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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

|                                                                   |  |                                                                                         
|------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------
|(Mark One)                                                         |  |                                                                                         
|þ                                                                  |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|                                                                   |  |                                                                                         
|For the quarterly period ended September 30, 2003                 
|                                                                   |  |                                                                                         
|                                                                   |  | OR                                                                                      
|                                                                   |  |                                                                                         
|o                                                                  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 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  þ   No  o

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

As of November 10, 2003, 4,478,971 shares of Common Stock were outstanding.





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TABLE OF CONTENTS




|                                                                                              |                                                      |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  |  | 
|Item 1. Financial Statements                                                                 
|                                                                                              | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                                                                                              | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     
|                                                                                              | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW      
|                                                                                              | 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 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                                                                   
|EX-31.1 SECTION 302 CERTIFICATION OF CEO                                                     
|EX-31.2 SECTION 302 CERTIFICATION OF CFO                                                     
|EX-32.1 SECTION 906 CERTIFICATION OF CEO                                                     
|EX-32.2 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)

September 30,
    
    December 31,2003
    
    2002ASSETS
    
    (unaudited)Current assets:Cash
    
    $
    2,320
    
    
    $
    2,644Accounts receivable, net
    
    
    2,177
    
    
    
    3,025Notes and interest receivable
    
    
    223
    
    
    
    205Inventories
    
    
    751
    
    
    
    671Other current assets
    
    
    219
    
    
    
    213Total current assets
    
    
    5,690
    
    
    
    6,758Long-term investments
    
    
    6,639
    
    
    
    7,145Property and equipment, at cost less accumulated depreciation
    
    
    652
    
    
    
    761Goodwill
    
    
    2,038
    
    
    
    2,380Intangibles, net
    
    
    554
    
    
    
    788Other assets
    
    
    28
    
    
    
    28Total assets
    
    $
    15,601
    
    
    $
    17,860LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,063
    
    
    $
    1,301Deferred revenue
    
    
    3,897
    
    
    
    1,784Deferred gain
    
    
    329
    
    
    
    428Accrued expenses and other current liabilities
    
    
    1,925
    
    
    
    1,755Total current liabilities
    
    
    7,214
    
    
    
    5,268Deferred revenue, net of current portion
    
    
    4,590
    
    
    
    4,813Other long-term liabilities
    
    
    1
    
    
    
    27Total long term liabilities
    
    
    4,591
    
    
    
    4,840Minority interest
    
    
    1,516
    
    
    
    1,516Redeemable preferred stock of subsidiary
    
    
    
    
    
    
    342Stockholders equity:Common stock, $0.01 par value, 20,000,000 shares authorized, 4,478,971 and
4,491,779 shares issued and outstanding at September 30, 2003 and December 31,
2002, respectively
    
    
    45
    
    
    
    45Paid-in capital
    
    
    18,410
    
    
    
    18,432Accumulated other comprehensive loss
    
    
    (19
    )
    
    
    (56
    )Accumulated deficit
    
    
    (16,156
    )
    
    
    (12,527
    )Total stockholders equity
    
    
    2,280
    
    
    
    5,894Total liabilities and stockholders equity
    
    $
    15,601
    
    
    $
    17,860


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

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

Three Months Ended Sept. 30,
    
    Nine Months Ended Sept. 30,2003
    
    2002
    
    2003
    
    2002RevenueProducts
    
    $
    1,727
    
    
    $
    1,849
    
    
    $
    5,231
    
    
    $
    4,535Services
    
    
    1,021
    
    
    
    1,143
    
    
    
    3,508
    
    
    
    2,876Total revenue
    
    
    2,748
    
    
    
    2,992
    
    
    
    8,739
    
    
    
    7,411Cost of revenueProducts
    
    
    855
    
    
    
    889
    
    
    
    2,520
    
    
    
    2,202Services
    
    
    755
    
    
    
    779
    
    
    
    2,597
    
    
    
    1,877Total cost of revenue
    
    
    1,610
    
    
    
    1,668
    
    
    
    5,117
    
    
    
    4,079ExpensesMarketing
    
    
    714
    
    
    
    725
    
    
    
    2,166
    
    
    
    2,123General & administrative
    
    
    883
    
    
    
    1,199
    
    
    
    2,917
    
    
    
    3,545Research & development
    
    
    2,076
    
    
    
    2,285
    
    
    
    6,256
    
    
    
    7,677Loss from operations
    
    
    (2,535
    )
    
    
    (2,885
    )
    
    
    (7,717
    )
    
    
    (10,013
    )Other incomeInterest income, net
    
    
    9
    
    
    
    30
    
    
    
    4
    
    
    
    107Investment income (loss), net
    
    
    (24
    )
    
    
    (360
    )
    
    
    3,645
    
    
    
    (902
    )Equity in earnings (losses) of affiliate companies
    
    
    80
    
    
    
    23
    
    
    
    47
    
    
    
    (103
    )Other income, net
    
    
    74
    
    
    
    133
    
    
    
    288
    
    
    
    1,035Loss before income tax benefit
    
    
    (2,396
    )
    
    
    (3,059
    )
    
    
    (3,733
    )
    
    
    (9,876
    )Income tax benefit
    
    
    
    
    
    
    (362
    )
    
    
    (104
    )
    
    
    (350
    )Net loss
    
    $
    (2,396
    )
    
    $
    (2,697
    )
    
    $
    (3,629
    )
    
    $
    (9,526
    )Basic and diluted net loss per share
    
    $
    (0.53
    )
    
    $
    (0.60
    )
    
    $
    (0.81
    )
    
    $
    (2.12
    )Basic and diluted weighted average shares outstanding
    
    
    4,478,971
    
    
    
    4,495,530
    
    
    
    4,484,954
    
    
    
    4,495,530


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

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

Nine Months Ended September 30,CASH PROVIDED BY (USED FOR):
    
    2003
    
    2002OPERATIONS:Net loss
    
    $
    (3,629
    )
    
    $
    (9,526
    )Adjustments to reconcile net loss to net cash used for operating activities, net of
effects of acquisitions and dispositions:Depreciation and amortization
    
    
    558
    
    
    
    740Deferred gain recognized
    
    
    (99
    )
    
    
    (1,031
    )Investment (income) loss, net
    
    
    (3,636
    )
    
    
    902Equity in (earnings) losses of affiliate companies
    
    
    (47
    )
    
    
    103Changes in operating assets and liabilities, net of effects of acquisitionAccounts receivable
    
    
    848
    
    
    
    200Inventories
    
    
    (80
    )
    
    
    (79
    )Other current assets
    
    
    (6
    )
    
    
    (90
    )Accounts payable
    
    
    (238
    )
    
    
    215Accrued expenses and other liabilities
    
    
    2,034
    
    
    
    1,378Cash used for operating activities
    
    
    (4,295
    )
    
    
    (7,188
    )INVESTING ACTIVITIES:Proceeds from sales of investments
    
    
    4,540
    
    
    
    2,488Acquisition of company, net of cash acquired
    
    
    
    
    
    
    39Purchase of long-term investments
    
    
    (160
    )
    
    
    (1,532
    )Repayments under notes receivable
    
    
    79
    
    
    
    3,037Advances under notes receivable
    
    
    (224
    )
    
    
    (3,355
    )Purchases of property and equipment, net
    
    
    (215
    )
    
    
    (259
    )Cash provided by investing activities
    
    
    4,020
    
    
    
    418FINANCING ACTIVITIES:Purchase and retirement of common stock
    
    
    (22
    )
    
    
    Cash used for financing activities
    
    
    (22
    )
    
    
    Effects of exchange rate changes on cash
    
    
    (27
    )
    
    
    (10
    )Net decrease in cash
    
    
    (324
    )
    
    
    (6,780
    )Cash at beginning of period
    
    
    2,644
    
    
    
    12,026Cash at end of period
    
    $
    2,320
    
    
    $
    5,246


The accompanying notes are an integral part of these condensed 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 condensed 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 and results of operations as of
and for the three and nine month periods ended September 30, 2003 and
2002. The interim results for the three and nine months ended September
30, 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 arising from the acquisition of PaySys by
FDC in April 2001. As a result of the Settlement Agreement, we received
$4,183,000 cash in March 2003, which represented our pro rata share
(30.7%) of the amount released from the escrow fund. In the second
quarter ended June 30, 2003, we received an additional $281,000 cash
representing 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. Since these escrow funds were contingent and not
considered in the previously reported gain on the sale of PaySys in April
2001, these escrow payments are recorded as investment income in the nine
month period ended September 30, 2003.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. |  | Write-down of RF Solutions Note Receivable and Investment The
year-to-date 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 company 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 recorded in the first quarter of 2003 and are presented in
the line item investment income for the nine months ended September 30,
2003. Under the terms of the RF Solutions sale, the note holders and
preferred shareholders of RF Solutions, including 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.
We received $79,000 cash in partial repayment 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. |  | Write-down of Carrying Value of Silverpop, Inc. During the quarter
ended June 30, 2003, we reserved $76,000 against our original investment
of $100,000 in Silverpop, Inc., an early stage technology company, to
reflect the valuation at which Silverpop recently raised additional
capital, which we believe indicates a non-temporary impairment of our
original carrying value.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|6. |  | 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:
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Three Months Ended
    
    Nine Months EndedConsolidated Statements of Comprehensive Income (Loss)
    
    September 30,
    
    September 30,(unaudited, in thousands)
    
    2003
    
    2002
    
    2003
    
    2002Net loss
    
    $
    (2,396
    )
    
    $
    (2,697
    )
    
    $
    (3,629
    )
    
    $
    (9,526
    )Other comprehensive income (loss):Foreign currency translation adjustment
    
    
    (7
    )
    
    
    4
    
    
    
    (27
    )
    
    
    (10
    )Unrealized gain (loss) on available-for-sale securities
    
    
    26
    
    
    
    (350
    )
    
    
    64
    
    
    
    249Comprehensive loss
    
    $
    (2,377
    )
    
    $
    (3,043
    )
    
    $
    (3,592
    )
    
    $
    (9,287
    )


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|7. |  | Stock-Based Compensation  At September 30, 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
Statement of Financial Accounting Standards (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
    
    Nine Months EndedSeptember 30,
    
    September 30,(in thousands, except per share data)
    
    2003
    
    2002
    
    2003
    
    2002Net loss, reported
    
    $
    (2,396
    )
    
    $
    (2,697
    )
    
    $
    (3,629
    )
    
    $
    (9,526
    )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
    
    
    (9
    )
    
    
    (2
    )
    
    
    (21
    )
    
    
    (12
    )Pro forma net loss
    
    $
    (2,405
    )
    
    $
    (2,699
    )
    
    $
    (3,650
    )
    
    $
    (9,538
    )Pro forma net loss per common share basic and diluted
    
    $
    (0.54
    )
    
    $
    (0.60
    )
    
    $
    (0.81
    )
    
    $
    (2.12
    )




|8. |  | Concentration of Revenue The following table indicates the percentage
of consolidated revenue represented by each customer for any period in
which such customer represented more than 10% of consolidated revenue.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,(unaudited)
    
    2003
    
    2002
    
    2003
    
    2002ChemFree Customer A
    
    
    19
    %
    
    
    12
    %
    
    
    13
    %
    
    
    15
    %ChemFree Customer B
    
    
    14
    %
    
    
    <10
    %
    
    
    11
    %
    
    
    <10
    %ChemFree Customer C
    
    
    <10
    %
    
    
    15
    %
    
    
    10
    %
    
    
    <10
    %VISaer Customer A
    
    
    16
    %
    
    
    <10
    %
    
    
    14
    %
    
    
    <10
    %




|9. |  | 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 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
three and nine month periods ended September 30, 2003 and 2002.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,(unaudited, in thousands)
    
    2003
    
    2002
    
    2003
    
    2002Information TechnologyRevenue
    
    $
    1,217
    
    
    $
    1,391
    
    
    $
    3,986
    
    
    $
    3,394Operating loss
    
    
    (2,422
    )
    
    
    (2,683
    )
    
    
    (7,468
    )
    
    
    (9,165
    )Industrial ProductsRevenue
    
    
    1,531
    
    
    
    1,601
    
    
    
    4,753
    
    
    
    4,017Operating income (loss)
    
    
    36
    
    
    
    44
    
    
    
    337
    
    
    
    (115
    )Consolidated SegmentsRevenue
    
    
    2,748
    
    
    
    2,992
    
    
    
    8,739
    
    
    
    7,411Operating loss
    
    
    (2,386
    )
    
    
    (2,639
    )
    
    
    (7,131
    )
    
    
    (9,280
    )


A reconciliation of consolidated segment data above to consolidated loss follows:

Consolidated segments operating loss
    
    $
    (2,386
    )
    
    $
    (2,639
    )
    
    $
    (7,131
    )
    
    $
    (9,280
    )Corporate expenses
    
    
    (149
    )
    
    
    (246
    )
    
    
    (586
    )
    
    
    (733
    )Consolidated operating loss
    
    
    (2,535
    )
    
    
    (2,885
    )
    
    
    (7,717
    )
    
    
    (10,013
    )Interest income
    
    
    9
    
    
    
    30
    
    
    
    4
    
    
    
    107Investment income (loss)
    
    
    (24
    )
    
    
    (360
    )
    
    
    3,645
    
    
    
    (902
    )Equity of affiliates
    
    
    80
    
    
    
    23
    
    
    
    47
    
    
    
    (103
    )Other income
    
    
    74
    
    
    
    133
    
    
    
    288
    
    
    
    1,035Loss before taxes
    
    
    (2,396
    )
    
    
    (3,059
    )
    
    
    (3,733
    )
    
    
    (9,876
    )Income tax benefit
    
    
    
    
    
    
    (362
    )
    
    
    (104
    )
    
    
    (350
    )Net loss
    
    $
    (2,396
    )
    
    $
    (2,697
    )
    
    $
    (3,629
    )
    
    $
    (9,526
    )Depreciation and Amortization, netInformation Technology
    
    $
    152
    
    
    $
    228
    
    
    $
    458
    
    
    $
    646Industrial Products
    
    
    30
    
    
    
    24
    
    
    
    80
    
    
    
    58Consolidated segments
    
    
    182
    
    
    
    252
    
    
    
    538
    
    
    
    704Corporate
    
    
    5
    
    
    
    11
    
    
    
    20
    
    
    
    36Consolidated depreciation and
amortization, net
    
    $
    187
    
    
    $
    263
    
    
    $
    558
    
    
    $
    740Capital Expenditures, netInformation Technology
    
    $
    62
    
    
    $
    30
    
    
    $
    133
    
    
    $
    63Industrial Products
    
    
    34
    
    
    
    31
    
    
    
    79
    
    
    
    185Consolidated segments
    
    
    96
    
    
    
    61
    
    
    
    212
    
    
    
    248Corporate
    
    
    
    
    
    
    8
    
    
    
    3
    
    
    
    11Consolidated capital expenditures, net
    
    $
    96
    
    
    $
    69
    
    
    $
    215
    
    
    $
    259


September 30, 2003
    
    December 31, 2002Identifiable AssetsInformation Technology
    
    $
    5,456
    
    
    $
    6,334Industrial Products
    
    
    2,349
    
    
    
    1,944Consolidated segments
    
    
    7,805
    
    
    
    8,278Corporate
    
    
    7,796
    
    
    
    9,582Consolidated assets
    
    $
    15,601
    
    
    $
    17,860




|10. |  | ISC Guarantee In conjunction with a Software License Agreement entered
into on June 12, 2003 between the companys majority owned subsidiary,
CoreCard Software, Inc., and a CoreCard customer, ISC entered into a
letter of guarantee with the CoreCard customer. Under the guarantee, in
the event that the Software License is terminated for certain reasons, ISC
has guaranteed that CoreCard will make available at its expense up to four
employees to provide technical assistance to the customer during a
transition period of up to one year. The guarantee is limited to the
amount paid by the customer to CoreCard under the Software License
Agreement at the time of termination. The guarantee phases out upon the
achievement of certain milestones or after five years, whichever occurs
sooner. As of
September 30, 2003, it does not appear probable that the guarantee will be
paid; thus no amounts have been accrued with respect to this guarantee.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|11. |  | New Accounting Pronouncements In May 2003, the Financial Accounting
Standards Board (FASB) issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity. The Statement establishes standards for how an issuer classifies
and measures in its statement of financial position certain financial
instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its
scope as a liability (or an asset in some circumstances) because that
financial instrument embodies an obligation of the issuer. Many of such
instruments were previously classified as equity by issuers. The
Statement is effective for financial instruments entered into or modified
after May 31, 2003, and otherwise effective at the beginning of the first
interim period beginning after June 15, 2003, except for mandatory
redeemable financial instruments of nonpublic entities. The Statement is
to be implemented by reporting the cumulative effect of a change in
accounting principle for financial instruments created before the issuance
of the date of the Statement and still existing at the beginning of the
interim period of adoption. Restatement is not permitted. On November
7, 2003, the FASB deferred the classification and measurement provisions
of FASB No. 150 as they apply to certain mandatory redeemable
non-controlling interests. This deferral is expected to remain in effect
while these provisions are further evaluated by the FASB. The adoption of
this Statement did not have a significant impact on our financial
position, results of operations or cash flows.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




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



| |  |  | In addition to historical information, thisForm 10-Qmay contain
forward-looking statements relating to 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 referenceable customer installations, delay in
anticipated customer payments, changes in customer requirements and
preferences, changes in financial markets, performance, financial
condition and valuation of affiliate companies, terrorist
activities and threats thereof, military and other conflicts in the
Middle East, Afghanistan, Africa and other areas 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   consolidated subsidiaries 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).

Revenues in the three and nine month periods ended September 30, 2003 decreased
by 8 percent and increased by 18 percent, respectively, compared to the same
periods in 2002. The net loss from operations in the three and nine month
periods of 2003 was lower by 12 percent and 23 percent, respectively, than in
the comparable periods in 2002. The reduced operating loss for the third
quarter of 2003 is mainly the result of lower overall expense levels whereas
the reduction in the year-to-date loss in 2003 is a combination of increased
revenues and lower expense levels, most significantly in the area of software research and development. In the year-to-date period in 2003, our
results include $4,464,000 in non-recurring gains (included in the investment
income category) 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.

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Revenue  Total revenues in the three month period ended September 2003 were
$2,748,000, an 8 percent decline compared to the third quarter of 2002.
Year-to-date total revenues in 2003 were $8,739,000, an 18 percent increase
compared to the same period in 2002. 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, decreased 7 percent
and increased 15 percent in the three and nine month periods, respectively, of
2003 compared to the same periods in 2002. The increase in product revenue in
the year-to-date period is due to an increase of $736,000 in revenue of
Industrial Products, offset in part by a net decline of $40,000 in license
revenue at the Information Technology subsidiaries. Of the Industrial Products
increase, approximately 68 percent was due to a higher volume of products sold
or leased due to increased demand for ChemFree products, particularly during
the first half of the year, and approximately 32 percent of the increase was
due to increases ranging from five to ten percent on product prices. The
year-to-date increase in regards to the service revenue is due primarily to a 21 percent increase in VISaers
service revenue reflecting a greater number of hours billed for professional
services (mostly for international customers) in the first half of 2003 and a
22 percent increase in QS Technologies service revenue, the majority of which
is related to annual maintenance contract revenue for domestic customers. The
decrease in service revenue for the three month period ended September 30, 2003
compared to the same period in 2002 reflects completion of a VISaer
professional services contract in the second quarter of 2003 that had begun in
the third quarter of 2002. In 2003, the quarter and year-to-date product and
service revenue includes a small contribution from CoreCard Software as the
subsidiary began its initial customer installations.

Cost of Revenue  In both the three and nine month periods ended September 30,
2003, total cost of revenue was 59 percent of consolidated revenue compared to
55 percent in both the three and nine month periods of 2002. Cost of product
revenue was virtually unchanged in both the three and nine month periods in
2003 and 2002, averaging between 48 percent and 50 percent in each period. The
slight variations reflect principally ChemFrees product mix in each period.
Cost of service revenue (which relates to the Information Technology
subsidiaries) was 74 percent in the three and nine month periods of 2003
compared to 68 percent and 65 percent, respectively, in the same periods last
year. Of the $720,000 increase in total dollars spent for services
year-to-date in 2003 compared to 2002, approximately 31 percent is related to
QS Technologies and the balance is related mainly to VISaer. In both the three
and nine month periods of 2003, QS Technologies cost of service revenue
increased as a percentage of revenue because QS Technologies allocated more
technical personnel to the customer support function this year than in 2002.
In addition, VISaers cost of service revenue increased as a percentage of
service revenue compared to the prior year in both the three and nine month
periods of 2003 because VISaer utilized more expensive third party contractors
for certain specialized development services in the first six months of 2003
and experienced some underutilization of professional services employees in the
third quarter due to completion of a major contract in the second quarter of
2003.

Operating Expenses  In the three and nine month periods ended September 30,
2003, total consolidated operating expenses decreased by 13 percent and 15
percent, respectively, from the comparable periods last year. Consolidated
marketing expenses were approximately the same in each of the comparable
quarter and year-to-date periods in 2003 and 2002. Consolidated general and
administrative expenses declined by 26 percent and 18 percent in the three and
nine month periods, respectively, of 2003 compared to the same periods last
year. On a year-to-date basis, this reduction reflects mainly the elimination
of duplicate administrative and management personnel expenses totaling
approximately $588,000 at CoreCard following the acquisition of CoreCard in the
first quarter of 2002 as well as lower net facility costs due to reduced lease
rates at the Norcross, Georgia offices. Consolidated research and development
expenses in the three and nine month period ended September 30, 2003 were lower
by 9 percent and 19 percent, respectively, than in the same periods in 2002.
The significant decline is due mainly to reduced expenses at both VISaer and
CoreCard. At VISaer, significant activities involving third party services
related to the initial conversion and development of the Web-based VISaer
software were completed in early 2003 and, at CoreCard, fewer employees are
required now to complete the application product development than were needed
in the same periods in 2002.

Interest Income  In the three and nine months ended September 30, 2003, we
recorded $9,000 and $4,000, respectively, in interest income compared to
interest income of $30,000 and $107,000 in the three and nine-month periods,
respectively, in 2002. In 2002, we earned interest on higher cash and notes
receivable balances than in 2003 because in 2002 we had a $1.2 million note
receivable outstanding for five months and a $3.0 million note receivable
outstanding for four months. Both notes were repaid or converted to equity
investments in 2002.

Investment
Income  In the third quarter of 2003, we recorded a net investment
loss of $24,000 compared to a net investment loss of $360,000 in the same
period of 2002. For the nine month period ended September 30, 2003, we earned
net investment income of $3,645,000 compared to a net investment loss of
$902,000 in the same period last year. Investment income in the first nine
months of 2003 includes $4,464,000 earned in the first half of the year related
to the PaySys escrow settlement, offset in part by write-downs of $600,000 in
the first quarter and $76,000 in the second quarter to

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reduce the carrying
value of our investments in RF Solutions, Inc. and Silverpop Inc.,
respectively, a first quarter charge of $119,000 to reduce the carrying value
of a note receivable from RF Solutions, Inc. and a third quarter loss of
$24,000 on the sale of our shares of Matria Healthcare, Inc. common stock.
See Notes 3, 4 and 5 to the unaudited condensed financial statements included
in Item 1 of this filing for a detailed description of certain of these
transactions. Included in the investment losses in the first nine months of
2002 were write-downs in the carrying value of Daw Technologies, Inc., Novient,
Inc. and Lumenor, Inc., offset in part by gains on the sales of the companys
holdings in Atherogenics, Inc. stock and Risk Laboratories, LLC. See Note 3 to
the Consolidated Financial Statements in the Report on Form 10-K for 2002 for
details of these transactions.

Equity Earnings (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. We recorded $80,000 and $47,000 in net
equity in earnings of affiliate companies in the three and nine months ended
September 30, 2003, respectively. By comparison, we recorded net equity in
earnings of $23,000 for the three month period ended September 30, 2002 and net
equity in losses of $103,000 for the year-to-date period in 2002. These results
include our pro rata share of the net earnings or losses reported by four
affiliate companies (CoreXpand, MediZeus, Riverside Software and Horizon
Software) in 2003 and three affiliate companies (CoreXpand, MediZeus and
Horizon Software) in 2002.

Other Income, Net  Other income includes $74,000 and $288,000 in the third
quarter and first nine months, respectively, of 2003. Such amounts include
recognition of deferred gain of $33,000 and $99,000 in the three and nine month
periods, respectively, related to a VISaer product line sale in July 2000,
$42,000 and $118,000 in foreign currency exchange gains in the quarter and
year-to-date periods, respectively, and other non-recurring miscellaneous
income. In 2002, other income reflects mainly recognition of deferred gain
related to the VISaer product line sale.

Income Taxes  In the first quarter of 2003, we recorded an income tax benefit
of $104,000 that 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 year-to-date 2003 because we currently estimate the company will
not incur income tax liability in 2003 and we believe that the deferred tax
assets should be fully reserved given their character and our recent losses.
The income tax benefit recorded in 2002 represents a refund for income taxes
related to alternative minimum taxes paid in 2001 on the PaySys sale.

Common Shares  The basic and diluted weighted average number of basic shares
outstanding in the three and nine month periods ended September 30, 2003
declined slightly from the three and nine month periods ended September 30,
2002 due to the repurchase and retirement of a small number of shares of our
common stock.

Liquidity and Capital Resources

Our cash balance at September 30, 2003 was $2,320,000 compared to $2,644,000 at
December 31, 2002. For the year-to-date period ended September 30, 2003, our
principal source of cash was $4,540,000 in investment income, of which
$4,464,000 was proceeds of the PaySys escrow settlement. During the nine month
period, we used $4,295,000 for operations, principally to support CoreCard
($2,246,000 in total) and VISaer ($3,300,000 in total), offset in part by cash
generated by the QS Technologies subsidiary. Cash used for operations also
included a decrease of $238,000 in accounts payable and an increase in
inventory of $80,000 (to support higher sales levels at ChemFree).

On October 1, 2003, we established a secured, revolving line of credit with a
banking institution pursuant to which we may borrow up to $1,500,000 calculated
on a borrowing base determined by the level of domestic accounts receivable and
inventory of our consolidated subsidiary companies. The term of the revolving
line of credit is one year and the line bears interest at the rate of prime
plus one and one-half percent of the outstanding balance. As of this filing,
no amounts have been borrowed under the line of credit.

We estimate that our cash requirements for the balance of 2003 will be lower
and more predictable than in 2002 and the first nine months of this year due to
new and pending software license contracts at our Information Technology
segment subsidiaries, revised customer payment schedules resulting in earlier
and more regular payments, and lower product
development costs at VISaer and CoreCard Software. It is unclear what further
impact, if any, will result from the ongoing uncertainty in the Middle East,
potential further terrorist attacks or threats thereof either in the United
States or abroad, the sudden acute respiratory syndrome (SARS) epidemics and
other general economic factors, particularly with respect to our VISaer
subsidiarys customers. In the nine month period ended September 30, 2003,
approximately 88 percent of VISaers revenue was from international customers
involved in the commercial aviation industry and a significant number of its
prospective customers are located in the Asian and Pacific markets. VISaer has
won a number of new contracts in 2003, has delivered a major version release of
its new web-based software product and believes there is demand for its new
product,

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pending successful installations at customer sites. External factors
contributed to weakness in the commercial aviation market in 2003 and resulted
in delays in contract awards and implementations and, combined with some
internal software development delays, increased VISaers cash requirements in
the first nine months of 2003. Based on revised payment schedules with major
customers and new contracts signed, VISaer believes its cash requirements will
be substantially lower in the fourth quarter of 2003 and early 2004. As of
this date, we do not intend to provide significant additional funding, if any,
to VISaer. Refer to Factors That May Affect Future Operations below. From
time to time, we have relied on sales of assets to generate cash to support our
early stage companies and we may do so in the future if it is deemed desirable
or necessary, although we have no specific plans to do so at this time. We
believe that our cash balances and access to bank borrowings will be adequate
to support our consolidated 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 have a material
affect on our financial condition, 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 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 at favorable valuations, or at all, 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 generally 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

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pricing), inability to establish
referenceable customers for new product offerings by CoreCard or VISaer,
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, terrorist activities or threat thereof,
the aftermath of the war against Iraq, other geopolitical or military actions,
the spread of communicable diseases, such as SARS 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
customer payments based on milestone achievements in advance of being able to
recognize license revenue. CoreCard and VISaer have required cash to operate
in 2003, although at lower levels than in 2002 due to lower expense levels and
customer payments. We anticipate that our other subsidiaries and our corporate
operations will be slightly positive in 2003 in the aggregate. If either
CoreCard or VISaer is unsuccessful or if we decide to suspend funding and the
subsidiarys internally generated cash flow is insufficient to support its
operations, we may not recover our investment. Furthermore, if VISaer or
CoreCard customers fail to make scheduled payments or if CoreCard or VISaer
are unsuccessful in completing their software and implementing initial
reference customers for their new software products, anticipated cash inflows
may be delayed, resulting in increased cash requirements.

To minimize the effects of further potential declines in an already weak
aviation market, VISaer is taking steps to focus its resources on meeting
current contract requirements, maximizing professional services revenue and
reducing expenses related to new sales and marketing efforts. VISaer has
renegotiated payment schedules with several customers to provide more
predictable, regular payments on contracts. However, these efforts may not
produce the expected results and VISaers cash requirements and financial
results could differ from our current forecasts. As of this date, we do not
intend to continue to provide significant funding to VISaer. While we believe
VISaers current forecast is reasonable, if customers do not fulfill their
commitments for periodic payments, then its cash flow may be insufficient to
support its current operations and VISaer would need to reduce its personnel
and operating expenses or significantly cut back the scope of its operations.

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 with limited installations. CoreCard
successfully installed its first significant customer in the third quarter of
2003 and is expanding its marketing efforts to identify several other reference
customers although it does not have further contracts as of this filing.
Furthermore, the fourth quarter of the year is typically the busiest for
CoreCards target market and therefore it is unlikely that new customers would
be committed until 2004. Depending on the number, payment terms and timing of
any new software contracts, CoreCards cash requirements and budgeted results
may differ from our current forecasts.




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, since we sell our
products denominated in US dollars.




Item 4. Controls and Procedures

ISCs Chief Executive Officer and Chief Financial Officer have reviewed and
evaluated the effectiveness of ISCs disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30,
2003. Based on that evaluation, the Chief Executive Officer and Chief
Financial Officer have concluded that ISCs current disclosure controls and
procedures are effective in timely notifying them of material information
related to ISC (including its consolidated subsidiaries) required to be
disclosed in the reports ISC files or submits under the Exchange Act.

There have been no significant changes in ISCs internal control over financial
reporting that occurred during the quarter ended September 30, 2003 that have
materially affected, or are reasonably likely to materially affect, ISCs
internal control over financial reporting.

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Part II. OTHER INFORMATION




Item 6. Exhibits and Reports on Form 8-K

We filed a Form 8-K on August 6, 2003 disclosing that we issued a press release
on August 6, 2003 announcing our financial results for the quarter ended June
30, 2003.

The following exhibits are filed or furnished with this report:

3(i)
    
    Amended and Restated Articles of Incorporation of the Registrant dated
November 14, 1991, as amended November 25, 1997. (Incorporated by
reference to Exhibit 3.1 to the Registrants Annual Report on Form 10-K
for the year ended December 31, 1991 and to Exhibit 3.1 to the
Registrants Report on Form 8-K dated November 25, 1997.)3(ii)
    
    Bylaws of the Registrant dated June 6, 1997. (Incorporated by reference
to Exhibit 3(ii) of the Registrants Form 10-K/A for the year ended
December 31, 1997.)4.1
    
    Rights Agreement dated as of November 25, 1997 between the Registrant and
American Stock Transfer & Trust Company as Rights Agent. (Incorporated by
reference to Exhibit 4.1 of the Registrants Report on Form 8-K dated
November 25, 1997 and filed on December 16, 1997.)4.2
    
    Form of Rights Certificate. (Incorporated by reference to Exhibit 4.2 of
the Registrants Report on Form 8-K dated November 25, 1997 and filed on
December 16, 1997.)31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer furnished as required by Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer furnished as 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
RegistrantDate:  November 13, 2003
    
    By:
    
    /s/ J. Leland StrangeJ. Leland Strange
Chief Executive Officer, PresidentDate:  November 13, 2003
    
    By:
    
    /s/ Bonnie L. HerronBonnie L. Herron
Chief Financial Officer


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