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COSTA MESA, CA -- (Marketwire) -- 02/14/13 -- ISC8® Inc. (OTCBB: ISCI), ("ISC8" or the "Company"), a provider of intelligent cybersecurity solutions, today reported unaudited operating results for its fiscal 2013 first quarter ended December 30, 2012.

"Having completed the majority of our transformation to commercialization, we are now focused on aggressively marketing our three key cybersecurity products and have received very positive feedback in the market," said Bill Joll, President and CEO of ISC8 Inc. "With our acquisition of key assets from Bivio Networks last October, we now have the products that address many of the cybersecurity issues facing enterprise, service provider and government networks. Our global business pipeline for Cyber NetFalcon™ and Cyber NetControl continues to grow and Cyber adAPT™ product trials are progressing well. We are encouraged with the trial findings and the ability of these products to detect Advanced Persistent Threats, which right out of the box includes threats that we believe are not immediately detectible by existing cybersecurity platforms in the marketplace."

Recent Business Highlights:

• Completed acquisition of two cybersecurity software products from Bivio Networks. The acquisition provided ISC8 with advanced products and technologies for Security Intelligence, Incident Response, Content Control and mitigation of Advanced Persistent Threats (APTs) in enterprise, service provider and government networks.
• ISC8 now has three leading edge technology Cybersecurity products:
  • Cyber adAPT capable of detecting targeted attacks such as APTs in larger corporate enterprise networks (with beta trials that began in January 2013)
  • Cyber NetFalcon capable of identifying perpetrators (currently available), and
  • Cyber NetControl capable of providing more user control and security to service operators, such as Mobile Carriers (currently available).
• Selected by a Middle Eastern service provider to deploy Cyber NetControl, ISC8's carrier grade, policy-based content control and traffic enforcement solution to provide advanced parental control functionality to their subscribers.

Financial Results:

Total revenues for the first quarter of fiscal 2013 were $875,000, compared to total revenues of $1,297,000 for the first quarter of fiscal 2012. Net loss in the first quarter of fiscal 2013 was $2,164,000, compared to a net loss of $8,250,000 in the first quarter of fiscal 2012. The decrease in net loss in the first quarter of fiscal 2013 compared to the prior year quarter was substantially attributable to the change in fair value of the derivative liability.

Excluding non-cash charges for changes in fair value of derivative liability, non-cash interest expense, stock-based compensation, depreciation and amortization and net loss from discontinued operations, non-GAAP net loss for the first quarter of fiscal 2013 was approximately $5.0 million, compared to non-GAAP net loss of approximately $3.2 million in the same quarter last year. See "Use of Non-GAAP Financial Information" below for important information regarding the Company's use of non-GAAP financial measures.

Use of Non-GAAP Financial Information - ISC8 reports net loss in accordance with accounting principles generally accepted in the United States ("GAAP") and also on a non-GAAP basis. The Company's presentation of non-GAAP net loss in this press release excludes the impact of changes in fair value of derivative liability, non-cash interest expense, stock-based compensation, depreciation and amortization expense and net earnings from discontinued operations. Stock-based compensation expense primarily includes the impact of stock options issued by the Company and stock contributions to the employees' retirement plan.

ISC8 believes that the presentation of non-GAAP net loss provides useful supplemental information to management and investors regarding financial and business trends related to the Company's financial condition and results of operations. The Company also believes that examination of non-GAAP net loss can facilitate consistency and comparability among and between prior periods, as well as comparison with other companies that present similar non-GAAP financial measures. However, the Company's presentation of non-GAAP information is not necessarily equivalent to non-GAAP measures presented by other reporting companies and should be considered in that context. The Company's management generally uses non-GAAP loss to evaluate the Company's operating performance because management believes that the exclusion of the non-cash items described above provides insight into the Company's core ongoing operating results, particularly from a cash generation or use perspective, and underlying business trends affecting the Company's performance. ISC8 has chosen to provide this non-GAAP information to investors to enable them to perform additional analyses of past, present and future operating performance and as a supplemental means to evaluate the Company's ongoing core operations. The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

For more information on ISC8 and its products, visit www.ISC8.com.

About ISC8®
ISC8 is actively engaged in the development and sale of intelligent cybersecurity solutions for commercial and government environments worldwide. ISC8's Cyber products are aimed at detecting next-generation malware and Advanced Persistent Threats (APTs). ISC8 provides hardware, software and service offerings for Malware Threat Detection leveraging its history in anti-tamper, secure memories, high-speed processors, and miniaturized sensors -- all technologies it has developed. ISC8 was founded in 1974 and is headquartered in Costa Mesa, California. For more information about ISC8 visit www.isc8.com.

                                  ISC8 Inc.
              UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS

The following non-GAAP adjustments are based upon the Company's unaudited consolidated statements of operations for the periods shown. These adjustments are not in accordance with or an alternative for GAAP. The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. ISC8 intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules, regulations and guidance, and may change its reporting of such non-GAAP results in the future as a result of such assessment.

                                                  13 Weeks Ended
                                       ------------------------------------
                                       December 30, 2012   January 1, 2012
                                       -----------------  -----------------
GAAP net loss attributable to ISC8     $      (2,164,000) $      (8,250,000)

Plus (Minus):
  Change in fair value of derivative
   instrument                                 (4,947,000)         2,310,000
  Non-cash interest expense                    1,674,000          1,465,000
  Non- cash stock-based compensation             235,000            836,000
  Depreciation and amortization                  184,000            174,000
  Loss from discontinued operations                    -            223,000
                                       -----------------  -----------------
Non-GAAP net loss attributable to ISC8 $      (5,018,000) $      (3,242,000)
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