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      Response Letter

      September
        8, 2005

      Mr.
        Brad
        Skinner, Accounting Branch Chief

      Ms.
        Christine Davis, Staff Accountant

      United
        States Securities and Exchange Commission

      Washington,
        D. C. 20549

      Sent
        via
        EDGAR

      Dear
        Mr.
        Skinner:

      We
        submit
        this letter in response to comments from the staff of the Securities and
        Exchange Commission (the “Staff”), received by letter dated August 24, 2005
        relating to International Microcomputer Software, Inc.’s (the “Company”) Form
        10-KSB for the fiscal year ended June 30, 2004 filed on September 13, 2004
        (File
        No. 000-15949).

      We
        appreciate your review comments to assist us in our compliance with the
        applicable disclosure requirements. Management and the Board of IMSI are
        committed to fulfilling our obligations to the public.

      Set
        forth
        below are the Staff’s comments followed by our responses.

      Item
        1.

      Comment:
        We
        note your response to previous comment number 1. It remains unclear to us
        why
        you consider the transfers into and out of your brokerage account to be
        investing cash flow. Your reconciliation appears to suggest that these transfers
        effectively represent the gross purchases and sales of securities considering
        that such amounts do not appear to be provided elsewhere within your response.
        We note that you present “gains on marketable securities” which appears to
        represent realized gains on these securities according to your statements
        of
        operations, but we were unable to locate the gross purchases and sales relating
        to these securities. Please explain to us in more detail why you believe
        such
        cash flows are investing cash flows and refer us to the authoritative guidance
        that supports your accounting.

      Answer: As
        noted in our response to Item 1 of the letter to you dated August 19, 2005,
        we
        presented the activity related to trading securities in our cash flow statement
        as follows:

                ·

                The
                  unrealized gains on marketable securities of $1,982,400 were included
                  in
                  “Cash flows from operating activities - Adjustments to reconcile
                  net
                  income to net cash used by operating
                  activities”.

          1

                ·

                The
                  gains on marketable securities and the expenses pertaining to the
                  marketable securities brokerage account were netted to $583,000
                  and
                  included in “Cash flows from operating activities - Changes in assets and
                  liabilities”.

                ·

                The
                  cash transfers into the investment account of $475,600 were included
                  in
                  “Cash flows from investing
                  activities”.

                ·

                The
                  cash transfers from the investment account of $115,900 were included
                  in
                  “Cash flows from investing
                  activities”.

      We
        now
        realize that our presentation was not in conformity with Paragraph 118 of
        FAS
        115, which provides guidance on the financial statement presentation and
        disclosure of trading securities, as follows -

                ·

                “Because
                  trading securities are bought and held principally for the purpose
                  of
                  selling them in the near term, the cash flows from purchases and
                  sales of
                  trading securities should be classified as cash flows from operating
                  activities.”

      Therefore,
        in the future, the IMSI Consolidated Statements of Cash Flows will classify
        cash
        flows from trading securities as cash flows from operating
        activities.

      The
        gross
        purchases and sales of securities were not shown in our reconciliation or
        the
        financial statements. To clarify that area of interest in future filings,
        we
        have an illustration (Exhibit A) of a trading securities footnote which we
        intend to use when encountering a similar situation in the future. These
        figures
        are within the text of the illustrative footnote. Although not directly relevant
        to the comment, we have expanded our disclosure of margin used in the securities
        account. For background only, as of the IMSI current fiscal year end, there
        is
        no margin utilized in the securities account.

      Item
        2.

      Portion
        of Comment:
        We
        have read your response to prior comment number 3. It does not appear that
        you
        have addressed the impact of the cash flows occurring subsequent to the
        disposition that result from your continued involvement with Keynomics in
        the
        form of a licensing agreement. Please respond by addressing how these ongoing
        cash flows affected your conclusion with respect to paragraph 42 of SFAS
        144.

      Answer:
        We considered this matter as follows, determining there was no impact and
        this
        warranted no mention.

      SFAS
        144,
        Appendix B, Paragraph 111, states:

      Paragraphs
        44(a) and (b) of this Statement refer to adjustments relating to the resolution
        of contingencies that arise pursuant to the terms of the disposal transaction,
        as well as to those that arise from, and that are directly related to, the
        operations of a component of an entity prior to its disposal. Paragraph 25
        of
        Opinion 30 specifies requirements for reporting in discontinued operations
        adjustments related to the disposal of a segment of a business that was reported
        in a prior period. It did not, however, specify the types of adjustments
        to
        which that reporting was intended to apply. Paragraph 25 of Opinion 30, as
        amended by FASB Statement No. 16, Prior
        Period Adjustments,
        stated:

          2

      Circumstances
        attendant to disposal of a segment of a business and extraordinary items
        frequently require estimates, for example, of associated costs and occasionally
        of associated revenue, based on judgment and evaluation of the facts known
        at
        the time of first accounting for the event. Each
        adjustment in the current period of a loss on disposal of a business segment
        or
        of an element of an extraordinary item that was reported in a prior period
        should be separately disclosed as to year of origin, nature, and amount and
        classified separately in the current period in the same manner as the original
        item. If the adjustment is the correction of an error, the provisions of
        APB
        Opinion No. 20, Accounting
        Changes,
        paragraphs 36 and 37 should be applied.

      SFAS
        144,
        Appendix B, Paragraph 112, states:

      SEC
        Staff
        Accounting Bulletin No. 93, Accounting
        and Disclosures Relating to Discontinued Operations,
        clarified for public enterprises the reporting required by paragraph 25 of
        Opinion 30 as follows:

      The
        [SEC]
        staff believes that the provisions of paragraph 25 apply only to adjustments
        that are necessary to reflect new information about events that have occurred
        that becomes available prior to disposal of the business, to reflect the
        actual
        timing and terms of the disposal when it is consummated, and to reflect the
        resolution of contingencies associated with that business, such as warranties
        and environmental liabilities retained by the seller.

      Probably
        the significant fact relates to the value of the activity. The subsequent
        cash
        flows resulting from our 10% investment in Keynomics, L.L.C. total $0 on
        a
        cumulative basis since June 30, 2004 and are not considered material,
        considering SAB No. 99, and therefore:

                ·

                Do
                  not reflect new information about the events that occurred prior
                  to the
                  disposal of Keynomics, Inc.,

                ·

                Do
                  not impact the timing and terms of the disposal, and

                ·

                Do
                  not reflect the resolution of contingencies associated with that
                  business.

      Therefore,
        we believe that we have no ongoing reporting requirements regarding our
        licensing agreement with Keynomics, L.L.C. As such, we reported the disposal
        of
        Keynomics, Inc. in accordance with paragraph 42 of SFAS 144, which stipulates
        the following two conditions that must be met for the results of operations
        of a
        component of an entity to be reported in discontinued operations:

                ·

                The
                  operations and cash flows of the component have been (or will be)
                  eliminated from the ongoing operations of the entity as a result
                  of the
                  disposal transactions (e.g., as shown in the discontinued operations
                  section of the income statement).

                ·

                The
                  entity will not have any significant continuing involvement in
                  the
                  operations of the component after the disposal transaction (e.g.,
                  subsequent cash flows are
                  immaterial).

          3

      Additionally,
        SAB Topic 5.E offers guidance on whether circumstances exist that may lead
        the
        staff to conclude that the risks of the business have not been transferred
        to
        the new owners and that a divestiture has not occurred. Topic 5.E indicates
        that
        factors to consider in determining whether a transaction should be accounted
        for
        as a divestiture: (1) continuing involvement by the seller in the business
        (such
        continuing involvement may take the form of veto power over major contracts
        or
        customers, significant voting power on the board of directors, or other
        involvement in the continuing operations of the business entailing risks
        or
        managerial authority similar to that of ownership); (2) absence of a significant
        financial investment in the business by the buyer; (3) repayment of debt,
        which
        constitutes the principal consideration in the transaction, is dependent
        on
        future successful operations; or (4) the continued necessity for debt or
        contract performance guarantees on behalf of the business by the seller.
        Overall, these considerations are not applicable to our sale of Keynomics,
        Inc.

      Portion
        of Comment:
        Refer to authoritative guidance that supports our assertion that the
“arms-length” and “non-exclusive” nature of the licensing agreement is relevant
        to our conclusion (re: SFAS 144, paragraph 42).

      Answer:
        “Arms-length” and “non-exclusive” are not, to our knowledge, tests from
        authoritative literature, and we only used these terms to illustrate our
        thought
        process.

      We
        trust
        that we have addressed your comments with our responses. If you have further
        comments, please contact me at (415) 878-4011 or Mr. Robert O’Callahan, Chief
        Financial Officer, at (415) 878-4020.

      Very
        truly yours,

      International
        Microcomputer Software, Inc.

      /s/
        Martin Wade III

      Martin
        Wade III

      Chief
        Executive Officer

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      Exhibit
        A

      Example
        of planned future disclosure referenced in answer to Comment 1.

      Marketable
        Securities (illustration)

      Short-term
        investments comprise equity securities, all of which are classified as trading
        securities and are carried at their fair value based on the quoted market
        prices
        of the securities at June 30, 2004. Net realized and unrealized gains and
        losses
        on trading securities are included in net earnings. For purpose of determining
        realized gains and losses, the cost of securities sold is based on specific
        identification. For the year ended June 30, 2004, gross purchases of trading
        securities totaled $2,402,000 and gross sales of trading securities totaled
        $1,198,000. The marketable securities balance of $2,151,000 is net of a margin
        loan of $584,000. Margin interest expense rates ranged between 5.37% and
        6.37%
        during the year and margin interest expense totaled $2,556.

      The
        composition of trading securities, classified as current assets, is as follows
        at June 30, 2004 (all amounts in thousands):

                Cost

                Fair
                  Value

                Common
                  stock

                $

                1,182

                $

                2,151

                Total
                  trading securities

                $

                1,182

                $

                2,151

      Investment
        income for the year ended June 30, 2004 consists of the following (all amounts
        in thousands):

                Gross
                  realized gains from sale of trading securities

                $

                585

                Dividend
                  and interest income

                78

                Net
                  unrealized holding gains

                1,982

                Net
                  investment income

                $

                2,645

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