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ISWI reports Q1 results

Net loss and net loss per share applicable to common stock (basic and diluted) for the three months ended December 31, 2007 were $300,000 and $0.02, respectively, compared with $1.0 million and $0.09 during the same quarter last year. This decrease of 70% in the net loss applicable to common stock in the 2007 period is primarily due to the Company's increased revenues and its cost reduction initiatives.

Cost of revenues for the three months ended December 31, 2007 was $181,000, as compared with $126,000 during the same period in the prior year. The increase in 2007 was primarily due to higher expenses associated with the OLG software development.

Research and development expense for the three months ended December 31, 2007 was $4,000, as compared with $111,000 during the same period in the prior year. This decrease in 2007 was primarily due to significantly lower payroll costs.

General and administrative expenses for the three months ended December 31, 2007 were $297,000, as compared with $860,000 during the same period in the prior year. The decrease was primarily due to lower payroll costs as well as a provision in the 2006 period for anticipated costs associated with GIG's terminated office lease and decreased non-cash compensation expense associated with warrants and common stock which were issued to consultants during the 2006 period.

Interest income for the three months ended December 31, 2007 was $0, as compared to $21,000 during the same period in the prior year. This decrease is the result of a decrease in interest earned from cash and short-term investments.

Liquidity and Capital Resources

As of December 31, 2007, the Company had liquid resources totaling $193,000, which consisted of cash and cash equivalents.

The Company's operations currently do not generate positive cash flow. The Company has taken a number of steps to improve cash flow by securing minimum monthly cash receipts from existing customers and new licensees and by reducing operating costs in the areas of payroll, rent, professional fees and consultants. On January 22, 2008, pursuant to note purchase agreements, dated as of January 14, 2008, the Company sold $269,000 aggregate principal amount of 14% Non-Negotiable Promissory Notes due July 31, 2008 (the "Notes") in a private placement exclusively to accredited investors who are existing stockholders (including Bernard Albanese, the Company's Chairman and Chief Executive Officer, and Philip Rule, a Director of the Company). The purpose of the financing was to temporarily address the Company's liquidity crisis by providing working capital to enable the Company to continue its operations beyond January 2008 and to pay past due and current accounts payable of the Company.

Management's immediate priority is to address the Company's long-term liquidity issues. The Company anticipates that, based on its current level of revenues and costs and without any proceeds from an equity financing or strategic transaction, its existing resources will be adequate to fund its capital and operating requirements through March 2008.

Sales, Marketing and Development:

The Company continues to market the SportXction(R) Sports Wagering System in those jurisdictions where sports wagering is legal. The Company is in discussions with several domestic and foreign companies in the gaming industry and it is hopeful that it will be able to add additional software licensees and bookmaking partners to the UK service it provides through GIG.

The Company continues software development to add additional features to the SportXction(R) System in order to satisfy the requirements of the Ontario Lottery and Gaming Corporation ("OLG"). In September 2007, the Company announced the receipt of a $175,000 purchase order from OLG to provide software modifications and other services. The Company is currently negotiating a licensing agreement with OLG, which would allow them to conduct a six-month field trial of the modified SportXction(R) product, after its completion, for use in up to two casinos. The Company is optimistic that this field trial will lead to a broader implementation in multiple casinos and other on-site gaming venues throughout Ontario, Canada.

The Company announced in December that it signed an agreement in principle with Neptune Race and Sports Book, Inc. ("Neptune"). This non-binding agreement provides the commercial framework for an anticipated licensing agreement to be negotiated between the two parties for the use of the Company's sports wagering software.

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