WMS INDUSTRIES INC /DE/ - 10-Q Quarterly Report

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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 March 31, 2003

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
of Incorporation or Organization) Identification No.)

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 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: 29,908,653 shares of common
stock, $.50 par value, were outstanding at May 7, 2003, excluding 2,449,662
shares held as treasury shares.

WMS INDUSTRIES INC.

INDEX

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

See notes to condensed consolidated financial statements.

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WMS INDUSTRIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)

See notes to condensed consolidated financial statements.

4

WMS INDUSTRIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)

See notes to condensed consolidated financial statements.

5

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

See notes to condensed consolidated financial statements.

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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 March 31, 2003 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 its 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:

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

The effective income tax rate for the three and nine months ended March 31,
2003, which includes both current and deferred taxes, reflects a benefit of
$665,000 from a reduction in prior year taxes, which were less than amounts
previously provided.

3. EARNINGS PER SHARE

At March 31, 2003, the Company had 3,610,000 stock options outstanding. We
had 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. On May 7,
2003, the Company purchased Mr. Nicastro's rights to the 250,000 shares of
restricted stock. See Note 8. The diluted earnings per share calculation for
the three months and nine months ended March 31, 2002 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 nine months ended March 31, 2002, the
diluted calculation includes 435,000 and 716,000 shares, respectively, of
potentially incremental shares outstanding. Had the Company recognized net
income for the three months and nine months ended March 31, 2003,
incremental shares attributable to the assumed exercise of outstanding
options would have increased diluted shares outstanding by 143,000 and
186,000 shares, respectively. For the three months and nine months ended
March 31, 2003, the diluted earnings per share calculation excludes
2,628,000 and 2,578,000 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:

4. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION AND SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES (IN THOUSANDS OF DOLLARS)

5. COMPREHENSIVE INCOME AND LOSS

Comprehensive income consists of net income or loss and foreign currency
translation adjustments and totaled a loss of $2.2 million and income of
$0.2 million for the three months ended March 31, 2003 and 2002,
respectively, and totaled a loss of $2.6 million and income of $8.9 million
for the nine months ended March 31, 2003 and 2002, respectively.

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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 an additional $10 million of our common stock in open market or
privately negotiated transactions. As of March 31, 2003, this repurchase
program was completed. The Company repurchased 833,200 shares, or
approximately 2.4% of the previously outstanding shares, at an average price
of $12.00 per share under the $10 million authorization, including 681,700
shares purchased in the current quarter for a cost of $7.9 million.

In April 2003, the Board of Directors authorized a new twelve-month plan to
repurchase up to an additional $10 million of our common stock in open
market or privately negotiated transactions from time to time.

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 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.

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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.
The total potential commitments at March 31, 2003 increased to $33.4 million
from $29.6 million at June 30, 2002. The total potential future payments at
March 31, 2003 decreased to $13.4 million from $17.2 million at June 30,
2002. At March 31, 2003, WMS had total potential royalty commitments,
advances and payments made, and potential future payments as follows:

Of the $20.1 million total advances and payments through March 31, 2003,
$3.7 million has been charged to expense and the remaining $16.4 million is
included in the March 31, 2003 balance sheet; $2.3 million in other current
assets and $14.1 million in other assets.

As of March 31, 2003, WMS has potential royalty payments as follows:

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
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, among other uses, 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 March 31, 2003, the Company had guaranteed minimum
payments related to technology alternatives aggregating $4.2 million, all of
which had been paid as advances. An additional $5.3 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 $9.5 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 the March 2003 quarter, WMS expensed $0.4 million related to
an estimated impairment of the SURVIVOR intellectual property license. In
connection with this agreement, we may have a contingent liability of
approximately $1.1 million, related to the net realizable value of SURVIVOR
inventory, which impairment 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 Technology
Committee of the Board of Directors, which was established to provide
enhanced oversight of the timely completion of our technology improvement
plan. At March 31, 2003, the tax affected market value of the restricted
stock grant is recorded as unearned restricted

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stock as a separate component of stockholders' equity. On May 7, 2003, the
Company purchased Mr. Nicastro's rights to the 250,000 restricted shares for
a purchase price of $3.5 million or $14.00 per share. This share price
reflects a discount of $0.50 per share from the closing market price on May
6, 2003. The Company will record a charge to its statement of operations of
$3.5 million in the June 2003 quarter to reflect this transaction.

9. LEGAL PROCEEDINGS

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

10. RECEIVABLE UNDER AGREEMENT WITH MIDWAY GAMES INC.

As of March 31, 2003, we have long-term receivables from our former
subsidiary, Midway Games Inc. (Midway), in the amount of $2.8 million,
primarily related to tax sharing, indemnification and separation agreements
wherein each company is obligated for those taxes associated with their
respective businesses. This advance by WMS to Midway will be repayable when
Midway's future taxable income allows it to claim the benefit of certain tax
losses on its tax returns. Through March 31, 2003, WMS has reduced the
carrying value of this receivable by $0.4 million, representing the
estimated discount to net present value based on WMS' estimate of when
repayment of such advance is expected. Midway has continued to experience
operating losses in its most recent fiscal year ended December 31, 2002 and
the three months ended March 31, 2003. While WMS believes the amounts
advanced under this agreement will be repaid, it is reasonably possible that
such amount may not be recovered.

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; 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 and in our later filings with the SEC. 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 have improved 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. All mandatory
upgrades for the 2.57 version of the operating system are complete except for a
casino in Ontario, Canada. Since its implementation, the 2.57 version has been
substantially more stable than previous software versions. Other regulators may
require upgrades in the future. We intend to make version 2.57 available in
other jurisdictions as an optional upgrade.

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Version 2.59, to upgrade our printer games, was approved by Gaming Laboratories
Inc. (GLI) and the Nevada regulatory testing laboratory in the March 2003
quarter. We have installed version 2.59 in several riverboat and Native American
casinos which are regulated by GLI. In Nevada, version 2.59 is about to begin a
field trial being conducted by the Audit Division of the Nevada Gaming Control
Board. Assuming successful completion of the field trial, we will begin the
upgrade of our printer gaming devices in Nevada before the end of June 2003 and
expect to complete the upgrade in July 2003. This upgrade is intended to comply
with new printer requirements in Nevada and contains modest enhancements,
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. We intend to
make version 2.59 available in other jurisdictions as an optional upgrade.

Our mid-term plan to introduce a new operating system and circuit board
continues on schedule. Called CPU-NXT, it contains features and functionality
currently demanded by our customers that our existing platform lacks. In order
to mitigate risk, we adopted a dual path development strategy for CPU-NXT. We
have an internally-developed version of CPU-NXT and an alternative version of
CPU-NXT being developed externally by Sierra Design Group ("SDG"). Both versions
have been submitted to the six major North American gaming labs, and we have
begun to receive first lab approvals for this initial version of the operating
system software. We expect to choose between these two alternative versions of
CPU-NXT in early summer of 2003.

We expect field trials on CPU-NXT to begin in the June 2003 quarter. Our goal is
to receive the first regulatory approval for the commercial version of CPU-NXT
in the September 2003 quarter, with other approvals expected in the months
thereafter. Based on past experience, we expect to receive new game theme
approvals within a month or two after the approval of CPU-NXT. The timing of
this approval is approximately the same as the first regulatory approval we
expect to receive for our Bluebird(TM) cabinet, which will utilize the CPU-NXT
operating system. Once approved, CPU-NXT will be available for sale and will
also be retrofittable into the over 50,000 WMS gaming devices currently
operating in North American 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 are in the process of evaluating specifications and
requirements for our next generation operating system. We continue to refine the
design and specifications to incorporate additional features we desire for this
system, and have recently begun allocating resources to this longer-term effort.

OTHER RECENT MATTERS

We submitted the first version of our new mechanical reel-spinning game
platform, developed for use on our Bluebird cabinet, to regulators in February
2003. Our goal for the June 2003 quarter is to begin field trials for this
platform, with a targeted commercialization of this product in the March 2004
quarter.

Our proprietary wide area progressive system, which links multiple gaming
devices in multiple locations, has been undergoing internal beta testing. In
April 2003, the Nevada Gaming Commission approved WMS as an operator of
inter-casino linked systems, which is the first of several key steps in
launching our proprietary wide-area progressive system. We expect to launch this
product late in fiscal 2004.

While we have received approvals for new games that utilize the version 2.57 and
2.59 operating systems, we anticipate that our revenues from sales of new gaming
devices through the December 2003 quarter will improve only modestly over the
levels experienced in the first nine 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 systems. As experienced in the March 2003 quarter, we expect
continued strength from game conversions in the next six months, as operators
seek the benefits of new WMS games, while they wait for CPU-NXT and the new
cabinet.

As part of our technology improvement plan, we have pursued alternative
development 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, among other uses, 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 March 31, 2003, we had guaranteed minimum payments related to technology
alternatives aggregating $4.2 million, all of which

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had been paid as advances. An additional $5.3 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
$9.5 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.

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 the
March 2003 quarter, WMS expensed $0.4 million related to an estimated impairment
of the SURVIVOR intellectual property license. In connection with this
agreement, we may have a contingent liability of approximately $1.1 million
related to the net realizable value of SURVIVOR inventory, which is not deemed
probable at this time.

As of March 31, 2003, we have long-term receivables from our former subsidiary,
Midway, in the amount of $2.8 million, primarily related to tax sharing,
indemnification and separation agreements wherein each company is obligated for
those taxes associated with their respective businesses. Through March 31, 2003
WMS has reduced the carrying value of the receivable by $0.4 million,
representing the estimated discount to net present value based on WMS' estimate
of when repayment of such advance is expected. While we believe the amounts
advanced under this agreement will be repaid, it is reasonably possible that
such amount may not be recovered.

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 Technology Committee of the
Board of Directors, which was established to provide enhanced oversight of the
timely completion of our technology improvement plan. The tax effected 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. On
May 7, 2003, the Company purchased Mr. Nicastro's rights to the 250,000
restricted shares for a purchase price of $3.5 million or $14.00 per share. This
share price reflects a discount of $0.50 per share from the closing market price
on May 6, 2003. The Company will record a charge to its statement of operations
of $3.5 million in the June 2003 quarter to reflect this transaction.

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 we offered
it as a leased game. We are also making additional modifications to the product
for the Nevada market, which will require further Nevada approvals. We intend to
seek 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
distribute 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 distribution 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. We earn a royalty fee from Multimedia and SDG for each
licensed WMS game that they distribute in the defined territories. In addition,
in each of the December 2002 and March 2003 quarters, we shipped 500 units of a
1,000 gaming cabinet order under an original equipment manufacturing agreement
with Multimedia Games.

In the September 2002 quarter, we 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 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. In the March 2003 quarter we received additional approvals for
PAC-MAN FRENZY(TM) and HOLLYWOOD SQUARES version 1.5, as well as the first
approvals of HOLLYWOOD SQUARES 2.0, called THE CENTER SQUARE(TM). We also
received the first approvals of the next version of our MONOPOLY branded series,
called FREE PARKING(TM), ahead of schedule. Given these new approvals, we expect
that our revenue per day will increase modestly in the June 2003 quarter. We
expect additional approvals for new game themes for these participation game
series throughout calendar 2003.

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CRITICAL ACCOUNTING POLICIES

During the quarter and nine months ended March 31, 2003, 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 $72.6
million at March 31, 2003, exclusive of $2.0 million of restricted cash, along
with our available $50.0 million bank revolving line of credit, 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. We are currently in the process of negotiating the renewal of
our revolving line of credit, which expires on May 21, 2003. 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.

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 Note 11 to the financial statements included in
our Annual Report on Form 10-K for the year ended June 30, 2002. None of our
leased office facilities are in excess of our current needs. 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 $33.4 million at
March 31, 2003. Please refer to Note 8 to our financial statements above for
additional details. 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. We have not entered into any
derivative financial instruments, although we have 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 was $15.5 million for the first nine
months of fiscal 2003, as compared to cash provided of $42.0 million for the
first nine months of fiscal 2002. The current period decrease relative to the
comparable prior year period was due to lower net income and a decrease in
operating assets and liabilities partially offset by greater depreciation
expense, the $1.8 million non-cash charge for the write off of the operating
system license agreement in the current year period, and $0.5 million of other
non-cash expenses related to intellectual property impairment charges. The
changes in operating assets and liabilities resulted in $4.8 million of cash
outflow for the nine months ended March 31, 2003, compared with a cash inflow of
$12.8 million during the comparable prior year period. The cash outflow for the
nine months ended March 31, 2003 was primarily due to a $10.4 million increase
in long-term royalty advances for new technology and brand licenses, and a $1.7
million increase in long-term receivables partially offset by a $2.0 million
increase in current liabilities, a $2.0 million decrease in current income taxes
receivable, a $1.1 million reduction in accounts receivable, and a $1.5 million
reduction in other current assets from the comparable balances at June 30, 2002.
The reduction in accounts receivable and other current assets and increase in
current liabilities is due to a lower level of revenues and higher expenses. The
decrease in income taxes receivable reflects collection of monies from taxing
authorities. The cash inflow for the nine months ended March 31, 2002 was
primarily due to a $23.6 million decrease in receivables partially offset by a
$3.3 million increase in inventories and a $6.3 million reduction in current
liabilities from the comparable balances at June 30, 2001. We have not
experienced significant bad debt expense in any of the periods presented. We
anticipate continued low levels of cash

14

from operations over the next six 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.

Cash used for investing activities was $14.5 million for the nine months ended
March 31, 2003, compared with $28.7 million for the comparable prior year
period. Cash used for the purchase of property, plant and equipment for the nine
months ended March 31, 2003 was $10.2 million compared with $12.1 million for
the comparable prior-year period. This decrease is due to lower renovation costs
in the current nine 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 enterprise resource planning information system. Cash
used for additions to participation gaming devices was $15.6 million and $12.7
million for the nine months ended March 31, 2003 and 2002, respectively. The
increase in the nine months ended March 31, 2003 was due to our PAC-MAN themed
games, which were introduced in May 2002, as well as top box conversions and
replacement of fully depreciated units. Cash of $11.3 million was provided by
the redemption of short-term investments for the nine months ended March 31,
2003, compared to $1.3 million used for the purchase of such investments in the
comparable prior year period. We used $2.5 million of cash in the nine months
ended March 31, 2002 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.

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, which we
completed in the March 2003 quarter. During the nine months ended March 31,
2003, we repurchased 1,855,700 shares for an aggregate price of $21.4 million
under both programs. Since the inception of the first common stock repurchase
program in January 2002, we have repurchased 2,401,200 shares of our common
stock, or 7.4% of our previously outstanding shares for $30 million at an
average price of $12.49 per share.

In April 2003, our Board of Directors authorized a new twelve-month plan to
repurchase up to an additional $10 million of our common stock in open market or
privately negotiated transactions from time to time. This program could further
reduce our cash balance and number of outstanding common shares through April
2004. The timing and actual number of shares to be purchased will depend on
market conditions.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2003 COMPARED WITH THREE MONTHS ENDED MARCH 31,
2002

Consolidated revenues increased 15.8% to $41.8 million in the quarter ended
March 31, 2003 from $36.1 million in the quarter ended March 31, 2002. Total
revenue increased $5.7 million: $7.4 million from increased product sales
revenue partially offset by $1.7 million from decreased participation and lease
revenue. We shipped 1,601 video and reel-type gaming devices in the current
quarter, plus 500 gaming stations under an original equipment manufacturing
(OEM) agreement, resulting in product and parts sales of $20.3 million versus
948 gaming devices resulting in $12.9 million of product and parts sales in the
comparable prior year quarter. The increase was primarily due to higher gaming
machine sales to customers outside North America, which accounted for 67% of
units sold in the current quarter compared to 56% in the prior year's quarter.
We shipped over 1,300 conversion kit sales during the current quarter, as
operators refreshed their installed WMS gaming devices with newly approved WMS
games. Parts, used games, OEM and game conversion revenue, which is included in
product sales revenue, increased 51.5% in the March 2003 quarter to $7.3 million
from $4.8 million in the prior year's quarter due to the greater customer demand
for each of these revenue sources. The average sales price for our new gaming
devices decreased from $8,481 in the prior year's quarter to $8,085 in the
current year's quarter due to the mix in gaming devices sold.

Participation and lease revenue decreased from $23.2 million in the March 2002
quarter to $21.5 million in the March 2003 quarter. The decrease in
participation revenue was mainly due to a decline from the prior year quarter in
the average installed base of participation games by 407 units to 5,336 units
and a decrease in the net revenue per day from $38.53 to $37.10. The period end
installed base decreased sequentially from December 31, 2002 by 277 units to
5,300 units at March 31, 2003, and compares to 5,647 units installed at March
31, 2002. The decline in the installed base in the March 2003 quarter resulted
from our current gaming platform not supporting key features and functionality
that casino operators now demand, such as certain cashless gaming options and
multi-denominational and tokenization capabilities. Several casino operators
have removed our participation games because our current platform does not
support the dual port EZ pay system. In addition, competition for floor space
has intensified as casinos have more participation product to choose from. The
net participation backlog, which represents customer indications of interest in
our

15

participation games, stood at over 400 units as of April 28, 2003, an increase
of 45% from our net backlog at December 31, 2002. In addition, we have a backlog
of over 1,000 requests for game conversions to new participation themes.

Consolidated gross profit in the quarter ended March 31, 2003 increased 10.8% to
$24.3 million from $22.0 million in the quarter ended March 31, 2002. The gross
margin percentage decreased from 60.9% in the quarter ended March 31, 2002 to
58.3% in the quarter ended March 31, 2003. The decrease in the overall gross
margin percentage resulted from a shift in the revenue mix from higher margin
participation and lease revenues to lower margin product sales. Participation
and lease revenues represented 51.5% of total revenues in the March 2003
quarter, compared to 64.3% in the March 2002 quarter. The gross profit margin
percentage on product sales was 36.7% in the March 2003 quarter, compared to
20.0% in the March 2002 quarter. The margin was 16.7 percentage points above the
prior year's quarter because higher margin products represented a greater
percentage of product sales revenues and higher production volume decreased cost
per unit sold, partially offset by a decrease in the average sales price per
unit. The gross profit margin percentage on participation and lease revenues
decreased from 83.5% in the March 2002 quarter to 78.5% in the March 2003
quarter due to the decrease in the net revenue per day, lower gross margin on
the SURVIVOR wide area progressive product, which was first introduced in April
2002, and higher royalties payable to licensors.

Research and development expenses were $9.9 million in the current quarter
compared to $6.7 million in the prior year's quarter. The increase in research
and development cost is due to the ongoing execution of our technology
improvement plan and preparation to expand our product offerings. We expect
continued higher research and development expenses in upcoming periods to
concurrently complete our technology improvement plan while expanding our
product offerings.

Selling and administrative expenses increased 35.5% from $9.5 million in the
prior year's quarter to $12.9 million in the current year's quarter, due to
costs incurred in preparation for our launch of CPU-NXT, Bluebird cabinets and
new games, ongoing costs incurred to implement a new enterprise resource
planning system and increased legal expenses. We expect our selling and
administrative expenses will continue to grow as we get closer to
commercializing the CPU-NXT operating system.

Depreciation and amortization, which includes depreciation of participation
games, increased during the current year's quarter to $6.7 million from $6.3
million in the prior year's quarter due to higher depreciation of top box
conversion capitalized costs.

We incurred an operating loss of $5.2 million in the current year's quarter,
compared to an operating loss of $0.6 million in the prior year's quarter. The
financial results of the current year's quarter reflect the increase in research
and development, selling and administrative and depreciation expenses, partially
offset by an increase in gross profit.

The effective income tax rate for the current quarter, which includes both
current and deferred taxes, reflects a benefit of $665,000 from a reduction in
prior year taxes, which were less than amounts previously provided.

Our net loss was $ 1.9 million or $0.06 per share for the current year's quarter
compared to nil per diluted share for the prior year's quarter.

NINE MONTHS ENDED MARCH 31, 2003 COMPARED WITH NINE MONTHS ENDED MARCH 31, 2002

Consolidated revenues decreased 2.8% to $127.8 million in the nine month period
ended March 31, 2003 from $131.5 million in the nine month period ended March
31, 2002. Total revenue decreased $3.7 million: $2.1 million from decreased
product sales revenue and $1.6 million from a decrease in participation and
lease revenue. We shipped 4,406 video and reel-type gaming devices in the
current nine month period, plus 1,000 gaming stations under an OEM agreement
resulting in product and parts sales of $57.1 million versus 5,604 gaming
devices resulting in $59.2 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 are all included in product sales
revenues, increased 64.8% in the nine months ended March 2003 to $20.8 million
from $12.6 million in the nine months ended March 2002 due to greater customer
demand for these revenue sources. The average sales price for our new gaming
devices decreased slightly from $8,314 in the prior year's nine month period to
$8,237 in the current year's nine month period due to the mix of gaming devices
sold.

Participation and lease revenue decreased slightly from $72.3 million in the
2002 nine month period to $70.7 million in the 2003 nine month period primarily
due to a decline in the installed base. The installed base at March 31, 2003
declined to 5,300 units compared to 5,647 units installed at March 31, 2002. The
decline in the installed base resulted from our current gaming platform not
supporting key features and functionality that casino operators now demand, such
as certain cashless gaming options and multi-denominational and

16

tokenization, and because we did not receive approvals for new participation
themes as we originally anticipated. Average revenue per day for machines
decreased from $39.18 in the 2002 nine month period to $38.51 in the 2003 nine
month period. The net participation backlog, which represents customer
indications of interest in our participation games, stood at over 400 units as
of April 28, 2003, an increase of 45% from our net backlog at December 31, 2002.
In addition, we have a backlog of over 1,000 requests for game conversions to
new participation themes.

Consolidated gross profit in the nine month period ended March 31, 2003 declined
6.3% to $78.5 million from $83.8 million in the nine month period ended March
31, 2002. The gross margin percentage decreased from 63.7% in the nine month
period ended March 31, 2002 to 61.4% in the nine month period ended March 31,
2003. The decrease in the overall gross margin percentage resulted from lower
gross margin percentages from participation and lease revenues, partially offset
by a higher margin on product sales. Participation and lease revenues were 55.3%
of total revenues in the 2003 nine month period, compared to 55.0% in the 2002
nine month period. The gross profit margin percentage on product sales was 38.5%
in the 2003 nine month period, compared to 37.7% in the 2002 nine month period.
The margin was 0.8 percentage points above the prior year's nine month period
due to higher margin parts, OEM and game sales conversion revenues representing
a greater percentage of total product sales revenues partially offset by the
impact of lower production volumes and a decrease in the average sales price per
unit. The gross profit margin percentage on participation and lease revenues
decreased from 85.0% in the 2002 nine month period to 79.9% in the 2003 nine
month period primarily due to the decrease in net revenue per day, lower gross
margin on the SURVIVOR wide area progressive product, which was first introduced
in April of 2002, higher conversion and parts costs, and higher royalties
payable to licensors.

Research and development expenses were $29.3 million in the current nine month
period and include the $2.8 million write-off of the operating system licensing
agreement. This compares to $17.9 million of research and development costs in
the 2002 nine month period which included $0.4 million of employee separation
costs. The increase in research and develop cost is due to the ongoing execution
of our technology improvement plan and product line enhancement efforts. We
expect continued higher research and development expenses through fiscal 2003 to
complete our technology improvement plan and expand product offerings.

Selling and administrative expenses increased from $35.5 million in the prior
year's nine month period to $36.5 million in the current year's nine month
period. The prior year's nine month period included $0.7 million for employee
separation costs. The current nine 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 offset by
ongoing costs incurred in preparation for our launch of CPU-NXT, Bluebird
cabinets and new games, ongoing costs incurred to implement a new enterprise
resource planning system, and increased legal expenses.

Depreciation and amortization, which includes depreciation of participation
games, increased during the current year's nine month period to $20.7 million
from $18.4 million in the prior year's nine month period due to the replacement
of fully depreciated participation gaming devices and higher top box capitalized
cost in the current nine month period.

We incurred an operating loss of $8.0 million in the current year's nine month
period, compared to operating income of $12.0 million in the prior year's nine
month period. The financial results of the current year's nine 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
selling and administrative expenses and depreciation expense.

The effective income tax rate for the March 2003 nine month period, which
includes both current and deferred taxes, reflects a benefit of $665,000 from a
reduction in prior year taxes, which were less than amounts previously provided.

Our net loss was $3.1 million, or $0.10 per share, for the current year's nine
month period compared to net income of $9.1 million, or $0.28 per diluted share,
for the prior year's nine month period. The 2003 nine 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 2002 nine
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.

MONOPOLY(TM) and FREE PARKING(TM) are trademarks of Hasbro, Inc 2003 Hasbro,
Inc. All rights reserved. Used with permission.

HOLLYWOOD SQUARES(TM) and THE CENTER SQUARE(TM) are trademarks of King World
Productions, Inc. All rights reserved.

PAC-MAN(TM) and PAC-MAN FRENZY(TM) and (C), 1980 Namco Limited. All rights
reserved.

17

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) 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.

18

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,
as amended, alleged that Shuffle Master (i) violates our trade dress, (ii) makes
false claims and false advertising, and (iii) infringes certain WMS patents
relating to bonusing technology. Shuffle Master responded and counterclaimed in
the Nevada action seeking declaratory relief that it had not infringed WMS trade
dress or patents.

On February 24, 2003 Shuffle Master filed an action against WMS Gaming, Inc. and
Bally Gaming, Inc. in the U.S. District Court for the Northern District of
Illinois alleging infringement of Shuffle Master's second event multiplier
patent.

On March 28, 2003, WMS and Shuffle Master reached an agreement to settle all
pending litigation between the parties. The settlement agreement provides for,
among other things, cross-licenses of the specified technologies between the
companies and permits Shuffle Master to convert a limited number of our games in
the field. The settlement did not have a material impact on the balance sheet,
income statement or cash flows of the Company.

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.

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.

10.1 Relocation compensation letter, dated March 6, 2003 between our
wholly owned subsidiary, WMS Gaming Inc., WMS and Seamus McGill,
Executive Vice President of Sales and Marketing of WMS Gaming Inc.

10.2 Employment offer letter, dated November 22, 2002, to Kathleen J.
McJohn, Vice President, General Counsel and Secretary.

10.3 Purchase and Settlement Agreement, dated May 7, 2003, between WMS
Industries Inc. and Louis J. Nicastro.

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

19

(b) Reports on Form 8-K.

Current report on Form 8-K filed January 28, 2003 under item 9
(reporting item 12 issues).

20

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: May 14, 2003 By: /s/ Scott D. Schweinfurth
------------------------------
Scott D. Schweinfurth
Executive Vice President,
Chief Financial Officer and Treasurer
(Principal Financial and Accounting
Officer)

21

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 we 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.

May 14, 2003

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

22

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 we 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.

May 14, 2003

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

23

EXHIBIT INDEX