8-K 1 doc1.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) April 30, 2003 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 identification No.) incorporation or organization) 75 Rowland Way, Novato, CA 94945 (Address of principal executive offices) (Zip code) (415) 878-4000 (Registrant's telephone number including area code) Item 5. Other Events ____________________________________________ International Microcomputer Software, Inc. ("IMSI") announced on May 1, 2003 that all litigation relating to a July 2001 settlement agreement the Company and its wholly owned subsidiary ArtToday.com, Inc. had originally entered into with Imageline, Inc. ('Imageline") and its president, George Riddick ("Riddick") has now been restructured and fully and finally resolved. Under the terms of the restructured settlement agreement, IMSI agreed to the following: - An immediate payment of $621,750 - A promissory note for $178,250 plus simple interest of 10% per annum due on or before April 18, 2004 - Licensing and republishing rights to certain intellectual property - The issuance of 600,000 fully vested three year warrants with a strike price of $0.46 per share to purchase the Company's common stock In return, the restructured settlement ends all litigation among the parties, eliminates an existing judgment against IMSI, and removes a lien on certain of IMSI's assets. The licenses granted in this settlement agreement will not negatively affect IMSI's ongoing operations and will allow the Company to end an expensive and time consuming legal dispute. As a result of this settlement, and, as will be disclosed in the notes to its March 31, 2003 financial statements, IMSI will recognize an additional non-operating charge of approximately $380,000 in its financial statements for the quarter ended June 30, 2003. The July 2001 settlement agreement was a settlement of a $2.6 million arbitration award in favor of Imageline against IMSI for intellectual property violations and attorney's fees. The award consisted of $1.2 million in actual damages, $1.2 in punitive damages and $0.2 million in attorneys' fees. The July 2001 settlement agreement called for the following; - Dismissal of any further appeals of the award - Cash payments to Imageline over a 12 year period, starting October 2001 and having a then present value of approximately $833,000 as follows: a) 12 monthly payments of $11,500 from October 5, 2001 to September 5, 2002 b) Four equal quarterly payments of $78,500 beginning on September 30, 2002 c) 132 monthly payments of $6,500 beginning October 5, 2002 - Rights to royalties and inventories pertaining to the MasterClips line of products - A percentage of any net recovery IMSI obtained from any indemnification claims IMSI had against third parties associated with the original circumstances leading to the arbitration award As a result of the July 2001 settlement, IMSI recognized a reduction in liabilities of $2 million in its June 30, 2001 financial statements. As of the date of this filing, IMSI had paid approximately $420,000 related to the July 2001 Settlement. No further payments will be made under the terms of July 2001 mutual settlement as it has been replaced by the current settlement. (a) Exhibits Press Release dated May 1, 2003 announcing settlement of Imageline dispute