<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                    FORM 10-Q

               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended December 31, 2002

                         Commission file number: 1-8300

                               WMS INDUSTRIES INC.
             (Exact Name of Registrant as Specified in Its Charter)

           Delaware                                     36-2814522
 (State or Other Jurisdiction              (I.R.S. Employer Identification No.)
of Incorporation or Organization)

                 800 South Northpoint Blvd., Waukegan, IL 60085
               (Address of Principal Executive Offices) (Zip Code)

       Registrant's telephone number, including area code: (847) 785-3000

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the t 0 0 Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 YES |X| NO | |

Indicate by check mark whether the registrant is an accelerated filer ( as
defined by Rule 12b-2 of the Exchange Act).

                                 YES |X| NO | |

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 30,835,253 shares of common
stock, $.50 par value, were outstanding at February 7, 2003, excluding 1,523,062
shares held as treasury shares.
<PAGE>
                               WMS INDUSTRIES INC.

                                      INDEX

<TABLE>
<CAPTION>
<S>                                                                                 <C>
                                                                                     Page
                                                                                    Number
PART I. FINANCIAL INFORMATION:

    ITEM 1.      Financial Statements:

                 Condensed Consolidated Statements of Operations -
                 Three and six months ended December 31, 2002 and 2001............       2

                 Condensed Consolidated Balance Sheets -
                 December 31, 2002 and June 30, 2002..............................       3

                 Condensed Consolidated Statements of Cash Flows -
                 Six months ended December 31, 2002 and 2001......................       5

                 Notes to Condensed Consolidated Financial Statements.............       6

      ITEM 2.    Management's Discussion and Analysis of Financial Condition
                 and Results of Operations........................................      11

      ITEM 3.    Quantitative and Qualitative Disclosures About Market Risk.......      18

      ITEM 4.    Controls and Procedures..........................................      18

PART II. OTHER INFORMATION:

    ITEM 1.      Legal Proceedings................................................      18

    ITEM 4.      Submission of Matters to a Vote of Security Holders..............      19

    ITEM 6.      Exhibits and Reports on Form 8-K.................................      19

SIGNATURES       .................................................................      21

CERTIFICATIONS   .................................................................      22
</TABLE>
<PAGE>
                          PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                               WMS INDUSTRIES INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (Thousands, except per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                  Three Months Ended    Six Months Ended
                                                     December 31,          December 31,
                                                 -------------------   -------------------
                                                   2002       2001       2002       2001
                                                 --------    -------   --------    -------
<S>                                              <C>         <C>       <C>         <C>
Revenues:
      Product sales                              $ 20,676    $25,483   $ 36,825    $46,341
      Participation and lease revenues             22,966     23,604     49,211     49,052
                                                 --------    -------   --------    -------
          Total revenues                           43,642     49,087     86,036     95,393
                                                 --------    -------   --------    -------

Costs and expenses:
      Cost of product sales                        11,499     14,896     22,313     26,563
      Cost of participation and lease revenues      4,444      3,613      9,609      7,030
      Research and development                     11,601      6,358     19,390     11,211
      Selling and administrative                   12,181     13,567     23,527     26,010
      Depreciation and amortization                 7,326      6,078     14,045     12,054
                                                 --------    -------   --------    -------
Total costs and expenses                           47,051     44,512     88,884     82,868
                                                 --------    -------   --------    -------

Operating income (loss)                            (3,409)     4,575     (2,848)    12,525
Interest and other income and expense, net            498        639        973      1,934
                                                 --------    -------   --------    -------
Income (loss) before income taxes                  (2,911)     5,214     (1,875)    14,459

Income tax provision (benefit)                     (1,074)     1,929       (698)     5,343
                                                 --------    -------   --------    -------

Net income  (loss)                               $ (1,837)   $ 3,285   $ (1,177)   $ 9,116
                                                 ========    =======   ========    =======

Earnings (loss) per share of common stock:
      Basic                                      $  (0.06)   $  0.10   $  (0.04)   $  0.28
                                                 ========    =======   ========    =======

      Diluted                                    $  (0.06)   $  0.10   $  (0.04)   $  0.28
                                                 ========    =======   ========    =======

Shares used in per share calculations:
      Basic                                        30,585     32,189     30,743     32,185
                                                 ========    =======   ========    =======

      Diluted                                      30,585     32,684     30,743     32,728
                                                 ========    =======   ========    =======
</TABLE>

      See notes to condensed consolidated financial statements.


                                       2
<PAGE>
                               WMS INDUSTRIES INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                             (Thousands of dollars)

<TABLE>
<CAPTION>
                                                                         December 31,    June 30,
                                                                             2002         2002
                                                                          ---------    ---------
                                                                         (Unaudited)
<S>                                                                      <C>           <C>
ASSETS

Current assets:
      Cash and cash equivalents, including $1,460 and $1,250              $  20,691    $  32,671
          of restricted  amounts for progressive jackpots, respectively
      Short-term investments                                                 64,391       72,909
                                                                          ---------    ---------
                                                                             85,082      105,580
      Receivables, net of allowances of $ 2,652 and $ 2,642,                 25,459       24,820
          respectively
      Notes receivable, current portion                                      10,593       11,589
      Income tax receivable                                                   2,256        9,491
      Inventories, at lower of cost (FIFO) or market:
          Raw materials and work in progress                                 13,262       15,448
          Finished goods                                                     14,735       14,225
                                                                          ---------    ---------
                                                                             27,997       29,673
      Other current assets                                                   11,454       11,532
                                                                          ---------    ---------
          Total current assets                                              162,841      192,685

Participation or leased gaming machines                                      85,310       78,748
Less accumulated depreciation                                               (53,394)     (47,234)
                                                                          ---------    ---------
                                                                             31,916       31,514

Property, plant and equipment                                                65,089       59,403
Less accumulated depreciation                                               (20,620)     (17,857)
                                                                          ---------    ---------
                                                                             44,469       41,546

Other assets                                                                 26,489       15,420
                                                                          ---------    ---------

Total assets                                                              $ 265,715    $ 281,165
                                                                          =========    =========
</TABLE>

See notes to condensed consolidated financial statements.


                                       3
<PAGE>
                               WMS INDUSTRIES INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                             (Thousands of dollars)

<TABLE>
<CAPTION>
                                                                     December 31,  June 30,
                                                                         2002        2002
                                                                      ---------    ---------
                                                                     (Unaudited)
<S>                                                                  <C>           <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
      Accounts payable                                                $   7,217    $   7,646
      Accrued compensation and related benefits                           2,938        4,770
      Other accrued liabilities                                           9,575        9,221
                                                                      ---------    ---------
            Total current liabilities                                    19,730       21,637

Commitments and contingencies (See note 8)

Stockholders' equity:
      Preferred stock (5,000,000 shares authorized, none issued)             --           --
      Common stock (100,000,000 shares authorized, 32,358,315 and
            32,346,519 shares issued, respectively)                      16,179       16,173
      Additional paid-in capital                                        198,834      198,347
      Retained earnings                                                  51,067       52,245
      Accumulated other comprehensive income                                821           67
      Unearned restriced stock (250,000 shares)                          (2,397)      (1,960)
      Treasury stock, at cost (1,523,062 shares and 372,812 shares)     (18,519)      (5,344)
                                                                      ---------    ---------
            Total stockholders' equity                                  245,985      259,528
                                                                      ---------    ---------

Total liabilities and stockholders' equity                            $ 265,715    $ 281,165
                                                                      =========    =========
</TABLE>

See notes to condensed consolidated financial statements.


                                       4
<PAGE>
                               WMS INDUSTRIES INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Thousands of dollars)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                Six Months Ended
                                                                                  December 31,
                                                                             --------------------
                                                                               2002        2001
                                                                             --------    --------
<S>                                                                          <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                                            $ (1,177)   $  9,116
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
      Depreciation and amortization                                            14,045      12,054
      Receivables provision                                                        10          --
      Deferred income taxes                                                    (1,971)     (1,328)
      Tax benefit from exercise of stock options                                  120         245
      Non-cash expenses                                                           992          --
      Non-cash write off of licensed technology                                 2,750          --
      Increase (decrease) from changes in operating assets and liabilities     (4,390)      2,685
                                                                             --------    --------
Net cash provided by operating activities                                      10,379      22,772

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment                                      (5,686)     (7,028)
Additions to participation or leased gaming machines                          (12,676)     (6,862)
Acquisition, net of cash acquired                                                  --      (2,500)
Net change in short-term investments                                            8,518      (1,004)
                                                                             --------    --------
Net cash used by investing activities                                          (9,844)    (17,394)

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash received on exercise of common stock options                                 195         127
Purchase of treasury stock                                                    (13,464)         --
                                                                             --------    --------
Net cash (used) provided by investing activities                              (13,269)        127

EFFECT OF EXCHANGE RATES ON CASH                                                  754          12
                                                                             --------    --------

Increase (decrease) in cash and cash equivalents                              (11,980)      5,517
Cash and cash equivalents at beginning of period                               32,671      14,963
                                                                             --------    --------
Cash and cash equivalents at end of period                                   $ 20,691    $ 20,480
                                                                             ========    ========
</TABLE>

See notes to condensed consolidated financial statements.


                                       5
<PAGE>
                               WMS INDUSTRIES INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.    FINANCIAL STATEMENTS

      The accompanying unaudited condensed consolidated financial statements
      have been prepared in accordance with generally accepted accounting
      principles for interim financial information, the instructions to Form
      10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
      all of the information and footnotes required by generally accepted
      accounting principles for complete financial statements. In the opinion of
      management, all adjustments (including normal recurring accruals)
      considered necessary for a fair presentation have been included. Operating
      results for the quarter ended December 31, 2002 are not necessarily
      indicative of the results that may be expected for the fiscal year ending
      June 30, 2003. For further information, refer to the consolidated
      financial statements and footnotes thereto included in the Company's
      Annual Report on Form 10-K for the year ended June 30, 2002.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

      The condensed consolidated financial statements include the accounts of
      the Company and our wholly-owned subsidiaries. All significant
      intercompany balances, transactions and investments have been eliminated.
      The Company has an agreement with International Game Technology (IGT)
      related to the operation of SURVIVOR(TM) branded gaming devices on IGT's
      wide area progressive system for which no legal entity exists. Activities
      under this agreement are accounted for by WMS recording its 50%
      proportionate share of revenues and expenses from operating activities and
      all assets it owns and liabilities it incurs related to such agreements in
      our consolidated financial statements.

      Certain prior period balances have been reclassified to conform to the
      current period presentation.

      The Company has elected to continue to follow APB Opinion No. 25 to
      account for stock options granted to employees and directors, as allowed
      by SFAS No. 123, "Accounting for Stock Based Compensation". Under APB No.
      25, the Company does not recognize compensation expense because the option
      terms are fixed and the exercise price equals the market price of the
      underlying stock on the grant date.

      The following table presents a comparison of the reported net income,
      earnings per share and compensation cost of options granted to employees
      to the pro forma amounts that would have been reported if stock option
      compensation expense had been determined using the fair value method
      allowed by SFAS No. 123:

<TABLE>
<CAPTION>
                                                               Three Months Ended         Six Months Ended
                                                                   December 31,             December 31,
                                                              ----------------------   ----------------------
                                                                 2002         2001        2002         2001
                                                              ---------    ---------   ---------    ---------
                                                                   (in thousands, except per share amounts)
<S>                                                           <C>          <C>         <C>          <C>
As Reported:
  Net income (loss)                                           $  (1,837)   $   3,285   $  (1,177)   $   9,116
  Earnings (loss) per share:
    Basic                                                     $   (0.06)   $    0.10   $   (0.04)   $    0.28
    Diluted                                                   $   (0.06)   $    0.10   $   (0.04)   $    0.28

Stock based employee compensation cost, net of related tax
effects, included in the determination of net income (loss)   $      --    $      --   $      --    $      --
</TABLE>


                                       6
<PAGE>
<TABLE>
<CAPTION>
                                                               Three Months Ended         Six Months Ended
                                                                   December 31,             December 31,
                                                              ----------------------   ----------------------
                                                                 2002         2001        2002         2001
                                                              ---------    ---------   ---------    ---------
                                                                   (in thousands, except per share amounts)
<S>                                                           <C>          <C>         <C>          <C>
Pro forma amounts if the fair value method had been applied
to all stock compensations awards:
Pro forma net income (loss)                                   $  (3,481)   $   1,637   $  (4,466)   $   5,820
Pro forma earnings (loss) per share:
       Basic                                                  $   (0.11)   $    0.05   $   (0.15)   $    0.18
       Diluted                                                $   (0.11)   $    0.05   $   (0.15)   $    0.18
Stock based employee compensation cost, net of related tax
effects, that would have been included in the determination
of net income (loss)                                          $   1,644    $   1,648   $   3,289    $   3,296
</TABLE>

The following assumptions were used to value the options in the periods
indicated:

<TABLE>
<CAPTION>
                                                               Three Months Ended         Six Months Ended
                                                                   December 31,             December 31,
                                                              ----------------------   ----------------------
                                                                 2002         2001        2002         2001
                                                              ---------    ---------   ---------    ---------
<S>                                                           <C>          <C>         <C>          <C>
      Risk-free interest rate                                    4.0%         5.0%        4.0%          5.0%
      Expected life                                             6 years      6 years     6 years       6 years
      Expected volatility                                         .44         .60         .44           .60
      Expected dividend yield                                      0           0           0             0
</TABLE>

3.    EARNINGS PER SHARE

      At December 31, 2002, the Company had 3,405,000 stock options outstanding.
      We have issued 250,000 shares of our common stock to our Chairman, Mr.
      Louis J. Nicastro, subject to performance and vesting conditions under a
      Restricted Stock Agreement. The diluted earnings per share calculation
      does not include the 250,000 shares subject to the Restricted Stock
      Agreement. The diluted earnings per share calculation for the three months
      and six months ended December 31, 2001 is different from the basic
      earnings per share calculation because the diluted calculation includes
      potential incremental shares of common stock outstanding from the
      hypothetical assumed exercise of employee stock options under the treasury
      stock method. For the three months and six months ended December 31, 2001,
      the diluted calculation includes 495,000 and 543,000 shares, respectively,
      of potentially incremental shares outstanding. Had the Company recognized
      net income for the three months and six months ended December 31, 2002,
      incremental shares attributable to the assumed exercise of outstanding
      options would have increased diluted shares outstanding by 326,000 and
      269,000 shares, respectively. For the three months and six months ended
      December 31, 2002, the diluted earnings per share calculation excludes
      1,718,000 and 1,733,000 shares underlying stock options, respectively,
      because the option exercise price was greater than the average market
      price of the common stock for the period, and therefore, the effect would
      be antidilutive.

      The following summarizes the stock options exercised during the periods
      indicated:

<TABLE>
<CAPTION>
                                                               Three Months Ended         Six Months Ended
                                                                   December 31,             December 31,
                                                              ----------------------   ----------------------
                                                                2002         2001        2002         2001
                                                              ---------    ---------   ---------    ---------
<S>                                                           <C>          <C>         <C>          <C>
            Stock options exercised                            27,796        4,500       35,546       32,239
            Weighted average
            exercise price                                    $  5.83      $  5.88      $  5.48      $  3.93
</TABLE>


                                       7
<PAGE>
4.    SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                          Six Months Ended
                                            December 31,
                                            2002      2001
                                          -------   -------
<S>                                       <C>       <C>
            Income taxes paid             $   299   $11,131
            Income tax refunds received   $ 6,086   $ 8,000
</TABLE>

5.    COMPREHENSIVE INCOME AND LOSS

      Comprehensive income consists of net income or loss and foreign currency
      translation adjustments and totaled a loss of $1.0 million and income of
      $3.3 million for the three months ended December 31, 2002 and 2001,
      respectively, and totaled a loss of $0.4 million and income of $9.1
      million for the six months ended December 31, 2002 and 2001, respectively.

6.    STOCKHOLDERS' EQUITY

      Common Stock Repurchase Program

      In January 2002, the Board of Directors authorized a $20 million common
      stock repurchase plan to repurchase our common stock in open market or
      privately negotiated transactions from time to time. By August 2, 2002,
      this repurchase program was completed. In total, the Company repurchased
      1,568,000 shares, or approximately 5% of the previously outstanding
      shares, at an average share price of $12.75 under the $20 million
      authorization.

      In September 2002, the Board of Directors authorized a twelve-month plan
      to repurchase up to an additional $10 million of our common stock in open
      market or privately negotiated transactions. As of December 31, 2002,
      repurchases of 151,500 shares at a cost of $2.1 million had been made
      under this plan at an average price of $13.81 per share, including 134,800
      shares purchased in the current quarter for a cost of $1.9 million. At
      December 31, 2002, $7.9 million remains available under the additional $10
      million repurchase plan.

7.    RECENTLY ISSUED ACCOUNTING STANDARDS

      In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
      Retirement Obligations." This statement addresses financial accounting and
      reporting for obligations associated with the retirement of tangible
      long-lived assets and the associated asset retirement costs. It applies to
      all legal obligations associated with the retirement of long-lived assets
      that result from the acquisition, construction, development and normal
      operation of a long-lived asset. We adopted SFAS No. 143 effective July 1,
      2002 and such adoption did not have a material effect on the balance
      sheet, statement of operations or cash flows of the Company.

      In August 2001, the FASB issued SFAS No. 144, "Accounting for the
      Impairment and Disposal of Long-Lived Assets." This statement requires
      that the same accounting model be used to recognize an impairment loss for
      long-lived assets, whether they are to be held and used, disposed of by
      sale, or disposed of other than by sale. This would apply to both
      previously held and used or newly acquired assets. It also broadens the
      presentation of discontinued operations to include more disposal
      transactions. We adopted SFAS No. 144 effective July 1, 2002 and such
      adoption did not have a material effect on the balance sheet, statement of
      operations or cash flows of the Company.

      In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
      Associated with Exit or Disposal Activities." SFAS No. 146 requires that a
      liability for a cost associated with an exit or disposal activity be
      recognized when the liability is incurred, and that an entity's commitment
      to a plan, by itself, does not create a present obligation to others that
      meets the definition of a liability. It nullifies Emerging Issues Task


                                       8
<PAGE>
      Force Issue 94-3, "Liability Recognition for Certain Employee Termination
      Benefits and Other Costs to Exit an Activity." The provisions of this
      statement are effective for exit or disposal activities that are initiated
      after December 31, 2002, with earlier application encouraged. We early
      adopted SFAS No. 146 effective July 1, 2002 and such adoption did not have
      a material effect on the balance sheet, statement of operations or cash
      flows of the Company.

      In December 2002, the FASB issued SFAS No. 148, "Accounting for
      Stock-Based Compensation - Transition and Disclosure." SFAS No. 148
      provides alternative methods of transition to SFAS No. 123's fair value
      method of accounting for stock-based employee compensation, but does not
      require companies to use the fair value method. It also amends the
      disclosure provisions of SFAS No. 123 and APB Opinion No. 28 to require
      disclosures in the summary of significant accounting policies of the
      effects of an entity's accounting policy with respect to stock-based
      employee compensation on reported net income and earnings per share in
      annual and interim financial statements. The provisions of this statement
      are effective for fiscal years ending after December 15, 2002 and for
      interim reporting periods beginning after December 15, 2002. We adopted
      the disclosure provisions of SFAS No. 148 in the quarter ending December
      31, 2002 and such adoption did not have a material effect on the balance
      sheet, statement of operations or cash flows of the Company.

      In November 2002, the FASB issued FASI No. 45, "Guarantor's Account and
      Disclosure Requirements for Guarantees, Including Indirect Guarantees of
      Indebtedness of Others." This interpretation requires certain guarantees
      to be initially recognized and recorded at fair value, and also increases
      disclosure requirements related to guarantees. The initial recognition
      provisions are applicable to guarantees issued or modified after December
      31, 2002. We have adopted FASI No. 45 in the quarter ending December 31,
      2002, and such adoption did not have a material impact on the balance
      sheet, statement of operations or cash flows of the Company.

8.    COMMITMENTS AND CONTINGENCIES

      WMS routinely enters into license agreements with others for use of
      intellectual properties in its products. These agreements generally
      provide for royalty advances when the agreements are signed, and provide
      for minimum guarantees as well as additional contingent payments based on
      future events. In the September and December 2002 quarters, WMS entered
      into new licensing agreements, which significantly increased its total
      potential royalty commitments. The total potential commitments at December
      31, 2002 increased to $50.2 million from $29.6 million at June 30, 2002.
      The total potential future payments at December 31, 2002 increased to
      $28.4 million from $17.2 million at June 30, 2002. At December 31, 2002,
      WMS had total potential royalty commitments, advances and payments made,
      and potential future payments as follows:

<TABLE>
<CAPTION>
                                                                        At December 31, 2002
                                                                        --------------------
                                                    Guaranteed          Contingent          Total Potential
                                                    Minimums            Payments            Payments
                                                    --------            --------            --------
                                                                        (in thousands)
<S>                                                 <C>                 <C>                 <C>
            Total royalty commitments               $  25,283           $   24,912          $  50,195
            Advances and payments made                (19,367)              (2,438)           (21,805)
                                                    ---------           ----------          ---------
            Potential future payments               $   5,916           $   22,474          $  28,390
                                                    =========           ==========          =========
</TABLE>

      Of the $21.8 million total advances and payments through December 31,
      2002, $5.6 million has been charged to expense and the remaining $16.2
      million is included in the December 31, 2002 balance sheet; $3.2 million
      in other current assets and $13.0 million in other assets.


                                       9
<PAGE>
         As of December 31, 2002, WMS has potential royalty payments as follows:

<TABLE>
<CAPTION>


                                        Year Ended          Guaranteed         Contingent      Total Potential
                                           June 30            Minimums           Payments             Payments
                                           -------            --------           --------             --------
                                                                           (in thousands)
<S>                                     <C>                     <C>                <C>                  <C>
                                        2003                    $1,260             $2,740               $4,000
                                        2004                       865              6,218                7,083
                                        2005                     1,916              6,506                8,422
                                        2006                     1,375              7,010                8,385
                                        2007                       500                 --                  500
                                                                ------            -------              -------
                                        Total                   $5,916            $22,474              $28,390
                                                                ======            =======              =======
</TABLE>

      The Company announced a three-part technology improvement plan in January
      2002 to stabilize the operating system software in its gaming devices. As
      part of this technology improvement plan, the Company has pursued
      alternative strategies for each phase of the plan, including licensing
      technology from third parties. For the short-term phase of the plan the
      Company's internally developed version 2.57 operating system continues to
      date to successfully operate in casinos in jurisdictions where it has been
      installed. As a result, the Company no longer intends to use an
      alternative operating system which was originally licensed to provide a
      back up during the short-term phase of the plan. In the December 2002
      quarter, the Company recorded a pre-tax charge of $2.8 million, or $1.7
      million after-tax or $0.06 per diluted share to write off this license
      agreement obligation. At December 31, 2002, the Company had guaranteed
      minimum payments related to technology alternatives aggregating $8.2
      million, of which $5.4 million had been paid as advances. An additional
      $5.4 million of contingent payments may become payable based on future
      events. These amounts are included in the table above. If the Company
      determines that it will not realize the value of a particular licensed
      technology alternative, it will record an immediate charge against
      earnings at the time of such determination of up to $10.8 million if all
      of the remaining contingent payments became due and all of the technology
      alternatives were to have no further value to the Company.

      We have an agreement with IGT for the operation of SURVIVOR branded games
      on its wide area progressive system. Under this agreement we record our
      50% proportionate share of revenues and costs from operating activities
      and all of the assets we own and liabilities we incur in connection with
      the operating activities in our consolidated financial statements under
      this agreement. In connection with this agreement, we may have a
      contingent liability of approximately $1.1 million, which is not deemed
      probable at this time.

      Effective March 1, 2002, we issued a restricted stock grant of 250,000
      shares of common stock held in treasury to Mr. Louis J. Nicastro, our
      Chairman of the Board of Directors and a non-employee director. This grant
      was issued in consideration for his service as Chairman of the Executive
      Committee of the Board of Directors, which was established to provide
      enhanced oversight of the timely completion of our technology improvement
      plan. The restricted stock vests on June 30, 2003, subject to the Board of
      Directors' satisfaction of the fulfillment of specified performance
      conditions relating to our technology improvement plan. The tax affected
      market value of the restricted stock grant at the date of the grant is
      recorded as unearned restricted stock as a separate component of
      stockholders' equity and adjusted to current market value as of the
      balance sheet date. Under terms of the grant, the shares would also vest
      upon death, disability, involuntary termination or change in control. If,
      in the March 2003 or June 2003 quarter, it becomes probable that the
      fulfillment of the specified performance vesting conditions will be met,
      the market value of the restricted stock at that time will be recorded as
      compensation expense.

9.    LEGAL PROCEEDINGS

      See Item 1 of Part II for the status of Shuffle Master, Inc. legal
      proceedings.


                                       10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

As used in this quarterly report on Form 10-Q, the terms "we," "us," "our" and
"WMS" mean WMS Industries Inc., a Delaware corporation, and its subsidiaries,
unless the context indicates a different meaning, and the term "common stock"
means our common stock, $0.50 par value per share. When we refer to
"participation games" we mean arrangements by which we lease our gaming machines
to casinos or other gaming machine operators for lease payments either based
upon a percentage of the net win of the gaming machines or based upon fixed
daily fees.

This report contains forward-looking statements concerning our future business
conditions and outlook based on currently available information that involves
risks and uncertainties. These statements reflect information as of the date of
this report. Our actual results could differ materially from those anticipated
in the forward-looking statements as a result of these risks and uncertainties,
including, without limitation, the expansion of legalized gaming into new
markets; the development, introduction and success of new games and new
technologies; the ability to maintain the scheduling of these introductions; the
occurrence of software anomalies that affect our games; our ability to implement
our technology improvement plan; and our ability to qualify for and maintain
gaming licenses and approvals and other risks more fully described under "Item
1. Business - Risk Factors" in our Annual Report on Form 10-K for the year ended
June 30, 2002. We make no commitment to update any forward-looking statements,
except as required by law, or to disclose any facts, events, or circumstances
after the date hereof that may affect the accuracy of any forward-looking
statement.

SIGNIFICANT EVENTS AND TRENDS

TECHNOLOGY IMPROVEMENT PLAN

In January 2002, we began to execute a three-part technology improvement plan to
address the near-, mid- and long-term needs for the operating system software
that runs our gaming devices.

In the near term, we set out to improve the stability of our operating system by
introducing two upgrades, version 2.57 and version 2.59. Version 2.57 was first
approved by Mississippi regulators in June 2002 and by Nevada regulators in
August 2002. We completed the upgrade of WMS hopper gaming devices in casinos to
version 2.57 in Mississippi by June 30, 2002, and completed the upgrade in
Puerto Rico in December 2002 and Nevada in early January 2003. Regulatory
approval of the version 2.57 upgrade also resulted in our obtaining our first
new game approvals in Nevada and Mississippi in over 9 months. We expect to
complete the upgrade in Ontario, Canada, the only remaining jurisdiction
currently requiring the upgrade, in the next few months. Other regulators may
require upgrades in the future. All new hopper game approvals will be submitted
on version 2.57 of the operating system software until the next version of the
operating system software, CPU-NXT(TM), is approved.

Version 2.59 has been submitted to the Nevada regulatory testing laboratory to
upgrade our printer games and is expected to be approved in the March 2003
quarter. This upgrade is intended to comply with new printer requirements in
Nevada and contains modest enhancements, and robustness improvements and some
new functionality for our games. Nevada is currently the only jurisdiction
requiring all printer games be upgraded to version 2.59. Other regulators may
require upgrades in the future. Version 2.59 is the last planned upgrade to our
legacy operating system.

Our mid-term plan to introduce a new operating system and circuit board, called
CPU-NXT, for our newly-developed cabinet design, called Bluebird(TM), continues
on schedule. We have an internally-developed version of CPU-NXT that has
completed internal testing and been submitted to the six major North American
gaming labs. An alternative version of CPU-NXT being developed externally by
Sierra Design Group ("SDG") is still in internal testing. We expect to submit
this version to the regulators in the next several weeks. We expect to choose
between these two alternative versions of CPU-NXT later this year. Both versions
have similar features and functionality. We expect field trials to begin in the
June 2003 quarter on CPU-NXT. Our goal is to receive the first regulatory
approval for CPU-NXT in the September 2003 quarter, with other approvals
expected in the months thereafter. The timing of this approval is approximately
the same as the first regulatory approval we expect to receive for the Bluebird
cabinet. Based on past experience, we expect to receive new game theme approvals
within a month or two after the approval


                                       11
<PAGE>
of CPU-NXT. Once approved, CPU-NXT will be available for sale and will be
retrofittable into the over 50,000 WMS gaming devices currently operating in
casinos should customers elect to purchase an upgrade. We expect to ship our
first Bluebird cabinets with new games on CPU-NXT in the December 2003 quarter.

For the long-term plan, we contracted with an independent specialist to develop
the design specification for our next generation operating system. We received
the completed design specification and were able to have several of the
components of this specification included in CPU-NXT. We currently intend to use
CPU-NXT as the foundation for our next generation operating system. We have been
modifying the long-term specification to incorporate additional features we
desire for this system.

While we have received approvals for new games that utilize the version 2.57
operating system, we anticipate that our revenues from sales of new gaming
devices in the last six months of fiscal 2003 will improve only modestly over
the revenues from sales of new gaming devices in the first six months of fiscal
2003. We believe that some of our customers will wait to purchase our gaming
devices until after CPU-NXT and Bluebird become available, as CPU-NXT is
expected to be an improvement over our existing operating system and will
include additional features and functionality desired by our customers that are
lacking in the version 2.57 and 2.59 operating system upgrades. As experienced
in the December 2002 quarter, we expect that revenues from game conversions in
the last six months of fiscal 2003 will be stronger than in the last six months
of fiscal 2002 as we expect that some customers will refresh existing WMS gaming
devices with new games on the version 2.57 and 2.59 operating systems. With a
greater number of game approvals expected in the second half of fiscal 2003, we
expect to be able to refresh our participation games with greater frequency and
expect that our revenue per day and installed base of participation games will
increase modestly in the balance of fiscal 2003.

As part of our technology improvement plan, we have pursued alternative
strategies for each phase of the plan, including licensing technology from third
parties. For the short-term phase of the plan, our internally developed version
2.57 operating system has operated successfully to date in casinos in
jurisdictions where it has been installed and, as a result, we no longer intend
to implement an alternative operating system which was originally licensed to
provide a back up during the short-term phase of the plan. In the December 2002
quarter, we recorded a pre-tax charge of $2.8 million, or $1.7 million after-tax
or $0.06 per diluted share to write off this license agreement obligation. At
December 31, 2002, we had guaranteed minimum payments related to technology
alternatives aggregating $8.2 million, of which $5.4 million had been paid as
advances. An additional $5.4 million of contingent payments may become payable
based on future events. If we determine that we will not realize the value of a
particular licensed-technology alternative, we will record an immediate charge
against earnings at the time of such determination of up to $10.8 million if all
of the remaining contingent payments become due and all of the remaining
technology alternatives were to have no further value to us.

Effective March 1, 2002, we issued a restricted stock grant of 250,000 shares of
common stock held in treasury to Mr. Louis J. Nicastro, our Chairman of the
Board of Directors and a non-employee director. This grant was issued in
consideration for his service as Chairman of the Executive Committee of the
Board of Directors, which was established to provide enhanced oversight of the
timely completion of our technology improvement plan. The restricted stock vests
on June 30, 2003, subject to the Board of Directors' satisfaction of the
fulfillment of specified performance conditions relating to our technology
improvement plan. The tax affected market value of the restricted stock grant at
the date of the grant is recorded as unearned restricted stock as a separate
component of stockholders' equity and adjusted to current market value as of the
balance sheet date. Under terms of the grant, the shares would also vest upon
death, disability, involuntary termination or change in control. If, in the
March 2003 or June 2003 quarter, it becomes probable that the fulfillment of the
specified performance vesting conditions will be met, the market value of the
restricted stock at that time will be recorded as compensation expense.

OTHER RECENT MATTERS

In September 2002, we entered into an agreement with Stargames Corporation Pty.
Ltd., an Australian company, to be the exclusive distributor for their RAPID
ROULETTE(TM) table gaming product in North America. This product combines a
traditional roulette wheel and a live dealer with electronic betting stations to
create a game that has the dual characteristics of a table game and a slot
machine. RAPID ROULETTE has been approved by Nevada regulators, and is offered
as a leased game. We are also making additional modifications to the product for
the


                                       12
<PAGE>
Nevada market, which will require further Nevada approvals. We are seeking
approval in other jurisdictions. We do not expect RAPID ROULETTE to provide any
material revenue or profit to us in fiscal 2003.

We entered into new agreements with SDG and Multimedia Games, Inc. ("Multimedia
Games") in the September 2002 quarter. We granted SDG non-exclusive rights to
the MONOPOLY(TM) branded series of games developed by WMS for Washington State
and to our proprietary base games for Washington State and New York State. We
also granted non-exclusive rights to Multimedia Games for the HOLLYWOOD
SQUARES(TM) series of games for Washington State and non-exclusive rights to our
proprietary base games for Washington State and Class II gaming venues. In
addition, in the December 2002 quarter we shipped 500 of the 1,000 gaming
cabinets Multimedia Games ordered from us under an original equipment
manufacturing agreement; we expect to ship the remaining 500 cabinets in the
March 2003 quarter.

In the Summer of 2002, we introduced a new product for sale which we call
3RV(TM), short for three reel video, that has the look anD feel of a mechanical
reel spinning product but is actually a video based product. We have installed
3RV games in several Native American and riverboat markets and received Nevada
regulatory approval in December 2002.

We also entered into new licensing agreements to expand our Classic TV Game Show
Series(TM) of participation games, adding SHOP 'TIL YOU DROP(TM) and SUPERMARKET
SWEEP(TM) which brings to six the total number of games for this new series
which we expect to begin to launch in fiscal 2004.

In late December 2002 and January 2003, we received approval for new versions of
the MONOPOLY branded participation games in Nevada and Mississippi, version 1.5
of our HOLLYWOOD SQUARES themed participation game for the Nevada, riverboat and
Native American markets, and our PAC-MAN(TM) branded participation game in
Mississippi. Given these new approvals, we expect that our revenue per day and
installed base will increase modestly in the March 2003 quarter. We expect
additional approvals for new game themes for these participation game series
throughout calendar 2003. We expect to make the first submission of our
mechanical reel products to regulators in the March 2003 quarter, and we expect
to receive final approvals around the end of calendar 2003. We are currently
running internal beta testing on our proprietary wide area progressive system,
which we expect to launch in the second half of fiscal 2004.

CRITICAL ACCOUNTING POLICIES

During the quarter and six months ended December 31, 2002, we have made no
changes in our critical accounting policies or in the application of those
policies, as reported in our Form 10-K for the year ended June 30, 2002.

RECENTLY ISSUED ACCOUNTING STANDARDS

We have adopted SFAS No. 143, SFAS No. 144, SFAS No. 146, SFAS No. 148 and FASI
No. 45 as discussed in Note 7 to our financial statements above. Such adoption
did not have a material effect on our balance sheet, statement of operations or
cash flows.

LIQUIDITY AND CAPITAL RESOURCES

We believe that cash and cash equivalents and short-term investments of $83.6
million at December 31, 2002, exclusive of $1.5 million of restricted cash,
along with our available $50.0 million bank revolving line of credit that
extends to May 21, 2003, and to a lesser extent, cash flow from operations, will
be adequate to fund the anticipated level of expenses, capital expenditures,
cash to be invested in participation games, and the levels of inventories and
receivables required in the operation of our business. For the next twelve
months we do not expect to be dependent on cash flow from operations due to the
amount of cash and short-term investments we have and the availability of our
bank revolving line of credit. We have no outstanding debt.


                                       13
<PAGE>
Our short-term investments primarily consist of Auction Market Preferred Stocks
stated at cost, which approximates market value. These investments generally
have no fixed maturity date but most have dividend reset dates every 49 days or
more. These investments can be liquidated under an auction process on the
dividend reset dates subject to a sufficient number of bids being submitted. Our
policy is to invest cash with issuers that have a high credit rating and to
limit the amount of credit exposure to any one issuer.

We are not dependent on off-balance sheet financing arrangements to fund our
operations. We utilize financing arrangements for operating leases of regional
office facilities and some equipment and for minimum guaranteed royalty
payments, which we discussed in footnote 11 to the financial statements included
in our Annual Report on Form 10-K for the year ended June 30, 2002. The total
potential royalty commitments, including payments already made and those
contingent upon future events, increased from $29.6 million at June 30, 2002 to
$50.2 million at December 31, 2002. Please refer to Note 8 to our financial
statements above. We do not have any special purpose entities for investment or
the conduct of our operations. We do have an agreement with IGT related to the
operation of SURVIVOR branded gaming devices on its wide area progressive
system, under which we record in our consolidated financial statements our 50%
proportionate share of revenues and costs from operating activities under that
agreement, and the full value of assets we own and liabilities we incur in
connection with the operating activities. Under this agreement, we have a
contingent liability of approximately $1.1 million, which is not deemed probable
at this time. We have not entered into any derivative financial instruments,
although we have a restricted stock grant and stock options granted to
employees, members of our Board of Directors and consultants. We do not
currently have any significant firm purchase commitments for raw material
inventory.

Cash provided by operating activities before changes in operating assets and
liabilities was $14.8 million for the first six months of fiscal 2003, as
compared to cash provided of $20.1 million for the first six months of fiscal
2002. The current period decrease relative to the comparable prior year period
was due to lower net income, partially offset by greater depreciation expense
and the non-cash charge for the write off of the operating system license
agreement in the current year period. We anticipate a reduced level of cash from
operations over the next twelve months due to anticipated lower revenues from
decreased game sales and higher research and development expenses to implement
our technology improvement plan and product line enhancement plans, partially
offset by our cost reduction efforts.

The changes in operating assets and liabilities resulted in $4.4 million of cash
outflow for the six months ended December 31, 2002, compared with a cash inflow
of $2.7 million during the comparable prior year period. The cash outflow for
the six months ended December 31, 2002 was primarily due to a $2.2 million
increase in long-term receivables, a $7.6 million increase in long-term royalty
advances, a $2.0 million increase in short and long-term deferred taxes, and a
$1.9 million reduction in current liabilities, partially offset by a $7.2
million decrease in income taxes receivable and a $1.7 million decrease in
inventories, from the comparable balances at June 30, 2002. The increase in
royalty advances was due to new technology and brand license agreements entered
into during the six months ended December 31, 2002. The reduction of current
liabilities is due to a lower level of business. The decrease in income taxes
receivable and inventories reflects collection of monies from taxing authorities
and lower reduced sales levels and activity during the period. The cash inflow
for the six months ended December 31, 2001 was primarily due to a $9.7 million
decrease in receivables offset by an $8.9 million increase in inventories from
the comparable balances at June 30, 2001. We have not experienced significant
bad debt expense in any of the periods presented.

Cash used by investing activities was $9.8 million for the six months ended
December 31, 2002, compared with $17.4 million for the comparable prior year
period. Cash used for the purchase of property, plant and equipment for the six
months ended December 31, 2002 was $5.7 million compared with $7.0 million for
the comparable prior-year period. This decrease is due to lower renovation costs
in the current six month period related to converting our Chicago facility into
a technology campus, partially offset by increased costs related to the ongoing
implementation of our new computerized information system. Cash used for
additions to participation gaming devices was $12.7 million and $6.9 million for
the six months ended December 31, 2002 and 2001, respectively. The increase in
the six months ended December 31, 2002 was due to our PAC-MAN(TM) themed games,
which were introduced in May 2002, top box conversions and replacement of fully
depreciated units. Cash of $8.5 million was provided by the redemption of
short-term investments for the six months ended December 31, 2002, compared to
$1.0 million used for the purchase of such investments in the comparable prior
year period. We used $2.5 million of cash in the six months ended December 31,
2001 for the acquisition of Bigfoot Software Research and Development, LLC,
which is now engaged in the design and development of a proprietary wide area
progressive system for us.


                                       14
<PAGE>
In August 2002, we completed our twelve-month, $20 million common stock share
repurchase program that had been authorized by our Board of Directors in January
2002. In September 2002, our Board of Directors authorized an additional
twelve-month, $10 million common stock share repurchase program. This program
could further reduce our cash balance and number of outstanding common shares
through September 2003. Both programs allow us to purchase our common stock from
time to time in open market or privately negotiated transactions. The timing and
actual number of shares to be purchased will depend on market conditions. During
the six months ended December 31, 2002, we repurchased 1,022,500 shares for an
aggregate price of $11.4 million under the $20 million program, and repurchased
151,500 shares for an aggregate price of $2.1 million under the $10 million
program including 134,800 shares in the current quarter for a cost of $1.9
million. Since the inception of the first program in January 2002, we have
repurchased 1,719,500 shares of our common stock, or 5.3% of our previously
outstanding shares for $22.1 million at an average price of $12.85 per share.

RESULTS OF OPERATIONS

THREE MONTHS ENDED DECEMBER 31, 2002 COMPARED WITH
THREE MONTHS ENDED DECEMBER 31, 2001

Consolidated revenues decreased 11.1% to $43.6 million in the quarter ended
December 31, 2002 from $49.1 million in the quarter ended December 31, 2001.
Total revenue decreased $5.4 million: $4.8 million from decreased product sales
and $0.6 million from decreased participation and lease revenue. We shipped
1,513 video and reel-type gaming devices in the current quarter, plus an
additional 500 gaming stations under an original equipment manufacturing (OEM)
agreement, resulting in product and parts sales of $20.7 million versus 2,606
gaming devices and $25.5 million of product and parts sales in the comparable
prior year quarter. The decrease in product sales revenues was primarily due to
lower North American unit sales resulting from decreased demand for our gaming
machines while WMS implements its three part technology improvement plan
discussed above. Parts, used games, OEM and game conversion revenue, which is
included in product sales revenue, increased 124% in the December 2002 quarter
to $8.4 million from $4.0 million in the prior year's quarter due to the greater
customer demand for each of these revenue sources. The average sales price
decreased slightly from $8,267 in the prior year's quarter to $8,136 in the
current year's quarter due to the mix in products sold.

Participation and lease revenue decreased from $23.6 million in the December
2001 quarter to $23.0 million in the December 2002 quarter. We had a total of
5,577 units installed at December 31, 2002, compared to 5,836 units installed at
December 31, 2001. The decline in the installed base in the December 2002
quarter resulted from casino operators removing our games at a higher rate than
previously experienced due to WMS not receiving approvals for new participation
themes in certain jurisdictions when originally anticipated, as discussed in
more detail above. Average revenue per day for machines decreased from $38.81 in
the December 2001 quarter to $37.81 in the December 2002 quarter. The net
participation backlog, which represents customer indications of interest in our
participation games, stood at 276 units as of January 28, 2003.

Consolidated gross profit in the quarter ended December 31, 2002 declined 9.4%
to $27.7 million from $30.6 million in the quarter ended December 31, 2001. The
gross margin percentage increased from 62.3% in the quarter ended December 31,
2001 to 63.5% in the quarter ended December 31, 2002. The increase in the
overall gross margin percentage resulted from higher margin parts, OEM and
conversion revenues representing a larger percentage of total revenues and a
slight shift in the revenue mix from lower margin product sales to higher margin
participation and lease revenues. Participation and lease revenues represented
52.6% of total revenues in the December 2002 quarter, compared to 48.1% in the
December 2001 quarter due to the decline of product sales revenue in the current
year's quarter. The gross profit margin percentage on product sales was 44.4% in
the December 2002 quarter, compared to 41.5% in the December 2001 quarter. The
margin was 2.9 percentage points above the prior year's quarter reflecting a
higher profit margin on parts, OEM and conversion revenues representing a larger
percentage of product sales revenues partially offset by the impact of lower
production volume. The gross profit margin percentage on participation and lease
revenues decreased from 84.7% in the December 2001 quarter to 80.6% in the
December 2002 quarter primarily due to higher parts costs, lower gross margin
realized on the new SURVIVOR branded wide area progressive product, and higher
royalty rates on newer participation game series offerings.


                                       15
<PAGE>
Research and development expenses were $11.6 million in the current quarter and
include the $2.8 million write-off of the operating system licensing agreement.
The increase in research and develop cost is due to the ongoing execution of our
technology improvement plan and product line enhancement efforts. This compares
to $6.4 million of research and development cost in the December 2001 quarter,
which included $0.4 million of employee separation costs. We expect continued
higher research and development expenses through fiscal 2003 to support the
ongoing execution of our technology improvement and product line expansion plans
in support of long-term growth opportunities.

Selling and administrative expenses decreased 11.5% from $13.6 million in the
prior year's quarter to $12.2 million in the current year's quarter. The prior
year's quarter includes $0.7 million for employee separation costs. The current
quarter reflects the headcount reductions and other cost containment measures
implemented in calendar 2002 to manage controllable expenses given the reduced
revenues we had expected.

Depreciation and amortization, which includes depreciation of participation
games, increased during the current year's quarter to $7.3 million from $6.1
million in the prior year's quarter due to the replacement of older, fully
depreciated participation gaming devices and top boxes, partially offset by a
decrease in the average installed base of participation games. The average
installed base was 5,605 units for the December 2002 quarter, compared to 5,767
units for the December 2001 quarter.

We incurred an operating loss of $3.4 million in the current year's quarter,
compared to operating income of $4.6 million in the prior year's quarter. The
financial results of the current year's quarter reflect lower gross profits,
higher research and development costs related to new products and technology
platforms, including the $2.8 million pre-tax charge for the write-off of the
operating system licensing agreement, as well as higher depreciation related to
replacement of the installed base of participation games.

The income tax benefit for the current quarter, which includes both current and
deferred taxes, is based on our estimated tax rate of 37%, which is consistent
with the December 2001 quarter.

Our net loss was $1.8 million or $0.06 per diluted share for the current year's
quarter compared to net income of $3.3 million, or $0.10 per diluted share, for
the prior year's quarter. The December 2002 quarter reflects a pre-tax charge of
$2.8 million, $1.7 million after tax or $0.06 per diluted share for the
write-off of the operating system license agreement. The December 2001 quarter
reflects a pre-tax charge of $1.3 million, $0.8 million after tax or $0.03 per
diluted share for employee separation costs.

SIX MONTHS ENDED DECEMBER 31, 2002 COMPARED WITH
SIX MONTHS ENDED DECEMBER 31, 2001

Consolidated revenues decreased 9.8% to $86.0 million in the six month period
ended December 31, 2002 from $95.4 million in the six month period ended
December 31, 2001. Total revenue decreased $9.4 million: $9.5 million from
decreased product sales partially offset by a $0.2 million increase in
participation and lease revenue. We shipped 2,805 video and reel-type gaming
devices in the current six month period, resulting in product and parts sales of
$36.8 million versus 4,656 gaming devices and $46.3 million of product and parts
sales in the comparable prior year period. The decrease was primarily due to
lower North American unit sales resulting from decreased demand for our gaming
machines while WMS implements its three-part technology improvement plan. Parts,
used games, OEM and game sales conversion revenues, which is included in product
sales revenues, increased 73% in the six months ended December 2002 to $13.5
million from $7.8 million in the six months ended December 2001 due to greater
customer demand for each of these revenue sources. The average sales price
increased slightly from $8,280 in the prior year's six month period to $8,324 in
the current year's six month period due to the mix of products sold.

Participation and lease revenue increased slightly from $49.1 million in the
December 2001 six month period to $49.2 million in the December 2002 six month
period. While the average installed base was higher for the current year's six
month period, the installed base at December 31, 2002 declined to 5,577 units
compared to 5,836 units installed at December 31, 2001. The decline in the
installed base resulted from casino operators removing our games at a higher
rate than previously experienced due to WMS not receiving approvals for new
participation themes in certain jurisdictions originally anticipated. Average
revenue per day for machines decreased from $39.50


                                       16
<PAGE>
in the December 2001 six month period to $39.16 in the December 2002 six month
period. The net participation backlog was 276 units as of January 28, 2003.

Consolidated gross profit in the six month period ended December 31, 2002
declined 12.4% to $54.1 million from $61.8 million in the six month period ended
December 31, 2001. The gross margin percentage decreased from 64.8% in the six
month period ended December 31, 2001 to 62.9% in the six month period ended
December 31, 2002. The decrease in the overall gross margin percentage resulted
from lower gross margin percentages from both product sales and participation
and lease revenues, partially offset by a shift in the revenue mix from lower
margin product sales revenues to higher margin participation and lease revenues.
Participation and lease revenues were 57.2% of total revenues in the December
2002 six month period, compared to 51.4% in the December 2001 six month period
due primarily to the decline of product sales revenue in the current six month
period. The gross profit margin percentage on product sales was 39.4% in the
December 2002 six month period, compared to 42.7% in the December 2001 six month
period. The margin was 3.3 percentage points below the prior year's six month
period due to the impact of lower production volumes partially offset by higher
margin parts, OEM and game sales conversion revenues representing a greater
percentage of total product sales revenues. The gross profit margin percentage
on participation and lease revenues decreased from 85.7% in the December 2001
six month period to 80.5% in the December 2002 six month period primarily due to
the impact of the SURVIVOR wide area progressive games having a lower gross
margin than our traditional participation games, higher conversion and parts
costs, and higher royalty rates on newer participation game series offerings.

Research and development expenses were $19.4 million in the current six month
period and include the $2.8 million write-off of the operating system licensing
agreement. This compares to $11.2 million of research and development costs in
the December 2001 six month period which included $0.4 million of employee
separation costs. The increase in research and development expenses relates to
the ongoing execution of our technology improvement plan and product line
enhancement efforts. WMS expects continued higher research and development
expenses through fiscal 2003 to support the ongoing execution of our technology
improvement and product line expansion plans in support of long-term growth
opportunities.

Selling and administrative expenses decreased from $26.0 million in the prior
year's six month period to $23.5 million in the current year's six month period.
The prior year's six month period included $0.7 million for employee separation
costs. The current six month period reflects the headcount reductions and other
cost containment measures implemented in calendar 2002 to manage controllable
expenses given the reduced revenues we experienced.

Depreciation and amortization, which includes depreciation of participation
games, increased during the current year's six month period to $14.0 million
from $12.1 million in the prior year's six month period due to the replacement
of fully deprecated participation gaming devices and top boxes in the current
six month period. The average installed base was 5,820 units for the December
2002 six month period, compared to 5,805 units for the December 2001 six month
period.

We incurred an operating loss of $2.8 million in the current year's six month
period, compared to operating income of $12.5 million in the prior year's six
month period. The financial results of the current year's six month period
reflect lower gross profit, higher research and development costs related to new
products and technology platforms, including the $2.8 million pre-tax charge for
the write off of the operating system licensing agreement as well as higher
depreciation related to replacement of the installed base of participation
games.

The income tax benefit for the December 2002 six month period, which includes
both current and deferred taxes, is based on our estimated tax rate of 37%,
which is consistent with the December 2001 six month period.

Our net loss was $1.2 million, or $0.04 per diluted share, for the current
year's six month period compared to net income of $9.1 million, or $0.28 per
diluted share, for the prior year's six month period. The December 2002 six
month period reflects a pre-tax charge of $2.8 million, $1.7 million after tax
or $0.06 per diluted share for the write off of the operating system license
agreement. The December 2001 six months reflects a pre-tax charge of $1.3
million, $0.8 million after tax or $0.03 per diluted share for employee
separation costs.


                                       17
<PAGE>
MONOPOLY(TM) is a trademark of Hasbro, Inc (C) 2003 Hasbro, Inc. All rights
reserved. Used with permission.

HOLLYWOOD SQUARES(TM) is a trademark of King World Productions, Inc. All rights
reserved.

PAC-MAN(TM) & (C) 1980 Namco Limited. All rights reserved.

SURVIVOR(TM) is a trademark of Survivor Productions LLC.

RAPID ROULETTE(TM) is a trademark of Stargames Corporation Limited and Crown
Limited.

SHOP 'TIL YOU DROP(TM) and all related logos are the trademarks and service
marks of Stone Stanley Entertainment. All rights reserved.

SUPERMARKET SWEEP(TM) is a trademark of Al Howard Productions, Inc.

Classic TV Game Show Series(TM), CPU-NXT(TM), 3RV(TM) and Bluebird(TM) are
trademarks of WMS Gaming Inc. All rights reserved.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

As of a date within 90 days prior to the date of this report, our Chief
Executive Officer and our Chief Financial Officer carried out an evaluation of
the effectiveness of the design and operation of our disclosure controls and
procedures, as required by Exchange Act Rule 13a-14. Based upon that evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective in ensuring that material
information about us and our subsidiaries, including the material information
required to be disclosed in our filings under the Securities Exchange Act of
1934, is recorded, processed, summarized and communicated to them as appropriate
to allow timely decisions regarding required disclosure.

There were no significant changes in our internal controls or in other factors
that could significantly affect internal controls subsequent to the date of the
most recent evaluation performed by our Chief Executive Officer and our Chief
Financial Officer, including any corrective actions with regard to significant
deficiencies and material weaknesses.

                                     PART II
                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On September 13, 2002, we filed a lawsuit against Shuffle Master, Inc. in the
United States District Court for the District of Nevada in Las Vegas. The suit
alleges that Shuffle Master's promotion, sale and installation of kits to
convert our gaming machines into what appear to be Shuffle Master gaming
machines violates our trademark rights and constitutes intentional tortuous
interference with our contracts with our customers. On the same day, Shuffle
Master filed suit against us in the United States District Court for the
District of Minnesota seeking a declaratory judgment that it has not violated
any laws in manufacturing and selling its upgrade kits for our Model 550 gaming
machines.

On November 27, 2002 we filed a motion seeking a preliminary injunction
preventing Shuffle Master from selling or marketing certain gaming machines and
converting our gaming machines into what appear to be Shuffle Master gaming
machines. This motion is currently before the Nevada District Court. On December
9, 2002, Shuffle Master voluntarily dismissed its federal court action. On
January 21, 2003, the United States District Court for the District


                                       18
<PAGE>
of Nevada granted us leave to amend our complaint to include the additional
allegations that Shuffle Master (i) violates our distinctive trade dress
protected by the Lanham Act; (ii) makes false claims and false advertising as
protected by the Lanham Act, and (iii) violates patent infringement statutes,
specifically related to our proprietary, patented bonusing technology. On
February 5, 2003 Shuffle Master filed its answer and counterclaims in the Nevada
action seeking declaratory relief that it has not infringed WMS Gaming trade
dress or patents. We believe the outcome of these lawsuits will not have a
material impact on our financial position or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a)   We held our Annual Meeting of Stockholders on November 14, 2002.

(b)   The directors elected at the meeting were:

<TABLE>
<CAPTION>
         Nominee:                   For:             Withheld:
         --------                   ----             ---------
<S>                                 <C>              <C>
         William C. Bartholomay     23,989,278       2,944,630
         Brian R. Gamache           24,260,947       2,672,961
         William E. McKenna         24,138,668       2,795,240
         Norman J. Menell           25,001,151       1,932,757
         Donna B. More              23,988,522       2,945,386
         Louis J. Nicastro          23,985,052       2,948,856
         Neil D. Nicastro           23,989,005       2,944,903
         Harvey Reich               25,148,697       1,785,211
         David M. Satz, Jr.         25,143,929       1,789,979
         Ira S. Scheinfeld          23,987,382       2,946,526
</TABLE>

(c)   Other matters voted upon at the meeting and the results of those votes
      were as follows:

      1)    Approval of the WMS Industries Inc. 2002 Stock Option Plan.

<TABLE>
<CAPTION>
                  For:                      Against:                   Abstain:
                  ----                      --------                   --------
<S>                                         <C>                        <C>
                  23,383,591                3,303,085                  247,232
</TABLE>

      2)    Approval of the appointment of Ernst & Young LLP as independent
            auditors for the 2003 fiscal year.

<TABLE>
<CAPTION>
                  For:                      Against:                   Abstain:
                  ----                      --------                   --------
<S>                                         <C>                        <C>
                  24,644,751                2,275,345                  13,812
</TABLE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

3.1   Amended and Restated Certificate of Incorporation of WMS dated February
      17, 1987; Certificate of Amendment dated January 28, 1993; and Certificate
      of Correction dated May 4, 1994, incorporated by reference to Exhibit 3(a)
      to our Annual Report on Form 10-K for the year ended June 30, 1994.

3.2   Certificate of Amendment to the Amended and Restated Certificate of
      Incorporation of WMS, as filed with the Secretary of the State of Delaware
      on February 25, 1998, incorporated by reference to Exhibit 3.1 to our
      Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1998.

3.3   Form of Certificate of Designations of Series A Preferred Stock,
      incorporated by reference to Exhibit A to the Form of Rights Agreement
      filed as Exhibit 1 to our Registration Statement on Form 8-A (File No.
      1-8300) filed March 25, 1998 (the "Form 8-A").

3.4   By-Laws of WMS, as amended and restated through June 26, 1996,
      incorporated by reference to Exhibit 3(b) to our Annual Report on Form
      10-K for the year ended June 30, 1996.


                                       19
<PAGE>
4     Rights Agreement dated as of March 5, 1998 between WMS and The Bank of New
      York, as Rights Agent, incorporated by reference to Exhibit B to the Form
      8-A.

99.1  Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section
      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.

99.2  Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section
      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.

(b)   Reports on Form 8-K.

      Current report on Form 8-K filed November 11, 2002, under items 5 and 7.


                                       20
<PAGE>
                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                WMS INDUSTRIES INC.


Dated:  February 12, 2003       By: /s/  Scott D. Schweinfurth
                                    --------------------------
                                    Scott D. Schweinfurth
                                    Executive Vice President,
                                    Chief Financial Officer and Treasurer
                                    (Principal Financial and Accounting Officer)


                                       21
<PAGE>
                                 CERTIFICATIONS

      I, Brian R. Gamache, Chief Executive Officer of WMS Industries Inc.,
certify that:

      1. I have reviewed this quarterly report on Form 10-Q of WMS Industries
Inc.;

      2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

      3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

      4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

      a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

      b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

      c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

      5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

      a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

      b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

      6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

February 12, 2003

                                            /s/ Brian R. Gamache
                                            -----------------------
                                            Brian R. Gamache
                                            Chief Executive Officer


                                       22
<PAGE>
      I, Scott D. Schweinfurth, Chief Financial Officer of WMS Industries Inc.,
certify that:

      1. I have reviewed this quarterly report on Form 10-Q of WMS Industries
Inc.;

      2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

      3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

      4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

      a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

      b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

      c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

      5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

      a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

      b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

      6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

February 12, 2003

                                              /s/ Scott D. Schweinfurth
                                              ---------------------------
                                              Scott D. Schweinfurth
                                              Chief Financial Officer


                                       23
<PAGE>
                                  EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number     Description
------     -----------
<S>        <C>
3.1        Amended and Restated Certificate of Incorporation of WMS dated February
           17, 1987; Certificate of Amendment dated January 28, 1993; and Certificate
           of Correction dated May 4, 1994, incorporated by reference to Exhibit 3(a)
           to our Annual Report on Form 10-K for the year ended June 30, 1994.

3.2        Certificate of Amendment to the Amended and Restated Certificate of
           Incorporation of WMS, as filed with the Secretary of the State of Delaware
           on February 25, 1998, incorporated by reference to Exhibit 3.1 to our
           Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1998.

3.3        Form of Certificate of Designations of Series A Preferred Stock,
           incorporated by reference to Exhibit A to the Form of Rights Agreement
           filed as Exhibit 1 to our Registration Statement on Form 8-A (File No.
           1-8300) filed March 25, 1998 ("the Form 8-A").

3.4        By-Laws of WMS, as amended and restated through June 26, 1996,
           incorporated by reference to Exhibit 3(b) to our Annual Report on Form
           10-K for the year ended June 30, 1996.

4          Rights Agreement dated as of March 5, 1998 between WMS and The Bank of New
           York, as Rights Agent, incorporated by reference to Exhibit B to the Form
           8-A.

99.1       Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section
           1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
           2002.

99.2       Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section
           1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
           2002.
</TABLE>


                                       i