  OTHER,  NET

Interest  and  other  expenses,  net,  include  interest  and  penalties on debt
instruments,  foreign  currency  transaction  gains  and  losses,  and  other
non-recurring  items.  The following table summarizes the components of interest
and  other,  net  for  the three and nine-month periods ended March 31, 2002 and
2001:

<TABLE>
<CAPTION>
<S>                                   <C>                            <C>
                                                FISCAL QUARTER ENDED MARCH 31,
                                      -----------------------------------------------

                                                  2002               2001 (RESTATED)
                                                    $                       $
                                      -----------------------------  ----------------
INTEREST AND OTHER, NET
  Interest expense                               $             (75)  $          (406)
  Interest income                                                3                 6
  Foreign exchange gain (loss)                                  14               (37)
  Penalties                                                     --              (135)
  Other income                                                (336)               --
-------------------------------------  ----------------------------  ----------------
TOTAL                                            $            (394)  $          (572)
-------------------------------------  ----------------------------  ----------------


                                                 NINE MONTHS ENDED MARCH 31,
                                      -----------------------------------------------

                                                  2002               2001 (RESTATED)
                                      -----------------------------  ----------------
                                                    $                       $
                                      -----------------------------  ----------------
INTEREST AND OTHER, NET
  Interest expense                                 $          (392)  $        (1,214)
  Interest related to warrants issued                          (65)               --
  Interest income                                                9                19
  Foreign exchange gain (loss)                                  15               (61)
  Penalties                                                    (90)             (405)
  Other income                                                (256)               --
-------------------------------------  ----------------------------  ----------------
TOTAL                                            $            (779)  $        (1,661)
-------------------------------------  ----------------------------  ----------------

</TABLE>


Interest  and  other  expense,  net,  decreased  substantially  in the three and
nine-month  periods  ended  March  31,  2002,  as compared to the same reporting
period  in  fiscal  2001.  This  decrease  is  mainly  the  result  of  our debt
restructuring and the plan of merger we signed with DCDC on August 31, 2001.  We
did  not  accrue  penalties  on the Baystar note after August 2001, and interest
expenses  of  8%  per annum on the new negotiated balance of the Baystar note is
substantially  reduced as compared to the same period from the previous year. We
saved on the interest previously paid to Union Bank of California since the note
was  acquired  by DCDC. The original merger agreement provided that the note not
bear  interest except in the event of the termination of the plan of merger. The
plan  of  merger  was terminated and the two companies entered into an agreement
entitled  Promissory Note Conversion and General Release, pursuant to which DCDC
converted the entire outstanding principal amount of $3,580,000 and all interest
due  under  the  promissory note it had acquired into 9,000,000 shares of common
stock  of  IMSI  and  cash  in  the  amount  of  $250,000  to be paid in monthly
installments  over  15  months.

In  the  fiscal  quarter  ended March 31, 2002, Interest and other expense, net,
included  $159,000  of  other  income  representing  the  net recovery amount of

                                       33
<PAGE>



$164,000  we  obtained  from indemnification claims we had against third parties
associated  with  the  original  circumstances  leading to the adverse Imageline
arbitration  award.

GAIN  ON  SALES  OF  PRODUCT  LINE

During  the  second quarter of fiscal 2002 we sold the rights to the Visual Cadd
software  product  to  TriTools Partners, a California company, for $20,000. The
entire  amount  of  the sale was recorded as a gain since the product had a zero
book  value  at  the  time  of  the  transaction.  This was the only transaction
involving  a gain or loss on sales of product lines during the nine-month period
ended  March  31,  2002.

During  the  nine-month  period ended March 31, 2001, we collected the remaining
$200,000  pertaining  to  the  sale  of  the  Easy  Language line of product and
recognized  that amount as a one-time gain on product line sale. During the same
period, ArtToday.com sold the domain name "Caboodles" for $85,000 and recorded a
one-time  gain  for  the  same  amount.

LOSS  ON  STOCK  ISSUANCE/DCDC  DEBT  CONVERSION

On  August  31, 2001, IMSI and DCDC entered into an Agreement and Plan of Merger
and  Reorganization  ("merger  agreement") pursuant to which DCDC was to acquire
51% of IMSI. Simultaneously and pursuant to the merger agreement, DCDC purchased
for $2,500,000 all rights as lender and holder under the promissory note between
Union  Bank  of  California  and  IMSI  with  a  remaining  principal  amount of
$3,580,000.

On  March  1, 2002, the merger agreement with DCDC was terminated. In connection
with  the  termination,  DCDC  agreed to cancel the entire outstanding principal
amount  of  $3,580,000  and  all interest due under the Union promissory note in
return  for  9,000,000  shares of common stock of IMSI and cash in the amount of
$250,000  to  be  paid  in  monthly  installments  over  15  months  as follows:

-     $10,000  per  month for the first five installments starting March 1, 2002
-     $20,000  per  month  for  ten  months  thereafter

Consistent  with the Keynomics transaction, we had previously accounted for this
transaction  as  an  arrangement between entities under common control, and as a
result  did  not  record  any  gain  or  loss on the extinguishment of the note.

However, in consideration of further interpretive guidance from the staff of the
Securities  and  Exchange  Commission,  we  have  revised  our treatment of this
transaction  to  account  for it using fair values.  This change has resulted in
our  recognizing  a  loss  on  the  transaction  of  $495,000.  The  loss  on
extinguishment was determined as follows (dollars in thousands, except per share
amounts):


                                       34
<PAGE>


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

BOOK  VALUE  OF  DEBT                                         $          3,580
                                                              =================
     FMV  OF  STOCK
    Shares  Issued                    9,000,000
    Market  Value  per  Share      $       0.425
    Total  Value  of  Stock                       $     3,825

 CASH  PAID                                       $       250

 TOTAL  CONSIDERATION                                         $          4,075
                                                              =================

 LOSS  FROM  STOCK  ISSUANCE                                  $           (495)
                                                              =================

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


GAIN  ON  EXTINGUISHMENT  OF  DEBT

We  did not record any gain from extinguishment of debt during the quarter ended
March  31, 2002. On April 3, 2002, we offered to Silicon Valley Bank and Silicon
Valley Bank accepted an early payment of the $700,000 balance of their note at a
$100,000  discount.  The  payment  of $600,000 was made on April 5, 2002. In the
next fiscal quarter, we will recognize an additional gain from extinguishment of
debt  of  $100,000  arising  from  this  transaction.

During  the  fiscal  quarter ended December 31, 2001, we recognized a $2,243,000
gain from extinguishment of debt. $2,062,000 was related to the forgiveness of a
portion  of  the principal and accrued interest on the Silicon Valley Bank note.
$140,000  was related to the forgiveness of amounts payable to Light Work Design
and  $40,500  was  related  to  the forgiveness of amounts payable to Microsoft.
Light  Work  Design  and  Microsoft  are  two unsecured creditors that were owed
royalties.

In  the  quarter  ended  September  30,  2001,  we recorded a gain of $5,727,000
related  to  the  extinguishment  of  debt  to  BayStar  Capital  and  DelRay
Technologies.  BayStar  Capital  agreed  to  settle for 10% of the principal and
accrued interest and penalties outstanding. According to the original agreement,
payments  are  to be made in four quarterly installments beginning September 30,
2002, with interest accruing at the rate of 8% per annum from August 31, 2001 to
the  date  of  the  first installment.  Thereafter, the interest rate is 12% per
annum  until  the  note  is  paid  in  full  on or before June 30, 2003.  DelRay
Technologies  agreed  to  a one-time payment of $20,000 as settlement in full of
its  outstanding  claim.

These  combined  transactions  resulted into an aggregate extinguishment of debt
gain  of  $7,970,000  for  the  nine-month  period  ended  March  31,  2002.

The  tax  expense  on  the  gain  on  extinguishment  of  debt  is approximately
$3,183,000  as  calculated at our marginal tax rate of 39.94%. This expense will
be  entirely  offset  by  the  net  operating  loss  carryforward.

SETTLEMENT  COSTS

We  recorded  a charge of $187,000 during the fiscal quarter ended September 30,
2000  relating to the issuance of 185,005 shares of common stock in July 2000 as
a  settlement of the ArtToday.com Fee Agreement.  We had no similar transactions
during  the  current  fiscal  year.

                                       35
<PAGE>



PROVISION  FOR  INCOME  TAXES

We  did  not  record  a tax benefit in the nine months ending March 31, 2002 for
domestic  tax  losses  because  of the uncertainty of realization.  We adhere to
Statement  of  Financial  Accounting  Standards  No.  109 "Accounting for Income
Taxes,"  which  requires an asset and liability approach to financial accounting
and  reporting  for  income  taxes.  Valuation  allowances  are established when
necessary  to  reduce deferred tax assets to the amount expected to be realized.

LIQUIDITY  AND  CAPITAL  RESOURCES
----------------------------------

As  of  March  31,  2002,  we had $2,352,000 in cash and cash equivalents.  This
represents  a  $1,122,000 increase from the $1,230,000 balance at June 30, 2001.
Working  capital at March 31, 2002 was a negative $4,628,000. This represents an
improvement  of $9,738,000 over the negative working capital at June 30, 2001 of
$14,366,000.  The improvement in working capital over the past nine-month period
is  mainly  the  result  of  the  decline  in  current liabilities following the
restructuring  of  our  debt  combined  with  an increase in cash of $1,122,000.

The increase in cash and cash equivalents during the quarter and the nine-months
ended  March  31,  2002 resulted primarily from our improved operations and from
the  cash  we raised through the private placement and the warrant exercises, in
part  offset  by  our  debt  payouts. During the quarter ended March 31, 2002 we
raised  cash  through  a  combination of a private placement and the exercise of
warrants  by certain executives and senior advisers to the company.  Part of the
proceeds  were  subsequently  used  to pay off the Silicon Valley Bank note at a
discount  in  the  beginning  of  the  fourth  quarter  of  fiscal  year  2002.

Our  operating activities generated cash of $1,077,000 and $1,809,000 during the
three  and  nine-month  period  ended  March 31, 2002.  The loss from continuing
operations  before  extraordinary  items  was $749,000 for the nine months ended
March  31,  2002. The main items that helped reconcile this loss to the net cash
provided  by  operating  activities during the nine-month period ended March 31,
2002 included depreciation and amortization expenses of $1,050,000, increases of
accrued  interest expenses of $277,000 and a non cash charge of $310,000 related
to  warrants  issued  to outside consultants and other third parties. During the
quarter  ended  March  31, 2002 we recovered $300,000 related to indemnification
claims  we have against third parties associated with the original circumstances
leading  to  the arbitration award. The recovered amount was subsequently offset
by  expenses  totaling  $136,000  representing  fees  related  to  this  matter.

Our  investing  activities  during the nine months ended March 31, 2002 consumed
$489,000 in cash used mainly in acquiring new domain names necessary to increase
traffic  to  ArtToday's websites, in acquiring new equipment for ArtToday and in
acquiring  Keynomics  during  the  previous  quarter.

Our  financing activities consumed cash of $193,000 during the nine-month period
ended  March 31, 2002.  During this period, we decreased our obligation to Union
Bank  by  $350,000  bringing  the  balance  of  all  amounts  due to the bank to
$3,580,000.  Subsequent  to  these  payments and pursuant to our original merger
agreement  with  DCDC,  DCDC  acquired  the Union Bank's note in August 2001 and
later  converted  the  note  into shares of IMSI's common stock. Also during the
same  period  of  fiscal  2002,  we  made  payments  relating  to  capital lease
obligations  of  $218,000 and we repaid $500,000 to Silicon Valley Bank pursuant
to  the  new  $1.2 million secured promissory note. Subsequently, and during the
fourth  quarter  of  fiscal  2002,  we paid the remaining balance of the Silicon
Valley  Bank at a $100,000 discount. We were able to do so after we raised funds
in  excess  of $700,000 through a private placement and the exercise of warrants
by  certain  executives  and  senior  advisers  to  the  company.
                                       36
<PAGE>



If  we  fail  to raise additional capital, the negative working capital position
could  have  a  material  adverse  effect  on  our liquidity in the future.  The
financial  statements  have  been  prepared  on  a  basis  that contemplates our
continuation  as  a  going  concern  and  the  realization  of  our  assets  and
liquidation  of  our  liabilities in the ordinary course of business. We have an
accumulated  deficit of $37 million and negative working capital of $4.6 million
at  March  31,  2002.  We  also lack sustained profitability across all business
segments  during  our  recent history.  All these issues raise substantial doubt
about  our ability to be a going concern for a reasonable period of time and the
auditors'  report  on our financial statements filed within our fiscal 2001 Form
10-K  reflects  such  doubt.  The  financial  statements  do  not  include  any
adjustments  relating  to  the recoverability or classification of assets or the
amounts  and classification of liabilities that might result from the outcome of
this  uncertainty.  Our  continued  existence  is  dependent  on  our ability to
complete  the  repayment  of  debt and obtain additional financing sufficient to
allow  us to meet our obligations as they become due and to achieve and maintain
profitable  operations.

Historically,  we  financed  our  working  capital  and  capital  expenditure
requirements  primarily  from  retained  earnings, short-term and long-term bank
borrowings,  capitalized  leases  and  sales  of  common stock.  We will require
additional  working  capital  to meet our ongoing operating expenses, to develop
new  products, and to properly conduct business activities.  We believe that the
reduction  in our liabilities under planned and completed settlements will allow
us  to  continue as a going concern, remain profitable in the future, and remedy
our  working  capital  needs.  In addition, we will continue to evaluate raising
additional  capital  investment  through the issuance of stock and short or long
term  debt  financing.

The  forecasted  period  of  time  through which our financial resources will be
adequate  to  support  working capital and capital expenditure requirements is a
forward-looking  statement  that  involves  risks  and uncertainties, and actual
results  could  vary.  The  factors described in "Risk Factors", as filed in our
fiscal  2001 Form 10-K, will affect future capital requirements and the adequacy
of  available  funds.  We can provide no assurance that needed financing will be
available.  Furthermore,  any  additional equity financing, if available, may be
dilutive  to  shareholders,  and  debt  financing,  if  available,  may  involve
restrictive  covenants.  Failure  to  raise  capital  when  needed  will  have a
material  adverse effect on our business, operating results, financial condition
and  ability  to  continue  as  a  going  concern.

We  had  no  material  commitments  for  future capital expenditures or material
long-term  debt  at  March  31,  2002  except  as previously disclosed under the
heading  "Debt  restructuring"  regarding  long  term  obligations to Imageline,
Baystar  Capital  and  other  unsecured  creditors.

OTHER  FACTORS  THAT  MAY  AFFECT  FUTURE  OPERATING  RESULTS
-------------------------------------------------------------

Other factors that may cause fluctuations of, or a decline in, operating results
in  the  future  include the market factors and competitive factors described in
our  Fiscal  2001  Form  10-K,  under  "Future  Performance  and Additional Risk
Factors."   Factors that may affect operating results in the future include, but
are  not  limited  to:

     -    Market  acceptance  of  our  products  or  those  of  our  competitors
     -    Timing  of  introductions of new products and new versions of existing
          products
     -    Expenses  relating  to  the  development  and  promotion  of  such new
          products  and  new  version  introductions
     -    Intense  price  competition  and  numerous  end-user  rebates
     -    Projected  and  actual  changes  in  platforms  and  technologies
     -    Accuracy  of  forecasts  of,  and  fluctuations  in,  consumer  demand
Extent  of  third  party  royalty  payments


                                       37
<PAGE>



     -    Rate  of  growth  of  the  consumer  software  and  Internet  markets
     -    Timing  of  orders  or  order  cancellations  from  major  customers
     -    Changes  or disruptions in the consumer software distribution channels
     -    Failure  of  Keynomics  to  become  profitable  on  a  sustained basis
     -    Economic  conditions,  both  generally  and  within  the  software  or
          Internet  industries

ITEM  3.  CONTROLS  AND  PROCEDURES

(a)  Under  the  supervision  and  with  the  participation  of  the  Company's
management,  including  the  Company's principal executive officer and principal
financial  officer,  the  Company  conducted  an  evaluation  of  its disclosure
controls  and  procedures,  as  such  term  is  defined  under  Rule  13a-14(c)
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"),  within  90  days  of  the  filing  date  of  this report. Based on their
evaluation,  our  principal  executive  officer  and principal financial officer
concluded  that  our  disclosure  controls  and  procedures  are  effective.

(b)  The  Company  has evaluated its accounting procedures and control processes
related  to  material  transactions  to  ensure  they  are  recorded  timely and
accurately  in the financial statements.  There have been no significant changes
in  the Company's internal controls or in other factors that could significantly
affect  these  controls  subsequent  to the date of the evaluation referenced in
paragraph  (a)  above.

                                       38
<PAGE>



                           PART II - OTHER INFORMATION
                           ---------------------------

ITEM  1.  LEGAL  PROCEEDINGS

Not  Applicable

ITEM  2.  CHANGES  IN  SECURITIES  AND  USE  OF  PROCEEDS

On  March  1, 2002, we mutually agreed with DCDC to terminate our planned merger
and  released  each  other  from  all  duties,  rights,  claims, obligations and
liabilities  arising  from,  in  connection  with,  or  relating  to, the Merger
Agreement  signed  on August 31, 2001. We also agreed to enter into an agreement
entitled  Promissory  Note Conversion and General Release pursuant to which DCDC
agreed  to  convert the entire outstanding principal amount and all interest due
under the Union Bank note into 9,000,000 shares of common stock of IMSI and cash
in  the  amount  of  $250,000 to be paid in monthly installments over 15 months.

In  addition, we raised capital through a private offering of IMSI shares during
the  fiscal  quarter  ended March 31, 2002. We offered shares of common stock at
$.50  per  share in a private placement offering to certain qualified accredited
investors.  The  money  received in the offering, together with additional funds
received pursuant to certain warrant exercises (as described below), contributed
significantly  to  our  ability  to pay off early and at a $100,000 discount the
remaining  $700,000  principal  balance  of  the  Silicon Valley Bank note. This
repayment  occurred  on  April  5,  2002.

As  of  March 31, 2002, we received formal commitment from investors to purchase
1,005,000  shares  of  IMSI's  capital  stock  at an aggregate purchase price of
$502,500. We received funds totaling $417,500 from the subscribers as of the end
of  the  quarter.  Subsequently  and as of the date of this filing all committed
funds have been received and deposited and all shares have been issued.  None of
the  participants in this private placement, except for Mr. John Wade who is our
CEO's  brother  and  Mr.  Matthew  Rexon  who  is  our  chairman's  cousin  are
"affiliates"  or  a  "related  parties".

The shares related to the offering have not been registered under the Securities
Act  of  1933  nor  have  they  been registered under the securities laws of any
state.  The  offer  and  sale  of  the shares are exempt from registration under
section  4(2)  of  the  Securities  Act  of  1933,  and Rule 506 of Regulation D
thereunder  and  exempt  from  securities qualification and related requirements
under  the  respective  rules  and regulations of the states in which the shares
were  being  offered  and sold.  All the investors represented to IMSI that they
are  accredited  investors  under  Rule  501  of  Regulation  D.

Also,  during  the  fiscal  quarter  ended  March 31, 2002, certain officers and
advisors  to  the  company exercised previously issued warrants in the aggregate
number  of  1,282,500  at  exercise  prices ranging from $.20 to $.30 (averaging
$.25).  The  proceeds  to  the  company  from  these  warrant  exercises totaled
$318,750.

These transactions resulted in the issuance of 11,117,500 shares of common stock
that  significantly diluted the 10,212,327 shares of IMSI's capital stock issued
and  outstanding  as  of  December  31,  2001.
The  following table details the activity regarding common stock for the quarter
ended  March  31,  2002.

                                       39
<PAGE>





<TABLE>
<CAPTION>



<S>                                        <C>                                     <C>                    <C>
TRANSACTION TYPE                               GROUP                         SECURITIES             AMOUNT
-------------------------------------------  --------------------------    ------------------   -------------------
SHARES OUTSTANDING AS OF DECEMBER31, 2001                                          10,212,327     $      29,737,465

  Private placement                           Accredited investors                    835,000               417,500

  Debt to equity conversion                   Related parties                       9,000,000             3,330,000

  Options issued for consulting services      Consultants                                                    41,956

  Options exercised                           Employees and consultants                73,000                14,994

  Warrants exercised                          Executives & advisers to IMSI         1,282,500               318,750

  Variable accounting charge                  Re-priced stock options                                        16,131

                                                                            -----------------   -------------------
    TOTAL                                                                          11,190,500             4,139,331
                                                                            -----------------   -------------------
SHARES OUTSTANDING AS OF MARCH31, 2002                                             21,402,827     $      33,876,796
                                                                            -----------------   -------------------

</TABLE>

ITEM  3.  DEFAULTS  UPON  SENIOR  SECURITIES

Not  Applicable

ITEM  4.  SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS

Not  Applicable

ITEM  5.  OTHER  INFORMATION

On  November  29,  2001,  we  entered into an agreement with DCDC to acquire all
issued  and  outstanding  shares  of  capital  stock  of Keynomics, a California
corporation  wholly owned and controlled by DCDC. The transaction was originally
accounted  for  as a transfer between entities under common control. However, in
consideration of further interpretive guidance, we have revised our treatment of
this  transaction  to  account  for  it using the purchase method of accounting.
This  change  in  accounting  treatment  has  been  reflected  in  our financial
statements  as  of  November  29, 2001. As a result of this modification, we are
required to file the audited financial statements of Keynomics on Form 8-K.  The
company  will  file  the  appropriate documents on Form 8-K as soon as possible.

ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

     (a)  Exhibits

DOCUMENTS  INCORPORATED  BY REFERENCE (as originally filed with the Security and
Exchange  Commission on May 20, 2002 on our original Form 10-QSB for the interim
period  ended  March  31,  2002)

     -    Executive  Employment  Agreement  -  Martin  Wade
     -    Amendment  To  Restructure  Agreement  -  Silicon  Valley  Bank

                                       40
<PAGE>



The  following  documents  are  filed  as  a  part  of  this  Report:


<TABLE>
<CAPTION>
<S>        <C>                     <C>

EXHIBIT
NUMBER     EXHIBIT  TITLE          PAGE
-------    --------------          ----

  99.1     Certification  of  Chief  Executive  Officer  -  Internal  controls
  99.2     Certification  of  Chief  Financial  Officer  -  Internal  controls
  99.3     Certification of Chief Executive Officer Pursuant to Section 906 of the
           Sarbanes-Oxley  Act  of  2002
  99.4     Certification of Chief Financial Officer Pursuant to Section 906 of the
           Sarbanes-Oxley  Act  of  2002

     (b)  Reports  on  Form  8-K

</TABLE>

One  report  on Form 8-K was filed during the third quarter of fiscal year 2002,
on  March 13, 2002, to discuss the mutual termination of the plan of merger with
DCDC  and  the  resignation of four directors as well as the addition of two new
directors  to  our  Board.



                                       41
<PAGE>

                                   SIGNATURES
                                   ----------

Pursuant  to  the  requirements  of  the  Securities  Exchange  Act of 1934, the
Registrant  has  duly  caused  this  report  to  be  signed on its behalf by the
undersigned  thereunto  duly  authorized.

Date:  December  27,  2002     INTERNATIONAL  MICROCOMPUTER  SOFTWARE,  INC.


By:  /s/  Martin  Wade,  III
Martin  Wade,  III
Director  &  Chief  Executive  Officer


By:  /s/  William  J.  Bush
William  J.  Bush
Chief  Financial  Officer  (Principal  Accounting  Officer)


                                       42
<PAGE>