IMSI Announces Record FY97 Revenues and Income; New Product Introductions and International Sales Drive 63% Revenue Growth and 172% Net Income Growth.

SAN RAFAEL, Calif.--(BUSINESS WIRE)--Aug. 13, 1997--IMSI (NASDAQ:IMSI), a leading developer and publisher of quality productivity software, today announced record results for the company's fourth quarter and fiscal year ended June 30, 1997.

Revenues of $41.8 million were reported for the fiscal year, a 63% increase over the $25.7 million reported last year. Net income totaled $2.6 million, a 172% increase over last year's reported net income of $953,572. Earnings per share for fiscal 1997 were $0.47, compared to $0.18 per share in fiscal 1996.

Revenues for the quarter ended June 30, 1997 were $11.4 million, a 58% increase over the $7.2 million reported during the same period last year. For the quarter, net income was $858,846, a 197% over last year's net income of $289,213. Earnings per share were $0.15, compared to $0.05 during the same period last year.

Overall sales and marketing expenses during the year were reduced to 28.7% of sales, down from 38.5% in fiscal 1996.

"We are very pleased with IMSI's second consecutive year of record revenues and profitability," said Martin Sacks, president and chief executive officer. "In fiscal 1997 we introduced several new products designed for the corporate user, as well as new products for the consumer. As a result of these new product introductions, our ongoing investment in our core technologies, our expanded international presence, and our continued strength in the retail channel, we had an extremely robust year."

"Along with our increased revenues, we were able to reduce operating expenses from 60.8% of sales in fiscal 1996 to 49.2% of sales in fiscal 1997, therefore significantly boosting profitability," added Ken Fineman, chief financial officer.

New Product Introductions and Acquisitions

One highlight of the fourth quarter was the introduction of Net Accelerator, an Internet utility designed to cache both textual and graphical content of a web page's associated links. By maximizing the efficiency of modem, browser and Internet connections, Net Accelerator can dramatically reduce "wait-time" and improve a user's efficiency and workflow. Net Accelerator marks the company's first entry into the Internet utility category.

Additionally, the company's focus in core technologies was strengthened with two acquisitions that closed in July 1997.

Hijaak, a popular graphics utility line was purchased from Quarterdeck Corp. This agreement gives IMSI full rights to the Hijaak registered trademark and to the Hijaak technology, as well as adding an experienced software development group to the team. This acquisition adds significantly to IMSI's expertise in the graphics and imaging category.

MapLinx, the leading PC-based data-mapping program was purchased from Computer Concepts Corp. This agreement gives IMSI exclusive rights to the technology and assets of MapLinx, providing the company with powerful GIS (geographic information systems) technology that can be integrated into future versions of TurboCAD and FormTool.

FY97 Product Successes

In January 1997, the latest edition to IMSI's consumer line of software was introduced. Within its first two months in the channel, Easy Language 17 Language Edition increased market share in this category fourfold from 4% in January of 1997, to over 16% in March of 1997, according to PC Data (Reston, VA). The release of Easy Language Conversional Skills (February 1997) also contributed to IMSI's continued success in the language learning category.

Additionally, the largest collection available in the company's line of premium desktop publishing and electronic art was released in January 1997. MasterClips 150,000 premium Image Collection boasted the highest quality clip art images available along with True Type fonts, color photos, Web images, sound clips, animation and video clips, full art catalogues and the powerful MasterClips Browser. This upgrade cemented IMSI's leadership position in the clip art category wherein MasterClips was the number one best-selling clip brand in revenues over the past year, according PC Data.

Fourth Quarter Product Releases

Other significant product releases in the fourth quarter included upgrades to the flagship computer-aided design and drafting software, TurboCAD. Both TurboCAD v4 and TurboCAD v4 Professional were introduced, offering significant enhancements over the previous release. Boasting vastly improved compatibility with AutoCAD's formats, TurboCAD v4 Professional supports (ACIS) solid modeling, DWF and DWG file formats, expanded Internet features, database connections, object-oriented programming, and symbol enhancements.

Finally, an upgrade to FormTool, the best-selling forms software was offered in the fourth quarter. FormTool 97 offers a profound new feature enabling users to create, fill and route forms over a network. Additionally, FormTool 97 includes a powerful relational database, over 400 pre-designed forms, over 200 label formats, and postal and UPC bar codes. This product offers businesses a simple, easy to use method for automating workflow systems.

Founded in 1983, international Microcomputer Software Inc. (IMSI) is a leader in developing and publishing premium productivity software for corporate, business and home markets. The Company offers a range of high quality, affordably priced software products including TurboCAD, MasterClips, FloorPlan Plus, FormTool and WinDelete. IMSI is headquartered at 1895 Francisco Boulevard East, San Rafael, CA, 94901-5506, with wholly-owned subsidiaries in the United Kingdom, France, Germany, Australia, South Africa and Brazil. For more information (Analysts Only), contact Linda Grey, Investor Relations Manager 415/251-3000 x. 249 or [e-mail] . For more information (Press Only), contact Jody Flynn, Director of Public Relations 415/257-3000 x. 393 or [e-mail], or visit IMSI's Web site at www.imsisoft.com .

For a consolidated view of the company's fiscal year fourth quarter announcements, view the PowerPoint presentation online at www.imsisoft/about/ir.html .

This press release contains statements that are forward looking. These statements are based on current expectations that are subject to risks and uncertainties. Actual results will vary because of factors such as PC shipment growth, product ship schedules, life cycles, terms and conditions, product mix, competitive products and pricing, customer demand, technological shifts and other issues discussed in the company's Form 10-K. -0-

Note to Editors: IMSI, TurboCAD, FloorPlan Plus, FormTool, WinDelete, MasterClips, MasterPhotos, Master Publisher, and Hijaak are trademarks of IMSI. Other products and companies mentioned herein are used for identification purposes only and may or may not be trademarks of their representative companies.

     INTERNATIONAL MICROCOMPUTER SOFTWARE INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                             (Unaudited)

                                     Three Months Ended June 30,
                                  1997                1996
                              ----------- ------  ----------- ------
Net revenues                  $11,447,166 100.0%  $ 7,255,771 100.0%
Product costs                   4,446,909  38.8%    2,338,399  32.2%
Gross margin                    7,000,257  61.2%    4,917,372  67.8%

Costs and expenses:
  Sales and marketing           3,354,967  29.3%    2,716,261  37.4%
  General and administrative      920,179   8.0%      649,694   9.0%
  Research and development      1,247,341  10.9%    1,011,844  13.9%
    Total operating expenses    5,522,487  48.2%    4,377,799  60.3%

Operating income                1,477,770  12.9%      539,573   7.4%

Other expense                      73,965   0.6%       72,312   1.0%

Income before taxes             1,403,805  12.3%      467,261   6.4%

Provision for income taxes        544,959   4.8%      178,048   2.5%

Net income                    $   858,846   7.5%  $   289,213   4.0%
Net income per common and
 common equivalent share            $0.15               $0.05

Average common and common
 equivalent shares used to
  compute earnings per share    5,805,225           5,424,265


                                    Twelve Months Ended June 30,
                                  1997                1996
                              ----------- ------  ----------- ------
Net revenues                  $41,839,795 100.0%  $25,679,017 100.0%
Product costs                  16,893,342  40.4%    8,261,583  32.2%
Gross margin                   24,946,453  59.6%   17,417,434  67.8%

Costs and expenses:
  Sales and marketing          12,025,941  28.7%    9,888,558  38.5%
  General and administrative    3,987,747   9.5%    2,556,757  10.0%
  Research and development      4,565,334  10.9%    3,170,937  12.3%
    Total operating expenses   20,579,022  49.2%   15,616,252  60.8%

Operating income                4,367,431  10.4%    1,801,182   7.0%

Other expense                     130,033   0.3%      262,374   1.0%

Income before taxes             4,237,398  10.1%    1,538,808   6.0%

Provision for income taxes      1,640,895   3.9%      585,236   2.3%

Net income                    $ 2,596,503   6.2%  $   953,572   3.7%
Net income per common and
 common equivalent share            $0.47               $0.18

Average common and common
 equivalent shares used to
  compute earnings per share    5,578,552           5,422,445


                 CONDENSED CONSOLIDATED BALANCE SHEETS
                              (Unaudited)

                                           June 30,     June 30,
                                             1997         1996
                                          -----------  -----------
ASSETS
Cash and cash equivalents                 $ 1,126,042  $   387,406
Receivables, less allowances for
 doubtful accounts and returns of
  $2,943,149 and $1,301,509                 7,535,634    4,121,210
Inventories                                 3,472,526    2,538,093
Other assets                                5,184,204    4,011,669
    Total assets                          $17,318,406  $11,058,378

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities                       $ 7,744,929  $ 5,971,998
Long-term debt and other obligations        2,078,355      564,571
Shareholders' equity                        7,495,122    4,521,809
    Total liabilities & shareholders'
     equity                               $17,318,406  $11,058,378

CONTACT: IMSI

Linda Grey, 415/257-3000, x249 (IR)

E-Mail: [e-mail]