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Interactive Systems Worldwide Reports Loss

The financial results from the quarter ended December 31, 2002 were as we anticipated and represent the migration from being a licensor to an operator of our wagering software," stated Barry Mindes, Chairman and Chief Executive Officer. "We are pleased with the progress of the Company in several areas. This quarter marks the first in the Company's history where SportXction(TM) was enjoyed by customers on the Internet through our agreement with ukbetting plc. We have continued our discussions with both interactive television and wireless communication providers with the goal of expanding the modes of delivery for SportXction(TM). Having achieved two successful product launches and excellent feedback from consumers, we are hopeful that the remainder of 2003 will be a year of continued customer acceptance and increased market penetration."

FINANCIAL SUMMARY

Three months ending December 31, 2002

Net revenues for the three months ended December 31, 2002 ("Fiscal 2003") decreased by 100% to $0. The decrease in Fiscal 2003 is attributable to the discontinuation of the minimum royalties due to GIG's default under the License Agreements and the eventual acquisition of GIG on July 31, 2002. During Fiscal 2003, license fees and service charges from the Company's agreement with ukbetting plc totaled $462 (rounded down to $0). ukbetting introduced the SportXction(TM) system to a limited number of their customers starting in mid-November, 2002. The system was recently "officially" launched (see "Corporate Update"). As a result, we anticipate revenues will not be significant during the quarter ending March 31, 2003, with increasing amounts in future quarters as we gain new partners and the product is promoted so that the number of users increases.

Research and development expense for Fiscal 2003 increased by 112% to $299,000. The increase in Fiscal 2003 resulted from higher programming and development costs as a result of the inclusion of GIG's expenses in the Company's consolidated results subsequent to the acquisition.

General and administrative expenses for Fiscal 2003 increased by 222% to $1,012,000. The increase in Fiscal 2003 was primarily due to an increased cost base as a result of the acquisition of GIG, increased employee salary and benefit expenses and increased professional fees.

Interest income increased by 64% to $54,000 during Fiscal 2003, which was due to a higher cash balance.

Income tax expense of $332,000 in Fiscal 2002 represented the utilization of a portion of the Company's net operating loss carryforwards and deductible temporary differences for which the tax benefit had been previously recognized.

Net loss and net loss per share (basic) for Fiscal 2003 represented decreases by 367% and 380% to ($1,257,000) and ($0.05), respectively. The decrease is the result of lower revenues and higher costs (as described above).

As of December 31, 2002, the Company had liquid resources totaling $6,664,000 and a tax receivable of approximately $1,173,000. These include cash and cash equivalents in the amount of $4,194,000, and short-term investments in the amount of $2,470,000. Cash and cash equivalents consist of funds held on deposit with banking institutions with original maturities of less than 90 days. Investments are limited to investment grade marketable securities with maturities of less than 18 months. At December 31, 2002, the Company had a receivable relating to a U.K. tax refund of approximately $1,173,000, which was collected in January 2003.

CORPORATE UPDATE

On September 18, 2002, the Company announced that GIG had signed an agreement with ukbetting for the incorporation of the SportXction(TM) system into "totalbet live", a product to be used on ukbetting's sports wagering web sites. The entire customer base of ukbetting includes approximately 138,000 wagering accounts in the U.K. In this non-exclusive agreement, which provides both parties with a share of the wagering revenue, GIG furnishes the technology and operates the system, and ukbetting is responsible for marketing the product, first level customer support and processing customer financial transactions.

In November 2002, totalbet live successfully completed live field trials in which ukbetting customers used play money to test the system. In addition, totalbet live was successfully launched through a gradual introduction using a series of games during which the number of users playing was gradually ramped up. As a result, the system was offered to a limited number of customers during the three months ending December 31, 2002. Repeated play by the initial customers has been very high and the Company has exceeded its intended wagering gross profit margins. The product was "officially" launched recently, supported by a public relations and promotion campaign led by ukbetting. Based upon initial favorable operating results, ukbetting introduced the SportXction(TM) System on a second on-line wagering website in late January 2003, ukbetting.com. In addition, the Company recently announced that a wagering product for cricket was launched at the start of the World Cup hosted by South Africa and Zimbabwe last week.

SYSTEM ENHANCEMENT

A major new version of the SportXction(TM) system, which supports wagering on multiple potential outcomes to a betting proposition, is currently being tested and is planned for introduction into live wagering this Spring. This system allows propositions such as; which of several soccer players will score next; will the margin of victory be one, two, three, or over three goals; etc. The Company believes that this system will provide more exciting wagering opportunities, with more choices and correspondingly longer odds offered and larger payouts.

REVENUE AND EARNINGS GUIDANCE

As announced with our Fiscal 2002 year-end results, the Company has significantly reduced its expectations of short-term profitability and cash flow. The Company expects revenue from its agreement with ukbetting not to be significant until the start of this summer's sports season including the start of the next English Football (soccer) season, with revenue projected to increase in future quarters as we gain new partners and the product is promoted so that the number of users grows. The Company expects to incur losses and negative cash flow at least for the year ended September 30, 2003. The Company anticipates that its existing resources, including the recently received U.K. tax refund of $1.2 million, will be adequate to fund its capital and operating requirements for approximately the next 18 months based upon the Company's current business plan.

SPORTXCTION SOFTWARE

ISWI's product, the SportXction(TM) system, is a patented, real-time, software system, which allows a player to make play-by-play wagers on a sporting event while viewing a television broadcast of the sporting event. The wagers have odds associated with them, 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.

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