Interactive Systems Worldwide Inc. Announces Fiscal 2004 Financial Results

Interactive Systems Worldwide Inc. Announces Fiscal 2004 Financial Results

WEST PATERSON, N.J., Dec. 22 /PRNewswire-FirstCall/ -- Interactive Systems Worldwide Inc., (NASDAQ:ISWI) recently reported its audited financial results for its fiscal year ended September 30, 2004. Revenues for the year were $45,000, as compared to $14,000 during Fiscal 2003. Net loss and net loss per common share (basic and diluted) for Fiscal 2004 were $5.99 million and $0.64, respectively, as compared to $5.58 million and $0.63, respectively, during Fiscal 2003.

ISWI President, Bernard Albanese, commented, "We are rapidly approaching the commercial launch of our first interactive television implementation and continue to build strong relationships with established and new strategic partners. We are confident this progress will significantly expand the user base of our SportXction(TM) play-by-play betting system in the coming year. As we announced in October, we completed the development of the iTV version of SportXction(TM) which is currently in the late stages of testing by our customer. Recently, we broadened our international customer base with the successful launches of Victor Chandler International and the Spanish wagering website of Sportingbet. Since August, we have seen an increase in betting volume which has led to a more efficient operation of our SportXction(TM) system and higher margins. We look forward to delivering marked improvement in our financial results in 2005 after the successful launch of our iTV product."

FINANCIAL RESULTS

Net revenues for Fiscal 2004 were $45,000, as compared to $14,000 during Fiscal 2003. The increase in Fiscal 2004 is due to the addition of a non- wagering prediction game, new partners and an increase in the number of events covered. In June and July 2004, the Company successfully launched a contest version (i.e. non-wagering) of its SportXction(TM) System during the Tri- Nations cricket tournament for sportinglife.com. Revenues for Fiscal 2004 also include service charges from the Company's agreements with Sportingbet plc (launched in August 2003), totesport.com (launched in June 2004) and the UK operating arm of Victor Chandler (launched in August 2004), which were not in "live" operation in Fiscal 2003. For the quarter ending December 31, 2004, the Company expects a moderate increase in revenues as compared to the quarter ended September 30, 2004, with more significant increases projected in future quarters as it launches the SportXction(TM) System on BSkyB's digital television platform and gains new partners.

Cost of revenues, research and development expense for Fiscal 2004 were $1.94 million, as compared to $1.49 million during Fiscal 2003. The increase in Fiscal 2004 was primarily due to higher programming costs as no software development costs were capitalized in Fiscal 2004 as well as an increase in the amortization of previously capitalized development costs.

General and administrative expenses during Fiscal 2004 were $3.63 million, as compared to $3.68 million during Fiscal 2003. The decrease in Fiscal 2004 was primarily due to lower payroll and benefit costs resulting from a reduced headcount and sublease income partially offset by higher business development and consulting fees.

During Fiscal 2003, the Company wrote-off $566,000 related to certain software purchased by GIG prior to its acquisition by ISWI which represented the purchase price allocated to this software in connection with the acquisition of GIG. During Fiscal 2004, the Company reversed $138,000 of this write-off.

Interest expense (income) during Fiscal 2004 was $606,000, as compared to ($146,000) during Fiscal 2003. In Fiscal 2004, this non-cash expense represents interest on the Debentures which was satisfied in shares of Common Stock, amortization of debt discount which is being accreted over the life of the debt using the effective interest method as well as an amount for amortization of debt issuance costs, net of interest income of $70,000. The amount in Fiscal 2003 represents interest income from cash and short term investments.

Net loss and net loss per share (basic and diluted) for Fiscal 2004 were $5.99 million and $0.64, respectively, as compared to $5.58 million and $0.63, respectively, during Fiscal 2003. The increase is primarily the result of interest expense associated with the Debentures (as described above).

As of September 30, 2004, the Company had liquid resources totaling $3.12 million. These include cash and cash equivalents in the amount of $2.83 million and investments in the amount of $285,000. Investments are limited to investment grade marketable securities with maturities of less than 12 months. Subsequent to year-end, the Company raised additional capital in a private placement of Series B Preferred Stock and realized approximately $2.6 million in cash after expenses of the offering.

The Company's operations currently do not generate positive cash flow and it anticipates that its existing resources including those generated by its recent financing will be adequate to fund its capital and operating requirements through at least the next 15 months based upon the Company's current business plan and longer, subject to the revenues generated by the SportXction(TM) System. The Company believes that this is a sufficient period of time to allow the Company to establish a successful enterprise in the intended market.

SPORTXCTION SOFTWARE

The Company's product, the SportXction(TM) system, is a patented, real- time, software system, which allows a player to make play-by-play wagers during the course of a sporting event while viewing or listening to a broadcast of the sporting event. The wagers have odds associated with them, and the odds are adjusted automatically by the system 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.

This press release contains "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 including, but not limited to: whether we will significantly expand the user base in the coming year, whether the SportXction(TM) system will be launched with our first digital television customer, whether the Company will sustain its recent margins, whether the Company will deliver marked improvements in its financial results, whether or when the Company will enter into agreements with additional partners to use the SportXction(TM) system, how long the Company will continue to incur significant losses and negative cash flow, how long the Company will continue to generate an insignificant amount of revenue, whether the Company has adequate capital to fund operations for the next fifteen months and whether the Company will need to raise additional capital and if so whether it will be able to do so, on what terms and the degree of dilution to existing shareholders that will result therefrom. Investors are cautioned that forward-looking statements are inherently uncertain. Actual performance and results of operations may differ materially from those projected or suggested in the forward-looking statements due to certain risks and uncertainties, including, without limitation, the ability of the Company and its business partners to attract adequate numbers of players to its wagering system and the ability of the Company to develop and market other opportunities for its products. Additional information concerning certain risks or uncertainties that would cause actual results to differ materially from those projected or suggested in the forward-looking statements is contained in the Company's filings with the Securities and Exchange Commission, including those risks and uncertainties discussed in its Form 10-KSB for the fiscal year ended September 30, 2004. The forward-looking statements contained herein represent the Company's judgment as of the date of this press release, and the Company cautions the reader not to place undue reliance on such matters.

For further information please contact: Barry Mindes, Chairman and CEO, bmindes@sportxction.com, or Bernard Albanese, President, balbanese@sportxction.com, or James McDade, Chief Financial Officer, jmcdade@sportxction.com, all for ISW, +1-973-256-8181; or investors, Matthew Hayden, President of Hayden IR, +1-858-456-4533, matt@haydenir.com, for Interactive Systems Worldwide Inc.

Interactive Systems Worldwide Inc. and Subsidiaries
Consolidated Statements of Operations

(Amounts in thousands except share and per share data)

Years Ended
September 30,
2004 2003

Revenues, net $45 $14

Costs and expenses:
Cost of revenues, research
and development expense 1,935 1,491

General and administrative expense 3,630 3,680
Loss (income) related to
impairment of software (138) 566
5,427 5,737

Operating loss (5,382) (5,723)

Interest expense (income), net 606 (146)

Net loss $(5,988) $(5,577)

Net loss per
common share - basic and diluted $(0.64) $(0.63)

Weighted average basic and diluted
common shares outstanding 9,322,906 8,914,718



Interactive Systems Worldwide Inc.
Summary Consolidated Balance Sheet Data
(Unaudited)
(All amounts in thousands)

September 30, September 30,
2004 2003

Cash and short term investments
(including marketable securities) $3,117 $4,317
Total current assets $3,313 $4,498

Total assets $4,505 $5,844

Current liabilities $1,075 $863
Total liabilities $2,613 $863

Stockholders' equity $1,892 $4,981



Source: Interactive Systems Worldwide Inc.

CONTACT: Barry Mindes, Chairman and CEO, bmindes@sportxction.com, or
Bernard Albanese, President, balbanese@sportxction.com, or James McDade, Chief
Financial Officer, jmcdade@sportxction.com, all for ISW, +1-973-256-8181; or
investors, Matthew Hayden, President of Hayden IR, +1-858-456-4533,
matt@haydenir.com, for Interactive Systems Worldwide Inc.


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