UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                 _______________

                                   Form 10-QSB
                                 _______________


|X|      QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
         ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 2005.

| |      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
         ACT  OF  1934  FOR  THE  TRANSITION   PERIOD  FROM   ______________  TO
         ______________.


                         Commission file number 1-11900


                        Integrated Security Systems, Inc.
        -----------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)


                  Delaware                        75-2422983
          ------------------------     ---------------------------------
          (State of incorporation)     (IRS Employer Identification No.)


          8200 Springwood Drive, Suite 230, Irving, Texas       75063
          -----------------------------------------------    ----------
             (Address of principal executive offices)        (Zip Code)


                                 (972) 444-8280
                           ---------------------------
                           (Issuer's telephone number)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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 April 30, 2005,  85,496,120  shares of the Registrant's  common stock were
outstanding.

Transitional Small Business Disclosure Format:  Yes [ ]   No [X]



<PAGE>


                        INTEGRATED SECURITY SYSTEMS, INC.
                                      INDEX

                                                                          Page
PART I.  FINANCIAL INFORMATION

    Item 1.  Financial Statements

             Consolidated Balance Sheets at March 31, 2005
                (unaudited) and June 30, 2004                               3

             Consolidated Statements of Operations (unaudited)
                for the three and nine months ended
                March 31, 2005 and 2004                                     4

             Consolidated Statements of Cash Flows (unaudited)
                for the nine months ended March 31, 2005 and 2004           5

             Notes to Financial Statements                                  6

    Item 2.  Management's Discussion and Analysis or Plan of Operation     12

    Item 3.  Controls and Procedures                                       15

PART II.  OTHER INFORMATION

    Item 1.  Legal Proceedings                                             16

    Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds   16

    Item 3.  Defaults Upon Senior Securities                               16

    Item 4.  Submission of Matters to a Vote of Security Holders           16

    Item 5.  Other Information                                             16

    Item 6.  Exhibits                                                      16

SIGNATURES                                                                 17







                                       2
<PAGE>


                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements.
<TABLE>
<CAPTION>
                        INTEGRATED SECURITY SYSTEMS, INC.
                           Consolidated Balance Sheets

                                                                 March 31,        June 30,
                                                                   2005             2004
                                                               ------------     ------------
                                                               (Unaudited)
<S>                                                            <C>              <C>
                                     ASSETS
 Current assets:
   Cash and cash equivalents                                   $    604,758     $    172,688
   Accounts receivable, net of allowance for doubtful
     accounts of $100,007 and $109,527, respectively              3,180,877        1,904,285
   Inventories                                                    2,029,705        1,272,532
   Other current assets                                              97,184           75,020
                                                               ------------     ------------
     Total current assets                                         5,912,524        3,424,525

Property and equipment, net                                         678,626          681,168
Goodwill                                                          3,761,194        3,547,162
Other assets                                                        455,767           59,956
                                                               ------------     ------------
     Total assets                                              $ 10,808,111     $  7,712,811
                                                               ============     ============

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
   Accounts payable                                            $  2,428,978     $  2,029,963
   Accrued liabilities                                              599,990          708,610
   Current portion of long-term debt                              4,289,313        1,845,949
                                                               ------------     ------------
     Total current liabilities                                 $  7,318,849     $  4,584,522
                                                               ------------     ------------

Long-term debt                                                    5,116,264        2,956,341

Stockholders' equity (deficit):
   Preferred stock, $.01 par value, 750,000 shares
     authorized; 100,750 shares issued and
     outstanding (liquidation value of $2,015,000)                    1,008            1,008
   Common stock, $.01 par value, 150,000,000 shares
     authorized; 85,496,120 and 84,298,984 shares
     issued, respectively                                           854,961          842,990
   Additional paid in capital                                    32,083,661       31,627,086
   Accumulated deficit                                          (34,447,314)     (32,180,386)
   Treasury stock, at cost - 50,000 common shares                  (118,750)        (118,750)
                                                               ------------     ------------
     Total stockholders' equity (deficit)                        (1,627,002)         171,948
                                                               ------------     ------------
       Total liabilities and stockholders' equity (deficit)    $ 10,808,111     $  7,712,811
                                                               ============     ============
</TABLE>


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




                                       3
<PAGE>
<TABLE>
<CAPTION>
                        INTEGRATED SECURITY SYSTEMS, INC.
                      Consolidated Statements of Operations
                                   (Unaudited)


                                  For the Three Months Ended       For the Nine Months Ended
                                           March 31,                        March 31,
                                 ----------------------------     ----------------------------
                                     2005            2004             2005            2004
                                 ------------    ------------     ------------    ------------
<S>                              <C>             <C>              <C>             <C>
Sales                            $  3,534,718    $  2,779,102     $ 10,065,562    $  7,866,881
Cost of sales                       2,767,775       1,885,019        7,334,115       5,233,121
                                 ------------    ------------     ------------    ------------
Gross margin                          766,943         894,083        2,731,447       2,633,760
                                 ------------    ------------     ------------    ------------

Operating expenses:
   Selling, general and
     administrative                 1,561,207       1,353,553        4,022,734       3,025,194
   Research and product
     development                      124,288         138,193          376,027         463,986
                                 ------------    ------------     ------------    ------------
                                    1,685,495       1,491,746        4,398,761       3,489,180
                                 ------------    ------------     ------------    ------------

Loss from operations                 (918,552)       (597,663)      (1,667,314)       (855,420)

Interest expense                     (236,752)       (420,847)        (599,604)     (1,085,122)
                                 ------------    ------------     ------------    ------------

Net loss                           (1,155,304)     (1,018,510)      (2,266,918)     (1,940,542)

Preferred dividends                   (40,500)        (40,950)        (123,300)       (123,750)
                                 ------------    ------------     ------------    ------------

Net loss allocable to common
   stockholders                  $ (1,195,804)   $ (1,059,460)    $ (2,390,218)   $ (2,064,292)
                                 ============    ============     ============    ============

Weighted average common
  shares outstanding - basic
  and diluted                      85,308,916      74,440,513       84,752,964      59,511,069
                                 ============    ============     ============    ============

Net loss per share - basic
  and diluted                    $      (0.01)   $      (0.01)    $      (0.03)   $      (0.03)
                                 ============    ============     ============    ============
</TABLE>


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




                                       4
<PAGE>
<TABLE>
<CAPTION>
                        INTEGRATED SECURITY SYSTEMS, INC.
                      Consolidated Statements of Cash Flows
                                   (Unaudited)

                                                                    For the Nine Months Ended
                                                                             March 31,
                                                                    --------------------------
                                                                       2005           2004
                                                                    -----------    -----------
<S>                                                                 <C>            <C>
Cash flows from operating activities:
   Net loss                                                         $(2,266,918)   $(1,940,542)
   Adjustments to reconcile net loss to net cash
     used by operating activities:
     Depreciation                                                       154,725        142,399
     Amortization                                                        44,364           --
     Provision for bad debt                                               4,749         39,500
     Provision for warranty reserve                                     250,000        105,000
     Provision for inventory reserve                                       --            1,000
     Amortization of debt discount                                         --          578,627
     Expenses paid with stock, warrants and options                     362,940        249,834
     Changes in operating assets and liabilities,
       net of effects of acquisition:
          Accounts receivable                                        (1,140,176)      (739,125)
          Inventories                                                  (633,411)      (198,586)
          Other assets                                                 (462,339)        16,228
          Accounts payable                                              339,330        588,623
          Accrued liabilities                                          (359,753)       240,113
                                                                    -----------    -----------
           Net cash used in operating activities                     (3,706,489)      (916,929)
                                                                    -----------    -----------

Cash flows from investing activities:
   Purchase of property and equipment                                  (152,186)      (193,102)
   Purchase of business, net of cash acquired                          (302,231)      (737,130)
                                                                    -----------    -----------
           Net cash used in investing activities                       (454,417)      (930,232)
                                                                    -----------    -----------

Cash flows from financing activities:
   Employee stock option exercise                                        18,750         48,125
   Warrant exercise                                                        --          120,000
   Payments on debt and other liabilities                              (198,061)      (411,838)
   Proceeds from notes payable and long-term debt                     4,772,287      2,003,077
                                                                    -----------    -----------
           Net cash provided by financing activities                  4,592,976      1,759,364
                                                                    -----------    -----------

Increase (decrease) in cash and cash equivalents                        432,070        (87,797)
Cash and cash equivalents at beginning of period                        172,688        177,078
                                                                    -----------    -----------
Cash and cash equivalents at end of period                          $   604,758    $    89,281
                                                                    ===========    ===========

Supplemental disclosure of noncash financing activities
     Conversion preferred stock                                            --      $ 7,495,052
     Issuance of company common stock in payment of
       preferred stock dividends                                           --      $ 1,094,680
</TABLE>



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



                                       5
<PAGE>

                        INTEGRATED SECURITY SYSTEMS, INC.
             Notes to Consolidated Financial Statements (Unaudited)
                    Nine Months Ended March 31, 2005 and 2004

Note 1 - Basis of Presentation

The accompanying  unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America for interim financial information.  Accordingly,  they do not include
all of the information and footnotes required for complete financial statements.
In the opinion of management, all adjustments (all of which are normal recurring
accruals)  considered  necessary  for a fair  presentation  have been  included.
Operating  results for the interim period are not necessarily  indicative of the
results that may be expected for the fiscal year ending June 30, 2005.

The  accompanying  financial  statements  include  the  accounts  of  Integrated
Security  Systems,  Inc. (the "Company") and all of its  subsidiaries,  with all
significant  intercompany  accounts  and  transactions  eliminated.  For further
information,  refer  to the  consolidated  financial  statements  and  footnotes
thereto included in the Company's fiscal 2004 Annual Report on Form 10-KSB filed
on October 13, 2004 with the Securities and Exchange Commission.

Note 2 - Stock Options

The  Company  accounts  for  stock-based  compensation  to  employees  using the
intrinsic value method. Accordingly, compensation cost for stock options granted
to  employees is measured as the excess,  if any, of the quoted  market price of
the Company's  common stock at the date of the grant over the amount an employee
must pay to acquire the stock.

In December 2004, the Financial  Accounting  Standards  Board ("FASB")  issued a
revision of FASB Statement No. 123,  "Accounting for  Stock-Based  Compensation"
("SFAS No. 123R").  SFAS No. 123R supercedes APB Opinion No. 25, "Accounting for
Stock Issued to  Employees"  and requires a public entity to measure the cost of
employee services received in exchange for an award of equity  instruments based
on the  grant-date  fair value of the award,  and  recognize  that cost over the
vesting period.  SFAS No. 123R is effective for the fiscal years beginning after
December 15, 2005 and the Company will begin recognizing  option expense July 1,
2006.

The following table illustrates the effect on net loss and earnings per share if
the Company had applied the fair value  recognition  provisions of SFAS No. 123R
to stock-based employee compensation:
<TABLE>
<S><C>
                                     For the Three Months Ended     For the Nine Months Ended
                                              March 31,                      March 31,
                                     --------------------------     --------------------------
                                        2005           2004            2005           2004
                                     -----------    -----------     -----------    -----------
Net loss, as reported                $(1,155,304)   $(1,018,510)    $(2,266,918)   $(1,940,542)
Deduct:  Total stock-based
   employee compensation
   expense determined under
   fair value based method               (94,697)       (60,015)       (284,091)      (395,629)
                                     -----------    -----------     -----------    -----------
Pro forma net loss                   $(1,250,001)   $(1,078,525)    $(2,551,009)   $(2,336,171)
                                     ===========    ===========     ===========    ===========

Earnings per share:
   Basic and Diluted-as reported     $     (0.01)   $     (0.01)    $     (0.03)   $     (0.03)
                                     ===========    ===========     ===========    ===========
   Basic and Diluted-pro forma       $     (0.01)   $     (0.01)    $     (0.03)   $     (0.03)
                                     ===========    ===========     ===========    ===========
</TABLE>


                                       6
<PAGE>

The fair value of these  options  was  estimated  at the date of grant using the
Black-Sholes   option  pricing  model  with  the  following   weighted   average
assumptions used for grants in fiscal 2005 and 2004,  respectively:  no dividend
yield,  expected  lives of three and five years  with  expected  volatility  and
risk-free interest rates as outlined in the following table:
<TABLE>
<S><C>
                            For the Three Months Ended     For the Nine Months Ended
                                     March 31,                     March 31,
                            --------------------------     --------------------------

                               2005           2004            2005           2004
                            -----------    -----------     -----------    -----------
Expected volatility             107.55%        108.04%         107.78%        108.28%

Risk-free interest rate           3.70%          3.20%           3.42%          3.29%
</TABLE>


Note 3 - Reclassification

Certain reclassifications of prior year amounts have been made to conform to the
current period presentation.

Note 4 - Accounts Receivable

The majority of the Company's accounts  receivable are due from companies in the
perimeter security and road and bridge  industries.  Credit is extended based on
evaluation  of  a  customer's   financial  condition  and  credit  history  and,
generally,  collateral is not required.  Accounts  receivable  are due within 30
days and are  stated at  amounts  due from  customers  net of an  allowance  for
doubtful  accounts.  Accounts  outstanding  longer than the contractual  payment
terms  are  considered  past  due.  The  Company  determines  its  allowance  by
considering  a number of factors,  including  the length of time trade  accounts
receivable  are past due, the Company's  previous loss history,  the  customer's
current  ability to pay its obligation to the Company,  and the condition of the
general  economy and the industry as a whole.  The Company  writes-off  accounts
receivable when they become uncollectible, and payments subsequently received on
such receivables are credited to the allowance for doubtful accounts.

                                                             March 31,
                                                     --------------------------
                                                        2005           2004
                                                     -----------    -----------
Accounts receivable:
     Trade receivables                               $ 3,280,884    $ 2,451,020
     Less:  allowance for doubtful receivables          (100,007)      (117,814)
                                                     -----------    -----------
                                                     $ 3,180,877    $ 2,333,206
                                                     ===========    ===========

Allowance for doubtful receivables:
     Beginning Balance                               $   109,527    $    64,183
          Bad debt expense                                 2,249         39,500
          Accounts written-off                           (11,769)       (39,430)
          ARMR Services Corporation merger                  --           53,561
                                                     -----------    -----------
     Ending Balance                                  $   100,007    $   117,814
                                                     ===========    ===========



                                       7
<PAGE>

Note 5 - Product Warranties

The Company offers  one-year,  two-year and five-year  warranties on products it
manufactures. The length of the warranty is dictated by competition. The Company
provides for repair or  replacement of components  and/or  products that contain
defects of material or workmanship.  When the Company uses other  manufacturers'
components,  the warranties of the other manufacturers are passed to the dealers
and end users.

The  Company  records a  liability  for an  estimate of costs that it expects to
incur under its basic  limited  warranty  when  product  revenue is  recognized.
Factors affecting the Company's  warranty  liability include the number of units
sold and historical  and  anticipated  rates of claims and costs per claim.  The
Company  periodically  assesses the adequacy of its warranty  liability based on
changes in these factors.

The changes in the Company's product warranty liability are as follows:

                                                        March 31,
                                                  ----------------------
                                                    2005         2004
                                                  ---------    ---------
        Liability, beginning of year              $  94,157    $ 135,471
        Expense for new warranties issued           250,000      105,000
        Warranty Claims                            (327,570)    (118,346)
                                                  ---------    ---------
        Liability, end of period                  $  16,587    $ 122,125
                                                  =========    =========

Note 6 - Preferred Stock Dividend Arrearage

At March 31,  2005,  the  Company  had  dividends  in  arrears  in the amount of
$369,413 related to its outstanding Series A and Series D preferred stock, which
consists of the following:

                           Shares         Dividends
                         Outstanding     In Arrears
                         -----------     -----------
        Series A $20           9,500     $        --
        Series D $20          91,250         369,413
                         -----------     -----------
                             100,750     $   369,413
                         ===========     ===========

Note 7 - Net Loss Per Share

The Company  computes  basic loss per common  share using the  weighted  average
number of common  shares.  At March 31, 2005 and 2004,  there were 5,310,955 and
15,798,721 shares,  respectively,  of in-the-money  potentially  dilutive common
shares  outstanding,   which  were  not  included  in  weighted  average  shares
outstanding  because their effect is antidilutive due to the Company's  reported
net loss.

At March 31,  2005 and 2004,  the  Company  had  approximately  111,457,616  and
98,457,978  shares,  respectively,  of common stock and common stock equivalents
outstanding,   which   comprises  all  of  the  Company's   outstanding   equity
instruments.




                                       8
<PAGE>

Note 8 - Subsequent Event Financing

In exchange  for an  aggregate of $525,000  cash  investment  received on May 6,
2005,  Integrated  Security  Systems,  Inc.  issued a promissory note to each of
Frost National Bank FBO Renaissance Capital Growth & Income Fund III, Inc. Frost
National Bank FBO Renaissance US Growth  Investment Trust PLC and Frost National
Bank FBO BFS US  Special  Opportunities  Trust PLC on May 5,  2005.  Each of the
three promissory  notes is in the original  principal amount of $175,000 and has
an annual interest rate of 8%. The promissory notes,  plus interest,  are due on
November 11, 2007. Interest is payable in monthly  installments on the first day
of each month.

As a part of this transaction, on May 5, 2005, Integrated Security Systems, Inc.
issued a stock purchase  warrant to each of Frost National Bank FBO  Renaissance
Capital Growth & Income Fund III, Inc.  Frost  National Bank FBO  Renaissance US
Growth  Investment  Trust  PLC  and  Frost  National  Bank  BFO  BFS US  Special
Opportunities  Trust PLC. Each of the three stock purchase warrants entitles the
Renaissance  entities  to  purchase  from the  Company  514,706  fully  paid and
non-assessable shares of Common Stock, $0.01 par value, of the Company for $0.34
per share.

In exchange  for an  aggregate of $200,000  cash  investment  received on May 6,
2005,  Integrated  Security  Systems,  Inc.  issued a  promissory  note to C. A.
Rundell,  Jr.,  Chairman and Chief Executive  Officer of the Company,  on May 4,
2005. The promissory  note is in the original  principal  amount of $200,000 and
has an annual interest rate of 8%. The promissory note, plus interest, is due on
November 11, 2007. Interest is payable in monthly  installments on the first day
of each month.

As a part of this transaction,  on May 4, 2005 Integrated Security Systems, Inc.
issued a stock  purchase  warrant  to C. A.  Rundell,  Jr.,  Chairman  and Chief
Executive  Officer of the  Company.  The stock  purchase  warrant  entitles  Mr.
Rundell to  purchase  from the  Company  588,235  fully paid and  non-assessable
shares of Common Stock, $0.01 par value, of the Company for $0.34 per share.




                                       9
<PAGE>

Note 9 - Debt

As of March 31, 2005, the Company's  current and long-term debt consisted of the
following:
<TABLE>
<S><C>
                                                 Current     Long-term      Total
                                                ----------   ----------   ----------
Notes payable to stockholders; interest
at 8% due in monthly installments of
$11,333; principal and accrued unpaid
interest due September 30, 2005.............    $2,400,000   $       --   $2,400,000

Asset based lending facility with a
financing company. The loan with the
asset based lending facility is a demand
loan, but has a three-year term expiring
November 10, 2007; interest at 2% above
the prime rate; secured by accounts
receivable and inventory of B&B ARMR
Corporation.................................     1,415,294           --    1,415,294

Convertible note payable to stockholder;
interest at 7% due in monthly
installments of $2,917; principal and
accrued unpaid interest due September 5,
2008; convertible at the option of the
shareholder at $0.40 per share; Company
may call the note at $0.60 per share
(based on certain restrictions).............            --      500,000      500,000

Note payable to bank and secured by a
letter of credit in the amount of
$500,000 from Chief Executive Officer;
interest at the prime rate of Bank One,
N.A. (4.25% as of June 30, 2004);
principal and accrued unpaid interest
due January 26, 2006........................       330,000           --      330,000

Term note payable to a bank; due in
monthly principal and interest
installments of $10,500; interest at
10.5% and 10% at June 30, 2004 and 2003,
respectively; secured by first mortgage
on real estate and equipment; maturity
date of February 26, 2006...................        76,091      408,758      484,849

Convertible notes payable; interest at
10% due in semi-annual installments of
$205,900; principal and accrued unpaid
interest due November 30, 2009;
convertible at the option of the
shareholder at $0.38 per share; Company
may call the notes at $0.60 per share
(based on certain
restrictions)...............................            --    4,118,000    4,118,000

Other.......................................        67,928       89,506      157,434
                                                ----------   ----------   ----------
                                                $4,289,313   $5,116,264   $9,405,577
                                                ==========   ==========   ==========
</TABLE>

Note 10 - Joint Venture Agreement

On March 4, 2005, the Company entered into a joint venture agreement with Causey
Lyon  Enterprises,   Inc.  d/b/a  Roadway  Manufacturing  ("CLE")  in  order  to
consolidate the two companies' core competencies in the city, state, and federal
road & bridge market.  Going forward,  the joint venture entity ("B&B  Roadway")
will  administrate,  sell,  manufacture and distribute all products  relating to
only the road and bridge industry, including product lines specifically designed
for that market.  B&B Roadway is 65% owned by B&B ARMR Corporation ("B&B ARMR"),
a wholly owned  subsidiary  of the  Company,  and 35% owned by CLE. CLE provides
manufacturing  services and general  sales &  administration  management  to the
joint venture and is the general manager of the day-to-day operations. The joint
venture was  primarily  funded by a $100,000  line of credit from B&B ARMR at 6%
interest  with a repayment  term of  approximately  18 months.  In  addition,  a
$400,000  line of credit is  available  to B&B Roadway  from a third party asset
based lender on a secured basis.  The $100,000 credit facility is subordinate to
the Company's third party asset based lender's credit facility.


                                       10
<PAGE>

Both B&B ARMR and CLE  contributed  all  outstanding  orders  not  currently  in
production,  intellectual property,  patterns,  molds, designs, and equipment to
the joint  venture.  All existing  orders that were  currently in  production or
substantially underway in the manufacturing process on the effective date of the
joint venture  agreement will be produced  independently by B&B ARMR and CLE and
these transactions will be recoded on the respective books of those entities.

B&B ARMR agreed to sell all remaining road and bridge  related  inventory to CLE
as part of the joint venture  transaction  which will be completed in the fourth
quarter of 2005. This inventory sale will be evidenced by a promissory note from
CLE to the B&B  ARMR at an  interest  rate of 6% with a  repayment  schedule  of
approximately 18 months after the inventory transfer has been completed.

Note 11 - Acquisition

On December 15,  2004,  the Company  acquired all of the issued and  outstanding
shares of Common Stock of DoorTek  Corporation  ("DoorTek"),  a manufacturer  of
access control systems and other physical security system products.  In exchange
for all of the outstanding shares of DoorTek,  the Company issued 228,572 shares
of its $0.01 par value  Common  Stock,  which has been  preliminarily  valued at
approximately  $87,000.  The Company  also paid  $120,000  in cash to  DoorTek's
former  stockholders.  In  addition,  the Company  and the  sellers  executed an
earn-out  agreement for maximum  additional  payments of approximately  $100,000
based  on net  profits  of  DoorTek  over the next  two  years.  Any  additional
consideration will increase the recorded goodwill. The Company entered into this
acquisition  seeing it as an opportunity to  significantly  enhance its services
and to allow it to expand its product  offering and customer base in conjunction
with the  Company's  strategic  growth  plans.  The  acquisition  of DoorTek was
accounted for using the purchase  method of accounting.  As such, the assets and
liabilities  of DoorTek  were  recorded  at their  estimated  fair value and the
results of operations have been included in the Company's  consolidated  results
of operations from the date of acquisition.  To date, the purchase price paid in
excess of the estimated fair value of the net assets acquired has been allocated
to  goodwill,  which is not  deductible  for  federal  income  tax  purposes.  A
preliminary  assessment of the other  identifiable  intangible assets related to
this acquisition transaction yielded no assignment of value thereto. The Company
is in the process of  finalizing  the  allocation  of the purchase  price to the
assets acquired.  Any adjustment  resulting form this allocation will reduce the
amount  of  goodwill  and any  required  amortization  will be  recorded.  It is
expected this  allocation  will be competed by the end of fiscal 2005. The table
below  summarizes  the current  allocation  of the  purchase  price based on the
estimated fair values of the assets acquired and liabilities assumed:

                                       Estimated Values
                                       ----------------
        Cash and cash equivalents      $         29,000
        Accounts receivable                     141,000
        Inventories                             124,000
        Accounts payable                       (60,000)
        Accrued liabilities                     (1,000)
        Long-term debt                         (29,000)
        Goodwill                                 27,000
                                       ----------------
        Purchase price                 $        231,000
                                       ================


                                       11
<PAGE>

The  following   unaudited  pro  forma  consolidated   statement  of  operations
information has been prepared as if the acquisition discussed above had occurred
at the beginning of each period presented.
<TABLE>
<S><C>
                                 For the Three Months Ended    For the Nine Months Ended
                                          March 31,                     March 31,
                                 --------------------------   ----------------------------
                                            2004                  2005            2004
                                 --------------------------   ------------    ------------

Sales                                   $  2,933,802          $ 10,490,526    $  8,334,749
Net loss allocable to
    common stockholders                 $ (1,047,445)         $ (2,237,923)   $ (2,076,798)
Net loss per share allocable
    To common stockholders,
    basic and diluted                   $      (0.01)         $      (0.03)   $      (0.03)
Weighted average shares
    outstanding,
    basic and diluted                     74,669,085            84,981,536      59,739,641
</TABLE>

Note 12 - Business Segments

Information for the Company's  reportable segments for the three and nine months
ended March 31, 2005 and 2004 is as follows:
<TABLE>
<S><C>
                                     For the Three Months Ended       For the Nine Months Ended
                                             March 31,                        March 31,
                                    ----------------------------     ----------------------------
                                        2005            2004             2005            2004
                                    ------------    ------------     ------------    ------------
Sales
   B&B ARMR Corporation             $  3,237,079    $  2,730,605     $  9,360,130    $  7,652,138
   B&B Roadway (1)                        11,530            --             11,530            --
   Intelli-Site, Inc.                     97,657          48,497          473,996         214,743
   DoorTek Corporation (1)               188,452            --            219,906            --
                                    ------------    ------------     ------------    ------------
                                    $  3,534,718    $  2,779,102     $ 10,065,562    $  7,866,881
                                    ============    ============     ============    ============

Income (loss) from operations
   B&B ARMR Corporation             $   (572,617)   $   (463,484)    $ (1,165,815)   $   (307,793)
   B&B Roadway (1)                        (1,055)           --             (1,055)           --
   Intelli-Site, Inc.                    (74,260)       (107,205)        (109,718)       (291,232)
   DoorTek Corporation (1)                 2,415            --              3,425            --

   Corporate                            (273,035)        (26,974)        (394,151)       (256,395)
                                    ------------    ------------     ------------    ------------
                                    $   (918,552)   $   (597,663)    $ (1,667,314)   $   (855,420)
                                    ============    ============     ============    ============
</TABLE>

(1) Includes only data since acquisition or formation date.



                                       12
<PAGE>

Item 2.  Management's Discussion and Analysis or Plan of Operation.

Forward Looking Statements

This  quarterly  report on Form  10-QSB  includes  "forward-looking  statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.  Forward-looking
statements can be identified by the use of  forward-looking  terminology such as
"may," "believe," "expect," "intend," "plan," "seek," "anticipate,"  "estimate,"
or "continue"  or the negative of those words or other  variations or comparable
terminology.

All  statements  other than  statements  of  historical  fact  included  in this
quarterly report on Form 10-QSB,  including the statements under "Part I. --Item
2.  Management's  Discussion  and  Analysis  or Plan of  Operation"  and located
elsewhere  in this  quarterly  report on Form  10-QSB  regarding  the  financial
position and liquidity of the Company are forward-looking  statements.  Although
the Company  believes  that the  expectations  reflected in the  forward-looking
statements are reasonable,  it can give no assurance that such expectations will
prove  to  have  been  correct.   Important  factors  regarding  forward-looking
statements,  including certain risks and  uncertainties  that could cause actual
results to differ materially from the Company's  expectations,  are disclosed in
this  quarterly  report on Form  10-QSB.  The  Company  does not  undertake  any
obligation to publicly revise its  forward-looking  statements to reflect events
or  circumstances  that arise  after the date of this  quarterly  report on Form
10-QSB.

Important  factors that could cause  actual  results to differ  materially  from
those in the forward-looking  statements in this quarterly report on Form 10-QSB
include changes from anticipated  levels of operations,  customer  acceptance of
existing and new products,  anticipated  development  schedules of new products,
anticipated   levels  of  sales,   future  national  or  regional  economic  and
competitive  conditions,  changes in  relationships  with  customers,  access to
capital,  casualty to or other disruption of the Company's  production  facility
and equipment, delays and disruptions in the shipment of the Company's products,
government  regulations  and the  ability  of the  Company  to meet  its  stated
business  goals.  All  subsequent  written and oral  forward-looking  statements
attributable  to the  Company  or persons  acting on its  behalf  are  expressly
qualified in their entirety by the Company's cautionary statements.

Results of Operations

Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004

Sales.  The Company's  total sales  increased by $0.8  million,  or 28%, to $3.6
million  during the quarter  ended March 31, 2005 from $2.8  million  during the
quarter ended March 31, 2004.  This increase is due to overall  increased  sales
levels at the Company's  B&B ARMR  Corporation  subsidiary  ("B&B ARMR") and the
inclusion of the sales of DoorTek  Corporation  ("DoorTek"),  as a result of the
acquisition of DoorTek on December 16, 2004.

Gross Margin.  Gross margin  decreased by $0.1 million,  or 14%, to $0.8 million
during the quarter  ended March 31,  2005 from $0.9  million  during the quarter
ended March 31, 2004.  This decrease is due to a less favorable  product mix and
cost overruns on a specific customer order at B&B ARMR, but was partially offset
by the inclusion of DoorTek.

Selling,  General  and  Administrative.   Selling,  general  and  administrative
expenses  increased by approximately  $0.2 or 16% during the quarter ended March
31,  2005  compared  to the  quarter  ended  March 31,  2004.  This  increase is
primarily due to increase in the  professional  staffing levels at B&B ARMR, the
inclusion of DoorTek,  and  administrative  expenses  incurred at the  corporate
level related to the registration statement filing on April 8, 2005.


                                       13
<PAGE>

Research and Product Development. Research and product development expenses were
comparable,  with a slight decrease of  approximately  $14,000 or 10% during the
quarter ended March 31, 2005 compared to the quarter ended March 31, 2004.

Interest Expense.  Interest expense  decreased by approximately  $200,000 during
the quarter  ended March 31, 2005  compared to the quarter ended March 31, 2004.
This decrease is due primarily to approximately  $300,000 in amortization of the
value of warrants  issued in conjunction  with securing  additional debt and the
interest on debt that was obtained to meet working  capital needs,  coupled with
additional debt financing  subsequent to the quarter ending March 31, 2004. This
decrease  was offset by an increase  of  approximately  $100,000  in  additional
interest  expense related to the Company's  placement of convertible  promissory
notes issued in November 2004.

Nine Months Ended March 31, 2005 Compared to Nine Months Ended March 31, 2004

Sales.  The Company's  total sales  increased by $2.2 million,  or 28%, to $10.0
million during the nine months ended March 31, 2005 from $7.8 million during the
nine months  ended March 31,  2004.  This  increase is due to overall  increased
sales  levels  at both the  Company's  B&B ARMR and  Intelli-Site  subsidiaries,
coupled  with  the  inclusion  of the  sales  of  DoorTek,  as a  result  of the
acquisition of DoorTek on December 16, 2004.

Gross Margin.  Gross margin  increased by $0.1  million,  or 4%, to $2.7 million
during the nine months  ended March 31, 2005 from $2.6  million  during the nine
months ended March 31, 2004.  This  increase is primarily  due to the  increased
sales volume at Intelli-Site,  which yields a higher gross margin  contribution,
in addition to the  inclusion of DoorTek.  This  increase was offset by the less
favorable  product  mix and cost  overruns on a specific  customer  order at B&B
ARMR.

Selling,  General  and  Administrative.   Selling,  general  and  administrative
expenses  increased by approximately  $1.0 million or 33% during the nine months
ended March 31, 2005  compared to the nine  months  ended March 31,  2004.  This
increase  is due to  increased  professional  staffing  levels at B&B ARMR,  the
inclusion of DoorTek,  and  administrative  expenses  incurred at the  corporate
level related to the registration statement filing on April 8, 2005.

Research  and Product  Development.  Research and product  development  expenses
decreased by approximately $90,000 or 19% during the nine months ended March 31,
2005  compared  to the nine  months  ended  March 31,  2004.  This  decrease  is
primarily  due to a reduction in research and product  development  expenditures
Company-wide,  which the Company  expects  will  continue at these lower  levels
through the remainder of fiscal 2005.

Interest Expense.  Interest expense  decreased by approximately  $485,000 during
the nine months ended March 31, 2005 compared to the nine months ended March 31,
2004 due to  approximately  $725,000  in  amortization  of the value of warrants
issued in  conjunction  with securing  additional  debt and the interest on debt
that was obtained to meet working  capital needs,  coupled with  additional debt
financing  subsequent to the nine months ended March 31, 2004. This decrease was
offset by approximately  $240,000 in additional  interest expense related to the
Company's placement of convertible promissory notes issued in November 2004.

Liquidity and Capital Resources

The Company's cash position  increased by $432,070  during the nine months ended
March 31,  2005.  At March 31,  2005,  the Company had $604,758 in cash and cash
equivalents and had approximately $1.4 million outstanding under its asset based
lending  facility.  This  asset  based  lending  facility,  which is  secured by
accounts  receivable  and  inventory,  permits  the  Company  to  borrow up to a
combined $3.0 million, subject to availability under its borrowing base.


                                       14
<PAGE>

For the nine months ended March 31, 2005,  the  Company's  operating  activities
used  $3,706,489 of cash compared to $916,929 of cash used in operations  during
the nine months ended March 31, 2004.

The Company used $152,186 for the purchase of property and equipment  during the
nine months ended March 31, 2005, compared to $193,102 for the nine months ended
March 31, 2004. In addition,  the Company used cash of $302,231  during the nine
months  ended  March 31,  2005,  consisting  of  $184,000  related  to  earn-out
agreements  executed as a part of the B&B ARMR merger  transaction  and $118,000
related to the purchase of DoorTek Corporation.

During the nine months ended March 31, 2005, the Company financed its operations
with cash flows from borrowings of $4,772,287  compared to $2,003,077 during the
nine months ended March 31, 2004. The  borrowings  from the first nine months of
fiscal  2004  consisted  of an  additional  $4.2  million  from the  issuance of
subordinated  10%  convertible  promissory  notes.  The Company also borrowed an
additional  $0.5 million under the Company's asset based lending  facility.  The
Company made payments of $198,061 on debt and other liabilities  during the nine
months ended March 31, 2005,  compared to payments of $411,838 on debt and other
liabilities during the nine months ended March 31, 2004.

Principal  payments  required under long-term debt outstanding at March 31, 2005
are as follows:

                           Year Ending June 30,
                         ------------------------
                         2005         $ 1,510,956
                         2006           3,223,098
                         2007              31,418
                         2008              13,935
                         2009           4,626,170
                                      -----------
                                      $ 9,405,577

The principal payments required for fiscal year 2005 consist of $1,415,294 under
the  Company's  asset  based  lending  facility  which is a demand note and will
expire on November 10, 2007 (see Note 9 - Debt). The Company does not anticipate
full repayment of this facility during fiscal 2005.

The cash  that the  Company  received  from the  placement  of $4.2  million  in
subordinated  10%  convertible  promissory  notes  in  November,  2004  and  the
availability  under its asset based lending facility will be utilized to support
Company-wide operations.  The Company's working capital requirements will depend
upon  many  factors,  including  future  sales of the  Company's  products,  the
Company's  operating  results,  the status of competitive  products,  and actual
profits  compared to the  Company's  business  plan.  The  Company is  currently
experiencing  declining  liquidity,  which makes it difficult for the Company to
meet its current cash  requirements and may jeopardize the Company's  ability to
continue as a going concern. The Company's former auditor issued a going concern
modification  in their  auditors'  report for our year ended June 30, 2004.  The
Company intends to address its liquidity problems by controlling costs,  seeking
additional  funding and maintaining  focus on revenues and  collections.  At the
present  time and in the  foreseeable  future,  the Company  will need to obtain
additional  financing  either through equity placement or additional debt. There
can be no assurance that the Company will be able to secure such  financing.  If
the Company's  liquidity does not improve by the end of fiscal 2005, it may have
to seek a merger  partner,  limit its  operations or seek  protection  under the
federal  bankruptcy laws. Any of the foregoing  options may be on terms that are
unfavorable to the Company or disadvantageous to the Company's stockholders.

The Company's backlog is calculated as the aggregate sales prices of firm orders
received  from  customers  less  revenue  recognized.  At April  30,  2005,  the
Company's  backlog was approximately  $6.0 million.  The Company expects that it
will fill the majority of this backlog by June 30, 2006.



                                       15
<PAGE>

Item 3.  Controls and Procedures.

         (a)    Evaluation of Disclosure  Controls and Procedures.  Based on his
evaluation as of the end of the period covered by this Quarterly  Report on Form
10-QSB, the Company's  principal  executive and principal  financial officer has
concluded that the Company's  disclosure  controls and procedures (as defined in
Rules  13a-15(e) and 15d-15(e)  under the  Securities  Exchange Act of 1934 (the
"Exchange  Act"))  are  effective  to ensure  that  information  required  to be
disclosed by the Company in reports that it files or submits  under the Exchange
Act is recorded,  processed,  summarized  and  reported  within the time periods
specified in the rules and forms of the Securities and Exchange Commission.

         We strive to  maintain  disclosure  controls  and  procedures  that are
designed to ensure that information required to be disclosed in our Exchange Act
reports is recorded, processed,  summarized and reported within the requirements
specified in the SEC's rules and forms, and that such information is accumulated
and  communicated to our management,  including our chief executive  officer and
chief  financial  officer,  as appropriate,  to allow for appropriate  decisions
regarding required disclosure.

         Our  former   independent   registered   public   accounting  firm  had
communicated to our audit committee a reportable  condition regarding our system
of internal  controls.  They noted a  reportable  condition  with respect to the
inadequacy  of staffing  levels in our financial  reporting  function that could
result in our inability to meet financial reporting objectives.  The Company and
its audit  committee  has taken the steps  necessary to correct this  identified
reportable  condition.  Effective January 2005, the Company hired an experienced
Chief Financial Officer at the Company's B&B ARMR subsidiary.  In addition,  the
Company  has  hired  additional  staffing  within  the  finance  and  accounting
department at the corporate office.

         (b)    Changes in Internal Controls.  There were no significant changes
in the Company's internal control over financial  reporting that occurred during
the company's last completed fiscal quarter that has materially affected,  or is
reasonably  likely to materially  affect,  the Company's  internal  control over
financial reporting, other than described above.  Additionally,  the Company has
and will  continue to improve  both the quality and the  quantity of staffing in
order to effect  significant  improvements  in the  Company's  internal  control
structure.


                                       16
<PAGE>

                           PART II. OTHER INFORMATION


Item 1. Legal Proceedings.

None.


Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

None.


Item 3.  Defaults Upon Senior Securities.

None.


Item 4.  Submission of Matters to a Vote of Security Holders.

None.


Item 5.  Other Information.

None.


Item 6.  Exhibits.

10.1+    Promissory Note, dated May 5, 2005,  payable to Frost National Bank FBO
         Renaissance  Capital  Growth & Income  Fund III,  Inc. in the amount of
         $100,000.

10.2+    Stock  Purchase  Warrant,  dated May 5, 2005,  issued to Frost National
         Bank FBO Renaissance Capital Growth & Income Fund III, Inc.

10.3+    Promissory Note, dated May 5, 2005,  payable to Frost National Bank FBO
         Renaissance US Growth Investment Trust PLC in the amount of $100,000.

10.4+    Stock  Purchase  Warrant,  dated May 5, 2005,  issued to Frost National
         Bank FBO Renaissance US Growth Investment Trust PLC.

10.5+    Promissory  Note,  dated May 5, 2005,  payable to HSBC  Global  Custody
         Nominee  (U.K)  Limited,  Designation  No.  896414  in  the  amount  of
         $100,000.

10.6+    Stock  Purchase  Warrant,  dated May 5,  2005,  issued  to HSBC  Global
         Custody Nominee (U.K) Limited, Designation No. 896414.

10.7+    Promissory  Note, Dated May 4, 2005,  payable to C. A. Rundell,  Jr. in
         the amount of $200,000.

10.8+    Stock Purchase Warrant, dated May 4, 2005 issued to C. A. Rundell, Jr.

31.1+    Officer's Certificate Pursuant to Section 302

32.1+    Officer's Certificate Pursuant to Section 906
________________

+        Filed herewith.


                                       17
<PAGE>

                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                          Integrated Security Systems, Inc.
                                                    (Registrant)



Date:   May 11, 2005                      /s/ C. A. RUNDELL, JR.
                                          ----------------------
                                          C. A. Rundell, Jr.
                                          Director, Chairman of the Board, and
                                          Chief Executive Officer (Principal
                                          Executive and Financial Officer)



Date:   May 11, 2005                      /s/ RICHARD B. POWELL
                                          ---------------------
                                          Richard B. Powell
                                          Vice President, Chief Accounting
                                          Officer and Secretary (Principal
                                          Accounting Officer)




                                       18
<PAGE>

                                  EXHIBIT INDEX

10.1+    Promissory Note, dated May 5, 2005,  payable to Frost National Bank FBO
         Renaissance  Capital  Growth & Income  Fund III,  Inc. in the amount of
         $100,000.

10.2+    Stock  Purchase  Warrant,  dated May 5, 2005,  issued to Frost National
         Bank FBO Renaissance Capital Growth & Income Fund III, Inc.

10.3+    Promissory Note, dated May 5, 2005,  payable to Frost National Bank FBO
         Renaissance US Growth Investment Trust PLC in the amount of $100,000.

10.4+    Stock  Purchase  Warrant,  dated May 5, 2005,  issued to Frost National
         Bank FBO Renaissance US Growth Investment Trust PLC.

10.5+    Promissory  Note,  dated May 5, 2005,  payable to HSBC  Global  Custody
         Nominee  (U.K)  Limited,  Designation  No.  896414  in  the  amount  of
         $100,000.

10.6+    Stock  Purchase  Warrant,  dated May 5,  2005,  issued  to HSBC  Global
         Custody Nominee (U.K) Limited, Designation No. 896414.

10.7+    Promissory  Note, Dated May 4, 2005,  payable to C. A. Rundell,  Jr. in
         the amount of $200,000.

10.8+    Stock Purchase Warrant, dated May 4, 2005 issued to C. A. Rundell, Jr.

31.1+    Officer's Certificate Pursuant to Section 302

32.1+    Officer's Certificate Pursuant to Section 906
________________

+        Filed herewith.





                                       19
<PAGE>