SEARCH NEWS:

 

Interactive Systems Worldwide Inc. Announces Q2 Results

Mr. Barry Mindes, Chairman of ISWI, stated, ``We are extremely pleased to report that our second quarter showed both record revenue and earnings, with net profit margins expanding to an impressive 45%. We expect net margins to expand in the third and fourth quarter and anticipate that ISWI will earn approximately $2 million in net income for the fiscal 2001 year.

'Global Interactive Gaming (GIG) visited our corporate offices in both March and April to conduct more extensive testing of the SportXction software system, and the software satisfactorily performed all functions tested. We anticipate GIG will formally launch their version of this software during the 2001 calendar year. In addition, the shareholders approved a corporate name change to Interactive Systems Worldwide Inc. and the Company continued to repurchase common stock under its previously announced stock buyback program during the quarter.''

Financial Summary:

For the three months ended March 31, 2001 the Company reported net income of $444,910, or $0.05 per share, on a basic and diluted basis using 8,935,725 and 9,245,529 weighted average common shares outstanding basic and diluted, respectively, compared with a net loss of $590,723 or $ 0.07 loss per share, on a basic and diluted basis using 8,576,363 weighted average common shares outstanding for the three months ended March 31, 2000. This turnaround of the Company's performance represents an increase in earnings of over $1,000,000, and the Company's fourth consecutive profitable quarter.

Net revenues of $974,200 were reported for the three months ended March 31, 2001, compared with revenues of $124,605 reported for the comparable prior year period. This large increase in net revenues is attributable to the recognition of license fees of $1,000,000 from the Company's agreements with Global Interactive Gaming LLC and Global Interactive Gaming Limited (collectively ``GIG''), net of $25,800 deferred expense amortization resulting from warrants granted in connection with the GIG Agreements.

The Company incurred approximately $252,000 in cost of revenues, research and development costs for the three months ended March 31, 2001, compared with approximately $248,000 for the comparable prior year period. There was a decrease in total operating expenses, which resulted from the Company's decision to discontinue its Nevada operations as of June 30, 2000. As of March 31, 2001, the Company had cash, cash equivalents, and investments in marketable securities totaling $3,727,028.

For the first six months of fiscal 2001, ISWI reported revenues of $1,698,400, compared with $131,876 reported in the comparable year ago period. Net income for the first six months of fiscal 2001 was $718,840, or $.08 per share, on a basic and diluted basis using 8,982,895 and 9,283,380 weighted average common shares outstanding basic and diluted, respectively, compared to a loss of $1,337,173, or $.16 per share, on a basic and diluted basis using 8,213,128 weighted average common shares as reported during the first six months of fiscal 2000.

Revenues and Earnings Guidance

ISWI's continuing licensing agreements with Global Interactive Gaming have not only helped the Company become profitable, but provides for a minimum annual growth in license revenues of 20%. The Company remains comfortable with its prior earnings projection of approximately $2 million, for the fiscal 2001 year, based on its contractual schedule of minimum license fees.

The Company estimates that it will report revenues of $1.25 million in license fees, with net income of between $650,000 and $750,000 (earnings between $.07/share and $.08/share) during both the third and fourth fiscal quarters of 2001. In addition to the minimum license fees, the Company anticipates that it will receive the first installment of 50% of the accelerated software delivery bonus from GIG during this fiscal year, which along with a continuation of the stock repurchase program, would increase earnings to approximately $0.25/share (basic).

Software Acceptance Testing

In October 2000, the Company announced that it had completed, four months ahead of schedule, the first phase of Acceptance Testing for the first software deliverable under its Agreements with GIG. This event qualifies the Company for an accelerated delivery bonus of up to $600,000. During March and April 2001, GIG has conducted more extensive functional testing of the software.

The SportXction System software satisfactorily performed all of the functions tested. The bonus criteria will be satisfied when the final phase of Acceptance Testing is successfully confirmed at GIG's site. The final phase of Acceptance Testing will be held when GIG has its system available for such testing, which ISWI estimates is not likely until late summer.

Corporate Update

On April 9, 2001, the Company elected to change its independent public accountants based upon cost considerations. As of April 9, 2001 it retained Richard A. Eisner & Company, LLP as its independent public accountants.

On February 28, 2001, at the Company's annual meeting of shareholders, an amendment to the Company's Certificate of Incorporation, to change the Company's name to Interactive Systems Worldwide Inc. was approved. The purpose of the name change was to reflect the changes in the business focus of the Company that have occurred during the past year.

The Company believed that its original name was too limiting and that the new name is more descriptive of the Company's business and technology. The change in corporate name did not affect the status of the Company or the rights of any stockholder in any respect, or the validity or transferability of outstanding stock certificates. The Company has retained the trading symbol ``ISWI''.

On December 20, 2000, the Company announced that its Board of Directors had authorized the repurchase of up to $500,000 worth of the Company's Common Stock. The repurchase plan will be used as a means of enhancing shareholder value, and to satisfy outstanding Company obligations for employee options and warrants. As of March 31, 2001, the Company purchased 132,100 shares of Common Stock at an aggregate purchase price of $136,097.

The GIG Licensing Agreement and SportXction Software

The Company's financial turnaround is the result of the Agreements it signed with GIG on March 17, 2000. Under the Agreements, GIG was granted the exclusive license to market, distribute and use the Company's interactive SportXction software, technology and patents on the Internet, interactive television, and wireless delivery modes, for contests and wagering on sporting events world-wide, other than for wagering in Nevada.

Under these Agreements, the Company will be paid 25% of the gross profit for the use of its technology for contests or other transactions. For wagering, the Company will be paid the lesser of 25% of the gross profit or 1% of the gross handle. The Company will bear no share of the cost of equipment, facilities or other operating expenses of GIG.

These percentage fees are subject to guaranteed minimum annual license fees of $3 million in the first year; $5 million in the second year; and increasing by 20% per year thereafter, for a total minimum of $250 million over the 14 year term of the Agreements, after which the license to GIG is fully paid. At all times the minimum license fee for the next four quarters is kept in a third party escrow account. As of March 31, 2001, the Company had received $4,000,000 in connection with the Agreements, and there is $5,250,000 being held in the escrow account.

SportXction is a patented, real-time, software system, which allows a player to make play-by-play wagers on a sporting event while the event is in progress. Wagering may be conducted while viewing a television broadcast of a sporting event. The wagers offered are mostly oriented to short-term plays, for example, is the next play a run or a pass, is the next pitch a ball or a strike, does the shooter make two foul shots, and many more, including parlays, in most sports.

The wagers have odds associated with them, which relate to the probable outcome of the proposition being wagered upon, and the odds are adjusted in real time by proprietary artificial intelligence software to reflect player sentiment, as derived from the betting patterns. The system also supports traditional, pre-game sports wagers.

< Gaming News