Interactive Systems Worldwide (ISWI) Signs Letter of Intent for Development and Marketing of New Product.

- Proposed Joint Venture with Techmatics Would Include Strategic Investment in ISWI -

WEST PATERSON, N.J. -- Interactive Systems Worldwide, Inc. (NASDAQ: ISWI), has signed a Letter of Intent (LOI) with Techmatics Inc. to jointly develop and market a new product that enables fixed-odds exotic race betting while satisfying pari-mutuel regulations.

Under the terms of the LOI, Techmatics will provide the design of the product, and ISWI will provide the programming services required to develop the software. Both companies will retain certain marketing rights. ISWI will be entitled to certain royalty payments for the future use of its developed software. As part of this proposed transaction, Techmatics will invest $1.8 million in ISWI, in exchange for 2.4 million shares of Common Stock.

Bernard Albanese, CEO of ISWI, said: "We are thrilled to be involved in the development and marketing of this exciting new product for horse race wagering. We see it as a perfect complement to our fixed-odds/pari-mutuel hybrid product, which is primarily aimed at the market segment of traditional straight bets. We are optimistic that this transaction, which will address the Company's immediate liquidity issues, can be consummated over the next month. This transaction, coupled with the cost-cutting measures that we have implemented, and increased revenues that we anticipate from our existing contracts, will serve as the basis for the Company's plan to regain and sustain compliance with the NASDAQ stockholders' equity requirement that we expect to submit by the end of today."

The transaction contemplated by this non-binding LOI is subject to entering into a definitive agreement by the parties, and the raising of the necessary capital by Techmatics. The definitive agreement is expected to be signed within 30 days.

Barry Mindes, President of Techmatics, said: "We are pleased to join forces with ISWI in this new strategic relationship. Techmatics is making this investment in ISWI because we are convinced that ISWI's unrivalled skills in developing and operating sophisticated gaming systems, will allow us to further our new horserace wagering product and revolutionize horserace wagering throughout the world."

Mr. Mindes added: "Our system, for which patent protection is pending, is unique in the history of horseracing. It allows bettors to place fixed-odds bets, while still satisfying pari-mutuel wagering laws. Furthermore, the system offers a multitude of betting options such as the order of finish of the horses in a race, the winners of a series of races, etc. It also has applications for other types of wagering."

Due to federal legislation, including the Unlawful Internet Gambling Enforcement Act (UIGE), pari-mutuel horserace wagering is currently the only legal form of online wagering in the U.S.

The Company intends to submit its plan to achieve and sustain compliance with the NASDAQ Capital Market stockholders' equity requirement to NASDAQ later today. However, there can be no assurance that the NASDAQ Staff will accept our plan of compliance and grant us additional time to complete it. If the NASDAQ Staff determines not to accept the plan, NASDAQ will provide written notification that the Company's securities are subject to delisting. At that time, the Company may appeal the NASDAQ Staff's decision to a NASDAQ Listing Qualifications Panel. The filing of an appeal would stay the delisting of the Company's securities until such time as the Panel issues a written determination following the hearing.

About Interactive Systems Worldwide Inc.

Interactive Systems Worldwide Inc. (NASDAQ: ISWI) has designed, developed and patented a proprietary software system, the SportXction System, which enables play-by-play wagering during the course of live sporting events. ISWI, through its wholly owned subsidiary Global Interactive Gaming (GIG), operates the SportXction[R] System in the U.K., in conjunction with established media and traditional wagering partners. The system can accept wagers from the Internet, handheld wireless devices, interactive televisions, and standalone kiosks. The system can be used for any live broadcast event worldwide.

About Techmatics Inc.

Techmatics, was founded early in 2006 by Barry Mindes to develop advanced technology and computer system designs for sports and financial transaction processing related activities. Mr. Mindes brings over 20 years of experience in the design, development and implementation of stock exchange and gaming related projects to its activities. Included are stock exchanges in New York and Chicago and gaming systems in New York, New Jersey, Nevada and Europe. Mr. Mindes is the founder and former CEO of ISWI.

FORWARD-LOOKING STATEMENTS: The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements, including, but not limited to, whether the described agreement will actually be signed and consummated in 30 days, or ever; whether Nasdaq will consider that the Company's plan adequately addresses the issues raised by the Nasdaq Staff deficiency letter; whether the new product satisfies all applicable pari-mutuel rules and regulations; and whether the Company will experience increased revenues for this new product or any of its existing products. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date thereof. Readers should carefully review the risks described in other documents the company files from time to time with the Securities and Exchange Commission, including Annual Reports, Quarterly Reports and Current Reports on Form 8-K.