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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q



| |           
| | ----------
| | (Mark One)

|  |  |                                                                                       
|- |  | --------------------------------------------------------------------------------------
|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934



| |                                              
| | ---------------------------------------------
| | For the quarterly period ended March 31, 2003

OR

|  |  |                                                                                        
|- |  | ---------------------------------------------------------------------------------------
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934



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

Commission file number 1-9330

INTELLIGENT SYSTEMS CORPORATION

(Exact name of Registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Georgia                                                        |  | 58-1964787                          
|                                                               |  |                                     
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

|                                         |  |           
|---------------------------------------- |  | ----------
|4355 Shackleford Road, Norcross, Georgia |  | 30093     
|                                         |  |           
|(Address of principal executive offices) |  | (Zip Code)

Registrants telephone number, including area code: (770) 381-2900

Indicate by a 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 o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2)
Yes o   No x

As of March 31, 2003, 4,489,321 shares of Common Stock were outstanding.



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TABLE OF CONTENTS



|                                                     |                                                                                               |  |  |  |  |  |  | 
|---------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                                                     | Item 1. Financial Statements                                                                 
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                                                     | Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
|                                                     | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                                     | Item 4. Controls and Procedures                                                              
|Part II. OTHER INFORMATION                          
|                                                     | Item 5. Other Information                                                                    
|                                                     | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                          
|CERTIFICATION OF CHIEF EXECUTIVE OFFICER SECTION 302
|CERTIFICATION OF CHIEF FINANCIAL OFFICER SECTION 302
|EX-99.1 SECTION 906 CERTIFICATION OF CEO            
|EX-99.2 SECTION 906 CERTIFICATION OF CFO            



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Item 1.     Financial Statements

Intelligent Systems Corporation
CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands, except share amounts)

|                                                              |                                                                                      |                                                                              |        |             |       |              |        |         |       | 
|------------------------------------------------------------- | ------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------- | ------ | ----------- | ----- | ------------ | ------ | ------- | ----- | 
|                                                              |                                                                                      |                                                                              |        | March 31,   |       | December 31,
|                                                              |                                                                                      |                                                                              |        | 2003        |       | 2002        
|                                                              |                                                                                      |                                                                              |        | (unaudited) |       | (audited)   
|                                                              |                                                                                      |                                                                              |        |             |       |             
|ASSETS                                                        |                                                                                      |                                                                              |        |             |       |              |        |        
|Current assets:                                               |                                                                                      |                                                                              |        |             |       |              |        |        
|                                                              | Cash                                                                                 |                                                                              | $      | 5,108       |       |              | $      | 2,644   |      
|                                                              | Accounts receivable, net                                                             |                                                                              |        | 2,339       |       |              |        | 3,025   |      
|                                                              | Notes and interest receivable                                                        |                                                                              |        | 79          |       |              |        | 205     |      
|                                                              | Inventories                                                                          |                                                                              |        | 680         |       |              |        | 671     |      
|                                                              | Other current assets                                                                 |                                                                              |        | 161         |       |              |        | 213     |      
|                                                              |                                                                                      |                                                                              |        |             |       |              |        |        
|                                                              |                                                                                      | Total current assets                                                         |        |             | 8,367 |              |        |         | 6,758 | 
|                                                              |                                                                                      |                                                                              |        |             |       |              |        |        
|Long-term investments                                         |                                                                                      |                                                                              | 6,483  |             |       |              | 7,145  |        
|Property and equipment, at cost less accumulated depreciation |                                                                                      |                                                                              | 721    |             |       |              | 761    |        
|Goodwill                                                      |                                                                                      |                                                                              | 2,038  |             |       |              | 2,380  |        
|Intangibles, net                                              |                                                                                      |                                                                              | 710    |             |       |              | 788    |        
|Other assets, net                                             |                                                                                      |                                                                              | 28     |             |       |              | 28     |        
|                                                              |                                                                                      |                                                                              |        |             |       |              |        |        
|Total assets                                                  |                                                                                      | $                                                                            | 18,347 |             |       | $            | 17,860 |        
|                                                              |                                                                                      |                                                                              |        |             |       |              |        |        
|LIABILITIES AND STOCKHOLDERS EQUITY                          |                                                                                      |                                                                              |        |             |       |              |        |        
|Current liabilities:                                          |                                                                                      |                                                                              |        |             |       |              |        |        
|                                                              | Accounts payable                                                                     |                                                                              | $      | 1,084       |       |              | $      | 1,301   |      
|                                                              | Deferred revenue                                                                     |                                                                              |        | 1,923       |       |              |        | 1,784   |      
|                                                              | Deferred gain                                                                        |                                                                              |        | 393         |       |              |        | 428     |      
|                                                              | Accrued expenses and other current liabilities                                       |                                                                              |        | 2,012       |       |              |        | 1,755   |      
|                                                              |                                                                                      |                                                                              |        |             |       |              |        |        
|                                                              |                                                                                      | Total current liabilities                                                    |        |             | 5,412 |              |        |         | 5,268 | 
|                                                              |                                                                                      |                                                                              |        |             |       |              |        |        
|Deferred revenue, net of current portion                      |                                                                                      |                                                                              | 4,563  |             |       |              | 4,813  |        
|Other long-term liabilities                                   |                                                                                      |                                                                              | 15     |             |       |              | 27     |        
|                                                              |                                                                                      |                                                                              |        |             |       |              |        |        
|                                                              |                                                                                      | Total long term liabilities                                                  |        |             | 4,578 |              |        |         | 4,840 | 
|                                                              |                                                                                      |                                                                              |        |             |       |              |        |        
|Minority interest                                             |                                                                                      |                                                                              | 1,516  |             |       |              | 1,516  |        
|Redeemable preferred stock of subsidiary                      |                                                                                      |                                                                              |       |             |       |              | 342    |        
|                                                              |                                                                                      |                                                                              |        |             |       |              |        |        
|Stockholders equity:                                         |                                                                                      |                                                                              |        |             |       |              |        |        
|                                                              | Common stock, $0.01 par value, 20,000,000 shares authorized, 4,489,321 and 4,491,779 |                                                                              |        |             |       |              |        |         |      
|                                                              |                                                                                      | issued and outstanding at March 31, 2003 and December 31, 2002, respectively |        |             | 45    |              |        |         | 45    | 
|                                                              | Paid-in capital                                                                      |                                                                              |        | 18,428      |       |              |        | 18,432  |      
|                                                              | Accumulated other comprehensive loss                                                 |                                                                              |        | (54         | )     |              |        | (56     | )    
|                                                              | Accumulated deficit                                                                  |                                                                              |        | (11,578     | )     |              |        | (12,527 | )    
|                                                              |                                                                                      |                                                                              |        |             |       |              |        |        
|                                                              |                                                                                      | Total stockholders equity                                                   |        |             | 6,841 |              |        |         | 5,894 | 
|Total liabilities and stockholders equity                    |                                                                                      | $                                                                            | 18,347 |             |       | $            | 17,860 |        
|                                                              |                                                                                      |                                                                              |        |             |       |              |        |        

The accompanying notes are an integral part of these consolidated balance sheets.

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Intelligent Systems Corporation
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(unaudited, in thousands, except share amounts)

|                                                      |          |                                         |           |       |       |   |           |       |       |  
|----------------------------------------------------- | -------- | --------------------------------------- | --------- | ----- | ----- | - | --------- | ----- | ----- | -
|Three Months Ended March 31,                          |          | 2003                                    |           | 2002 
|                                                      |          |                                         |           |      
|Revenue                                               |          |                                         |           |       |       |   |           |      
|                                                      | Products |                                         | $         | 1,704 |       |   | $         | 1,352 |      
|                                                      | Services |                                         |           | 1,466 |       |   |           | 835   |      
|                                                      |          |                                         |           |       |       |   |           |      
|                                                      |          | Total revenue                           |           |       | 3,170 |   |           |       | 2,187 |  
|                                                      |          |                                         |           |       |       |   |           |      
|Cost of revenue                                       |          |                                         |           |       |       |   |           |      
|                                                      | Products |                                         |           | 759   |       |   |           | 649   |      
|                                                      | Services |                                         |           | 1,050 |       |   |           | 546   |      
|                                                      |          |                                         |           |       |       |   |           |      
|                                                      |          | Total cost of revenue                   |           |       | 1,809 |   |           |       | 1,195 |  
|                                                      |          |                                         |           |       |       |   |           |      
|Expenses                                              |          |                                         |           |       |       |   |           |      
|                                                      |          | Marketing                               |           |       | 771   |   |           |       | 587   |  
|                                                      |          | General & administrative                |           |       | 1,083 |   |           |       | 1,236 |  
|                                                      |          | Research & development                  |           |       | 2,081 |   |           |       | 2,786 |  
|                                                      |          |                                         |           |       |       |   |           |      
|Loss from operations                                  |          |                                         | (2,574    | )     |       |   | (3,617    | )    
|                                                      |          |                                         |           |       |       |   |           |      
|Other income                                          |          |                                         |           |       |       |   |           |      
|                                                      |          | Interest income (expense), net          |           |       | (5    | ) |           |       | 24    |  
|                                                      |          | Investment income, net                  |           |       | 3,464 |   |           |       | 797   |  
|                                                      |          | Equity in losses of affiliate companies |           |       | (67   | ) |           |       | (66   | )
|                                                      |          | Other income, net                       |           |       | 27    |   |           |       | 751   |  
|                                                      |          |                                         |           |       |       |   |           |      
|Income (loss) before income tax provision (benefit)   |          |                                         | 845       |       |       |   | (2,111    | )    
|                                                      |          |                                         |           |       |       |   |           |      
|Income tax provision (benefit)                        |          |                                         | (104      | )     |       |   | 11        |      
|                                                      |          |                                         |           |       |       |   |           |      
|Net income (loss)                                     |          | $                                       | 949       |       |       | $ | (2,122    | )    
|                                                      |          |                                         |           |       |       |   |           |      
|Basic and diluted net income (loss) per share         |          | $                                       | 0.21      |       |       | $ | (0.47     | )    
|                                                      |          |                                         |           |       |       |   |           |      
|Basic and diluted weighted average shares outstanding |          |                                         | 4,490,467 |       |       |   | 4,495,530 |      
|                                                      |          |                                         |           |       |       |   |           |      

The accompanying notes are an integral part of these consolidated financial
statements.

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Intelligent Systems Corporation
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW(unaudited, in thousands)

|                                         |                                                        |                                           |                                                                            |                                        |   |                              |        |        |   |        |     | 
|---------------------------------------- | ------------------------------------------------------ | ----------------------------------------- | -------------------------------------------------------------------------- | -------------------------------------- | - | ---------------------------- | ------ | ------ | - | ------ | --- | 
|                                         |                                                        |                                           |                                                                            |                                        |   | Three Months Ended March 31,
|                                         |                                                        |                                           |                                                                            |                                        |   |                             
|CASH PROVIDED BY (USED FOR):             |                                                        | 2003                                      |                                                                            | 2002                                  
|                                         |                                                        |                                           |                                                                            |                                       
|OPERATIONS:                              |                                                        |                                           |                                                                            |                                        |   |                              |        |       
|                                         | Net income (loss)                                      |                                           | $                                                                          | 949                                    |   |                              | $      | (2,122 | )
|                                         | Adjustments to reconcile net income (loss) to net cash |                                           |                                                                            |                                        |   |                              |        |        |  
|                                         |                                                        | used for operating activities, net of     |                                                                            |                                        |   |                              |        |        |   |       
|                                         |                                                        | effects of acquisitions and dispositions: |                                                                            |                                        |   |                              |        |        |   |       
|                                         |                                                        |                                           | Depreciation and amortization                                              |                                        |   | 177                          |        |        |   | 220    |    
|                                         |                                                        |                                           | Deferred gain recognized                                                   |                                        |   | (35                          | )      |        |   | (752   | )  
|                                         |                                                        |                                           | Investment income, net                                                     |                                        |   | (3,458                       | )      |        |   | (1,047 | )  
|                                         |                                                        |                                           | Equity in losses of affiliate companies                                    |                                        |   | 67                           |        |        |   | 66     |    
|                                         |                                                        |                                           | Changes in operating assets and liabilities, net of effects of acquisition |                                        |   |                              |        |        |   |        |    
|                                         |                                                        |                                           |                                                                            | Accounts receivable                    |   |                              | 686    |        |   |        | 388 | 
|                                         |                                                        |                                           |                                                                            | Inventories                            |   |                              | (9     | )      |   |        | 34  | 
|                                         |                                                        |                                           |                                                                            | Other current assets                   |   |                              | 52     |        |   |        | 177 | 
|                                         |                                                        |                                           |                                                                            | Accounts payable                       |   |                              | (217   | )      |   |        | 172 | 
|                                         |                                                        |                                           |                                                                            | Accrued expenses and other liabilities |   |                              | 136    |        |   |        | 448 | 
|                                         |                                                        |                                           |                                                                            |                                        |   |                              |        |       
|Cash used for continuing operations      |                                                        |                                           | (1,652                                                                     | )                                      |   |                              | (2,416 | )     
|                                         |                                                        |                                           |                                                                            |                                        |   |                              |        |       
|INVESTING ACTIVITIES:                    |                                                        |                                           |                                                                            |                                        |   |                              |        |       
|                                         | Proceeds from sales of investments                     |                                           |                                                                            | 4,183                                  |   |                              |        | 1,666  |  
|                                         | Acquisition of company, net of cash acquired           |                                           |                                                                            |                                       |   |                              |        | 39     |  
|                                         | Repayments under notes and interest receivable         |                                           |                                                                            |                                       |   |                              |        | 14     |  
|                                         | Advances under notes and interest receivable           |                                           |                                                                            |                                       |   |                              |        | (1,057 | )
|                                         | Purchases of property and equipment, net               |                                           |                                                                            | (59                                    | ) |                              |        | (105   | )
|                                         |                                                        |                                           |                                                                            |                                        |   |                              |        |       
|Cash provided by investing activities    |                                                        |                                           | 4,124                                                                      |                                        |   |                              | 557    |       
|                                         |                                                        |                                           |                                                                            |                                        |   |                              |        |       
|FINANCING ACTIVITIES:                    |                                                        |                                           |                                                                            |                                        |   |                              |        |       
|                                         | Purchase and retirement of stock                       |                                           |                                                                            | (4                                     | ) |                              |        |       |  
|                                         |                                                        |                                           |                                                                            |                                        |   |                              |        |       
|Cash used for financing activities       |                                                        |                                           | (4                                                                         | )                                      |   |                              |       |       
|                                         |                                                        |                                           |                                                                            |                                        |   |                              |        |       
|Effects of exchange rate changes on cash |                                                        |                                           | (4                                                                         | )                                      |   |                              | 5      |       
|                                         |                                                        |                                           |                                                                            |                                        |   |                              |        |       
|Net increase (decrease) in cash          |                                                        |                                           | 2,464                                                                      |                                        |   |                              | (1,854 | )     
|Cash at beginning of period              |                                                        |                                           | 2,644                                                                      |                                        |   |                              | 12,026 |       
|Cash at end of period                    |                                                        | $                                         | 5,108                                                                      |                                        |   | $                            | 10,172 |       
|                                         |                                                        |                                           |                                                                            |                                        |   |                              |        |       

The accompanying notes are an integral part of these consolidated financial
statements.

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Intelligent Systems Corporation




NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



|1. |  | Throughout this report, the terms we, us, ours, ISC and company
refer to Intelligent Systems Corporation, including its subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | The unaudited consolidated financial statements presented in this Form
10-Q have been prepared in accordance with accounting principles generally
accepted in the United States applicable to interim financial statements.
Accordingly, they do not include all of the information and notes required
for complete financial statements. In the opinion of ISC management,
these consolidated financial statements contain all adjustments (which
comprise only normal and recurring accruals) necessary to present fairly
the financial position as of March 31, 2003 and 2002. The interim results
for the three months ended March 31, 2003 are not necessarily indicative
of the results to be expected for the full year. These statements should
be read in conjunction with our consolidated financial statements and
notes thereto for the fiscal year ended December 31, 2002, as filed in our
annual report on Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|3. |  | Settlement of Escrow Fund- On March 21, 2003, the former shareholders of
PaySys International, Inc. entered into a Settlement Agreement with First
Data Corporation (FDC) related to funds that had been held in escrow to
resolve any post-closing claims by FDC related to the acquisition of
PaySys by FDC in April 2001. As a result of the Settlement Agreement, we
received $4,183,000 cash which represented our pro rata share (30.7%) of
the amount released from the escrow fund. Since funds were contingent and
not considered in the previously calculated gain on the sale, this amount
is included as investment income in the results of the quarter ended March
31, 2003 and is reflected in the cash balance at the end of the quarter.
We will also receive our pro rata share of the balance of a $1.0 million
legal defense fund, after payment of legal and administrative expenses
related to the escrow. We expect a disbursement from the legal defense
fund in the second quarter of 2003, which will represent additional
investment income and cash proceeds.                                                                                                                                                                                                                                                                         
|  
|4. |  | Write-down of RF Solutions Note Receivable and Investment- The first
quarter 2003 results include a reserve of $600,000 against the $600,000
carrying value of our minority investment in RF Solutions, Inc., an early
stage supplier of WLAN semiconductor products that sold its principal
assets to a publicly traded company effective early in April 2003. We
also took a reserve of $119,000 against the carrying value of a note
receivable from RF Solutions. Both reserves were presented in the line
item investment income for the quarter ended March 31, 2003. Under the
terms of the April 2003 sale, the note holders and preferred shareholders
of RF Solutions, including several venture capital funds and other
minority investors like ISC, received a cash payment to repay part of the
principal and interest outstanding on the notes and may receive an
additional payment on the note balance and preferred stock investment,
payable in common stock of Anadigics, Inc., the acquiror company [NASDAQ:
ANAD], based on achievement of certain performance targets over the next
twelve months. In April 2003, we received $79,000 cash in partial payment
of our note. Since the amount of any future payment, if any, is not
determinable at this time, we have fully reserved our remaining note
balance and investment in RF Solutions.
|  
|5. |  | Comprehensive Income (Loss)- In accordance with Financial Accounting
Standards Board Statement No. 130, Reporting Comprehensive Income,
comprehensive income is the total of net income and all other non-owner
changes in equity in a period. A summary follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   |  | Consolidated Statements of Comprehensive Income (Loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|                                   |                                         |      |                              |      |   |   |        |      |  
|---------------------------------- | --------------------------------------- | ---- | ---------------------------- | ---- | - | - | ------ | ---- | -
|                                   |                                         |      | Three Months Ended March 31,
|                                   |                                         |      |                             
|(unaudited, in thousands)          |                                         | 2003 |                              | 2002
|                                   |                                         |      |                              |     
|Net income (loss)                  |                                         | $    | 949                          |      |   | $ | (2,122 | )   
|Other comprehensive income (loss): |                                         |      |                              |      |   |   |        |     
|                                   | Foreign currency translation adjustment |      |                              | (4   | ) |   |        | 5    |  
|                                   | Unrealized gain (loss)                  |      |                              | 5    |   |   |        | (439 | )
|                                   |                                         |      |                              |      |   |   |        |     
|Comprehensive income (loss)        |                                         | $    | 950                          |      |   | $ | (2,556 | )   
|                                   |                                         |      |                              |      |   |   |        |     



|6. |  | Industry Segments Our consolidated subsidiaries are involved in two
industry segments: Information Technology products and services, and
Industrial Products. Operations in Information Technology products and
services include development and sales of software licenses and related
professional services and software maintenance contracts
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | provided through three subsidiaries: QS Technologies, Inc., VISaer, Inc.,
and CoreCard Software, Inc. Operations in the Industrial Products segment
include the manufacture and sale of bio-remediating parts washing systems by
our ChemFree Corporation subsidiary. Total revenue by industry segment
includes sales to unaffiliated customers. Sales between our industry
segments are not material. Operating profit (loss) is total revenue less
operating expenses. None of the corporate overhead expense is allocated to
the individual industry segments. Identifiable assets by industry segment
are those assets that are used in our subsidiaries in each industry segment.
Corporate assets are principally cash, notes receivable and investments. The
table following contains segment information for the quarters ended March
31, 2003 and 2002, in thousands.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |                         |      |   |        |   |  |   |        |  
|----------------------- | ----------------------- | ---- | - | ------ | - |  | - | ------ | -
|Quarter ended March 31, |                         |      |   |        |   |  |   |       
|                        |                         |      |   |        |   |  |   |       
|(unaudited)             |                         | 2003 |   | 2002  
|                        |                         |      |   |       
|Information Technology  |                         |      |   |        |   |  |   |       
|                        | Revenue                 |      | $ | 1,577  |   |  | $ | 1,043  |  
|                        | Operating income (loss) |      |   | (2,542 | ) |  |   | (3,241 | )
|Industrial Products     |                         |      |   |        |   |  |   |       
|                        | Revenue                 |      |   | 1,593  |   |  |   | 1,144  |  
|                        | Operating income (loss) |      |   | 205    |   |  |   | (19    | )
|                        |                         |      |   |        |   |  |   |       
|Consolidated
Segments   |                         |      |   |        |   |  |   |       
|                        | Revenue                 |      | $ | 3,170  |   |  | $ | 2,187  |  
|                        | Operating income (loss) |      |   | (2,337 | ) |  |   | (3,260 | )

A reconciliation of consolidated segment data above to consolidated income (loss) follows:

|                                     |  |   |        |   |  |   |        |  
|------------------------------------ |  | - | ------ | - |  | - | ------ | -
|Consolidated segments operating loss |  | $ | (2,337 | ) |  | $ | (3,260 | )
|Corporate expenses                   |  |   | (237   | ) |  |   | (357   | )
|                                     |  |   |        |   |  |   |        |  
|Consolidated operating loss          |  |   | (2,574 | ) |  |   | (3,617 | )
|Interest income (expense)            |  |   | (5     | ) |  |   | 24     |  
|Investment income                    |  |   | 3,464  |   |  |   | 797    |  
|Equity of affiliates                 |  |   | (67    | ) |  |   | (66    | )
|Other income                         |  |   | 27     |   |  |   | 751    |  
|                                     |  |   |        |   |  |   |        |  
|Income (loss) before taxes           |  |   | 845    |   |  |   | (2,111 | )
|Income tax provision (benefit)       |  |   | (104   | ) |  |   | 11     |  
|                                     |  |   |        |   |  |   |        |  
|Net income (loss)                    |  | $ | 949    |   |  | $ | (2,122 | )
|                                     |  |   |        |   |  |   |        |  

|                                           |  |                |        |                   |  |   |        | 
|------------------------------------------ |  | -------------- | ------ | ----------------- |  | - | ------ | 
|                                           |  | March 31, 2003 |        | December 31, 2002
|                                           |  | (unaudited)    |        | (audited)        
|                                           |  |                |        |                  
|Depreciation and
Amortization             
|Information Technology                     |  | $              | 148    |                   |  | $ | 192    | 
|Industrial Products                        |  |                | 22     |                   |  |   | 16     | 
|                                           |  |                |        |                   |  |   |        | 
|Consolidated segments                      |  |                | 170    |                   |  |   | 208    | 
|Corporate                                  |  |                | 7      |                   |  |   | 12     | 
|                                           |  |                |        |                   |  |   |        | 
|Consolidated depreciation and amortization |  | $              | 177    |                   |  | $ | 220    | 
|                                           |  |                |        |                   |  |   |        | 
|Capital Expenditures                       |  |                |        |                   |  |   |        | 
|Information Technology                     |  | $              | 40     |                   |  | $ | 15     | 
|Industrial Products                        |  |                | 16     |                   |  |   | 86     | 
|                                           |  |                |        |                   |  |   |        | 
|Consolidated segments                      |  |                | 56     |                   |  |   | 101    | 
|Corporate                                  |  |                | 3      |                   |  |   | 4      | 
|                                           |  |                |        |                   |  |   |        | 
|Consolidated capital expenditures          |  | $              | 59     |                   |  | $ | 105    | 
|                                           |  |                |        |                   |  |   |        | 
|Identifiable Assets                        |  |                |        |                   |  |   |        | 
|Information Technology                     |  | $              | 5,639  |                   |  | $ | 6,334  | 
|Industrial Products                        |  |                | 2,154  |                   |  |   | 1,944  | 
|                                           |  |                |        |                   |  |   |        | 
|Consolidated segments                      |  |                | 7,793  |                   |  |   | 8,278  | 
|Corporate                                  |  |                | 10,554 |                   |  |   | 9,582  | 
|                                           |  |                |        |                   |  |   |        | 
|Consolidated assets                        |  | $              | 18,347 |                   |  | $ | 17,860 | 
|                                           |  |                |        |                   |  |   |        | 

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|7. |  | Stock-Based Compensation At March 31, 2003 we had two stock-based
compensation plans. We account for the plans under the intrinsic value
recognition and measurement principles of Accounting Principles Board
(APB) No. 25, Accounting for Stock Issued to Employees, and related
interpretations. The intrinsic value recognition is measured by the
difference between the exercise price and the market value of the
underlying securities. Based on the additional disclosure requirements of
SFAS No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure  an Amendment to SFAS No. 123, the following table
illustrates the effect of net income and earnings (loss) per share if we
had applied the fair value recognition provisions of SFAS No. 123,
Accounting for Stock Based Compensation.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                     |                                                       |      |      |      |   |   |        |    |  
|---------------------------------------------------- | ----------------------------------------------------- | ---- | ---- | ---- | - | - | ------ | -- | -
|Three Months ended March 31,                         |                                                       |      |      |      |   |   |        |   
|(in
thousands, except per share data)                |                                                       | 2003 |      | 2002
|                                                     |                                                       |      |      |     
|Net income (loss), reported                          |                                                       | $    | 949  |      |   | $ | (2,122 | ) 
|Add: stock-based employee compensation included in   |                                                       |      |      |      |   |   |        |   
|                                                     | reported net income (loss), net of related tax effect |      |      |     |   |   |        |   |  
|Deduct: stock-based compensation expense determined  |                                                       |      |      |      |   |   |        |   
|                                                     | under fair value based method for all awards, net of  |      |      |      |   |   |        |    |  
|                                                     | related tax effect                                    |      |      | (3   | ) |   |        | (7 | )
|Pro forma net income (loss)                          |                                                       | $    | 946  |      |   | $ | (2,129 | ) 
|                                                     |                                                       |      |      |      |   |   |        |   
|Pro forma net income (loss) per common share basic   |                                                       | $    | 0.21 |      |   | $ | (0.47  | ) 
|                                                     |                                                       |      |      |      |   |   |        |   
|Pro forma net income (loss) per common share diluted |                                                       | $    | 0.21 |      |   | $ | (0.47  | ) 
|                                                     |                                                       |      |      |      |   |   |        |   




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



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In addition to historical information, this Form 10-Q may contain
forward-looking statements relating to Intelligent Systems
Corporation (ISC). All statements, trend analysis and other
information contained in the following discussion relative to
markets for our products and trends in revenue, gross margins and
anticipated expense levels, as well as other statements including
works such as anticipate, believe, plan, estimate,
expect, and intend, and other similar expressions, constitute
forward-looking statements. Prospective investors are cautioned
that any such forward-looking statements are not guarantees of
future performance and involve risks and uncertainties, and that
actual results may differ materially from those contemplated by
such forward-looking statements. Among the important factors that
could cause actual results to differ materially from those
indicated by such forward-looking statements are delays in product
development, undetected software errors, competitive pressures
(including pricing), market acceptance, failure to establish
referencable customer installations, changes in customer
requirements, and preferences, changes in financial markets,
performance, financial condition and valuation of affiliate
companies, the war against Iraq and the SARS epidemic and their
impact on the worldwide commercial aviation industry, other
geopolitical or military actions, and general economic conditions,
particularly those that cause business and government to delay or
cancel software purchase decisions. ISC undertakes no obligation
to update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes in
future operating results.

Results of Operations

The following discussion should be read in conjunction with the consolidated
financial statements and the notes to the consolidated financial statements
presented in this Form 10-Q.

Overview- Our consolidated subsidiaries during 2003 operate in two industry
segments: Information Technology and Industrial Products. Included in the
Information Technology sector are QS Technologies, Inc. (software for health
and human services), VISaer, Inc. (software for maintenance, repair and
overhaul operations in the aviation industry) and CoreCard Software, Inc.
(software for the card processing market). The Industrial Products segment
includes ChemFree Corporation (bio-remediating parts washers).

Revenue in the first quarter of 2003 was $3,170,000, an increase of 45 percent
compared to the same period in 2002. Our net loss from operations in the first
quarter of 2003 was $2,574,000 compared to a net loss of $3,617,000 in the
first quarter of 2002. The reduction in operating loss is a result of improved
performance at each of the controlled subsidiaries resulting from higher sales
levels at VISaer, QS Technologies and ChemFree and lower expense levels,
principally in the area of research and development. In the current quarter,
we recognized a total of $3,523,000 in other income that offset the loss

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from operations, resulting in consolidated net income for the quarter of
$949,000 compared to a net loss of $2,122,000 in the first quarter of 2002.
The income in the first quarter of 2003 reflects a gain of $4,183,000 due to
settlement of the escrow fund that had been established in April 2001 at the
time of the sale of our affiliate company, PaySys International, Inc., to First
Data Corporation.

Revenue- Total revenue in the first quarter of 2003 was $3,170,000, an
increase of 45 percent compared to revenue of $2,187,000 in the same period
last year. Revenue from products, which includes sales of equipment in our
Industrial Products segment as well as software license fees related to the
Information Technology segment, increased 26 percent period-to-period whereas
revenue from services billed by the Information Technology segment increased 80
percent period-to-period. The increase in product revenue is due mainly to a
39 percent increase period-to-period in sales of ChemFree products, reflecting
a greater number of machines sold or leased as well as more units sales of
fluid and filters due to increased demand for the ChemFree products. Compared
to the same period last year, ChemFrees revenue increased by 24 percent in
domestic markets and 123 percent internationally, although the company does not
expect the same level of increase in each succeeding quarter of 2003,
particularly in the European markets or during the summer months. With respect
to revenue from services, the period-to-period increase is due primarily to a
112 percent increase in VISaers service revenue reflecting a greater number of
hours billed for professional services and a 29 percent increase in QS
Technologies service revenue, the majority of which is related to annual
maintenance contract revenue.

Cost of Revenue- In the three months ended March 31, 2003, cost of revenue was
57 percent of consolidated revenue, compared to 55 percent in the same period
last year. Cost of product revenue was 45 percent of product revenue in the
first quarter of 2003 compared to 48 percent in the comparable period in 2002.
The decrease between periods reflects a more favorable product mix in the
current quarter as proportionately more of ChemFrees revenue was derived from
higher margin fluid and filter sales (as compared to lower margin parts washer
machines). Cost of service revenue (all of which relates to the VISaer and QS
Technologies subsidiaries) increased by 92 percent from period to period and by
7 percent as a percentage of service revenue, reflecting changes at both QS
Technologies and VISaer. While VISaers cost of service revenue increased in
absolute dollars to support a higher level of service revenue, the cost as a
percentage of service revenue declined because the utilization rate for
billable VISaer personnel was higher in the first quarter this year than last
year. QS Technologies cost of service revenue increased in absolute amounts
and as a percentage of revenue because QS Technologies allocated more technical
personnel to the customer support function in the first quarter of this year
than in the first quarter last year.

Operating Expenses- In the first quarter of 2003, total consolidated operating
expenses decreased by 15 percent from the comparable period last year.
Consolidated marketing expenses were up 31 percent period-to-period, reflecting
mainly higher expenses in the Information Technology segment to support a
higher sales volume offset in part by a reduction in marketing expenses in the
Industrial Products segment. This reduction occurred because last year
ChemFree incurred significant up-front expenses for a new marketing initiative
in 2002 that did not require the same level of expenditure in 2003.
Consolidated general and administrative expenses declined by 12 percent in the
first period of 2003 compared to the first period last year. This reduction
reflects mainly the elimination of duplicate administrative and management
personnel expenses at CoreCard following the acquisition of CoreCard in the
first quarter of 2002. Consolidated research and development expense in the
first period of 2003 was $2,081,000 which is $705,000 (or 25 percent) less than
for the first period last year. The significant decline is due mainly to
reduced expenses at both VISaer and CoreCard. At VISaer, significant
activities and subcontractor expense related to the initial conversion and
development of the Web-based VISaer software have been completed and at
CoreCard, fewer employees are required now than were needed in the early stages
to create the technology platform and develop initial specifications and
software code.

Interest Income- In the first quarter this year, we recorded $5,000 in
interest expense compared to interest income of $24,000 in the first quarter of
2002. In 2003, interest expense relates to interest payable on equipment
leases. In 2002, we earned interest on higher cash balances than in 2003.

Investment Income- In the first quarter of 2003, we earned net investment
income of $3,464,000, representing investment income of $4,183,000 earned on
the PaySys escrow settlement offset in part by a write-down of $600,000 to
reduce the carrying value of our investment in RF Solutions, Inc. and a charge
of $119,000 to reduce the carrying value of a note receivable from RF
Solutions, Inc. (see Notes 3 and 4 to these financial statements for a detailed
description of these transactions). By comparison, in the first quarter of
2002, we earned $797,000 in net investment income representing gains of
$573,000 on the sale of shares of Atherogenics stock and $474,000 on the
private sale of our remaining interest in a former affiliate company, Risk
Labs, off set by a reserve of $250,000 to write down the carrying value of our
minority interest in a privately held early stage software company.

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Equity Losses of Affiliate Companies-On a quarterly basis, we recognize our
pro rata share of the earnings or losses of affiliate companies that we record
on the equity method. These companies are typically early stage companies that
incur losses during their development and early revenue stages. We recorded
$67,000 and $66,000 of net equity losses in the first quarter of 2003 and 2002,
respectively, which included our pro rata share of the net earnings or losses
reported by three affiliate companies (CoreXpand, MediZeus and Horizon
Software) in 2003 and one affiliate company (CoreXpand) in 2002.

Other Income, Net- Other income includes $27,000 and $752,000 in the first
quarter of 2003 and 2002, respectively, most of which reflects recognition of
deferred gain related to a VISaer product line sale in July 2000.

Taxes- In the first quarter of 2003, we recorded a tax benefit of $104,000
which reflects a refund of alternative minimum taxes paid by the VISaer
subsidiary in a prior year. We did not accrue for any income tax liability in
the first quarter of 2003 because we currently estimate the company will not
incur a tax liability for the full year 2003. In the first quarter of 2002, we
recorded income tax expense of $11,000 representing a subsidiarys state tax
liability.

Common Shares- The basic and diluted weighted average number of basic shares
outstanding in the first quarter of 2002 declined slightly due to our
repurchase and retirement of a small number of shares of our common stock.

Liquidity and Capital Resources

Our cash balance at March 31, 2003 was $5,108,000 compared to $2,644,000 at
December 31, 2002. For the first quarter ended March 31, 2003, our principal
source of cash was $4,183,000 from the proceeds of the PaySys escrow
settlement. During the three month period, our principal uses of cash were to
support operations at CoreCard Software and VISaer, through advances totaling
$1,578,000. Cash used for operations included a decrease of $217,000 in
accounts payable and cash provided by operations included $686,000 generated
from collections of accounts receivable.

In the first quarter of 2003, all of the preferred shareholders of VISaer
permanently waived their rights to redemption by VISaer of their preferred
shares. Consequently, VISaer reclassed the amounts that it had accrued in
prior periods related to the redemption provision and, on our consolidated
balance sheet at March 31, 2003, we reclassed the amounts shown as redeemable
preferred stock of subsidiary at December 31, 2002, against goodwill. There
was no income statement impact on this entry.

Our budgeted cash requirements for 2003 are substantially lower than for 2002
based on new and pending software license contracts at our Information
Technology segment subsidiaries, anticipated software customer payments based
on milestone achievements, and lower product development costs at VISaer and
CoreCard Software. It is unclear what impact, if any, will result from the war
against Iraq, potential further terrorist attacks either in the United States
or abroad, the sudden acute respiratory syndrome (SARS) epidemic and other
general economic factors, particularly with respect to VISaers and ChemFrees
international business, which represented $1,346,000 (42 percent) of
consolidated revenue for the first quarter of 2003. We expect the impact may
be more severe at VISaer since approximately 90 percent of its current year
revenue is from international customers involved in the commercial aviation
industry and a significant number of its prospective customers are in the Asian
and Pacific markets. Unanticipated delays in contract awards, implementations
or customer payments may increase our cash requirements during 2003. We
believe our cash balances are adequate to support our operations and plans for
the foreseeable future. We do not have off-balance sheet arrangements,
relationships, transactions or guarantees with third parties or related parties
that would affect our liquidity or results of operations.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to
make estimates and judgments that affect the reported amount of assets,
liabilities, revenues and expenses. We consider certain accounting policies
related to revenue recognition, valuation of acquired intangibles and
impairment of long-lived assets, and valuation of investments to be critical
policies due to the estimation processes involved in each. Management
discusses its estimates and judgments with the Audit Committee of the Board of
Directors. For a detailed description on the application of these and other
accounting policies, see Note 1 to the Consolidated Financial Statements
contained in our annual report on Form 10-K for 2002.

Revenue Recognition- Our product revenue consists of fees from software
licenses and sales of equipment and supplies. Our service revenue consists of
fees for implementation, consulting, training, maintenance and support for
software products. A portion of our revenue is derived from software contracts
that contain significant production, modification and/or

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customization requirements and license fees for such contracts are recognized
using contract accounting. In some situations, we recognize revenue on a
percentage of completion basis that involves estimating our progress on the
contract based on input measures. We recognize revenue and the related costs
in the same proportion that the amount of labor hours incurred to date bears to
the total estimated hours required for contract completion. If reliable
estimates cannot be determined or if there is an acceptance clause in the
contract, all revenue is deferred until the customer has accepted the software
and any refund rights have expired. If we do not accurately estimate the
resources required or the scope of work to be performed, or we do not manage
the contract properly, in future periods we may need to restate revenues or to
incur additional cost which would impact our margins and reported results.

Valuation of Intangibles- Purchase accounting for an acquisition requires use
of accounting estimates and judgments to allocate the purchase price to the
fair market value of the assets and liabilities purchased. Our business
acquisitions may result in the allocation of a portion of the purchase price to
goodwill and other intangible assets. The determination of the value of such
intangible assets requires management to make estimates and assumptions that
affect the amount of future period amortization expenses and possible
impairment expense that we will incur. On at least an annual basis, we review
the values assigned to long-lived assets using an estimate of the undiscounted
cash flows of the entity over the remaining life of the asset. Any resulting
impairment could require a write-down that would have a material adverse impact
on our financial condition or results of operations.

Valuation of Investments- We hold minority interests in non-publicly traded
companies whose values are difficult to determine and are based on managements
estimate of realizability of the carrying value of the investment. Future
adverse changes in market conditions, poor operating results, lack of progress
of the underlying investment or inability to raise capital to support the
business plan could result in losses or an inability to recover the current
carrying value of the investment. Our policy with respect to minority
interests is to record an impairment charge when we believe an investment has
experienced a decline in value that is other than temporary. Such charges
could have a material adverse impact on our financial condition or results of
operations and are not predictable or quantifiable in advance.

Factors That May Affect Future Operations

Future operations in both the Information Technology and Industrial Products
segments are subject to risks and uncertainties that may negatively impact our
results or projected cash requirements. In addition, the value of our
investments are impacted by a number of factors beyond our control. Among the
factors that may affect our consolidated results of operations or financial
condition are delays in software product development, undetected software
errors, competitive pressures (including pricing), inability to establish
referenceable customers by CoreCard, failure of our product specifications and
features to achieve market acceptance, changes in customer requirements and
preferences, delays in anticipated customer payments, declines in performance,
financial condition or valuation of minority-owned companies, the aftermath of
the war against Iraq, other geopolitical or military actions, the SARS epidemic
and the impact of these factors on the commercial aviation industry,
particularly in the developing Asian-Pacific markets, and other general
economic conditions, particularly those which may cause commercial and
government customers to delay or cancel software purchase decisions.

Both VISaer and CoreCard will incur operating losses in 2003 although their
cash requirements are expected to be less than their reported losses because of
scheduled customer payments based on milestone achievements in advance of being
able to recognize license revenue. CoreCard and VISaer will require cash to
operate in 2003, although at significantly lower levels than in 2002. We
anticipate that our other subsidiaries and our corporate operations will be
cash neutral in 2003 in the aggregate. If either CoreCard or VISaer is
unsuccessful or if we decide to suspend funding, we may not recover our
investment. Furthermore, if VISaer fails to meet product development
milestones or if CoreCard is unsuccessful in implementing its initial reference
customers, anticipated payments from customers may be delayed, resulting in
increased cash requirements. To minimize the effects of a potential slowdown
in new business booked by VISaer due to further potential declines in an
already weak aviation market, VISaer is taking proactive steps to focus its
resources on meeting current contract requirements and deferring expenses
related to new sales and marketing efforts. CoreCards challenge is to
establish a growing base of referenceable, satisfied customers and to overcome
customer reluctance to implement a business critical system based on a new
product offering from an early stage company with limited installations. One
such customer contract is in negotiation at this time and others will be needed
to overcome this reluctance. Depending on the number and payment terms of new
software contracts, CoreCards cash requirements and budgeted results may
differ from our current forecasts.

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Item 3.     Quantitative and Qualitative Disclosures About Market Risk

We do not have any material market risk because we have no long-term borrowings
and our exposure to foreign currency valuation is minimal.




Item 4.     Controls and Procedures

Within 90 days prior to the filing date of this report on Form 10-Q, management
of ISC conducted an evaluation, under the supervision and with the
participation of ISCs management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures. Based on this evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that ISCs disclosure
controls and procedures are effective in ensuring that information required to
be disclosed by ISC in the reports that it files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified by the Securities and Exchange Commissions
rules and forms. In addition, ISC management, including our Chief Executive
Officer and Chief Financial Officer, reviewed our internal controls, and there
have been no significant changes in our internal controls or in other factors
that could significantly affect those controls subsequent to the date of our
last evaluation.




Part II. OTHER INFORMATION




Item 5.     Other Information

Certifications Under Section 906 of the Sarbanes-Oxley Act of 2002

In accordance with guidance recently issued by the SEC, we have submitted the
certifications of our Chief Executive Officer and our Chief Financial Officer
required by section 906 of the Sarbanes-Oxley Act of 2002 as Exhibits 99.1 and
99.2, respectively, accompanying this report. Pursuant to this SEC guidance,
such exhibits shall not be deemed to be filed as part of this report.




Item 6.     Exhibits and Reports on Form 8-K

We filed a Form 8-K on May 7, 2003 disclosing that we issued a press release on
May 7, 2003 announcing our financial results for the quarter ended March 31,
2003.

The following exhibits are filed with this report:

|     |  |                                                                                                    
|---- |  | ---------------------------------------------------------------------------------------------------
|99.1 |  | Certification of Chief Executive Officer required by section 906 of the Sarbanes-Oxley Act of 2002.
|99.2 |  | Certification of Chief Financial Officer required by section 906 of the Sarbanes-Oxley Act of 2002.




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, hereunto duly authorized.

|                   |  |                                                                               
|------------------ |  | ------------------------------------------------------------------------------
|                   |  | INTELLIGENT SYSTEMS CORPORATION
Registrant                                    
|                   |  |                                                                               
|Date: May 15, 2003 |  | By: /s/ J. Leland Strange
J. Leland Strange
Chief Executive Officer, President
|                   |  |                                                                               
|                   |  |                                                                               
|Date: May 15, 2003 |  | By: /s/ Bonnie L. Herron

Bonnie L. Herron
Chief Financial Officer            

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CERTIFICATION

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, J. Leland Strange, the Chief Executive Officer of Intelligent Systems
Corporation, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Intelligent Systems
Corporation;                                                                                                                                                                                                                                        
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|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 function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 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.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: May 15, 2003

| |  |                                                                              
| |  | -----------------------------------------------------------------------------
| |  | /s/ J. Leland Strange
J. Leland Strange
Chief Executive Officer and President

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CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bonnie L. Herron, the Chief Financial Officer of Intelligent Systems
Corporation, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Intelligent Systems
Corporation;                                                                                                                                                                                                                                        
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|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 function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 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.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: May 15, 2003

| |  |                                                               
| |  | --------------------------------------------------------------
| |  | /s/ Bonnie L. Herron

Bonnie L. Herron
Chief Financial Officer

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