<PAGE>   1
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


             Quarterly Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

                      FOR THE QUARTER ENDED MARCH 31, 1997


                          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          (I.R.S. Employer Identification No.)
incorporation or organization)

   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 
                                              ---     ---

     As of March 31, 1997, 5,092,567 shares of Common Stock were outstanding.




================================================================================





                                     


<PAGE>   2



ITEM 1.  FINANCIAL STATEMENTS

                         INTELLIGENT SYSTEMS CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                       (in thousands except share amounts)


<TABLE>
<CAPTION>
                                                                                            March 31,      December 31,
                                                                                              1997             1996
-----------------------------------------------------------------------------------------------------------------------
ASSETS                                                                                     (Unaudited)      (Audited)
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                                        <C>              <C>      
Current assets:
  Cash                                                                                     $  1,432         $   2,434
  Certificate of deposit                                                                      1,364             1,056
  Accounts receivable, net                                                                    3,449             3,764
  Notes and interest receivable                                                               3,550             3,212
  Inventories                                                                                   585               648
  Other current assets                                                                          444               737
---------------------------------------------------------------------------------------------------------------------
    Total current assets                                                                     10,824            11,851
---------------------------------------------------------------------------------------------------------------------
Long-term investments                                                                         8,604             8,967
Long-term notes receivable                                                                      907             1,414
Property and equipment, at cost less accumulated depreciation and amortization                2,429             2,126
Excess of cost over underlying net assets of businesses acquired,
      net of accumulated amortization                                                           464               569
---------------------------------------------------------------------------------------------------------------------
Total assets                                                                                $23,228           $24,927
=====================================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
---------------------------------------------------------------------------------------------------------------------
Current liabilities:
  Accounts payable                                                                            1,058               984
  Accrued expenses and other current liabilities                                              1,609             2,313
---------------------------------------------------------------------------------------------------------------------
    Total current liabilities                                                                 2,667             3,297
---------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
  Common stock, $.01 par value, 20,000,000 authorized, 5,092,567 and
    5,126,767 outstanding at March 31, 1997 and December 31, 1996, respectively                  51                51
  Paid-in capital                                                                            24,026            24,139
  Foreign currency translation adjustment                                                      (186)             (196)
  Unrealized gain in available-for-sale securities                                            1,685             3,804
  Accumulated deficit                                                                        (5,015)           (6,168)
---------------------------------------------------------------------------------------------------------------------
    Total stockholders' equity                                                               20,561            21,630
---------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity                                                  $23,228           $24,927
=====================================================================================================================
</TABLE>

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

                                                                        Page 2


<PAGE>   3



                         INTELLIGENT SYSTEMS CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (unaudited, in thousands except share amounts)


<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,                                1997               1996
------------------------------------------------------------------------------------
<S>                                                    <C>                <C>   
Net sales                                              $    5,108         $    6,085
Expenses:
  Cost of sales                                             3,083              3,348
  Marketing                                                   871              1,139
  General & administrative                                  1,794              1,892
  Research & development                                       44                 41
------------------------------------------------------------------------------------
Loss from operations                                         (684)              (335)
------------------------------------------------------------------------------------
Other income (expense):
  Interest income, net                                        182                 85
  Investment income (expense), net                          1,600               (238)
  Other income (expense), net                                  61                (41)
------------------------------------------------------------------------------------
Income (loss) before income tax provision 
  and minority interest                                     1,159               (529)
------------------------------------------------------------------------------------
Income tax provision                                            4               --
------------------------------------------------------------------------------------
Income (loss) before minority interest                      1,155               (529)
------------------------------------------------------------------------------------
Minority interest                                               2                  3
------------------------------------------------------------------------------------
Net income (loss)                                      $    1,153         $     (532)
====================================================================================
Net income (loss) per share based upon weighted
  average shares outstanding                           $     0.23         $    (0.10)
====================================================================================
Weighted average shares outstanding                     5,095,857          5,312,867
====================================================================================
</TABLE>

The accompanying notes are an integral part of these statements.

                                                                         Page 3


<PAGE>   4



                         INTELLIGENT SYSTEMS CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                            (unaudited, in thousands)

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED MARCH 31,
CASH PROVIDED BY (USED FOR):                                         1997              1996
----------------------------------------------------------------------------------------------
<S>                                                              <C>               <C>        
OPERATIONS:
 Net income (loss)                                               $    1,153        $     (532)
 Adjustments to reconcile net income (loss)
  to net cash provided by
  (used for) operating activities, net of
  effects of acquisitions and dispositions:
    Depreciation and amortization                                       274               187
    Gain from sale of assets                                         (1,864)             (201)
    Equity in net loss of affiliates                                    385               439
    Changes in operating assets and liabilities:
     Accounts receivable                                                315              (548)
     Inventories                                                         63               (14)
     Other current assets                                               293               152
     Accounts payable                                                    74              (412)
     Accrued expenses and other current liabilities                      25               554
---------------------------------------------------------------------------------------------
Cash provided by (used for) continuing operations                       718              (375)
---------------------------------------------------------------------------------------------

INVESTING ACTIVITIES:
 Proceeds from sale of investment                                     2,000             1,074
 Proceeds from sale of discontinued operations                          100                --
 Acquisitions of companies, net of cash acquired                         --               (30)
 Purchase of certificate of deposit                                    (308)               --
 Acquisitions of long-term investments                               (2,276)             (200)
 Repayments of (advances under) notes receivable, net                  (659)              123
 Purchases of property and equipment, net                              (474)              (59)
---------------------------------------------------------------------------------------------
Cash provided by (used for) investing activities                     (1,617)              908
---------------------------------------------------------------------------------- ----------

FINANCING ACTIVITIES:
 Net borrowings (repayments) under short-term
  borrowing arrangements                                                 --               (32)
 Purchase and retirement of stock                                      (113)               --
 Foreign currency translation adjustment                                 10                10
---------------------------------------------------------------------------------------------
Cash used for financing activities                                     (103)              (22)
---------------------------------------------------------------------------------------------
Net increase (decrease) in cash                                      (1,002)              511
Cash at beginning of period                                           2,434               520
---------------------------------------------------------------------------------------------
Cash at end of period                                            $    1,432        $    1,031
=============================================================================================
</TABLE>

The accompanying notes are an integral part of these statements.

                                                                         Page 4


<PAGE>   5

                         INTELLIGENT SYSTEMS CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   The financial statements furnished herein reflect all adjustments,
     consisting of normal recurring accruals, which, in the opinion of
     management, are necessary for a fair statement of the results for the
     periods for which they are presented. Such results, however, are not
     necessarily indicative of the results to be expected for the full year. The
     accounting policies followed by the Company are set forth in Note 1 to the
     Consolidated Financial Statements in the Company's Report on Form 10-K for
     the year ended December 31, 1996, previously filed with the Commission.

2.   Accounting Changes - In February 1997, the Financial Accounting Standards
     Board issued Statement 128 "Earnings Per Share" superseding Opinion 15, the
     existing standard for calculating earnings per share. The Company believes
     the adoption of this standard will not have a material impact on the
     Company's computation of earnings per share. Earnings per share computed
     under the provisions of Statement 128 were the same as those computed under
     Opinion 15 for the three months ended March 31, 1997 and March 31, 1996.


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
        FINANCIAL CONDITION

RESULTS OF OPERATIONS

Sales - Revenue from operations is derived from two major industry segments:
technology-related products and services, and health care services. For the
three month period ended March 31, 1997, net sales were $5,108,000, a decline of
16 percent compared to the first quarter last year. Although each of the
subsidiaries in the technology sector experienced increases in revenue
year-to-year, revenue derived from health care services declined. The Company's
health care services subsidiary, PsyCare America, had fewer hospital based
programs in operation in the first quarter this year as compared to last year
and on-going price pressure in the managed care environment further reduced the
revenue contribution from each program. PsyCare is negotiating to open more
programs in additional hospitals over the next two quarters and plans to offer
new services as well, such as outpatient programs and counseling support
materials. However, during this transition, revenue and profit contribution from
the health care business will likely be lower than for the comparable periods in
1996.

Cost of sales - Cost of sales as a percentage of revenue was higher in the first
quarter this year compared to the same period last year. The change reflects
principally higher personnel costs in 1997 at two of the Company's technology
subsidiaries. The Company added more technical personnel to support increased
sales of products and services. In addition, industry-wide demand for technical
trainers and programmers increased compensation rates for personnel.

Operating Expenses - Total marketing, general and administrative and research
and development expenses in the first quarter of 1997 were $2,709,000, which was
12 percent less than the amount spent in the comparable period in 1996. In the
health care services sector, marketing and general and administrative expenses
declined significantly reflecting fewer program locations and more efficient
operations. On the other hand, marketing and G&A expenses increased year-to-year
at several technology subsidiaries to support higher levels of sales activities.


                                                                         Page 5


<PAGE>   6




Operating Loss - The loss from operations in the first quarter of 1997 was
greater than in the comparable period last year because the profit contribution
from the health care services sector was lower in 1997.

Interest Income - Net interest income increased 114 percent in the current
quarter compared to the same period last year. In the first quarter this year,
the Company earned interest income on notes receivable, which were at a higher
level and outstanding for more of the quarter this year as compared to the same
period last year. The Company also earned interest of $38,000 on its money
market funds and certificates of deposit in the first quarter this year. In the
first quarter last year, the Company had interest expense of $33,000 which
offset in part the interest income earned in that period on the notes
receivable. There was no interest expense in the current quarter since the
Company repaid all its bank debt in 1996.

Investment Income - The Company realized a gain of $1,865,000 on the sale of
50,537 shares of common stock of PaySys International, Inc., a privately held
firm in which the Company is the largest shareholder. The stock sold represented
approximately 6 percent of the common stock of PaySys which the Company owns or
has rights to own. Offset against the gain was an expense of approximately
$265,000 representing the Company's equity in losses of investee companies.

Minority Interest - This amount represents the pro rata ownership share of
minority shareholders in certain non-wholly-owned subsidiaries of the Company.

Common Shares - There was a decline of 4 percent in the weighted average number
of shares outstanding in the current period compared to the prior year because
of the Company's on-going share repurchase program.

FINANCIAL CONDITION

In the first three months of 1997, the principal source of cash was $2,000,000
from the sale of 50,537 shares of common stock of PaySys as well as cash
generated by operations through increased collections of accounts receivables
(including proceeds of sales in December 1996 of IQ common stock) and lower
inventory levels. The Company used cash to fund $2,276,000 in investments in two
software companies, to provide a $500,000 short-term loan to an affiliated
company (which was repaid in April 1997), to repurchase shares of the Company's
common stock, and to purchase computers and other equipment principally related
to expanding training classroom facilities at the InterQuad Services subsidiary
in the United Kingdom.

Since December 31, 1996, the Company's unrealized gain in available-for-sale
securities has declined by approximately $2.1 million as a result of a drop in
the trading prices of common stock of IQ Software Corporation and OrCAD, Inc.,
of which the Company holds 157,801 and 104,484 shares respectively.

The Company believes it has adequate working capital and access to additional
cash through borrowings or sales of marketable securities to support its
operations and other activities.


                                                                        Page 6


<PAGE>   7



                           PART II. OTHER INFORMATION

ITEM 6.  EXHIBITS, REPORTS ON FORM 8-K

A.   Exhibit 27 - Financial Data Schedule (for SEC use only)

B.   The Company has not filed any Reports on Form 8-K during the period covered
     by this report.


--------------------------------------------------------------------------------


                                   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 13, 1997               By:  /s/  J. LELAND STRANGE
                                       --------------------------------------
                                             J. Leland Strange
                                             Chairman of the Board, President




 Date:  May 13, 1997               By:  /s/  HENRY H. BIRDSONG
                                       -----------------------------
                                             Henry H. Birdsong
                                             Chief Financial Officer

                                                                         Page 7