<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-QSB


(X)      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

         For the quarterly period ended March 31, 2003

                                       OR

( )      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

         For the transition period from             to
                                        -----------     ------------


                         Commission file number 0-21831

                       Interactive Systems Worldwide Inc.

       (Exact name of Small Business Issuer as specified in its charter)

                 Delaware                           22-3375134

     (State or other jurisdiction of              (IRS Employer
     incorporation or organization)             Identification No.)

   2 Andrews Drive, West Paterson, NJ                 07424

    (Address of principal executive
              offices)                              (Zip Code)

Issuer's telephone number, including area code:  (973) 256-8181
                                                 --------------

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirement for the past 90 days.
Yes  X     No
   -----     -----

There were 8,927,545 shares of Common Stock outstanding at April 30, 2003.

Transitional Small Business Disclosure Format (check one):
Yes          No  X
   -----       -----







<PAGE>



Interactive Systems Worldwide Inc.
March 31, 2003
FORM 10-QSB

Index
                                                                           Page
                                                                           ----

Part I:  Financial Information

Item 1.  Financial Statements,

         Consolidated Balance Sheets at March 31, 2003 (Unaudited)
         and September 30, 2002                                               2

         Consolidated Statements of Operations for the Three and Six
         Months Ended March 31, 2003 and 2002 (Unaudited)                     3

         Consolidated Statement of Stockholders' Equity for the
         Six Months Ended March 31, 2003 (Unaudited)                          4

         Consolidated Statements of Cash Flows for the Six Months
         Ended March 31, 2003 and 2002 (Unaudited)                            5

         Notes to Consolidated Financial Statements (Unaudited)             6-9

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                              10-13

Item 3.  Controls and Procedures                                             14

Part II: Other Information

Item 6.  Exhibits and Reports on Form 8-K                                    14

Signatures                                                                   15

Certifications                                                            16-17

<PAGE>



         Part I: Financial Information

Item 1. Financial Statements

                       Interactive Systems Worldwide Inc.
                          Consolidated Balance Sheets

             (Amounts in thousands except share and per share data)

                                                   March 31,  September 30,
                                                     2003        2002
                                                  (Unaudited)   Note 1
                                                   --------    --------

Current assets:
   Cash and cash equivalents                       $  5,015    $  4,753
   Accounts receivable                                    8          --
   Investments in marketable securities               1,327       3,183
   Other receivables                                     62       1,108
   Prepaid expenses and other current assets            236         136
                                                   --------    --------
       Total current assets                           6,648       9,180

   Property and equipment, net                          281         314
   Investments in marketable securities,
      non current portion                                --         190
   Capitalized software                               1,360       1,110
   Other assets                                         359         302
                                                   --------    --------
                 Total assets                      $  8,648    $ 11,096
                                                   ========    ========

Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable                                $    387    $    387
   Accrued expenses                                     470         439
                                                   --------    --------
       Total current liabilities                        857         826
                                                   --------    --------

Stockholders' Equity:
   Preferred stock, par value $.001 per share;
       2,000,000 shares authorized, 60,000
       Series A issued                                   --          --
   Common stock par value $.001 per share;
       20,000,000 shares authorized;
       9,143,545 issued                                   9           9
   Additional paid-in capital                        12,749      12,749
   Treasury stock, at cost, 242,000 shares             (441)       (441)
   Accumulated other comprehensive income (loss)         13          (3)
   Accumulated deficit                               (4,539)     (2,044)
                                                   --------    --------
             Total stockholders' equity               7,791      10,270
                                                   --------    --------
             Total liabilities and
                     stockholders' equity          $  8,648    $ 11,096
                                                   ========    ========

See accompanying notes to consolidated financial statements


                                       2
<PAGE>


                       Interactive Systems Worldwide Inc.
                     Consolidated Statements of Operations
                                  (Unaudited)

             (Amounts in thousands except share and per share data)

<TABLE>
<CAPTION>
                                          Three Months Ended            Six Months Ended
                                              March 31,                     March 31,
                                          2003           2002           2003           2002
                                      -----------    -----------    -----------    -----------

<S>                                   <C>            <C>            <C>            <C>
Revenues, net                         $         8    $     1,349    $         8    $     2,573
                                      -----------    -----------    -----------    -----------

Costs and expenses:
   Cost of revenues, research
     and development expense                  400            162            699            303

   General and
     administrative expense                   894            757          1,906          1,071
                                      -----------    -----------    -----------    -----------
                                            1,294            919          2,605          1,374
                                      -----------    -----------    -----------    -----------

        Operating (loss) income            (1,286)           430         (2,597)         1,199

Interest income                                49             24            102             57
                                      -----------    -----------    -----------    -----------

         (Loss)income before income
           taxes                           (1,237)           454         (2,495)         1,256

Provision for income taxes                     --            181             --            513
                                      -----------    -----------    -----------    -----------

        Net (loss) income             $    (1,237)   $       273    $    (2,495)   $       743
                                      ===========    ===========    ===========    ===========

Net (loss) income per
   common share- basic                $     (0.14)   $      0.03    $     (0.28)   $      0.08
                                      ===========    ===========    ===========    ===========

Weighted average basic
  common shares outstanding             8,901,545      8,898,689      8,901,545      8,893,410
                                      ===========    ===========    ===========    ===========

Net (loss) income per
   common share- diluted              $     (0.14)   $      0.03    $     (0.28)   $      0.07
                                      ===========    ===========    ===========    ===========

Weighted average diluted
   common shares outstanding            8,901,545      9,985,831      8,901,545      9,977,546
                                      ===========    ===========    ===========    ===========

</TABLE>



See accompanying notes to consolidated financial statements


                                       3
<PAGE>



                       Interactive Systems Worldwide Inc.
                 Consolidated Statement of Stockholders' Equity
                    For the Six Months Ended March 31, 2003
                                  (Unaudited)

                    (Amounts in thousands except share data)


<TABLE>
<CAPTION>
                                                                                           Accumulated
                               Common Stock        Additional      Treasury Stock             Other
                        ------------------------    Paid-In     ----------------------    Comprehensive  Accumulated
                          Shares        Amount      Capital        Shares       Amount     Income (Loss)    deficit      Total
                        ----------    ----------   ----------   ----------   ----------    ----------    ----------    ----------

<S>                    <C>          <C>          <C>             <C>       <C>           <C>           <C>           <C>
Balance at
   September 30, 2002    9,143,545    $        9   $   12,749      242,000   $     (441)   $       (3)   $   (2,044)   $   10,270

Net loss                        --            --           --           --           --            --        (2,495)       (2,495)

Foreign currency
   translation                  --            --           --           --           --            16            --            16
                                                                                                                       ----------
Comprehensive loss                                                                                                         (2,479)

                        ----------    ----------   ----------   ----------   ----------    ----------    ----------    ----------
Balance at
   March 31, 2003        9,143,545    $        9   $   12,749      242,000   $     (441)   $       13    $   (4,539)   $    7,791
                        ----------    ----------   ----------   ----------   ----------    ----------    ----------    ----------
</TABLE>




See accompanying notes to consolidated financial statements



                                       4
<PAGE>



                       Interactive Systems Worldwide Inc.
                      Consolidated Statements of Cash Flows
                                   (Unaudited)

                             (Amounts in thousands)

                                                       Six Months Ended
                                                           March 31,
                                                        2003       2002
                                                       -------    -------
Cash flows from operating activities:
  Net (loss) income                                    $(2,495)   $   743
Adjustments to reconcile net (loss) income
    to net cash provided by
    operating activities:
    Depreciation and amortization                           97         14
    Non-cash warrant and option charge                      --         69
    Provision for doubtful accounts                         --        300
    Provision for deferred income taxes                     --        513
Changes in assets and liabilities:
  Accounts receivable                                       (8)       293
  Other receivables                                      1,046         --
  Prepaid expenses and other current assets               (100)       (58)
  Other assets                                             (57)       (12)
  Accounts payable                                          --         17
  Deferred revenue                                          --        125
  Accrued expenses                                          31         37
                                                       -------    -------
         Net cash (used in) provided by
           operating activities                         (1,486)     2,041
                                                       -------    -------

Cash flows from investing activities:
  Purchase of investments                                   --     (5,288)
  Proceeds from sales of investments                     2,046      2,262
  Purchase of property and equipment                       (14)       (20)
  Capitalized software                                    (298)      (244)
                                                       -------    -------
         Net cash provided by (used in)
           investing activities                          1,734     (3,290)
                                                       -------    -------

Cash flows from financing activities:
  Net proceeds from issuance of common stock                --         49
                                                       -------    -------
         Net cash provided by
           financing activities                             --         49
                                                       -------    -------


Net increase (decrease) in cash and cash equivalents       248     (1,200)
Effect of exchange rate on cash                             14         --
Cash and cash equivalents, beginning of period           4,753      4,116
                                                       -------    -------
Cash and cash equivalents, end of period               $ 5,015    $ 2,916
                                                       =======    =======



See accompanying notes to consolidated financial statements




                                       5
<PAGE>


                       Interactive Systems Worldwide Inc.
                   Notes To Consolidated Financial Statements
                                  (Unaudited)


Note l - Basis of Presentation:


         The information at March 31, 2003 and for the three and six months
         ended March 31, 2003 and 2002, is unaudited, but includes all
         adjustments (consisting only of normal recurring adjustments) which in
         the opinion of management, are necessary to present fairly the
         financial information set forth therein in accordance with accounting
         principles generally accepted in the United States of America. The
         interim results are not necessarily indicative of results to be
         expected for the full fiscal year period. Certain information and
         footnote disclosures have been omitted pursuant to rules and
         regulations published by the Securities and Exchange Commission
         ("SEC"), although the Company believes that the disclosures are
         adequate to make the information presented not misleading. The
         consolidated financial statements include the accounts of Interactive
         Systems Worldwide Inc., and its wholly owned subsidiaries, ISW
         Acquisition Co., LLC and Global Interactive Gaming Limited
         (collectively the "Company"). All significant intercompany balances and
         transactions have been eliminated. These consolidated financial
         statements should be read in conjunction with the audited financial
         statements for the year ended September 30, 2002 included in the
         Company's Annual Report on Form 10-KSB filed with the SEC.


Note 2 - Stock Options:


         The Company has adopted the disclosure-only provisions of SFAS No. 148,
         "Accounting for Stock-based Compensation" and applies APB Opinion 25 in
         accounting for its plans in its consolidated financial statements. Had
         the Company determined compensation cost based on the fair value at the
         grant date consistent with the provisions of SFAS No. 148, the
         Company's net (loss) income would have been decreased to the pro forma
         amounts indicated below:


                             (Amounts in thousands)
<TABLE>
<CAPTION>

                                         Three Months Ended    Six Months Ended
                                               March 31,          March 31,
                                           2003      2002      2003      2002
                                          ------    ------    ------    ------
<S>                                       <C>          <C>    <C>          <C>
         Net (loss) income, as reported   (1,237)      273    (2,495)      743
         Deduct: Total stock-based
           employee compensation
           expense determined under
           fair value based method           (72)      (22)     (145)      (60)
                                          ------    ------    ------    ------

         Pro forma net (loss) income      (1,309)      251    (2,640)      683
                                          ======    ======    ======    ======
</TABLE>



                                       6
<PAGE>

                       Interactive Systems Worldwide Inc.
                   Notes To Consolidated Financial Statements
                                  (Unaudited)


Note 2 - Stock Options (continued):



                                   Three Months Ended       Six Months Ended
                                        March 31,               March 31,
                                     2003        2002       2003        2002
                                   --------    --------   --------    --------

         Net (loss) income per
          common share- basic,
          as reported              $  (0.14)   $   0.03   $  (0.28)   $   0.08
                                   ========    ========   ========    ========

         Net (loss) income per
          common share- basic,
          pro forma                $  (0.15)   $   0.03   $  (0.30)   $   0.08
                                   ========    ========   ========    ========

         Net (loss) income per
          common share- diluted,
          as reported              $  (0.14)   $   0.03   $  (0.28)   $   0.07
                                   ========    ========   ========    ========

         Net (loss) income per
          common share- diluted,
          pro forma                $  (0.15)   $   0.03   $  (0.30)   $   0.07
                                   ========    ========   ========    ========


         The fair value of the stock options granted is estimated at grant date
         using the Black-Scholes option pricing model with the following
         weighted average assumptions: expected dividend yield 0.0% (for all
         periods), risk free interest rates of 3.71% and 4.34% in 2003 and 2002,
         respectively, expected volatility of 89% and 123% in 2003 and 2002,
         respectively, and an expected life of 7 years (for all periods). The
         weighted average fair value of options granted in 2003 and 2002 was
         $4.12 and $1.82, respectively.


Note 3 - Acquisition of Global Interactive Gaming Limited:


         On July 31, 2002, the Company acquired all of the outstanding share
         capital of Global Interactive Gaming Ltd ("GIG"), an interactive gaming
         service provider to licensed bookmakers and the Company's worldwide
         licensee of its SportXctionTM software for $1,092,000, including
         professional fees and other acquisition costs of $536,000. The purchase
         price paid to GIG's stockholders consisted of $365,000 in cash, 60,000
         shares of Series A Preferred Stock valued at $64,000 and warrants to
         acquire 157,652 shares of the Company's Common Stock at an exercise
         price of $4.38 per share, valued at $127,000.

         In addition, an acquired deferred tax asset of $7,570,000, resulting
         from an excess of the tax basis of the acquired net assets over the
         consideration paid, in addition to the existence of a net operating
         loss carryforward which GIG has available to offset future taxable
         income in the United Kingdom, has been fully offset by a valuation
         allowance.

         GIG's results of operations are included in the consolidated statements
         of operations for the three and six months ended March 31, 2003.



                                       7
<PAGE>



                       Interactive Systems Worldwide Inc.
                   Notes To Consolidated Financial Statements
                                  (Unaudited)


Note 4 - Revenue Recognition:


         In 2002, the Company's revenue consisted of license fees under its
         license agreements dated as of March 17, 2000 (the "License
         Agreements") with GIG which are no longer being received as a result of
         the insolvency filing of GIG's major shareholder and resultant
         discontinuance of funding provided to GIG as well as the subsequent
         acquisition of GIG by the Company. The Company recognized revenue under
         its License Agreements with GIG based upon the guaranteed annual
         minimum amounts due under the License Agreements as GIG had not
         commenced commercial use of the software. Revenues were recognized on a
         straight-line basis over the respective contract year. The Company
         received payments of the minimum amounts at predetermined dates as
         stipulated in the License Agreements. Accordingly, collections received
         in advance of recognizing revenue were recorded as deferred revenue on
         the balance sheet. The Company recognizes revenue from its current
         service agreements as it is earned based on a percentage share of the
         wagering revenue.


Note 5 - Basic and Diluted Net (Loss) Income per Share:


         Basic and diluted net (loss) income per common share is presented in
         accordance with SFAS 128, "Earnings Per Share". Basic net (loss) income
         per share is computed by dividing net (loss) income by the weighted
         average number of common shares outstanding during the applicable
         reporting periods. Diluted net income per share reflects the potential
         dilution that would occur if outstanding options and warrants were
         exercised and Common Stock was issued utilizing the treasury stock
         method.

         The following represents the calculations of the basic and diluted net
         (loss) income per common share for the three and six months ended March
         31, 2003 and 2002.

             (Amounts in thousands except share and per share data)


<TABLE>
<CAPTION>
                                        Three Months Ended          Six Months Ended
                                              March 31,                   March 31,
                                         2003           2002          2003           2002
                                      -----------    -----------   -----------    -----------


<S>                                   <C>            <C>           <C>            <C>
         Net (loss) income            $    (1,237)   $       273   $    (2,495)   $       743
                                      ===========    ===========   ===========    ===========

         Weighted average basic
          common shares outstanding     8,901,545      8,898,689     8,901,545      8,893,410

         Effect of dilutive
          securities: stock options
          and warrants                         --      1,087,142            --      1,084,136
                                      -----------    -----------   -----------    -----------

         Weighted average diluted
          common shares outstanding     8,901,545      9,985,831     8,901,545      9,977,546
                                      ===========    ===========   ===========    ===========
</TABLE>



                                       8
<PAGE>

                       Interactive Systems Worldwide Inc.
                   Notes To Consolidated Financial Statements
                                   (Unaudited)


Note 5 - Basic and Diluted Net (Loss) Income per Share (continued):


                                   Three Months Ended      Six Months Ended
                                        March 31,             March 31,
                                    2003        2002       2003        2002
                                  --------    --------   --------    --------

         Net (loss) income per
          common share- basic     $  (0.14)   $   0.03   $  (0.28)   $   0.08
                                  ========    ========   ========    ========

         Net (loss) income per
          common share- diluted   $  (0.14)   $   0.03   $  (0.28)   $   0.07
                                  ========    ========   ========    ========


         The Company's computation of dilutive net loss per share for the three
         and six months ended March 31, 2003 does not assume any exercise of
         options or warrants to purchase 905,107 and 773,754 common shares,
         respectively, as their effect is antidilutive. The Company's
         computation of dilutive net loss per share for the three and six months
         ended March 31, 2002 does not include options to purchase 10,000 shares
         of Common Stock at an exercise price of $5.75, and warrants to purchase
         1,725,000 shares of Common Stock at an exercise price of $7.20, which
         expired on February 25, 2002, because the exercise prices were greater
         than the average market price of the common shares during the period.


Note 6 - Preferred Stock:


         The designations, rights, and preferences of the Company's Preferred
         Stock are to be determined by the Board of Directors at the time of
         issuance. In connection with the acquisition of GIG on July 31, 2002,
         the Company issued 60,000 shares of a new class of Series A Preferred
         Stock ("Series A"). Each share of Series A has one vote, is convertible
         through July 31, 2009 into 10 shares of the Company's Common Stock at
         $15 per common share on a cashless basis and is redeemable by the
         Company seven years after issuance for nominal consideration if not
         previously converted into Common Stock. The holder of Series A is
         entitled to a dividend of 6% per annum if and when declared by the
         Board of Directors. Series A has no liquidation preference.


Note 7 - Income taxes:


         As a result of losses prior to the fiscal year ended September 30,
         2001, the Company had a deferred tax asset (principally comprised of
         the tax benefit of net operating loss carryforwards) of $2,681,000 at
         such date. The Company had reversed the valuation allowance for this
         deferred tax asset into income in the fourth quarter of fiscal year
         2001 based on its recent history of pre-tax profits, the minimum future
         royalty payments to be received under the GIG License Agreements and
         the projected taxable income to be realized from operations.
         Accordingly, the Company recorded a provision for income taxes during
         the three and six months ending March 31, 2002 of $181,000 and
         $513,000, respectively. During the quarter ended June 30, 2002,
         following the breach by GIG of the License Agreements, the Company
         determined that there would be limited additional revenues received
         under the License Agreements. As a result, the Company provided a
         valuation allowance to offset the remaining deferred tax asset which
         the Company recorded as income tax expense on its statement of
         operations during such quarter.


                                       9
<PAGE>



Item 2. Management`s Discussion and Analysis of Financial
        Condition and Results of Operations


Financial Results

         In March 2000, ISWI became a licensor of interactive gaming software
through the signing of license agreements (the "License Agreements") with Global
Interactive Gaming Limited ("GIG"). The License Agreements provided, among other
things, for the payment of minimum royalties on a quarterly basis and provided
that the minimum due to ISWI for the forthcoming 12 month period was held in a
third party escrow account ("Escrow Account"). During the three and six months
ended March 31, 2002 ("Fiscal 2002"), ISWI's revenues solely represented minimum
fees received pursuant to the terms of the License Agreements. ISWI's efforts
between early 2000 and 2002 focused on enhancing the SportXction(TM) System for
use by GIG. GIG's majority shareholder was Prisma iVentures Ltd., the majority
stockholder of which was The Kirch Group, a German media conglomerate. As a
result of Kirch Media's insolvency filing in Germany in April 2002, an event
unrelated to ISWI, The Kirch Group ceased providing funding for GIG. On July 31,
2002, ISWI acquired all of the outstanding share capital of GIG (see
"Acquisition of GIG"). As a result of the acquisition of GIG, ISWI will not
receive any further minimum royalties and will need to generate revenues based
upon use of the SportXction(TM) System, from service charges from existing
agreements and by entering into additional agreements. GIG's results of
operations are included in ISWI's consolidated statements of operations for the
three and six months ended March 31, 2003 ("Fiscal 2003"). The Company's revenue
in Fiscal 2003 represents a percentage share of the wagering revenue from its
agreements in "live" operation.

Three Months Ended March 31, 2003 and 2002

         Revenues for the three months ended March 31, 2003 were $8,000, as
compared to $1,349,000 during the same period in Fiscal 2002. The decrease in
Fiscal 2003 is attributable to the discontinuation of the minimum royalties due
to GIG's default under the License Agreements and the eventual acquisition of
GIG on July 31, 2002. In September 2002, GIG signed an agreement with ukbetting
plc ("ukbetting") to utilize the SportXction(TM) System on ukbetting's internet
sports wagering sites. Ukbetting "officially" launched the SportXction(TM)
System to its customers in early 2003. The Company anticipates limited revenues
during the year ending September 30, 2003, with increasing amounts projected in
future quarters as it launches the SportXction(TM) System on BSkyB's digital
television platform (see "Recent Developments"), introduces a mobile phone
product (see "Recent Developments") and gains new partners.

         Cost of revenues, research and development expense for the three months
ended March 31, 2003 were $400,000, as compared to $162,000 during the same
period in Fiscal 2002. The increase in Fiscal 2003 was primarily due to higher
programming and development costs as a result of the acquisition of GIG, costs
incurred to operate betting events, partially offset by an increase in the
amount of software development costs which were capitalized.

         General and administrative expenses during the three months ended March
31, 2003 were $894,000, as compared to $757,000 during the same period in Fiscal
2002. The increase in Fiscal 2003 was primarily due to an increased cost base as
a result of the acquisition of GIG, increased employee salary and benefit
expenses, partially offset by the creation of a reserve of $300,000 for a
doubtful account and other expenses related to the license agreements with GIG
which were incurred in Fiscal 2002 but did not recur in Fiscal 2003.

         Interest income during the three months ended March 31, 2003 was
$49,000, as compared to $24,000 during the same period in Fiscal 2002. The
increase in Fiscal 2003 was due to a higher cash balance.



                                       10
<PAGE>

         Income tax expense of $332,000 in the three months ended March 31, 2002
represented the utilization of a portion of the Company's net operating loss
carryforwards and deductible temporary differences for which the tax benefit had
been previously recognized.

         Net (loss) income and net (loss) per share (basic) for the three months
ended March 31, 2003 were ($1,237,000) and ($0.14), respectively, as compared to
$273,000 and $0.03, respectively, during the same period in Fiscal 2002. The
decrease is the result of lower revenues and higher costs (as described above).

         During the three months ended March 31, 2003, the Company capitalized
$162,000 of expenses related to enhancements of its SportXction(TM) System
related to wagering on multiple potential outcomes to a betting proposition.
Capitalized amounts are amortized commencing with the product's introduction
over its estimated economic life, generally three years.

Six Months Ended March 31, 2003 and 2002

         Revenues for the six months ended March 31, 2003 were $8,000, as
compared to $2,573,000 during the same period in Fiscal 2002. The decrease in
Fiscal 2003 is attributable to the discontinuation of the minimum royalties due
to GIG's default under the License Agreements and the eventual acquisition of
GIG on July 31, 2002. Ukbetting introduced the SportXction(TM) System to a
limited number of its customers starting in mid-November, 2002 and "officially"
launched the System in early 2003.

         Cost of revenues, research and development expense for the six months
ended March 31, 2003 were $699,000, as compared to $303,000 during the same
period in Fiscal 2002. The increase in Fiscal 2003 was primarily due to higher
programming and development costs as a result of the acquisition of GIG, costs
incurred to operate betting events, partially offset by an increase in the
amount of software development costs which were capitalized.

         General and administrative expenses during the six months ended March
31, 2003 were $1,906,000, as compared to $1,071,000 during the same period in
Fiscal 2002. The increase in Fiscal 2003 was primarily due to an increased cost
base as a result of the acquisition of GIG, increased employee salary and
benefit expenses, partially offset by the creation of a reserve of $300,000 for
a doubtful account and other expenses related to the license agreements with GIG
which were incurred in Fiscal 2002 but did not recur in Fiscal 2003.

         Interest income during the six months ended March 31, 2003 was
$102,000, as compared to $57,000 during the same period in Fiscal 2002. The
increase in Fiscal 2003 was due to a higher cash balance.

         Income tax expense of $513,000 in the six months ended March 31, 2002
represented the utilization of a portion of the Company's net operating loss
carryforwards and deductible temporary differences for which the tax benefit had
been previously recognized.

         Net (loss) income and net (loss) income per share (basic) for the six
months ended March 31, 2003 were ($2,495,000) and ($0.28), respectively, as
compared to $743,000 and $0.08, respectively, during the same period in Fiscal
2002. The decrease is the result of lower revenues and higher costs (as
described above).

         During the six months ended March 31, 2003, the Company capitalized
$301,000 of expenses related to enhancements of its SportXction(TM) System
primarily related to wagering on multiple potential outcomes to a betting
proposition.


                                       11
<PAGE>

Liquidity and Capital Resources

         As of March 31, 2003, the Company had liquid resources totaling
$6,342,000. These include cash and cash equivalents in the amount of $5,015,000,
and short-term investments in the amount of $1,327,000. Cash and cash
equivalents consist of funds held on deposit with banking institutions with
original maturities of less than 90 days. Investments are limited to investment
grade marketable securities with maturities of less than 18 months.

         The Company's operations currently do not generate positive cash flow
and the Company expects to incur substantial losses and negative cash flow
during the fiscal year ending September 30, 2003. The Company anticipates that
its existing resources will be adequate to fund its capital and operating
requirements for the next 15 months based upon the Company's current business
plan and longer, subject to the revenues generated by the SportXction(TM)
System. It appears likely that the Company will be required to seek additional
funding to prosecute its international development and growth plans as well as
provide additional liquid resources in the event that the growth in revenues is
slower than anticipated. Such additional funding may be dilutive to existing
shareholders of the Company. If the Company is unable to raise additional
funding on terms deemed reasonable or at all, then the Company will be required
to curtail certain operations in order to reduce its expenses.

         The Company expects that its recently signed agreements will produce
meaningful revenues. The Company is also in discussions with other interactive
television, legal Internet wagering and mobile phone operators to utilize the
SportXction(TM) System. There is no assurance however, that the System will be
accepted by potential users or that any additional agreements will be signed.

         Capital expenditures are expected to be incurred in relation to system
rollout of existing contracts as well as the purchase of additional computer
equipment. Existing resources are expected to be able to fund these
requirements. The Company's capital requirements may vary materially from those
now planned due to a number of factors, including the rate at which the Company
can introduce its System, the market acceptance and competitive position of the
System and the response of competitors to the System.

Acquisition of Global Interactive Gaming Limited

         On July 31, 2002, the Company acquired all of the outstanding share
capital of GIG, an interactive gaming service provider to licensed bookmakers
and the Company's worldwide licensee of its SportXctionTM software, for
$1,092,000, including professional fees and other acquisition costs of $536,000.
The purchase price paid to GIG's stockholders consisted of $365,000 in cash,
60,000 shares of Series A Preferred Stock valued at $64,000 and warrants to
acquire 157,652 shares of the Company's Common Stock at an exercise price of
$4.38 per share, valued at $127,000.

         In addition, an acquired deferred tax asset of $7,570,000, resulting
from an excess of the tax basis of the acquired net assets over the
consideration paid, in addition to the existence of a net operating loss
carryforward which GIG has available to offset future taxable income in the
United Kingdom, has been fully offset by a valuation allowance.

         GIG's results of operations are included in the consolidated statement
of operations for the three and six months ended March 31, 2003.

         As a result of the acquisition of GIG on July 31, 2002, the Company's
revenue, expenses and overall profitability have been impacted. By recovering
its software license, the Company now acts as the primary operator of its
SportXction(TM) System and is entitled to all of the proceeds generated by its
technology, net of any revenue sharing arrangements with the distributor of the
technology to the end users, versus the fractional share it would have received
as licensor. It is important to note that the Company is currently incurring
greater costs without the comfort of previous minimum license fees. The Company
expects to incur losses and negative cash flow at least for the fiscal year
ended September 30, 2003.



                                       12
<PAGE>


Recent Developments

         On April 10, 2003, the Company announced that GIG had signed an
agreement with Sky Bet (registered company name Hestview Limited), a wholly
owned subsidiary of British Sky Broadcasting Limited ("BSkyB"). Under the
agreement, GIG and Sky Bet anticipate launching the Company's SportXction(TM)
System on BSkyB's digital television platform in August 2003, when the next
season of the Barclaycard Premiership League, one of the world's top soccer
leagues, commences. Under this twelve month trial revenue sharing arrangement,
GIG will operate the SportXction(TM) System and Sky Bet will be responsible for
a comprehensive marketing program. BSkyB is the UK's largest supplier of digital
TV services with approximately 6.6 million active households throughout the UK
and Ireland. In addition, BSkyB is also one of the UK's leading sports rights
holders and is at the forefront of developing innovative interactive
applications. The SportXction(TM) System will be made available through Sky
Bet's "Sky Bet Live" product offering to all digital subscribers of BSkyB's Sky
Sports 1 channel for certain sports events and through the "Sky Bet" product
offering for other events. On May 1, 2003, the Company announced that an
extension of the agreement was reached to launch the Company's SportXction(TM)
System on Sky Bet's internet website, skybet.com.

         On May 12, 2003, the Company announced that it had reached an
additional agreement with ukbetting, to incorporate the SportXction(TM) System
into a suite of betting services being marketed to key players in the UK mobile
phone market. Ukbetting has already concluded deals with several of the UK's
leading mobile operators to provide betting services through WAP-enabled
devices. Under this revenue sharing arrangement, ukbetting will bear the costs
of promoting the service while GIG will furnish the technical integration
capability as well as operate the SportXction(TM) System from within its
existing resources.


Safe Harbor Statement

         Except for the historical information contained herein, this Quarterly
Report on Form 10-QSB contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking statements
include, but are not limited to: whether the Company's available cash and liquid
assets will be adequate to fund its requirements for the next 15 months and
whether the Company will be able to meet its cash requirements; whether the
Company will be able to raise additional funds, if sought, and the terms there
of, which could be dilutive to current shareholders; whether the Company's
revenue will increase in future quarters and whether the Company will launch the
SportXction(TM) System on BSkyB's digital television platform in August 2003;
whether the Company will launch a mobile phone product and if so, when it will
do so; whether the Company will gain new partners; and whether the Company or
its Internet, interactive television and mobile phone partners will gain a
sufficient number of customers to generate meaningful revenue. Investors are
cautioned that forward-looking statements are inherently uncertain. Actual
performance and results of operations may differ materially from those projected
or suggested in the forward-looking statements due to certain risks and
uncertainties, including, without limitation, the ability of the Company and its
partners to attract adequate numbers of players to its wagering system and the
ability of the Company to develop and market other opportunities for its
products. Additional information concerning certain risks or uncertainties that
would cause actual results to differ materially from those projected or
suggested in the forward-looking statements is contained in the Company's
filings with the Securities and Exchange Commission, including those risks and
uncertainties discussed in its Form 10-KSB for the fiscal year ended September
30, 2002. The forward-looking statements contained herein represent the
Company's judgment as of the date of this report, and the Company cautions the
reader not to place undue reliance on such matters.



                                       13
<PAGE>

Item 3.  Controls and Procedures

(a)   Evaluation of Disclosure and Procedures. Within 90 days prior to the date
      of this report (the "Evaluation Date"), the Company's principal executive
      officer and principal financial officer carried out an evaluation of the
      effectiveness of the Company's "disclosure controls and procedures" (as
      defined in the Securities Exchange Act of 1934 Rules 13(a)-14 and
      15(d)-14). Based on that evaluation, these officers have concluded that as
      of the Evaluation Date, the Company's disclosure controls and procedures
      were effective and designed to ensure that material information relating
      to the Company and its consolidated subsidiaries would be made known to
      them by others within these entities.

(b)   Changes in Internal Controls. There were no significant changes in the
      Company's internal controls, or in other factors which could significantly
      affect these controls subsequent to the Evaluation Date.


Part II: Other Information


Item 6.  Exhibits and Reports on Form 8-K


                  (a)      Exhibits

                           None

                  (b) Reports on Form 8-K

                           Current Report on Form 8-K filed on February 13, 2003
                           to report the Certification of Barry Mindes and James
                           McDade pursuant to Section 906 of the Sarbanes-Oxley
                           Act of 2002, filed solely for the purposes of
                           incorporation by reference into Item 9 of such
                           Current Reports.


                                       14
<PAGE>

                                   SIGNATURES

         In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                   Interactive Systems Worldwide Inc.


Dated:   May 15, 2003              By:  /s/ Barry Mindes
                                        ------------------------------
                                        Barry Mindes, Chairman of the
                                        Board of Directors and
                                        Chief Executive Officer
                                        (Principal Executive Officer)



Dated:   May 15, 2003              By:  /s/ James McDade
                                        ------------------------------
                                        James McDade, Chief Financial Officer
                                        (Principal Financial Officer)


                                       15
<PAGE>

I, Barry Mindes, certify that:

1.       I have reviewed this quarterly report on Form 10-QSB of Interactive
         Systems Worldwide 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 officer 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 officer 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 officer 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.

Date: May 15, 2003
                                     By: /s/ Barry Mindes
                                         --------------------------------
                                     Name: Barry Mindes
                                     Title: Chairman of the Board and
                                            Chief Executive Officer



                                       16
<PAGE>



I, James McDade, certify that:

1.       I have reviewed this quarterly report on Form 10-QSB of Interactive
         Systems Worldwide 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 officer 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 officer 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 officer 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.

Date: May 15, 2003

                                        By: /s/ James McDade
                                        -----------------------------------
                                        Name: James McDade
                                        Title: Chief Financial Officer

                                       17