UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 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 September 30, 2003.

| |      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 October 31, 2003,  73,442,880 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 September 30, 2003
                 (unaudited) and June 30, 2003                          3

              Consolidated Statements of Operations (unaudited)
                 for the three months ended September 30, 2003
                 and 2002                                               4

              Consolidated Statements of Cash Flows (unaudited)
                 for the three months ended September 30, 2003
                 and 2002                                               5

              Notes to Financial Statements                             6

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

     Item 3.  Controls and Procedures                                  14


PART II.  OTHER INFORMATION

     Item 1.  Legal Proceedings                                        15

     Item 2.  Changes in Securities                                    15

     Item 3.  Defaults Upon Senior Securities                          15

     Item 4.  Submission of Matters to a Vote of Security Holders      15

     Item 5.  Other Information                                        15

     Item 6.  Exhibits and Reports on Form 8-K                         16

SIGNATURES                                                             17



                                       2
<PAGE>


                          PART I. FINANCIAL INFORMATION

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

                                                                   September 30,       June 30,
                                                                       2003              2003
                                                                   -------------     -------------
                                                                    (Unaudited)
<S>                                                                <C>               <C>
                                     ASSETS
Current assets:
   Cash and cash equivalents                                       $     246,958     $     177,078
   Accounts receivable, net of allowance for doubtful
     accounts of $96,210 and $64,183, respectively                     1,872,732           545,337
   Inventories                                                         1,059,335           630,995
   Other current assets                                                   64,391            70,071
                                                                   -------------     -------------
     Total current assets                                              3,243,416         1,423,481

Property and equipment, net                                              579,024           481,608
Goodwill                                                               4,294,064              --
Other assets                                                              28,461            15,011
                                                                   -------------     -------------
     Total assets                                                  $   8,144,965     $   1,920,100
                                                                   =============     =============

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
   Accounts payable                                                $   1,713,484     $     538,190
   Accrued liabilities                                                   858,384           510,000
   Current portion of long-term debt                                   2,878,554           374,330
                                                                   -------------     -------------
     Total current liabilities                                     $   5,450,422     $   1,422,520
                                                                   -------------     -------------

Long-term debt                                                           575,075         1,919,409

Preferred stock subject to redemption                                       --           7,495,052

Stockholders' deficit:
   Preferred stock, $.01 par value, 750,000 shares authorized;
     100,750 and 161,345 shares, respectively, issued and
     outstanding (liquidation value of $2,015,000)                         1,008             1,613
   Common stock, $.01 par value, 75,000,000 shares
     authorized; 73,422,880 and 12,881,110 shares,
     respectively, issued                                                734,229           128,811
   Additional paid in capital                                         30,325,930        18,434,838
   Accumulated deficit                                               (28,822,949)      (27,363,393)
   Treasury stock, at cost - 50,000 common shares                       (118,750)         (118,750)
                                                                   -------------     -------------
     Total stockholders' equity (deficit)                              2,199,468        (8,916,881)
                                                                   -------------     -------------
       Total liabilities and stockholders' equity (deficit)        $   8,144,965     $   1,920,100
                                                                   =============     =============
</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
                                                                    September 30,
                                                            -----------------------------
                                                                2003             2002
                                                            ------------     ------------
<S>                                                         <C>              <C>
Sales                                                       $  1,719,896     $  1,413,095
Cost of sales                                                  1,068,280          828,426
                                                            ------------     ------------
Gross margin                                                     651,616          584,669
                                                            ------------     ------------

Operating expenses:
  Selling, general and administrative                            675,700          590,486
  Research and product development                               138,957           34,982
                                                            ------------     ------------
                                                                 814,657          625,468
                                                            ------------     ------------

Loss from operations                                            (163,041)         (40,799)

Other expense:
  Interest expense                                              (252,686)         (53,148)
                                                            ------------     ------------

Net loss                                                        (415,727)         (93,947)

Preferred dividends                                              (41,400)        (154,950)
                                                            ------------     ------------

Net loss allocable to common stockholders                   $   (457,127)    $   (248,897)
                                                            ============     ============
Weighted average common and
   common equivalent shares
   outstanding  - basic and diluted                           30,659,213       11,891,825
                                                            ============     ============

Net loss per share                                          $      (0.02)    $      (0.02)
                                                            ============     ============
</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 Three Months Ended
                                                                    September 30,
                                                             ---------------------------
                                                                2003            2002
                                                             -----------     -----------
<S>                                                          <C>             <C>
Cash flows from operating activities:
   Net loss                                                  $  (415,727)    $   (93,947)
   Adjustments to reconcile net loss to net cash
     used by operating activities:
     Depreciation                                                 32,806          30,388
     Provision for bad debt                                        5,500            --
     Provision for warranty reserve                               10,000          12,000
     Provision for inventory reserve                               2,000          18,000
     Amortization of debt discount                               166,888            --
     Expenses paid with stock, warrants and options               48,847          24,924
     Changes in operating assets and liabilities,
       net of effects of acquisition:
          Accounts receivable                                   (244,651)        161,638
          Inventories                                            (82,659)         53,359
          Other assets                                            11,331           6,854
          Accounts payable                                       235,675         (68,513)
          Accrued liabilities                                    199,400         (80,572)
                                                             -----------     -----------
           Net cash provided(used) in operating activities       (30,590)         64,131
                                                             -----------     -----------

Cash flows from investing activities:
   Purchase of property and equipment                            (13,793)         (9,206)
   Purchase of business                                         (586,915)           --
   Capitalized software development costs                           --          (128,772)
                                                             -----------     -----------
           Net cash used in investing activities                (600,708)       (137,978)
                                                             -----------     -----------

Cash flows from financing activities:
   Employee stock option exercise                                  9,375           4,125
   Payments on debt and other liabilities                       (266,597)        (19,749)
   Proceeds from notes payable and long-term debt                958,400         187,962
                                                             -----------     -----------
           Net cash provided by financing activities             701,178         172,338
                                                             -----------     -----------

Increase in cash and cash equivalents                             69,880          98,491
Cash and cash equivalents at beginning of period                 177,078          28,958
                                                             -----------     -----------
Cash and cash equivalents at end of period                   $   246,958     $   127,449
                                                             ===========     ===========

Supplemental disclosure of noncash financing activities
   Conversion preferred stock                                $ 7,495,052            --
   Issuance of company common stock in payment of
     preferred stock dividends                               $ 1,043,829            --

</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)
                   Quarters Ended September 30, 2003 and 2002


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, 2004.

The  accompanying  financial  statements  include  the  accounts  of  Integrated
Security  Systems,  Inc.  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 2003 Annual Report on Form 10-KSB filed on October 14, 2003
with the Securities and Exchange Commission.


Note 2 - Reclassification

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


Note 3 - 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  customers'   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.


                                                          September 30,
                                                   ---------------------------
                                                      2003            2002
                                                   -----------     -----------

Accounts receivable:
   Trade receivables                               $ 1,968,942     $   973,466
   Less: allowance for doubtful receivables            (42,649)        (99,271)
                                                   -----------     -----------
                                                   $ 1,926,293     $   874,195
                                                   ===========     ===========

Allowance for doubtful receivables:
   Beginning Balance                               $    64,183     $   100,692
        Bad debt expense                                 5,500            --
        Accounts written-off                           (27,034)         (1,421)
                                                   -----------     -----------
   Ending Balance                                  $    42,649     $    99,271
                                                   ===========     ===========


                                       6
<PAGE>


Note 4 - Software Development Costs

We account for  software  developments  costs in  accordance  with  Statement of
Financial  Accounting  Standards  ("SFAS") No. 86,  "Accounting for the Costs of
Computer  Software to be Sold,  Leased,  or  Otherwise  Marketed."  Accordingly,
qualifying costs that are deemed to be recoverable are capitalized and amortized
using the greater of the revenue  method or the  straight-line  method over five
years. At September 30, 2003 and June 30, 2003,  software  development costs had
not been  capitalized  because of uncertainty  regarding  their  recoverability.
Capitalized  software  development  costs of $128,772 at September 30, 2002 were
expensed  during the fourth  quarter of fiscal 2003 due to the  unrecoverability
and resulting impairment of these costs.


Note 5 - Product Warranties

The Company has  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:

                                                   September 30,
                                              -----------------------
                                                2003          2002
                                              ---------     ---------
      Liability, beginning of year            $ 135,471     $  97,095
      Expense for new warranties issued          10,000        12,000
      Warranty Claims                           (25,119)      (35,360)
                                              ---------     ---------
      Liability, end of period                $ 120,352     $  73,735
                                              =========     =========




                                       7
<PAGE>


Note 6 - 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. If the Company recognized compensation expense as
recommended  under  Statement of Financial  Accounting  Standards No. 123 ("SFAS
123"),  based on the fair value at the grant dates,  the Company's pro forma net
loss and net loss per share would have been as follows:

                                                     For the Three Months Ended
                                                            September 30,
                                                     --------------------------
                                                       2003             2002
                                                     ---------        ---------
Net loss, as reported                                $(531,874)       $ (93,947)
Add:  Stock-based employee compensation
    expense included in reported net loss                 --               --

Deduct:  Total stock-based employee compensation
    expense determined under fair value based
    method                                            (252,454)         (12,039)
                                                     ---------        ---------
Pro forma net loss                                   $(784,328)       $(105,986)
                                                     =========        =========

Earnings per share:
    Basic and Diluted - as reported                  $   (0.02)       $   (0.01)
                                                     =========        =========
    Basic and Diluted - pro forma                    $   (0.03)       $   (0.01)
                                                     =========        =========

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 2004 and 2003,  respectively:  no dividend
yield,  expected  volatility of 108.1% to 119.6% and 110.1%;  risk-free interest
rates of approximately  2.27% to 3.30% and 2.31% and expected lives of three and
five years.


Note 7 - Preferred Stock Conversion

During August and September  2003, all of the holders of the Company's  Series F
and Series G  Preferred  Stock  converted  all of these  shares at a rate of 125
shares of  Common  Stock for each  share of the  Preferred  Stock and all of the
related accrued  dividends at a rate of $0.20 into the Company's $0.01 par value
common stock. These conversions are detailed in the following tables.


                        Convertible Preferred Stock
    --------------------------------------------------------------------
       Preferred Stock           Number of               Number of
           Series             Preferred Shares         Common Shares
    --------------------------------------------------------------------
    Series F                            60,595             7,574,375
    Series G                           299,802            37,475,250


               Convertible Preferred Stock Accrued Dividends
    ---------------------------------------------------------------------
       Preferred Stock            Amount of              Number of
           Series             Accrued Dividends        Common Shares
    ---------------------------------------------------------------------
    Series F                           $175,350              876,750
    Series G                            868,480            4,342,400



                                       8
<PAGE>


Note 8 - Preferred Stock Dividend Arrearage

At  September  30, 2003,  the Company had  dividends in arrears in the amount of
$224,513  related to its  outstanding  Series A, and D  preferred  stock,  which
consists of the following:


                               Shares          Dividends
                             Outstanding      In Arrears
                             -----------      -----------
         Series A $20              9,500      $      --
         Series D $20             91,250          224,513
                             -----------      -----------
                                 100,750      $   224,513
                             ===========      ===========


Note 9 - Acquisition of Assets

On September  5, 2003,  the Company  acquired all of the issued and  outstanding
shares of common stock of ARMR Services  Corporation  ("ARMR"),  a manufacturing
company that  engineers and  manufactures  high security  crash rated  barriers,
parking control equipment and other security systems for business and government
use, in a merger  transaction.  In exchange  for all the  outstanding  shares of
ARMR, the Company paid the selling  stockholders  approximately  $3.8 million in
common stock (10 million shares) of the Company and $500,000 in cash,  which had
been obtained through the issuance of a $500,000 convertible  promissory note in
September  2003. In addition,  the Company and the sellers  executed an earn-out
agreement for maximum additional payments of approximately $2.2 million based on
sales  over  the  next  three  years.  The  Company  entered  into  this  merger
transaction  seeing it as an  opportunistic  acquisition  that would allow it to
expand its product  offering and customer base in conjunction with the Company's
strategic  growth plans.  The  acquisition  and merger of ARMR was accounted for
using the purchase method of accounting.  As such, the assets and liabilities of
ARMR 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.  The purchase price in excess of the book value of the net
assets acquired has been allocated to goodwill. The Company is in the process of
allocating the purchase price to the assets acquired.  Any adjustment  resulting
from this  allocation  will  reduce  the  amount of  goodwill  and any  required
amortization will be recorded.  It is expected this allocation will be completed
by March 31, 2004.  The table below  summarizes  the current  allocation  of the
purchase price based on the estimated fair values of the assets acquired:

                                            Estimated Values
                                            ----------------

Cash and cash equivalents                   $         29,000
Accounts receivable                                1,088,000
Inventory                                            348,000
Property and equipment                               116,000
Other assets                                          19,000
Accounts payable                                    (940,000)
Accrued liabilities                                 (254,000)
Current debt                                        (337,000)
Long-term debt                                       (63,000)
Goodwill                                           4,294,000
                                            ----------------
Purchase price                              $      4,300,000
                                            ================

The following  unaudited pro forma  consolidated  statements of operations  have
been  prepared as if the  acquisition  discussed  above had  occurred at July 1,
2003.

                                               For the Three Months Ended
                                                      September 30,
                                              ----------------------------
                                                  2003            2002
                                              ------------    ------------

Sales                                         $  2,405,823    $  3,205,383
Net loss allocable to common stockholders     $   (634,907)   $   (122,818)
Net loss per share allocable to common
       stockholders, basic and diluted        $      (0.02)   $      (0.01)

Weighted average shares outstanding,
       basic and diluted                        30,659,213      11,891,825



Note 10 - Net Loss Per Share

The Company  computes  basic loss per common  share using the  weighted  average
number of common shares.  At September 30, 2003 and 2002,  there were 86,649,507
and 68,941,029  potentially dilutive common shares outstanding were not included
in weighted average shares outstanding because their effect is antidilutive.


                                       9
<PAGE>


As  discussed in Note 7 and Note 8, all  outstanding  shares of the Series F and
Series G Preferred Stock and all of the related accrued dividends were converted
into common shares during August and September 2003. These conversions increased
to number of common shares  outstanding  by 50,268,775  shares.  As discussed in
Note 9,  10,000,000  common  shares were issued in September  2003 in a purchase
transaction.  Per share  amounts for the first  quarter of fiscal  2004  reflect
these additional common shares outstanding.

At October 31, 2003, the Company had  approximately  99,340,617 shares of common
and common stock equivalents  outstanding,  which is in excess of the authorized
shares of 75,000,000.  The Company will be seeking  shareholder  approval for an
increase in the number of authorized  shares,  in order to accommodate  for this
excess, at the next annual shareholders' meeting.


Note 11 - Financing

In exchange for an aggregate of $500,000 cash  investment,  the Company issued a
convertible promissory note to BFS US Special Opportunities Trust PLC ("BFS"), a
public limited  company  registered in England and Wales,  on September 5, 2003.
The convertible  promissory note is in the original principal amount of $500,000
and has an annual interest rate of 7% and is payable in monthly  installments on
the first day of each month. The convertible  promissory note, plus interest, is
due on September 5, 2008. The convertible  promissory note is convertible at the
option of BFS into the  common  stock of the  Company at a  conversion  price of
$0.40 per share (1,250,000 shares).  On the date the convertible  promissory not
was issued,  the  Company's  common stock had a market value of $0.45 per share,
resulting in a beneficial  conversion  feature of $62,500.  This amount has been
reflected  in the  financial  statements  as a  discount  on  debt  and  will be
amortized as additional  interest expense over the term of the note. The Company
has the right to call the convertible promissory note if the market price of the
commons stock of the Company is above $0.60 per share for period of 60 days.

In exchange for an aggregate of $100,000 cash  investment,  the Company issued a
promissory note to C. A. Rundell,  Jr.,  Chairman and Chief Executive Officer of
the Company,  on  September  26, 2003.  The  promissory  note is in the original
principal  amount  of  $100,000  and has an  annual  interest  rate  of 7%.  The
promissory note, plus interest,  is due on April 1, 2004. Interest is payable in
monthly  installments  on the  first  day of  each  month.  As a  part  of  this
transaction the Company 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  125,000  fully paid and
non-assessable shares of Common Stock, $0.01 par value, of the Company for $0.40
per share.  The value  assigned to the warrant of $36,300 was recorded as a debt
discount and will be amortized as interest expense over the term of the note.


Note 12 - Subsequent Event - Financing

In exchange for an aggregate of $400,000 cash  investment,  the Company issued a
promissory note to each of Frost National Bank FBO Renaissance  Capital Growth &
Income  Fund  III,  Inc.  and  Frost  National  Bank FBO  Renaissance  US Growth
Investment  Trust PLC on October 1, 2003. Each of the two promissory notes is in
the original principal amount of $200,000 and has an annual interest rate of 7%.
The  promissory  notes,  plus  interest,  are due on April 1, 2004.  Interest is
payable in monthly  installments  on the first day of each  month.  As a part of
this  transaction,  on October  1, 2003,  the  Company  issued a stock  purchase
warrant to each of Frost National Bank FBO  Renaissance  Capital Growth & Income
Fund III, Inc. and Frost  National  Bank FBO  Renaissance  US Growth  Investment
Trust PLC.  Each of the two stock  purchase  warrants  entitles the  Renaissance
entities to  purchase  from the Company  250,000  fully paid and  non-assessable
shares of Common Stock, $0.01 par value, of the Company for $0.40 per share. The
value assigned to these  warrants of $145,450 is being  amortized over the terms
of the notes.


                                       10
<PAGE>


Note 13 - Business Segments

Information  for the  Company's  reportable  segments for the three months ended
September 30, 2003 and 2002 is as follows:

                                            For the Three Months Ended
                                                  September 30,
                                           ----------------------------
                                               2003             2002
                                           -----------      -----------
       Sales
          B&B ARMR Corporation             $ 1,627,895      $ 1,374,880
          Intelli-Site, Inc.                    91,911           38,215
                                           -----------      -----------
                                           $ 1,719,896      $ 1,413,905
                                           ===========      ===========

       Income (loss) from operations
          B&B Electromatic, Inc.           $   (10,635)     $   113,098
          Intelli-Site, Inc.                   (94,703)         (72,231)
          Corporate                            (78,973)         (81,665)
                                           -----------      -----------
                                           $  (163,041)     $   (40,798)
                                           ===========      ===========




                                       11
<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  September 30, 2003 Compared to Three Months Ended  September
30, 2002

Sales.  The Company's  total sales  increased by $0.3  million,  or 22%, to $1.7
million during the quarter ended September 30, 2003 from $1.4 million during the
quarter ended  September 30, 2002.  This increase is due to the inclusion of the
sales of ARMR Services  Corporation,  as a result of the merger of ARMR with the
Company's  B&B  Electromatic,  Inc.  subsidiary  into  B&B ARMR  Corporation  on
September 1, 2003.

Gross Margin.  Gross margin as a percentage of sales decreased to 38% during the
quarter ending  September 30, 2003 from 41% during the quarter ending  September
30, 2002. This decrease is due to a less favorable  product mix at the Company's
B&B ARMR subsidiary.

Selling,  General  and  Administrative.   Selling,  general  and  administrative
expenses  increased  by  approximately  $85,000 or 14% during the quarter  ended
September  30, 2003  compared to the quarter  ended  September  30,  2002.  This
increase is primarily  due to the inclusion of ARMR  Services  Corporation  as a
result of the merger of B&B Electromatic, Inc. and ARMR Services Corporation.

Research  and Product  Development.  Research and product  development  expenses
increased by approximately  $104,000 during the quarter ended September 30, 2003
compared to the quarter ended September 30, 2002. This increase is primarily due
to approximately  $86,000 in software  development  costs in the current quarter
compared to the capitalization of approximately  $96,000 in software development
costs at the Company's  Intelli-Site,  Inc. subsidiary during the same quarter a
year ago. Research and development  expenditures increased approximately $18,000
related to the Company's B&B ARMR subsidiary.


                                       12
<PAGE>

Interest Expense.  Interest expense  increased by approximately  $200,000 during
the quarter ended September 30, 2003 compared to the quarter ended September 30,
2002 due to the issuance of warrants in  conjunction  with  securing  additional
debt and the interest on that debt was obtained to meet  working  capital  needs
coupled  with  additional  debt  financing  subsequent  to  the  quarter  ending
September 30, 2002.

Liquidity and Capital Resources

The  Company's  cash  position  increased  by $69,880  during the quarter  ended
September  30,  2003,  compared to the quarter  ended  September  30,  2002.  At
September 30, 2003,  the Company had $246,958 in cash and cash  equivalents  and
had approximately  $666,000  outstanding under its accounts receivable factoring
facilities.  The factoring facilities,  which are secured by accounts receivable
and  inventory,  permits  the Company to borrow up to a combined  $1.8  million,
subject to availability under its borrowing base.

For  the  three  months  ended  September  30,  2003,  the  Company's  operating
activities  used  $30,590  of cash  compared  to  $64,131  of cash  provided  in
operations during the three months ended September 30, 2002.

The Company used $13,793 for the purchase of property and  equipment  during the
quarter  ended  September  30,  2003,  compared to $9,206 for the quarter  ended
September 30, 2002. In addition,  the Company acquired net assets using $586,915
of cash in  connection  with the asset  purchase  and merger with ARMR  Services
Corporation.  Please  see  Note 9  (Acquisition  of  Assets)  to  the  financial
statements above for details regarding this transaction.

During the quarter  ending  September 30, 2003,  the Company  issued 3.8 million
shares of its $0.01 par value common stock in the asset purchase and merger with
ARMR  Services  Corporation.  Please see Note 9  (Acquisition  of Assets) to the
financial statements above for details regarding this transaction.

During the quarter ended September 30, 2003, the Company financed its operations
with cash flows from  borrowings  of $958,400  compared  to $187,962  during the
quarter ended  September 30, 2002. The Company made payments of $266,597 on debt
and other liabilities  during the quarter ended September 30, 2003,  compared to
payments  of $19,749 on debt and other  liabilities  during  the  quarter  ended
September 30, 2002.

During the quarter  ending  September  30,  2003,  the holders of the  Company's
Series F and Series G preferred stock converted all the Series F and G preferred
stock and related accrued dividends into  approximately 50 million shares of the
Company's  $0.01 par value  common  stock.  Please see Note 7  (Preferred  Stock
Conversion)  to the  financial  statements  above  for  details  regarding  this
transaction.

During the fiscal  quarter  ended  September  30, 2003,  the Company  received a
$500,000 cash investment from BFS US Special Opportunities Trust PLC in order to
finance the  purchase/merger  of ARMR Services  Corporation.  Please see Note 11
(Financing)  to the  financial  statements  above for  details  regarding  these
investments.

The cash  that the  Company  receives  from the  accounts  receivable  factoring
facilities is 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  and the
Company's auditor issued a going concern  modification in their auditors' report
for our year ended June 30, 2003.  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, 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.


                                       13
<PAGE>

The Company's backlog is calculated as the aggregate sales prices of firm orders
received  from  customers  less revenue  recognized.  At October 31,  2003,  the
Company's  backlog was approximately  $3.5 million.  The Company expects that it
will fill the majority of this backlog by December 31, 2004.


Item 3.  Controls and Procedures

         (a)    Evaluation of Disclosure  Controls and Procedures.  Based on his
evaluation  as of a date  within 90 days of the  filing  date of 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-14(c) and 15d-14(c)  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.

         (b)    Changes in Internal Controls.  There were no significant changes
in the Company's internal controls or in other factors that could  significantly
affect these controls  subsequent to the date of his  evaluation,  including any
corrective  actions  with  regard  to  significant   deficiencies  and  material
weaknesses.  The Company has begun to  integrate  its current  internal  control
program and  procedures  that are  currently  in place at the  Company  into the
operations of the newly  acquired  operations of ARMR Services  Corporation  and
anticipates this integration to be completed by March 2004.





                                       14
<PAGE>


PART II.  OTHER INFORMATION


Item 1. Legal Proceedings.

None.


Item 2.  Changes in Securities.

During  the  three  months  ended   September  30,  2003,   the  Company  issued
unregistered securities in connection with the transactions described below. The
issuances of convertible  promissory  notes,  promissory  notes and  convertible
warrants were exempt from the  registration  requirements of the Securities Act,
as amended,  by virtue of Section 4(2) thereof,  as transactions not involving a
public  offering  and an  appropriate  restrictive  legend  was  affixed  to the
warrants.

In exchange for an aggregate of $500,000 cash  investment,  the Company issued a
convertible promissory note to BFS US Special Opportunities Trust PLC ("BFS"), a
public limited  company  registered in England and Wales,  on September 5, 2003.
The convertible  promissory note is in the original principal amount of $500,000
and has an annual interest rate of 7% and is payable in monthly  installments on
the first day of each month. The convertible  promissory note, plus interest, is
due on September 5, 2008. The convertible  promissory note is convertible at the
option of BFS into the  common  stock of the  Company at a  conversion  price of
$0.40  per  share  (1,250,000  shares).  The  Company  has the right to call the
convertible  promissory  note if the market  price of the  commons  stock of the
Company is above $0.60 per share for period of 60 days.

In exchange for an aggregate of $100,000 cash  investment,  the Company issued a
promissory note to C. A. Rundell,  Jr.,  Chairman and Chief Executive Officer of
the Company,  on  September  26, 2003.  The  promissory  note is in the original
principal  amount  of  $100,000  and has an  annual  interest  rate  of 7%.  The
promissory note, plus interest,  is due on April 1, 2004. Interest is payable in
monthly  installments  on the  first  day of  each  month.  As a  part  of  this
transaction the Company issued a stock purchase  warrant to C. A. Rundell,  Jr.,
Chairman and Chief Executive Officer of the Company.  The stock purchase warrant
entitles the Mr.  Rundell to purchase  from the Company  125,000  fully paid and
non-assessable shares of Common Stock, $0.01 par value, of the Company for $0.40
per share.


Item 3.  Defaults Upon Senior Securities.

None.


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

None.


Item 5.  Other Information.

None.



                                       15
<PAGE>


Item 6.  Exhibits and Reports on Form 8-K.

(a)  Exhibits

     31.1      Officer's Certificate Pursuant to Section 302

     32.1      Officer's Certificate Pursuant to Section 906

(b)  Reports filed on Form 8-K.

     The Company  filed a Current  Report on Form 8-K on July 18, 2003 to report
     an  additional  investment  of  $200,000  in  cash  on May  29,  2003  from
     Renaissance US Growth & Income Trust PLC in exchange for  promissory  notes
     and stock purchase  warrants  issued to Frost National Bank FBO Renaissance
     US Growth & Income Trust PLC; an additional  investment of $200,000 in cash
     on  May  30,  2003  from  HSBC  Global  Custody   Nominee  (U.K.)  Limited,
     Designation No. 896414 in exchange for promissory  notes and stock purchase
     warrants, issued to HSBC Global Custody Nominee (U.K.) Limited, Designation
     No.  896414;  and an additional  investment of $100,000 in cash on June 18,
     2003 from  Renaissance  Capital  Growth & Income Fund III, Inc. in exchange
     for promissory  notes and stock purchase  warrants issued to Frost National
     Bank FBO Renaissance Capital Growth & Income Fund III, Inc.

     The Company  filed a Current  Report on Form 8-K on  September  22, 2003 to
     report the  acquisition of ARMR Services  Corporation in a merger  whereby,
     effective September 5, 2002, ARMR Services  Corporation was merged with and
     into a wholly-owned subsidiary of the Company, on September 5, 2003.

     The Company filed a Current Report on Form 8-K on October 3, 2003 to report
     an additional  investment of $500,000 in cash on September 5, 2003 from BFS
     US Special Opportunities Trust PLC in exchange for a convertible promissory
     note issued to BFS US Special Opportunities Trust PLC.

     The Company filed a Current Report on Form 8-K on October 3, 2003 to report
     an additional  investment of $100,000 in cash on September 26, 2003 from C.
     A.  Rundell,  Jr. in exchange  for a promissory  note and a stock  purchase
     warrant issued to C. A. Rundell, Jr.

     The Company filed a Current Report on Form 8-K on October 3, 2003 to report
     an  additional  investment of $200,000 in cash on October 1, 2003 from each
     of Renaissance  Capital  Growth & Income Fund III, Inc. and  Renaissance US
     Growth & Income  Trust  PLC in  exchange  for  promissory  notes  and stock
     purchase  warrants  issued to each of Frost  National Bank FBO  Renaissance
     Capital  Growth &  Income  Fund  III,  Inc.  and  Frost  National  Bank FBO
     Renaissance US Growth & Income Trust PLC.

     The  Company  filed a Current  Report on Form 8-K on  October  14,  2003 to
     report the announcement the Company's  earnings results for the fiscal year
     ending June 30, 2003.



                                       16
<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:   November 19, 2003                /s/ C. A. RUNDELL, JR.
                                         ----------------------
                                         C. A. Rundell, Jr.
                                         Director, Chairman of the Board, and
                                         Chief Executive Officer (Principal
                                         Executive and Financial Officer)


Date:   November 19, 2003                /s/ RICHARD B. POWELL
                                         ---------------------
                                         Richard B. Powell
                                         Vice President, Chief Accounting
                                         Officer, Secretary (Principal
                                         Accounting Officer)





                                       17
<PAGE>