Interactive Systems Worldwide Announces Fiscal 2006 Financial Results.

WEST PATERSON, N.J. -- Interactive Systems Worldwide, Inc. (NASDAQ: ISWI) today reported its audited financial results for its fiscal year ended September 30, 2006. Revenues for the year were $111,000, as compared with $162,000 during fiscal 2005. Net loss and net loss per share applicable to common stock (basic and diluted) for Fiscal 2006 were $4.7 million and $0.40, respectively, as compared with $7.3 million and $0.71, respectively, during fiscal 2005. The decrease in the net loss applicable to common stock in fiscal 2006 is primarily due to lower interest expense, the beneficial conversion feature associated with the issuances of preferred stock in fiscal 2005, and lower research and development expenses.

Since the year end, ISWI has achieved several important milestones, including the successful launch of the Company's enhanced, fully-integrated version of SportXction([R]) with Sportingbet and Ladbrokes, two of the world's leading bookmakers, and the deployment of its unique standalone play-by-play betting product with BetShop.

Bernard Albanese, ISWI's Chief Executive Officer, said, "We are encouraged by the feedback from the launches with Sportingbet and Ladbrokes. We remain optimistic that we will see increased revenues and improvement in our financial results despite the short-term challenges that we are facing. We are aggressively pursuing opportunities for new license and partnership relationships and continue to manage our costs. However, the immediate priority is to address the Company's liquidity issues."

ISWI anticipates that, based on its current level of spending, its existing resources will be adequate to fund its capital and operating requirements only through March 31, 2007, and cannot assure that it will be able to successfully implement its plans to reduce expenses, raise additional capital or execute a strategic transaction, or that revenues will significantly increase.

The Company's financial statements for the year ended September 30, 2006, included an audit report containing a going concern qualification from its independent public accounting firm. Further information regarding the qualification can be found in the Company's Annual Report on Form 10-KSB for the year ended September 30, 2006.

Revenues for fiscal 2006 were $111,000, as compared with $162,000 during fiscal 2005. The decrease in revenues in fiscal 2006 was primarily because the Spanish, Greek, and Turkish affiliates of Sportingbet discontinued the use of the Company's stand-alone product during Fiscal 2006, partially offset by a new agreement with Hipodromo de Agua Caliente S.A. de C.V. (Caliente). In April 2006, the Company entered into a new agreement with Sportingbet to provide an enhanced product. Subsequently, Sportingbet completed the migration of its foreign affiliates to its next generation back-end software and ceased using the Company's stand-alone product. On December 5, 2006, the Company announced the launch of this enhanced product with Sportingbet. The Company also announced on January 9, 2007 the launch of its enhanced product with Ladbrokes eGaming Ltd. The Company believes this enhanced product will result in a significant increase to revenues following launch.

Cost of revenues for fiscal 2006 decreased to $377,000, as compared with $434,000 during fiscal 2005, due to lower personnel costs.

Research and development expense for fiscal 2006 were $662,000, as compared with $1,483,000 during Fiscal 2005. The decrease in fiscal 2006 was primarily due to certain development costs which met the criteria for capitalization, lower amortization expenses associated with capitalized product enhancements that had become fully amortized, as well as lower payroll and technical consulting costs.

General and administrative expenses during Fiscal 2006 were $3,526,000, as compared with $3,207,000 during Fiscal 2005. The increase was primarily due to higher professional fees and increased non-cash compensation expense associated with employee stock options due to the adoption of Statement of Financial Accounting Standards No. 123(R) partially offset by lower payroll and travel expenses.

Interest expense during fiscal 2006 declined to $2,000, as compared to $885,000 during Fiscal 2005, due to a decrease in the Company's outstanding Debentures, which have been satisfied primarily through the issuance of shares of Common Stock. The Debentures were fully repaid in May 2006.

Other income represents changes in value associated with the registration rights agreements entered into in connection with the private placements, which have been accounted for as a separate freestanding instrument in accordance with SFAS 133. (See Note 4 to the Company's financial statements for a detailed discussion.)

In connection with the issuance of the Series B Convertible Preferred Stock ("Series B") in November 2004, the Company recorded a dividend to Series B shareholders of $552,000 representing the beneficial conversion feature. In connection with the issuance of the Series C Convertible Preferred Stock ("Series C") in August 2005, the Company recorded a dividend to Series C shareholders of $777,000 representing the beneficial conversion feature. In each of these issuances, the beneficial feature resulted from the difference between the effective conversion price and the quoted market price of the Company's Common Stock at the date of issuance. These preferred stock dividends did not require the payment of cash or the issuance of additional shares of Common Stock.

Net loss and net loss per share applicable to common stock (basic and diluted) for fiscal 2006 were $4,721,000 and $0.43, respectively, as compared with $7,314,000 and $0.71, respectively, during Fiscal 2005. The decrease is primarily due to lower interest expense (as described above), the beneficial conversion feature associated with the Series B and Series C Preferred Stock in Fiscal 2005 (as described above) and lower research and development expense (as described above).

As of September 30, 2006, the Company had liquid resources totaling $2,182,000. These include cash and cash equivalents in the amount of $1,207,000 and investments in the amount of $975,000. Investments are limited to investment grade marketable securities with maturities of less than 12 months.

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.

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. 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.

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